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Stocks End Lower As Tariff Worries Linger

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Just when global investors thought that a deal would be sealed, US President Donald Trump claimed China “broke the deal” from commitments made during earlier negotiations. Fuelled by frustration over the pace of talks, Trump threatened to escalate tariffs on US$200 billion of Chinese imports from 10 percent to 25 percent effective 10 May 2019 and would “soon” target the remaining Chinese imports with fresh tariffs.

Trump’s latest tariff threat came as a shock, coming just days after officials on two sides had sounded positive on the talks, with markets broadly expecting a trade resolution to be announced soon.

The proposed new tariff measures against China sparked a global sell-off where Shanghai shares lost 5.8 percent to close at 2,906.46 on 6 May 2019 to record its biggest one-day loss since 2016. Meanwhile, Dow Jones Industrial Average (DJIA) fell 1.8 percent to close at 25,965.09 on 7 May 2019 to register its second-biggest daily percentage drop of the year.

Attention now turns to the two-day meeting between Chinese Vice Premier Liu He and US top trade officials in Washington on 9-10 May 2019. Investors are closely watching the fresh China-US trade talk and whether the US will follow through with its threat to hike tariffs on Chinese imports.

Over the fortnight, the DJIA lost 2.4 percent to end at 25,828.36 as worries persisted over the outcome of the trade negotiations. The broad-based S&P 500 decreased 1.9 percent ending at 2,870.72, while the tech-rich Nasdaq Composite Index fell 2.6 percent to 7,910.59.

Asian markets tracked Wall Street losses with Shanghai Composite Index bearing the brunt of the losses, sliding 4.8 percent to close at 2,939.21. Hang Seng Index fell 3.6 percent to close at 28,550.24 and Nikkei 225 lost 4.1 percent to close at 21,344.92.

On the Singapore bourse, the Monetary Authority of Singapore (MAS) will be transferring excess $45 billion from the official foreign reserves (OFR) to the city-state’s sovereign wealth fund GIC to manage. As of April 2019, the OFR stood at $404 billion. MAS stated the transfer of the excess is deemed to be necessary to maintain confidence in Singapore’s exchange rate-centred monetary policy in the face of low inflation and interest rate environment.

Over the fortnight, the local benchmark Straits Times Index (STI) closed lower by 2.5 percent to end at 3,273.50.

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