➤ U.S. blacklists Chinese entities; China signals willingness to strike back.
➤ Safe-haven assets, including US Treasurys, gain.
Wall Street extended losses amid fresh concerns ahead of upcoming U.S.-China trade talks following a report that the U.S. was discussing potential restrictions on investment flows into China and a U.S. move to blacklist a slew of Chinese entities.
S&P 500 and Nasdaq 100 were down 0.9% and 0.8% around 9:30 a.m. ET on Oct. 8.
The U.S. is understood to be proceeding with talks about possibly limiting portfolio flows into China, focusing particularly on keeping U.S. government retirement funds from investing in China. A White House official previously dismissed reports that such restrictions were under review.
The U.S. added Hangzhou Hikvision Digital Technology Co. Ltd. and 27 other entities to a trade blacklist over their alleged involvement in human rights violations, a claim China denied, suggesting it may retaliate.
U.S. officials said the move was not related to trade talks due later in the week.
Asked whether China would react to the U.S. move, China Foreign Ministry spokesman Geng Shuang said "stay tuned," urging the U.S. to "stop interfering in China's internal affairs," Bloomberg News reported.
Recent developments, including the blacklisting and reports that China was looking to narrow the scope of trade talks, "will certainly dampen the mood" as the two countries prepare for high-level negotiations on Oct. 10-11, said Ipek Ozkardeskaya, senior analyst at London Capital Group, adding that "it would be highly surprising" if a comprehensive pact is reached.
"Even an interim deal is at jeopardy," Ozkardeskaya said.
European bourses also traded lower, with the FTSE 100 edging 0.4% down, Germany's DAX declining 1% and France's CAC 40 falling 0.9%.
Shares of London Stock Exchange Group PLC tumbled 4.6% after Hong Kong Exchanges & Clearing Ltd. said it will no longer pursue its planned acquisition of the British bourse.
Chinese stocks were upbeat upon return from a week-long holiday, with the Shanghai SE Composite up 0.3%. Hong Kong's Hang Seng gained 0.3% and Japan's Nikkei 225 advanced 1%.
The U.S. and Japan signed two trade accords, including an agreement pursuant to which Japan will eliminate or reduce tariffs on about $7.2 billion in U.S. agricultural exports.
In the bond markets, the yield on 10-year Treasurys fell nearly 5 basis points to 1.515%, while that on German Bunds with equal maturity lost 2 basis points.
In currencies, sterling fell 0.7% versus the dollar as Brexit talks were seen collapsing. While a Brexit deal cannot be ruled out, the U.K. government is believed to be preparing for talks not proceeding any further, BBC News reported. U.K. Prime Minister Boris Johnson told Germany's Angela Merkel that a deal would not be possible with Northern Ireland staying in the EU Customs Union, Bloomberg News reported.
The U.K. government updated its temporary tariff regime for a potential no-deal Brexit scenario, saying 88% of total U.K. imports by value would qualify for tariff-free access.
Yesterday, a Scottish court rejected a legal bid that sought to force Johnson to abide by a new law designed to prevent a no-deal Brexit this month by postponing the Oct. 31 departure date.
The euro was little changed as Germany's industrial production unexpectedly grew in August following two monthly declines.
The Japanese yen gained 0.3%. The dollar index was little changed.
In commodities, Brent crude oil declined 0.8% to $57.86 per barrel on the ICE Futures Exchange, while gold gained 0.6%.
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