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Stocks continue to fall; Trump threatens more tariffs on China if they don't back down

The dollar and bond yields increased on Monday, as major stock indexes continued to fall in volatile trading. U.S. president Donald Trump announced that he would impose an extra 50% tariff on China should Beijing not remove its retaliatory duties on the United States.

The White House also denied a report saying that Trump was considering a 90 day pause on tariffs for all nations except China. The White House called the report "fake" news, but it briefly boosted U.S. stock prices.

The markets were volatile amid changing headlines and U.S. stock prices remained far from their day's lows.

You can tell that shorts are tense today. They're watching every turn for any possible Fed intervention, tariff suspension, or trade agreement. This shows how short-lived the current market turmoil is expected to be, said Jamie Cox of Harris Financial Group, Richmond, Virginia.

The traders bet that the recession would increase.

Federal Reserve

Interest rates could be cut as early as May. Futures markets have already priced in nearly five quarter-point reductions in U.S. interest rates this year.

Stocks plunged at the start of the day, and S&P 500 was on track to confirm the bear market as Trump showed no signs of backing down from his tariff plans. The stock market dropped sharply after the announcement of tariffs.

The Dow Jones Industrial Average dropped 629.33, or 1.6%, to 37.685.53, while the S&P 500 fell 56.14, or 1.14% to 5,016.43, and the Nasdaq Composite declined 129.97, or 0.8%, at 15,450.15.

The MSCI index of global stocks fell by 23.61 points or 3.09% to 740.68.

Investors were also forced to sell, and the pain spread to European stocks. Recent market darlings like defense shares were particularly affected. The pan-European STOXX 600 fell by 4.54%.

The Hang Seng index in Hong Kong fell 13% on a single day, the biggest drop since 1997. In mainland China, the blue-chip CSI 300 was down 7%. It only found a bottom when the state media announced that China's sovereign funds Central Huijin were buyers.

Treasury yields increased. Benchmark 10-year notes yields rose 12.8 basis points in the last hour to 4.119%. On Friday, they fell to 3.86%, their lowest level since October 4.

The yields on two-year interest-sensitive bonds rose by 2.9 basis points, to 3.699%. Earlier, they had reached 3.435% - the lowest level since September 2022.

Dollar also rose, and oil prices fell due to a more gloomy outlook for growth.

The dollar index (which measures the greenback in relation to a basket including the yen, the euro and others) rose by 0.81%, while the euro fell by 0.37%, at $1.0914. The dollar gained 0.69% against the Japanese yen to reach 147.92.

U.S. crude dropped 1.84%, to $60.84 per barrel. Brent was down to $64.41 a barrel on the same day.

(source: Reuters)