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World markets shaken by US-China trade dispute

 A man checks his bag in front of an electronic stock indicator in Tokyo Monday, Sept. 14, 2009. Japan's Nikkei 225 stock average took the day's bigge...

Japan Markets

A man checks his bag in front of an electronic stock indicator in Tokyo Monday, Sept. 14, 2009. Japan's Nikkei 225 stock average took the day's bigge...

World markets fell Monday as investors worried that a new trade dispute between the U.S. and China could hurt a fledgling global economic recovery.
Germany's DAX fell 1.0 percent to 5,569.03 and Britain's FTSE 100 lost 0.6 percent to 4,979.57. France's CAC-40 shed 1.0 percent to 3,696.16.
Asian indexes lost as much as 2 percent and U.S. markets droped on the open. The Dow Jones industrial average was down 0.7 percent at 9,540.65 and the Standard & Poor's 500 fell 0.6 percent to 1,036.35.
The U.S. decision to impose trade penalties on Chinese tires infuriated Beijing, which condemned the move as protectionist and filed a complaint with the World Trade Organization complaint on Monday.
As retaliation, Beijing on Sunday announced it would examine imports of American auto and chicken products and whether they benefit from subsidies.
Crucially, the dispute suggests international economic cooperation is weak ahead of the G-20 summit of rich and developing nations later this month in Pittsburgh. With U.S.-Chinese trade a key link in the global economy, investors were spooked by the potential repercussions.
"The possibility of a trade war would be detrimental to a world economy reeling from the biggest financial crisis in over 70 years, especially at a time when G-7 nations are considering the unwinding of fiscal and monetary stimuli," said Ashraf Laidi, chief market strategist at CMC Markets in London. The G-7 refers to the Group of Seven industrialized democracies.
Also hurting sentiment outside the U.S. was the dollar's recent drop against world currencies like the yen, the pound and the euro _ against which it hit a yearly low last week. Although it recovered somewhat Monday, its sharp fall this month has hurt confidence in companies in export-heavy European and Asian economies.
Meanwhile, a slump in commodity prices weighed on mining stocks, with Anglo American down 1.2 percent and BHP Billiton down 1.7 percent, while a drop in euro zone industrial production data reminded markets that manufacturers are not yet out of the woods.
Industrial output in the euro area fell 0.3 percent in July compared to June, which "shows that while the wider economy has probably returned to positive growth in the third quarter, the recovery will not be particularly strong," said Ben May, economist at Capital Economics.
In Britain, financial stocks were also under pressure after Moody's credit rating agency said it continues to view U.K. banks' prospects over the next 12 to 18 months as negative. It expects them to lose another 130 billion pounds on bad loans and securities, which is more than banks have lost since the start of the global financial crisis in 2007.
Both Barclays was down 1.2 percent, Lloyds Banking Group 0.7 percent and Royal Bank of Scotland 1.3 percent.
In Asia, Japan's Nikkei 225 index took the day's biggest hit, 2.3 percent to 10,202.06. Toyota, the world's largest car company, lost 2.6 percent, electronics giant Canon was off 3.4 percent and Sony dropped 2.4 percent.
Hong Kong's Hang Seng closed down 1.1 percent while Korea's Kospi shed 1 percent. Australia's key index lost 1.4 percent, India's Sensex was down 0.5 percent and Taiwan's benchmark fell 1.1 percent. Shanghai's market defied the downswing, adding 1.2 percent.
Looking ahead, investors will be eyeing Obama's speech Monday about plans to wind down government measures that bailed out financial firms last year and to overhaul the country's tattered regulatory regime. He will ask the financial industry to support his overhaul, as well as take responsibility for its failings and learn to police itself. Banks and other financial services companies are expected to pay their employees huge bonuses just a year after being rescued with public money.
Oil prices dropped in Europe, with benchmark crude for October delivery down 39 cents to $68.90 a barrel. On Friday, the contract tumbled $2.65 to settle at $69.29.
The dollar, which has tanked in recent days, rebounded modestly to 90.83 yen compared to 90.42 yen. The euro edged up to $1.4606 from $1.4597.
Associated Press writer Jeremiah Marquez in Hong Kong contributed to this report.

Updated : 2021-10-21 16:28 GMT+08:00