Wall Street’s major indexes posted their biggest percentage drop of the year on Monday, as a fall in the yuan following President Donald Trump’s vow to impose additional tariffs on Chinese goods sparked fears of further escalation of the U.S.-China trade war, Reuters writes.
While stocks pared losses in the last hour of trading to finish off their session lows, the benchmark S&P 500 fell about 3% to notch its biggest one-day percentage decline since Dec. 4.
The decline amounted to a $766 billion paper loss for the index, according to Refinitiv data. The S&P 500 has fallen for six consecutive sessions and is now about 6% below its record closing high on July 26.
The yuan weakened past the seven-per-dollar level, its lowest in 11 years, after the People’s Bank of China, with the blessing of policymakers, set its daily midpoint at the weakest level in eight months. On Twitter, Trump called the action a “major violation” and “currency manipulation.”
Several investors viewed the move in the yuan as a direct response to Trump’s announcement of 10% tariffs on an additional $300 billion of Chinese imports.
“It’s the escalation of the trade war,” said Steven DeSanctis, equity strategist at Jefferies in New York. “The dollar strengthening presents another issue. For companies that do a lot of business outside the U.S., it all adds up.”
A weaker yuan and a stronger dollar pose challenges for U.S. companies that do substantial business in China by effectively raising the cost of their goods for Chinese customers.
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