➤ China asks state companies to stop buying U.S. agricultural products.
➤ Yuan hits 11-year low.
➤ Safe-haven assets rise amid trade tensions.
➤ Pakistan, India shares down as India cancels special status of Kashmir.
Global stocks extended losses as China let its currency fall below the key level of 7 per dollar, hitting an 11-year low, amid mounting trade tensions with the U.S.
Wall Street opened lower Aug. 5, with S&P 500 down 1.6% and Nasdaq 100 slipping 2.3%. The indexes lost 0.7% and 1.4%, respectively, at market close Friday.
China asked state firms to stop buying U.S. agricultural products in apparent retaliation against U.S. President Donald Trump's announcement of a 10% tariff on $300 billion of Chinese goods previously untouched by duties.
In Asia, the Shanghai SE Composite fell 1.6%. Analysts at Citi expect that the latest round of tariffs could drag China's GDP growth by 0.5 percentage point and the U.S. economy by 0.1 percentage point to 0.2 percentage point.
Japan's Nikkei 225 dropped 1.7% and South Korea's tech-heavy KOSDAQ index slumped 7.5% at market close, as the relation between the two nations remained strained.
Hong Kong's Hang Seng tumbled 2.9% as Hong Kong Financial Secretary Paul Chan warned that a recession is likely as protests continue to grip the Asian financial hub.
Pakistan and India shares also took a hit Aug. 5 as tensions between both the nations were likely to rise after India scrapped Article 370, which allowed Jammu and Kashmir to have its own rules, Reuters reported. The move means that India's laws will now be applicable in Jammu and Kashmir. Pakistan, which also claims Kashmir, reportedly vowed to take all possible options to counter what it termed as an "illegal" step.
The Bombay Stock Exchange SENSEX index closed 1.1% down and the Karachi Stock Exchange 100 index closed 1.6% lower Aug. 5.
In Europe, the FTSE 100 lost 2% around 9:30 a.m. ET, with HSBC Holdings PLC declining about 2.5% on its CEO's unexpected departure. Germany's DAX fell 1.4% and France's CAC 40 declined nearly 1.7%.
Among currencies, the Chinese yuan sank 1.6% against the dollar around 9:45 a.m. ET, having previously fallen to the lowest level since 2008 in onshore trading as the People's Bank of China set the reference rate for the currency at 6.8996 per dollar, the weakest level since December 2018.
The dollar index, which measures the U.S. currency's performance against a basket of major peers, was down 0.4%. White House economic adviser Larry Kudlow said Friday that the Trump administration will not attempt any dollar intervention.
Derek Halpenny from MUFG Bank believes that the move by China could lead the U.S. to ultimately intervene and weaken the dollar, though more substantial yuan weakness would have to unfold for that to happen.
Sterling was little changed against the dollar as data showed U.K. business activity rising to a nine-month high in July.
The euro rose 0.6% versus the dollar as eurozone business activity growth slowed in July amid a continued downturn in manufacturing. Separately, the EU reached an agreement with the U.S. to triple annual duty-free exports of hormone-free American beef to the bloc.
Safe-haven assets rose, with the Japanese yen up 0.5% against the dollar and gold gaining 1.2%.
In the bond market, the yield on 10-year U.S. Treasurys shed 8 basis points to 1.764% as of 9:51 a.m. ET. The yield on German Bunds with the same maturity lost 2 basis points.
Brent crude fell 1.9% to $60.73 per barrel on the ICE Futures Exchange.
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The day ahead:
10 a.m. ET - ISM non-manufacturing index (Econoday consensus: 55.5)
12:30 p.m. ET – U.S. TD Ameritrade IMX
7:30 p.m. ET – Japan household spending
9:30 p.m. ET – Australia merchandise trade