GLOBAL MARKETS-U.S.-China trade setback prolongs the equities slide

* Global stocks slide as Sino-US trade talks deadlocked
* Bitcoin hit 9-month highs over weekend
* U.S. prepares to raise tariffs on all remaining imports
from
China
* China defiant, Trump-Xi talks seen likely at G20 summit in
June
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
* 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 and neither side showed a
willingness to budge, raising fears of a fresh round of
tit-for-tat tariffs.
The United States and China appeared at a deadlock over
trade negotiations on Sunday as Washington demanded promises of
concrete changes to Chinese law and Beijing said it would not
swallow any "bitter fruit" that harmed its interests.
"Looks like we are just slowly ebbing away. More tweets from
Trump over the weekend stoking the fires for a trade war," said
John Woolfitt at London-based Atlantic Markets.
The impasse left investors bracing for threatened
retaliation by China for Washington's tariff increase on Friday
on $200 billion worth of Chinese goods. The move followed
accusations by U.S. President Donald Trump that Beijing had
reneged on earlier commitments.
The pan-European Stoxx 600 .STOXX slipped 0.7% while S&P
500 futures ESc1 shed 1.3%.
Chinese shares tumbled, with the benchmark Shanghai
Composite .SSEC and the blue-chip CSI 300 .CSI300 shedding
1.2% and 1.8%, respectively, while Hong Kong's financial markets
were closed for a holiday.
Japan's Nikkei average .N225 sank as much as 1.0% to hit
its lowest level since March 28, before closing down 0.7%.
"How far this escalates is what the market is really worried
about as we haven't really got full details of what the U.S.
will do and how China will retaliate. The important thing is
what's the impact on growth, and that's what the market is
really fearing," said Justin Oneukwusi, portfolio manager at
Legal & General Investment Management.
White House economic adviser Larry Kudlow told the "Fox News
Sunday" program 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 there was a strong possibility that
Trump would 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 approximately $300 billion.
"Our base case is for limited progress and Chinese
retaliation," said Michael Hanson, head of global macro strategy
at TD Securities.
The offshore Chinese yuan fell to its lowest levels in more
than four months at 6.90 to the dollar. CNH=
Major currencies were relatively calm with the euro steady
at $1.1230 EUR= , while the dollar was little changed against a
basket of currencies at 97.324 .DXY .
The U.S. Treasury bond yield curve between three-month and
10-year rates inverted on Monday for the second time in a week,
with the 10-year yield now standing 0.0025% above the
shorter-maturity bill.
Viewed as a classic warning signal of a looming U.S.
recession, the curve inverted last Thursday for the first time
since March US10YT=RR , US3MT=RR .
The U.S. curve has inverted before each recession in the
past 50 years. It offered a false signal just once in that time.
"Overall in the short term the chances of recession have
increased," Legal & General's Oneukwusi said.
The trade war hit emerging market stocks .MSCIEF , which
were down 0.7 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 rose on increasing concerns
about supply disruptions in the crucial producing region of the
Middle East. Brent crude futures LCOc1 rose 0.5% to $71.00 a
barrel and U.S. West Texas Intermediate futures CLc1 were up
marginally at $61.73 per barrel.
In digital currencies, Bitcoin continued to move higher,
holding onto gains over weekend. Bitcoin BTC=BTSP jumped more
than 10% on Saturday and marked a nine-month high of $7,585.00
on Sunday.