GLOBAL MARKETS-Trump's tariffs jolt global stocks, spark rush to safer assets

* Trump to impose 10% tariffs on rest of U.S. imports from
China
* Interest rate futures price in Fed rate cut in Sept
* Yen marks biggest gain in 2 years, gold near 6-year high
* European futures down 2.0%, U.S. stock futures down 0.2%

By Hideyuki Sano and Tomo Uetake
TOKYO, Aug 2 (Reuters) - Global stocks took a beating on
Friday, with investors piling into safe-haven assets but oil
prices recouped some losses after U.S. President Donald Trump
said he would slap a 10% tariff on the remaining $300 billion of
Chinese imports starting Sept. 1.
Pan-European Euro Stoxx 50 futures STXEc1 shed 2.0% in
late Asian trade, indicating that European cash share markets
will open sharply lower on Friday, while U.S. stock futures
ESc1 extended losses, dropping 0.2%, following the S&P 500
.SPX skidding 0.9% to hit one-month lows overnight.
Oil prices rose more than 2%, after suffering their biggest
one-day fall in years the previous day following further U.S.
tariffs on China, intensifying trade tensions between the
world's two biggest economies and crude consumers.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS fell 1.6% to its lowest since mid-June while
Japan's Nikkei .N225 tumbled 2.1%.
Chinese stocks were also hit hard, with the benchmark
Shanghai Composite .SSEC and the blue-chip CSI300 .CSI300
down 1.5% and 1.6%, respectively, while Hong Kong's Hang Seng
.HSI slumped 2.2%.
Trump's announcement, which came a day after U.S. and
Chinese negotiators concluded a meeting in Shanghai without
significant signs of progress, marks an end to a truce in the
trade war struck in June and could further disrupt global supply
chains. "After the U.S.-China summit meeting, people had expected
there would be a lull for quite some time," said Masahiro
Ichikawa, senior strategist at Sumitomo Mitsui DS Asset
Management.
"And the market was also relieved by signs of recovery in
the semi-conductor sector. But now investors and companies will
have to revise their scenarios."
Indeed, the tech-heavy Taiwan's Taiex .TWII slid 1.7% and
South Korea's KOSPI .KS11 lost as much as 1.5% to hit a fresh
seven-month low, after Tokyo approved a plan to remove Seoul
from a list of its trusted trading partners, known as a "white
list." China's state media quickly denounced Trump's new tariffs,
with the editor in chief of the Global Times saying on Friday
that a trade deal between the United States and China was now
"further away." The war of words appeared to escalate after U.S. Secretary
of State Mike Pompeo said "decades of bad behaviour" from China
had hampered free trade and prompted tariffs and other action
from Washington. The proposed levies triggered a stampede for safe-haven
assets, including U.S. bonds, gold and the yen, while the
Chinese yuan and the Australian dollar hit multi-month lows.
Gold XAU= stood at $1,432.86 per ounce, down 0.8% in Asia
after having risen 2.4% on Thursday, staying near a six-year
high of $1,453 touched two weeks ago.
The Japanese yen surged to a five-week high versus the
dollar and a 2-1/2-year peak against the pound as Trump's tweets
bolstered demand for safe-havens. FRX
The yen strengthened to as high as 106.855 to the dollar
JPY=EBS in early Asian trade, after rising 1.3% overnight, its
biggest daily gain in more than two years. The pair last stood
at 107.10.
"Yen buying still has further room to run, especially
against the crosses. Trump has given us plenty of reason to move
to risk-off trades," said Yukio Ishizuki, foreign exchange
strategist at Daiwa Securities.
The euro recovered to $1.1085 EUR=EBS , from a two-year low
of $1.1027 hit in U.S. trade.
In contrast, the risk sensitive Australian dollar dropped to
a seven-month low of $0.6795 AUD=D4 .
China's onshore yuan slumped to its lowest since November
2018, falling more than 0.7% to 6.95 per dollar CNY=CFXS , as
new tariffs put an end to a recent pause in a trade war that has
forced Chinese policymakers to unleash stimulus to offset its
slowing economy. In the offshore market, the yuan fell to as low
as 6.9778. CNH= .
The British pound edged towards a 30-month low versus the
dollar due to persistent worries about a no-deal Brexit and a
cut in the Bank of England's economic forecasts. GBP= was last 0.1% lower on the day at $1.2110.
The 10-year U.S. bond yield fell almost 12 basis points on
Thursday to 1.902 percent US10YT=RR , hitting the lowest since
Nov. 8, 2016, when Trump won a surprise victory in the
presidential election. The 10-year yield extended its slide to
as low as 1.875% in early Asian trade.
Trump's decision has thrown the Federal Reserve another
curve ball that may force it to again cut interest rates to
protect the U.S. economy from trade-policy risks after its first
rate cut in more than a decade on Wednesday. Although Fed Chairman Jerome Powell said the rate cut was a
"mid-cycle adjustment" and not a start to a full-blown
rate-cutting cycle, markets aren't fully convinced.
The October Fed funds rate futures FFV9 have jumped to now
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 wide 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.
Oil prices bounced back after suffering a sharp selloff.
O/R
Brent crude LCOc1 rose 2.2% to $61.81 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 1.8% to $54.92, having shed 7.9% the
previous day.

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