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Stocks mimic Wall Street's plunge before steadying in Asia

Trump threatens new China tariffs

Beijing -- Asian stocks followed Wall Street lower on Tuesday after China let its currency sink and halted purchases of U.S. farm goods, fueling fears Beijing's trade war with President Trump will harm the global economy.

China's main index lost 2.5% and Tokyo fell 2%. Markets in Hong Kong, Sydney and Seoul also retreated. Shares then steadied by mid-session, the Reuters news agency reports, and U.S. stocks futures pointed to a strong rebound. 

China's main index wound up losing 1.5% and Australia's was down 2.3%. Markets in Tokyo, Hong Kong and Seoul also retreated. 

Beijing allowed its yuan to fall past the politically sensitive level of seven to the dollar on Monday following Mr. Trump's threat last week to extend punitive tariffs to an additional $300 billion of Chinese imports. Also, the Ministry of Commerce announced it was suspending promised purchases of American farm products.

Passersby are reflected on a stock quotation board outside a brokerage in Tokyo
Passersby are reflected on a stock quotation board outside a brokerage in Tokyo on August 6, 2019 ISSEI KATO / REUTERS

On Tuesday, the yuan fell further to 7.052 to the dollar in early trading. That came after the U.S. Treasury Department officially labeled Beijing a currency manipulator, a status that opens the way to possible additional sanctions.

But the yen levelled off on Asian markets after authorities took steps stem its fall, Reuters said.

The ruling Communist Party's main newspaper accused Washington of "deliberately destroying the rules-based international order" and jeopardizing economic cooperation.

It didn't mention Monday's currency decision but accused the Trump administration of using American families as hostages in trade talks. "One cannot understand how such a big, internationally influential country could be so irresponsible," the People's Daily said. 

The U.S. decision is "protectionist behavior" that will have "a major impact on global finance," the People's Bank of China said on its website.   

The Chinese central bank denied improperly manipulating the exchange rate. It said the yuan's decline was driven by market forces.

"The latest U.S. move will likely harden China's position in trade negotiations," Tao Wang of UBS said in a report.

American officials complain a weak yuan - also known as the renminbi, or "people's money" - makes China's export prices unfairly low, hurting foreign competitors and swelling Beijing's trade surplus.

On Wall Street, stocks suffered their biggest loss since December Monday.

Investors already were unnerved about a cooling global economy and falling U.S. corporate profits.

The Standard & Poor's 500 index dropped 3% to 2,844.74. The Dow Jones Industrial Average lost 2.9% to 25,717.74, and the Nasdaq composite fell 3.5% to 7,726.04.

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