GLOBAL MARKETS-Trump tariff salvo pushes stocks into sea of red, safe havens shine

* Trump to impose 10% tariffs on rest of China imports
* U.S. President to make EU trade announcement at 1745 GMT
* European stocks drop 2.7%, biggest daily fall in 2019
* Interest rate futures price in Fed rate cut in Sept
* U.S. stock futures indicated down 0.5-0.9%

By Karin Strohecker
LONDON, Aug 2 (Reuters) - European stocks posted their
biggest drop of 2019 on Friday and bond yields tumbled to
record lows after U.S. President Donald Trump fired another
trade war salvo at China, sparking a frenzied dash for
safe-haven assets.
Trump said he would impose a 10% tariff on $300 billion of
Chinese imports from Sept. 1, escalating a bruising and
protracted clash between the world's two biggest
economies. China said on Friday it would take
countermeasures. The abrupt end to a truce in the trade conflict capped a
critical week for global markets after the U.S. Federal Reserve
delivered a widely anticipated interest rate cut but played down
expectations of many more ahead.
News that Trump will make an announcement about trade with
the European Union at 1745 GMT on Friday did little to soothe
frayed nerves.
Markets around the globe dived into a sea of red, with the
pan-European Stoxx .STOXX dropping 2% in its sharpest daily
tumble of 2019. The trade-sensitive DAX .GDAXI and France's
CAC 40 .FCHI dropped 2.7%, the former hitting a two-month
lows.
"The market's looking very, very nervous," said Stephane
Barbier de la Serre, adding that Trump's move also ramped up the
pressure on the Fed to deliver more rate cuts.
"Trump didn't get the rate cut he wanted, so he's going to
force (the Fed) to do that. That's frightful. And what will
China do? What will the Fed do? It's hijacking of monetary
policy."
MSCI's index of world stocks .MIWD00000PUS dropped 0.6%
as Asian bourses suffered heavy losses. Japan's Nikkei .N225
fell 2.1%, Hong Kong .HSI slumped 2.4% and China mainland
stocks .SSEC .CSI300 declined around 1.5%.
The toxic cocktail of unmet expectations for central bank
policy, trade war turmoil, Brexit woes and worries over the
health of the corporate sector has wiped $1 trillion off world
stocks this week.
Futures pointed to no let-up for U.S. markets: S&P 500
e-minis EScv1 indicated 0.5% lower while Nasdaq 100 e-minis
NQcv1 slipped 0.9%.
Trump's announcement, which came a day after U.S. and
Chinese negotiators concluded a meeting in Shanghai without much
progress, marks an end to a trade truce struck in June and could
further disrupt global supply chains. The proposed levies triggered a stampede for safe-haven
assets. Core euro zone bond yields tumbled, with German 10-year
government bond yields DE10YT=RR dropping to an all-time low
of -0.502% and the country's entire government bond yield curve
turning negative for the first time ever.
That tracked the drop in 10-year U.S. Treasuries US10YT=RR
yields to 1.832% - the lowest since Nov. 8, 2016, the day Trump
was elected president.
Trump's move may force the Fed to cut rates again to protect
the U.S. economy from trade-policy risks. Although Fed Chairman Jerome Powell said Wednesday's cut -
its first in more than a decade - was a "mid-cycle adjustment"
and not the start of an easing cycle, markets are not fully
convinced.
Data on Friday showed U.S. jobs growth slowed in July and
wages picked up moderately, providing further incentive to cut
rates. The October Fed funds rate futures FFV9 have jumped to
fully price in a rate cut in September, compared with only
around 60% before the tariff announcement. Another 25 basis
point move is priced in by December.
"In the grand scheme of things, it will become clearer and
clearer that the Federal Reserve has started an easing cycle and
will have no choice but to cut rates further," said Akira Takei,
fund manager at Asset Management One.
The new tariffs would hit a swathe of consumer goods from
cell phones and laptop computers to toys and footwear, at a time
when the manufacturing sector is already reeling from the
accumulative impact of the trade war.
The U.S. Institute for Supply Management said on Thursday
its index of national factory activity fell to 51.2 last month,
the lowest reading since August 2016. In currency markets, safe haven bets took the limelight. The
Japanese yen JPY= surged to 16-month high against the dollar,
while the Swiss franc reached a two-year high of 1.0925
EURCHF= against the euro.
The dollar .DXY softened 0.2% against a basket of
currencies. /FRX
"How things progress for the U.S. and the U.S. dollar will
depend now much more on whether there are signs that the trade
conflict is increasingly leaving a mark on the U.S. economy,"
Commerzbank FX analyst Esther Reichelt said.
The euro recovered to $1.1096 EUR=EBS , from a two-year low
of $1.1027 hit in U.S. trade.
China's offshore yuan CNH= weakened 0.2% after in early
trade touching 6.9769 per dollar - its lowest since November
2018.
The British pound held near a 30-month low versus the dollar
as the governing Conservatives' majority in parliament was
reduced to one seat, adding to concern over politics three
months before the country is due to leave the European
Union. Sterling GBP= last stood at $1.2137.
In commodity markets, gold XAU= softened a touch to
$1,440.15 per ounce after having risen 2.3% on Thursday, staying
near a six-year high of $1,453 touched two weeks ago.
Oil prices bounced back after suffering a sharp selloff.
O/R
Brent crude LCOc1 rose 2.8% to $62.19 per barrel, after
having fallen 7.0% on Thursday, its biggest daily percentage
drop since February 2016. U.S. West Texas Intermediate (WTI)
CLc1 crude rebounded 2.6% to $55.34, having shed 7.9% the
previous day.

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Bond Bonanza https://tmsnrt.rs/2yx5KJs
Daily closes for Brent, U.S. crude in 2019 png https://tmsnrt.rs/2yHHep7
$1 trillion wiped off global equities https://tmsnrt.rs/33gSkzo
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