By David Hodari 
   -- Fresh tariff threats batter global stocks 
 
   -- ZTE pounded after Senate votes to reimpose ban 
 
   -- Trade tensions sting commodities 

Global stocks dropped Tuesday as trade tensions between the U.S. and China continued to spiral, sparking particularly heavy selling in Asia.

The Shanghai Composite Index was last down 3.8% to its lowest in almost two years, and the Shenzhen A Share index plunged 5.8%. Investors also unloaded stocks from neighboring indexes, with Hong Kong's Hang Seng slumping 3.2% and Taiwan's Taiex falling 1.7%.

The Stoxx Europe 600 was down 1.1% in early trading. Futures put the S&P 500 and the Dow Jones Industrial Average on course for opening selloffs of 1.3% and 1.6%, respectively.

President Donald Trump raised the stakes in Washington's trade conflict with China Monday, asking his administration to draw up a fresh list of Chinese goods worth $200 billion on which to impose tariffs.

The move followed levies on $50 billion in Chinese imports to the U.S. enforced late last week aimed at punishing China for unfair trading practices. Beijing immediately threatened retaliatory measures on high-value American exports like crude oil, farm products, and cars.

Should China follow through on those measures, Mr. Trump said he had instructed U.S. Trade Representative Robert Lighthizer to impose a 10% tariff on that fresh tranche of goods.

The development marked the latest escalation in a series of events that investors fear could precipitate a trade war between the world's two largest economies. Investor worries about the willingness of the Trump administration to maintain international trading relationships with neighbors and allies have injected uncertainty into global markets in recent months.

While the impact of the trade spat for U.S. consumers has so far been muted, firms across the world would feel the effects if Washington and Beijing implement their proposed levies, according to Paul Donovan, chief economist at UBS Global Wealth Management.

"Non-Chinese companies, including U.S. companies, are just as likely to be affected by taxes on Chinese goods, given the complexity of modern supply chains," Mr. Donovan said in a note.

The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, was last up 0.3% extending its five-day climb to 1.1%. The yield on U.S. 10-year Treasurys had last fallen to 2.861% from 2.926% late Monday. Yields move inversely to prices.

Sino-American trade news stung European stocks in early trading, with the Stoxx Europe 600 basic materials sector dropping 2% and industrial goods and services firms also slipping. Global logistics giant A.P. Moller-Maersk fell 3.6%.

European market participants were also eyeing car import tariffs, sending the Stoxx 600's autos and parts sector down 1.7%.

"If we reverse the trend since the 1950s of movement toward free trade... Europe could be significantly hit by tariffs on cars if the probe on imported autos leads to actual decisions by the U.S.," said Gilles Moec, chief European economist at Bank of America Merrill Lynch.

Hong Kong-listed ZTE Group plummeted 25% after the U.S. Senate voted to reinstate a ban on selling U.S. parts to the Chinese telecom company. The move marked the rejection of a deal between Mr. Trump and Beijing to save the firm.

Also among the Hang Seng's worst performers was Chinese pork producer WH Group, which owns U.S.-based Smithfield Foods, dropping 5.7% on jitters about the impact of the tariffs on agricultural trading.

Trade friction fears were reflected among commodities, too. Chicago-traded soybean futures were last down 2.7%, London Metal Exchange copper futures fell 1.9%, and West Texas Intermediate crude oil--which Beijing has threatened to target--was down 1.3% at $65.01 a barrel. Brent crude was last down 0.8% at $74.71 a barrel.

Saumya Vaishampayan and William Mauldin contributed to this article.

Write to David Hodari at David.Hodari@dowjones.com

(END) Dow Jones Newswires

June 19, 2018 05:17 ET (09:17 GMT)

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