* China's yuan drops below 7 per dollar
* Wall Street tumbles on renewed trade worries
* Yen, bonds and gold benefit on safety bid
* Oil down as trade war concerns hit demand outlook
(Updates with U.S. market close)
By Saqib Iqbal Ahmed
NEW YORK, Aug 5 (Reuters) - Stock markets around the world
fell hard on Monday on fears that China's willingness to let the
yuan slide in response to the latest U.S. tariff threat could
further aggravate trade-related tensions between the world's two
largest economies.
China on Monday let the yuan CNY= tumble beyond the
7-per-dollar level for the first time in more than a decade, in
a sign Beijing might be willing to tolerate further currency
weakness after U.S. President Donald Trump vowed last week to
impose 10% tariffs on the remaining $300 billion of Chinese
imports from Sept. 1. A weaker yuan - and a stronger dollar - pose challenges for
U.S. companies that do substantial business in China, as it
effectively raises the cost of their goods for Chinese
customers.
China also said it would stop buying U.S. agricultural
products. Safe-haven assets, including the Japanese yen, government
bonds and gold, rallied as investors cut back on riskier assets.
"I think there's a sense that President Trump might try and
escalate in terms of a reaction, if he thinks that this was a
deliberate move by the Chinese to try and weaken their currency
artificially,” said Brian Daingerfield, head of G10 FX strategy
for the Americas at NatWest Markets in Connecticut.
Against the Japanese yen, the U.S. dollar fell 0.43% to its
lowest level since a January flash crash. JPY=
Trade-sensitive emerging market currencies took a beating.
The emerging market currency index .MIEM00000CUS fell 1.24% to
set a 2019 low, on pace for its worst one-day drop since June
2016. MSCI's All Country World Index .MIWD00000PUS , which tracks
shares in 47 countries, extended last week's slide and was down
2.53% to a two-month low.
On Wall Street, the main indexes logged steep declines, led
by technology companies. "The currency move is part of the trade war," said Andre
Bakhos, managing director at New Vines Capital LLC in
Bernardsville, New Jersey. "It is a bold statement to the U.S.
that says 'If you want to play, we could play a different way as
well.' It takes any optimism out of the market that there will
be a quick resolution to trade."
The Dow Jones Industrial Average .DJI fell 767.27 points,
or 2.9%, to finish at 25,717.74, the S&P 500 .SPX lost 87.31
points, or 2.98%, to close at 2,844.74 and the Nasdaq Composite
.IXIC dropped 278.03 points, or 3.47%, to end at 7,726.04.
The pan-European STOXX 600 index .STOXX closed down
2.31%. Factoring in Friday's losses, the index marked its
largest two-day decline in over three years. .EU
Worries about a slowdown in global growth due to an extended
trade conflict also hurt oil prices. "The escalation in the U.S.-China trade is another negative
for the oil demand outlook, as the fallout from the spat
continues to greatly impact the Asian economic region, which is
key to the oil demand outlook," said John Kilduff, partner at
Again Capital Management.
Brent crude LCOc1 fell $2.08, or 3.36%, to settle at
$59.81 a barrel, while U.S. West Texas Intermediate (WTI) crude
CLc1 futures fell 97 cents, or 1.74%, to settle at $54.69 a
barrel.
Gold rose to a more than six-year high. Spot gold XAU= was
up 1.52% at $1,462.32 per ounce. U.S. Treasury yields tumbled, with 10-year yields hitting
their lowest level since November 2016 on the safety bid.
In late U.S. trading, the yield on benchmark 10-year
Treasury notes US10YT=RR was down 12.7 basis points at
1.7278%.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
GRAPHIC-World FX rates in 2019 http://tmsnrt.rs/2egbfVh
GRAPHIC-Emerging market currencies plunge https://tmsnrt.rs/2YoaWOZ
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>