Not Surprisingly U.S.-China Trade War Rhetoric Heats Up Ahead Of Renewal Of Talks

Today the Trump administration put eight of China’s technology giants on a blacklist over alleged human rights violations against Muslim minorities. And China signaled that it would retaliate over the blacklist. Foreign ministry spokesman Geng Shuang told reporters “Stay tuned.”

The companies on the blacklist include two video surveillance companies– Hangzhou Hikvision Digital Technology and Zhejiang Dahua Technology– that by some accounts control as much as a third of the global market for video surveillance.  Also targeted were SenseTime Group, the world’s most valuable artificial intelligence startup, and fellow AI giant Megvii Technology, which is looking to raise up to $1 billion in a Hong Kong initial public offering. The two are backed by Chinese e-commerce giant Alibaba Group Holding and are a key part of the China’s ambition to dominate AI in coming years. Companies on the list are prohibited from doing business with American companies without being granted a U.S. government license. These restrictions follow on those imposed on China’s telecom gear and smartphone giant Huawei Technology.

U.S. financial markets weren’t amused by the latest signs that the round of talks slated to begin this week–with high-level talks scheduled for Thursday and Friday of next week–aren’t likely to result in an end of the trade war between the two countries that has sent the global economy into a slowdown.

At the close today the Standard & Poor’s 500 was down 1.56% and the Dow Jones Industrial Average was lower by 1.19%. The NASDAQ Composite fell 1.67% and the Russell 2000 dropped 1.52%. The iShares MSCI Emerging Market ETF (EEM) lost 0.71%.

Crude prices fell as well with the U.S. benchmark West Texas Intermediate down 0.91% to $52.27 a barrel and international benchmark Brent crude off 0.75% to $57.91 a barrel.

As you might imagine, risk haven assets gained. Gold climbed 0.44% to $1511 an ounce. Silver was up 1.45% to $17.80.

The yield on the 10-year Treasury fell 2 basis points to 1.53%. The yield on the 2-year Treasury kept pace falling to 1.42%.

The dollar was stronger (which makes the move up in gold and silver more impressive) with the Dollar Spot Index gaining 0.17%.