INSUBCONTINENT EXCLUSIVE:
LONDON: European shares struggled on Monday as fears of the escalating US-China trade conflict outweighed the boost to sentiment from
Chinese authorities' intervention last week to shore up its currency.
Disappointing corporate earnings in the European banking sector added
to the cautious start to the week's trading.
Chinese state media launched an unusually personal attack against US President Donald Trump's
trade policies on Monday, saying Trump's trade "extortion" would not work.
It also sought to reassure investors about Chinese economic
strength as the months-long dispute rattles financial markets and raises deepening worries about the impact on the real economy.
After an
initial rise, Asian shares earlier succumbed to selling pressure, with Chinese shares sliding into negative territory.
European shares were
The pan-European share index dropped 0.06 per cent while Germany's DAX fell 0.34 per cent and France's CAC 40 was virtually flat, down 0.02
per cent.
The biggest plunge in German industrial orders in nearly 18-months added to pressure on German stocks.
The weakness in European
shares followed a more than 1 per cent drop in the Chinese blue-chip index and Shanghai's SSE Composite
Japan's Nikkei and South Korea's Kospi index also dropped.
The MSCI world equity index, which tracks shares in 47 countries edged down 0.08
per cent.
"In his latest Twitter tirades and his latest appearances in front of his supporters the US president has indicated something akin
to a "strategy" behind his trade war policy," Commerzbank said
"The trade war will remain in place regardless of how much the Chinese cave in."
The trade dispute remains a live issue for markets with
China proposing tariffs on $60 billion worth of US goods on Friday, while a senior Chinese diplomat cast doubt on prospects of talks with
Washington to resolve the bitter trade conflict.
At the same time, Trump said his strategy of placing steep tariffs on Chinese imports is
"working far better than anyone ever anticipated", citing losses in China's stock market
He predicted the US market could "go up dramatically" once trade deals were renegotiated.
The People's Bank of China's intervention last
week to impose a reserve requirement on foreign exchange forward contracts had the desired impact of halting the slide in the yuan.
In
offshore markets, the Chinese currency fell 0.1 per cent against the dollar to 6.8562 on Monday, but was well away from the 6.91 weak point
the yuan had plumbed last week.
The yuan has been one of the main casualties from the trade conflict, with many investors speculating that
the PBOC was happy for the renminbi to weaken to counter the impact of US tariffs.
Traders saw the PBOC effort as an attempt by Chinese
authorities to show they wanted stability, and some interpreted it as a conciliatory move to nudge the Americans towards the negotiating
table.
Other said the intervention would not stop further yuan weakness with Washington and Beijing at loggerheads over tariffs.
The dollar
index, which has benefited as investors rush to safety, rose 0.2 per cent to 95.291, close to a 2-1/2 week high.
US jobs data on Friday,
although weaker than expected, underlined that the world's largest economy is growing robustly, supporting synchronized global growth that
had underpinned sentiment towards risk assets before the eruption of the trade dispute.
Markets are increasingly nervous about whether US
growth may have peaked.
"Investors are also closely watching the rising value of the US dollar, slowing global economic growth and the risk
of the Federal Reserve tightening short-term interest rates too quickly and dampening domestic economic growth," said Lachlan McPherson,
Senior Investment Consultant at Charles Schwab Australia.
The euro inched down to $1.155.
The British pound slid towards a fresh 10-month
low after the UK trade minister warned Britain was headed for a no-deal Brexit.
Gold hovered near 17-month lows and was last at $1,211.89
GOL/
Brent crude futures rose 0.5 per cent to $73.55, while US crude oil futures added 0.7 per cent to $68.94 a barrel.
