Trump retaliates against China with tariff hike; stocks sell off

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The US dollar stumbled on Friday after US President Donald Trump ordered US companies to start looking for an alternative to China as Beijing imposed more tariffs on US goods, further exacerbating a prolonged trade dispute between the world's two largest economies. I will be responding to China's Tariffs this afternoon.

The Dow Jones Industrial Average sank almost 500 points after the president made the announcements on Twitter.

The stock market's "fear gauge" - the CBOE VIX - spiked almost 20% on Friday as a series of Trump tweets ignited Wall Street panic.

Stocks in all three companies were lower as investors digested the logistics of implementing such an order. Trump has been pressuring the Fed to lower interest rates aggressively, arguing that the dollar's strength is undermining the competitiveness of U.S. manufacturers.

His tweet followed China's announcement on Friday of retaliatory tariffs on about US$75 billion worth of U.S. goods.

The market opened lower with the news of the new tariffs.

Gold edged lower on Friday, heading for its worst week in over four months, as investors locked in profits from bullion's recent strength as they awaited clarity on United States interest rate cuts from the Federal Reserve chairman's speech at Jackson Hole.

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Federal Reserve Chair Jerome Powell stressed Friday that the central bank will act to ensure the United States economic expansion continues, even in the face of "significant risks" posed by slowing global growth. Powell said the Fed "will act as appropriate to sustain the expansion". A quarter-point rate cut reduction in September is considered all but certain.

Contrary to what the market had hoped, Powell did not give a clear signal about further interest rate cuts. Days earlier, the president canceled a planned visit to Denmark after Frederiksen said it was "absurd" that Trump might consider trying to buy Greenland, an autonomous Danish region. The S&P 500 was down 75.84 points, or 2.59 percent, to 2,847.11. The average was briefly down 549 points. Apple and Intel lost 4.62 percent and 3.89 percent, respectively, the worst performers of the day.

At the same time, labor markets remain strong and consumers continue to spend at stores and online. The price of crude sank 3.2% to $53.59 a barrel as traders anxious that the latest escalation in the trade battle could sap global demand for energy.

"The move this morning is just more people buying gold simply with the expectations that interest rates will be lower by year-end". The yield on the two-year Treasury bond fell by 10 basis points to 1.51 percent, while yield on the 10-year Treasury bond dropped to slightly below that level.

By 14:08 pm EDT (1801 GMT), price of spot gold increased 1.9% to $1,526.60 per ounce. The 25 percent levy on $250 billion worth of Chinese goods will rise to 30 percent from October 1. China announced a new round of tariffs on U.S. products earlier in the day, and Trump responded with higher duties on certain Chinese goods.

Those developments include new USA tariffs on imports from China; signs of a global slowdown, namely in the economic powerhouses Germany and China; and the growing possibility that the United Kingdom will leave the European Union without a deal.

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