LONDON (Reuters) - A 2 percent slide in Chinese equities on Wednesday and a fresh weakening in the yuan highlighted mounting stress on the world’s number two economy from trade tensions with the United States, while global stocks slipped to approach two-month lows.
While the prospect of trade protectionism and tit-for-tat tariffs are raising serious fears for the world economy, the growth and inflation outlook is being further complicated by oil prices rising back above $75 per barrel, due to Washington pressuring its allies to halt Iranian imports.
Oil’s rise, despite last week’s deal by crude producers to raise output, helped Wall Street rebound on Tuesday, while technology stocks also jumped as President Donald Trump said he endorsed a measured approach to restricting Chinese investment in U.S. tech companies.
But that rally has fizzled. Equity futures indicate Wall Street will open weaker and MSCI's ex-Japan Asian equity index fell 0.8 percent to a fresh two-year low .MIAPJ0000PUS. Losses were led by China, where Shenzen-listed blue chips .CSI300 sank 2.2 percent to stand a whisker above 13-month lows.
Chinese equities have now fallen into so-called bear market territory, having tumbled 20 percent from recent peaks.
The yuan slipped to a fresh six-month low against the dollar CNY=, as the central bank allowed the biggest one-day weakening in the currency in percentage terms since January 2017. Many analysts now see authorities allowing currency weakness in order to counter the hit to trade.
“After a lot of sabre-rattling,
