NEW YORK – Stocks and commodity prices fell sharply on Wednesday as concerns over escalating trade tensions between the United States and China threatened to erase the week’s gains.
The administration of US President Donald Trump said Tuesday it would assess 10-percent tariffs on an additional $200 billion in Chinese goods.
China called the move “totally unacceptable” in a statement attributed to an unnamed ministry spokesman and vowed to roll out unspecified countermeasures.
The news drove Asian stocks down, with Hong Kong’s Hang Seng dropping 1.3 percent amid losses in tech companies and China’s Shanghai Composite Index falling 1.8 percent.
Futures pointed to a 0.8-percent opening loss for the S&P 500 while the Stoxx Europe 600 was down 1.2 percent in midmorning trading, pushed lower by shares of mining, auto and oil-and-gas companies.
A response from China would mean “moving from a trade conflict to a trade war between the two superpowers,” analysts at Commerzbank said in a note Wednesday.
In Europe, shares of BP were down 2.4 percent and Royal Dutch Shell dropped 1.6 percent as Brent crude, the global benchmark, reversed course from gains earlier in the week, falling 1.9 percent to $77.35 a barrel.
Shares of mining companies Glencore and Rio Tinto were also among the biggest decliners. Trade concerns have continued to weigh down commodities prices with copper futures down 2.7 percent to around one-year lows.
The metal has been hit especially hard amid the escalating trade rhetoric and is seen by many analysts as a barometer for global economic health.
Less economically-sensitive stocks in Europe, including food and beverage, utilities and real-estate companies, fared better than banks and auto companies, which have fallen sharply as trade tensions have appeared to escalate.
The declines were widespread Wednesday: Japan’s Nikkei fell 1.2 percent and South Korea’s Kospi was down 0.6 percent.
The tariffs, which wouldn’t come into effect for at least two months, cover a variety of Chinese goods, including tuna, salmon and other fish, luggage, tires, dog leashes, handbags, baseball gloves, furniture, apparel and mattresses. Hearings on the proposed measures are scheduled to take place in late August.
Market participants had been tentatively optimistic on trade earlier in the week, driving stocks higher as they looked toward what are expected to be positive second-quarter earnings reports.
If stocks decline, it won’t be due to earnings, Bob Phillips, managing principal at Spectrum Management Group, said Tuesday. Instead, the “trade war getting out of hand” would depress stocks, Phillips said.
According to Dow Jones, investors will also be keeping an eye on Wednesday’s NATO summit as Trump reiterates criticism of what he sees as insufficient military spending from European allies.
Although the summit focuses on national security, he may also use the session to press his case that European Union nations are using 10 percent tariffs on automobiles to protect their market from US vehicle exports.
Elsewhere in markets, yields on 10-year Treasurys fell to 2.835 percent from 2.873 percent on Tuesday. Yields fall as prices rise.
The WSJ Dollar Index, which measures the US currency against 16 others, was up 0.2 percent.