GLOBAL MARKETS-U.S.-China trade setback stokes recession fears; stocks slide

* Global stocks slide as Sino-US trade talks deadlocked
* Bitcoin hit nine-month highs over weekend
* U.S. ready to raise tariffs on all remaining imports from
China
* China defiant, Trump-Xi talks seen likely at G20 summit in
June
* Brent crude futures up 1.8%, WTI up 1.5%
* For Reuters Live Markets blog on European and UK stock
markets,
please click on: LIVE/

By Thyagaraju Adinarayan
LONDON, May 13 (Reuters) - Global equities fell on Monday
after their worst week of 2019 as hopes of an imminent
U.S.-China trade deal were crushed, raising fears of a fresh
round of tit-for-tat tariffs.
The impasse left investors bracing for retaliation by China
for Washington's increase on Friday of tariffs on $200 billion
worth of Chinese goods. The move followed accusations by U.S.
President Donald Trump that Beijing had reneged on earlier
commitments.
Trump on Monday warned China not to retaliate against an
increase in tariffs he imposed last week. Escalation could tip the U.S. economy into recession, a risk
flagged by the inversion in U.S. Treasury bond yield curve
between three-month and 10-year rates for the second time in
under a week.
The U.S. curve has inverted before each recession in the
past 50 years. It gave a false signal just once. "Overall, in the short term the chances of recession have
increased, so equity markets will be priced on the back of
that," said Justin Oneukwusi, portfolio manager at Legal &
General Investment Management.
The pan-European Stoxx 600 .STOXX slipped 0.5%. S&P 500
futures ESc1 shed 1.3%.
Chinese shares tumbled. The benchmark Shanghai Composite
.SSEC and the blue-chip CSI 300 .CSI300 indices shed 1.2%
and 1.8%, respectively.
The offshore Chinese yuan fell to its lowest in more than
four months, 6.88 to the dollar. CNH= Trade talks as Washington demanded promises of concrete
changes to Chinese law and Beijing said it would not swallow any
"bitter fruit" that harmed its interests. "How far this escalates is what the market is really worried
about ... The important thing is what's the impact on growth,
and that's what the market is really fearing," Oneukwusi said.
White House economic adviser Larry Kudlow told Fox News that
China needed to agree to "very strong" enforcement provisions to
secure a deal. He said the sticking point was Beijing's
reluctance to put into law changes that had been agreed.
Kudlow said U.S. tariffs would remain in place while
negotiations continued and Trump was likely to meet Chinese
President Xi Jinping at a G20 summit in Japan in late June.
"The risk of a full-blown trade war has materially
increased, even though both sides seem to still want a trade
deal and talks are expected to continue," UBS economist Tao Wang
said.
Washington said it was preparing to raise tariffs on all
remaining imports from China, worth about $300 billion.
"Our base case is for limited progress and Chinese
retaliation," said Michael Hanson, head of global macro strategy
at TD Securities.
Major currencies were relatively calm. The euro was steady
at $1.1234 EUR= and the dollar little changed against a basket
of currencies at 97.270 .DXY .
"We've seen pretty restrained moves among currencies,
despite some severe rhetoric between the U.S. and China so far.
However, cause for concern remains a weaker yuan, which should
be a warning sign for risk assets," said Marc-André Fongern of
MAF Global Forex.
Emerging-market stocks .MSCIEF were down 0.9 percent,
hovering near January lows. JPMorgan said it had reduced its
emerging-markets risk for the second time in as many months on
Monday following the set-back in U.S-China trade talks.
In commodities, oil futures jumped on growing concern about
supply disruptions in the Middle East. Brent crude futures
LCOc1 rose 1.8% to $71.90 a barrel and U.S. West Texas
Intermediate futures CLc1 were up 1.5% at $62.56 per barrel.
In digital currencies, Bitcoin hovered above $7,000 on
Monday, close to nine-month highs, as the biggest
cryptocurrency's 2019 rally gathered steam. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Chinese stocks lose shine https://tmsnrt.rs/2LF2yVz
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