Global stocks fell Thursday amid heightened concerns over the escalating trade dispute between the U.S. and China.
The Stoxx Europe 600 was down 0.3% in early morning trading, while in Asia the Shanghai Composite Index dropped 2% and Hong Kong’s Hang Seng fell 2.3%.
Japan’s Nikkei and South Korea’s Kospi were also down, by 1% and 1.6% respectively.
In a sign of investor concern, Germany’s export-heavy DAX fell 1.2% despite a declining euro, which makes exports more attractive.
On Wednesday the Trump administration threatened to more than double proposed tariffs on $200 billion of Chinese goods to 25%, up from an original 10%.
While the administration didn’t give specific reasons for the potential increase, industry officials who have discussed the move with the White House say one reason is to compensate for a declining yuan. The Chinese currency has dropped over 7% against the dollar in the last three months.
President Donald Trump has expressed displeasure over the weakened currency, which makes Chinese products more competitive in global markets.
Senior administration officials said they would ask for comments from industry on both proposed tariff levels. A final decision on the rate isn’t expected until September at the earliest.
Rising U.S. interest rates have also been seen as a threat to Asian companies, as they make paying back or refinancing dollar-denominated debt more difficult.
While the Federal Reserve left short-term interest rates unchanged Wednesday, an upbeat assessment of the U.S. economy’s performance suggests another rate increase is likely at the next meeting. Analysts expect an additional two rate rises this year.
The Bank of England, meanwhile, is expected to raise interest rates later Thursday for only the second time in a decade.
Yields on 10-year U.S. edged down on Thursday to 2.994% after ticking above 3% Wednesday. Yields and prices move in opposite directions.
In currencies, the Turkish lira was down 0.7% against the dollar on Thursday–bringing its loss this year above 24%–after the White House announced Wednesday it would sanction the country over the detention of a U.S. pastor.
The WSJ Dollar Index, which measures the currency against a basket of 16 others, was up 0.2%.
In commodities, Brent crude rose 0.4% to $72.68 a barrel, but remains down 2.2% this week after an unexpected increase in U.S. inventories of crude reignited worries of oversupply. Gold edged lower 0.1% to $1,226.90 an ounce.