A dramatic escalation in the US-China trade war triggered a plunge on global markets

The ASX 200 slumped 68 points or 1.1 per cent to 6268 after US President Donald Trump threatened to increase tariffs on Chinese imports as soon as Friday. If his intention was to force a deal, the move appeared to backfire, with news outlets reporting China may pull out of this week’s trade talks altogether. 

The effect on markets was profound: US stock futures fell almost 2 per cent, Chinese shares cratered more than 4 per cent and crude oil dropped more than 2 per cent. 

The Australian market opened weak and declined for much of the morning. A close around present levels would hand the index its worst loss since January 2. 

A soft trading update from Westpac added the headwinds. The bank’s half-year profit slumped 22 per cent as it set aside $896 million to compensate customers in the wake of the Hayne Royal Commission. Not the sort of news to release with the market under pressure. The share price dropped 1.6 per cent. 

Macquarie Group fell for a second session following reports the financial powerhouse is on the nose in Denmark. Bloomberg reported the $90 billion Danish fund PFA is refusing any new deals with Macquarie while German authorities investigate the bank over an alleged dividend tax fraud. Macquarie shares fell 2.4 per cent. 

Cimic, the construction group formerly known as Leightons, tumbled 7.4 per cent after a Hong Kong research firm accused the group of artificially inflating profits. 

The high-flying I.T. sector took a heavy hit as traders locked in profits on some of the year’s best-performing stocks. Appen shed 5.2 per cent, Wisetech 5.1 per cent and Afterpay 1.2 per cent. 

Havens from the carnage were scarce, but gold stocks soaked up some of the selling as the precious metal ticked higher. Evolution Mining gained 2.4 per cent, Northern Star 0.6 per cent and St Barbara 0.5 per cent. Gold futures edged up $2.60 or 0.2 per cent in the US to $US1,283.90 an ounce. 

US-China trade talks were believed to be nearing a conclusion prior to the President’s intervention, which he said followed attempts by the Chinese to renegotiate. The President announced this morning that tariffs on $200 billion of Chinese goods will increase on Friday to 25 per cent from 10 per cent. 

The reaction in Asia was brutal: China’s Shanghai Composite gave up 4.1 per cent and Hong Kong’s Hang Seng 3.5 percent. Japanese markets remained closed.

In the US, S&P 500 futures fell 56 points or 1.9 per cent. Texas crude oil futures sagged $1.40 or 2.3 per cent to $US60.54 a barrel.