World shares sink as US-China spat takes center stage

World markets were broadly lower on Thursday as traders focused on tensions between the U.S. and China and braced for the impact of their tariff hikes.

Polls for the European Parliament opened in the Netherlands and the U.K., with 26 other members of the European Union to follow before it ends Sunday night.

Preliminary private surveys showed that the bloc’s composite purchasing managers’ index picked up slightly in May, although manufacturing and services activity slowed.

France’s CAC 40 dropped 1.6% to 5,294.51 and the DAX in Germany was down 1.5% at 11,985.73. Britain’s FTSE 100 lost 1.1% to 7,250.46, after lawmakers rejected Prime Minister Theresa May’s Brexit offer and called for her resignation.

Wall Street was set for losses on the open, with the future contract for the S&P 500 index dipping 0.7% to 2,836.30. That for the Dow Jones Industrial Average also eased 0.7% to 25,588.00.

Earlier this month, the U.S. and China concluded their 11th round of trade talks with no agreement. Further talks have not been arranged.

The U.S. has imposed 25% tariffs on $250 billion in Chinese imports and is planning to target another $300 billion. It has also mounted sanctions against Huawei and is threatening to do the same with other Chinese companies.

China, meanwhile, has retaliated against $110 billion in U.S. products, and is offering tax cuts to software and chip companies.

“The stalemate between the U.S. and China looks likely to last longer as both sides continued to ratchet up rhetoric,” Zhu Huani of Mizuho Bank said in a commentary.

“Despite potential significant negative spillover effect this might have on U.S. firms, the Trump administration seems determined to curb China’s rise in technology advancement,” she added.

Over in Asia, the Shanghai Composite index retreated 1.4% to 2,852.52. Hong Kong’s Hang Seng tumbled 1.6% to 27,267.13 and the Kospi in South Korea was 0.3% lower at 2,059.59. Australia’s S&P ASX 200 fell 0.3% to 6,491.80. Shares slipped in Taiwan, Singapore and the Philippines but rallied in Indonesia.

Japan’s Nikkei 225 index lost 0.6% to 21,151.14, after a private survey suggested that manufacturing contracted in May. The Markit/JMMA flash purchasing managers’ index fell to 49.6 in May from 50.2 in the previous month. Numbers above 50 on the index show acceleration.

ENERGY: Benchmark U.S. crude lost 44 cents to $60.98 per barrel in electronic trading on the New York Mercantile Exchange. It gave up $1.71 to settle at $61.42 per barrel on Wednesday. Brent crude, the international standard, shed 60 cents to $70.39 per barrel. The contract slipped $1.19 to $70.99 in the previous session.

CURRENCIES: The dollar fell to 110.14 Japanese yen from 110.34 yen late Wednesday. The euro weakened to $1.1137 from $1.1151.

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