June 15, 2018 / 6:44 PM / 10 months ago

GLOBAL MARKETS-Trade tensions hit stocks, while oil craters on supply fears

    * GRAPHIC-World FX rates in 2018: tmsnrt.rs/2egbfVh
    * Trump OKs $50B in tariffs as China vows retaliation
    * European, emerging market stocks down more than 1 percent
    * Oil down 3 pct on prospect for higher output

 (Updates with afternoon trading)
    By Nick Brown
    NEW YORK, June 15 (Reuters) - Share prices extended their
slide across the globe in U.S. afternoon trading on Friday after
U.S. President Donald Trump announced new tariffs on Chinese
goods, while oil prices plummeted 3 percent over signs that
supply may soon rise. 
    Trump announced hefty tariffs on $50 billion of Chinese
imports on Friday, with Beijing threatening to respond in kind,
stoking fears of a trade war between the world's two biggest
    Trump unveiled a 25 percent tariff on a list of
strategically important imports from China, promising further
measures if Beijing struck back.
    MSCI's gauge of stocks across the globe                 shed
0.64 percent, while the pan-European FTSEurofirst 300 index
         lost 1.00 percent.
    Emerging market stocks were hit particularly hard, tumbling
1.12 percent, a move maybe attributable as much to a strong
dollar as to trade tensions.
    "I think the biggest concern at the moment, more than talk
about trade, is the tightening of monetary conditions in
emerging markets caused by a stronger dollar," said Michael
Hewson, chief markets analyst at CMC Markets in London, noting
the Federal Reserve's forecast for a total of four interest rate
rises in 2018. 
    Trump's decision on tariffs comes a day after stock markets
had rallied on the European Central Bank's decision to hold off
on raising rates at least until the middle of next year.
    U.S. share indexes opened lower on the impending tariffs and
kept sliding afternoon trading. 
    The Dow Jones Industrial Average        fell 214.92 points,
or 0.85 percent, to 24,960.39, the S&P 500        lost 11.52
points, or 0.41 percent, to 2,770.97 and the Nasdaq Composite
        dropped 24.31 points, or 0.31 percent, to 7,736.73.
    The outbreak of a global trade war has been the most
frequently cited 'biggest tail risk' by investors this year in
Bank of America Merrill Lynch's monthly survey of global fund
managers, on the back of ramped up protectionist rhetoric and
measures by the U.S. administration.
    It is not clear when Trump will activate the measures, but 
rising Sino-U.S. tensions will put more pressure on China's
economy, which is starting to show signs of cooling.
    MSCI's broadest index of Asia-Pacific shares outside Japan
                closed 0.65 percent lower, with Chinese stocks
leading the losses.
    World oil markets cratered on fears of increased supply,
with U.S. Crude on track for its biggest decline since May 15,
and to end the week down 1.3 percent. Brent was on track for a 4
percent loss on the week.             
    The Organization of Petroleum Exporting Countries is slated
to meet next week in Vienna, with two of the biggest producers -
Saudi Arabia and Russia - indicating they were prepared to
increase output. 
    "Everyone is talking about raising production - the only
question is by how much," said Bob Yawger, director, energy at
Mizuho in New York.
    U.S. crude         settled at $65.06 per barrel, down 2.74
percent, while Brent          was last at $73.37, down 3.38
    In currencies, the U.S. dollar slipped against the
safe-haven yen in the wake of the announced tariffs, while the
dollar index       , which measures the greenback against six
currencies, fell 0.02 percent. 
    The euro       , which on Thursday had suffered its biggest
fall against the dollar in two years after the ECB's interest
rate decision, rose 0.38 percent to $1.1611.             
    Trade fears drove demand for safe government bonds, causing
U.S. Treasury yields to fall to their lowest levels in a week.
Benchmark 10-year notes             last rose 10/32 in price to
yield 2.9095 percent, from 2.946 percent late on Thursday.
    The 30-year bond             last rose 21/32 in price to
yield 3.0323 percent, from 3.066 percent Thursday.
    “You’ve seen a little bit of a risk-off trade, which is
aiding in the Treasury rally,” said Justin Lederer, an interest
rate strategist at Cantor Fitzgerald in New York.

 (Additional reporting by Ritvik Carvalho, Jessica Resnick-Ault
and Karen Brettell; Editing by Bernadette Baum)
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