Wall Street Warns China Retaliation in U.S. Trade War is ’11’ on Scale of 1 to 10

Analysts continued to warn about the dangers of an escalating trade war on Monday, as China moved to strike back at the U.S., hitting U.S. stocks and boosting Treasuries.

Semiconductors, with direct exposure to trade, and banks stocks, which are sensitive to interest rates, were among the decliners. The biggest U.S. banks slid, with the KBW Bank Index dropping as much as 4.1% to the lowest since June 4. Bank of America Corp. led index decliners, with a drop of 5.5%, the most since Dec. 4, while Citigroup Inc. shed more than 4% and JPMorgan Chase & Co. slipped 3.8%.

Micron Technology Inc. fell 6.2% while Texas Instruments Inc. lost 4.4% and Intel Corp. was down 4%. Apple Inc. dropped 5.6%, the most since May 13. Shares in Chinese tech giants Alibaba Group Holding and JD.com Inc. fell near two month lows in U.S. Trading.

Agriculture equipment makers Deere & Co. and AGCO Corp. tumbled as China suspended imports of U.S. agricultural products. The escalating trade tensions are also a major risk for the U.S. automotive industry, which has a significant exposure to the country. According to UBS’s Global Wealth Management Chief Investment Officer Mark Haefele, the latest spat raises the possibility that “tariffs could also be placed on auto imports.”

President Donald Trump tweeted about China and the Fed on Monday morning, saying: “China dropped the price of their currency to an almost a historic low. It’s called ‘currency manipulation.’ Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!”

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SOURCE: Bloomberg, Felice Maranz