By David Hodari 
   -- Fresh tariff threats batter global stocks 
 
   -- ZTE pounded after Senate votes to reimpose ban 
 
   -- Industrials, materials sectors among worst in S&P 

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

The Dow Jones Industrial Average recently tumbled 296 points, or 1.2%, to 24692. The S&P 500 and Nasdaq both declined 0.7%.

Aerospace giant Boeing fell 3% and machinery company Caterpillar dropped 2.8%. Energy, industrials and materials were some of the S&P 500's worst-performing sectors. At the same time, U.S. crude fell 1.4% to $64.80 a barrel.

Those moves came after Asian investors dumped Chinese stocks. The Shanghai Composite Index slumped 3.8% to its lowest level in almost two years, and the Shenzhen A Share index plunged 5.8%. Investors also unloaded equities from neighboring indexes, with Hong Kong's Hang Seng down 2.8% and Taiwan's Taiex off 1.7%.

The Stoxx Europe 600 was down 0.7% in early afternoon trading.

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 such as 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.

Trade concerns were among the risks highlighted by European Central Bank President Mario Draghi on Tuesday, when he said the bank could extend its giant bond-buying program again and delay any interest-rate increases amid mounting economic risks. The comments, days after the ECB laid out plans to phase out its bond purchases, underline the bank's caution in winding down a major stimulus program just as the region's economy appears to be slowing.

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 yield on U.S. 10-year Treasurys fell to 2.893% from 2.926% late Monday. Yields move inversely to prices. With strong growth and an interest-rate increase last week from the Federal Reserve, 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 1.2%.

If U.S. tariffs do begin to squeeze the Chinese economy, "the fear would be that China could be tempted to devalue its currency as a support mechanism for its economy," said Lee Hardman, currency analyst at MUFG.

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.

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 10:20 ET (14:20 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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