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Stocks Start the Quarter With Losses as Trade Tensions Heat Up


Global stocks started the quarter with steep declines as escalating trade rhetoric, concerns about the German government and a downbeat economic reading from China curbed markets participants’ appetite for risk.
The Stoxx Europe 600 fell 1.2% shortly after markets opened Monday, led lower by declines in banks, autos and commodity-linked companies.
Markets across Asia were down sharply with Japanese and South Korean markets off over 2%, while futures pointed to a 0.7% opening loss for the S&P 500.
Analysts pointed to continued uncertainty around global trade as a catalyst for the moves.
U.S. President Donald Trump said he sees his threat to impose global auto tariffs as his biggest weapon to extract concessions from trading partners as his administration studies a proposal to impose 20% tariffs on imported vehicles.
China meanwhile fulfilled a pledge to slash tariffs on imported cars Sunday, but Beijing is preparing to slap an additional 25% tariff on U.S. auto imports this Friday.
Shares of Germany’s BMW AG–which builds premium sport-utility vehicles in the U.S. and ships them to China–were down 1% in morning trading, while Fiat Chrysler Automobiles was down 2.2% as the European auto sector came under pressure.
Shares of commodity-linked companies also fell in European trading, with Brent crude oil down 1.1% at $78.43 a barrel and copper futures down 0.6% at $6,580 a ton.
Yields on German 10-year bonds edged down to 0.291% from around 0.305% Friday afternoon while 10-year Treasurys edged down to 2.839% from 2.847% Friday afternoon. Yields move inversely to prices.
Germany’s interior minister raised the stakes in his immigration showdown with Chancellor Angela Merkel, saying he was willing to resign after rejecting as insufficient a European Union plan to limit inflows.
Until an agreement is reached with the CSU, “the future of the government in its current form remains uncertain,” strategists at Commerzbank wrote in a note. European stocks had jumped Friday in response to the EU’s agreement on migration, taking it as a sign of stability for the German government.
Earlier, Japan’s Nikkei Stock Average fell 2.2%, its biggest drop since late March amid weakness in consumer stocks. South Korea’s Kospi fell 2.4%.
China’s Shanghai Composite Index fell 2.4%. Growth in China’s manufacturing sector slowed in June, a private gauge showed, tallying with official data that showed a slight cooling of growth in manufacturing activity on the back of simmering trade tension between the U.S. and China.
In currencies, the WSJ Dollar Index, which tracks the dollar against a basket of 16 others, was up 0.3%. The euro was down 0.5% at $1.1637.
The Mexican peso was off 0.8% against the dollar after Mexico’s electoral institute said Sunday that leftist candidate Andrés Manuel López Obrador won the country’s presidential election by a wide margin.

Source: Dow Jones