After US President Donald Trump imposed additional tariffs on China, China made its first official currency adjustment and maintained the exchange rate of the renminbi against the dollar at 7.169.
Following these developments, sentiment in China fell after a short-lived rally. The CSI 300 index fell 0.3% and Hong Kong's Hang Seng index fell 0.6% at midday. It is predicted that the renminbi may fall to 7.50 if the US continues to increase customs duties.
Fluctuations in U.S. and Asian Markets
U.S. stock markets opened mixed after China announced additional tariffs on certain American products as retaliation. The Dow Jones index dropped by 0.13%, falling to 44,363 points, while the S&P 500 declined by 0.02%, reaching 5,993 points. The Nasdaq, supported by tech sentiment, rose by 0.18% to 19,426 points.
Asian markets experienced similar volatility. Japan's Nikkei 225 index increased by 0.2%, while the Australian stock market rose by 0.5%. South Korea's Kospi index saw a 1.1% gain, buoyed by positive sentiment from Wall Street.
On the corporate front, pharmaceutical giant Merck's shares plunged by 11% due to a disappointing earnings forecast. Similarly, Pepsi's stock fell by 2%, while AI-driven data analytics company Palantir surged by 27% on strong financial results.
Gold prices hit a new record, soaring to 2,875 per ounce as investors sought safe-haven assets, further supported by the weakening U.S. dollar.
Oil prices, however, declined, with U.S. crude oil falling to $72.50 per barrel and Brent crude dropping to $75.89. The initial shock came from China's announcement of tariffs on U.S. oil imports, but prices hit their lowest point following reports that Trump was seeking to reduce Iran’s oil exports to zero.
The yield on the U.S. 10-year Treasury note rose to 4.56%, while the dollar index fell by 0.7% to 108.2. In the forex market, the U.S. dollar weakened against the Japanese yen, sliding from 154.30 to 153.41.
Investors are also closely watching Trump's latest remarks regarding his intention to take control of and revitalize war-torn Gaza.
As the effects of the trade war continue to be felt in global markets, all eyes remain on China's next moves.
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