China's yuan drops through seven-per-dollar level

Multiple rounds of tit-for-tat tariffs between the world's top two economies have already battered trade

Multiple rounds of tit-for-tat tariffs between the world's top two economies have already battered trade More

"Based on the historic currency manipulation by China, it is now even more obvious to everyone that Americans are not paying for the Tariffs - they are being paid for compliments of China, and the taking in tens of Billions of Dollars!" the president said on Twitter, using his unconventional system of capitalization to make his point.

A weaker yuan also might disrupt Chinese efforts to shore up cooling economic growth. The president has repeatedly accused Beijing of artificially weakening its currency to offset the effects of US tariffs on its exports.

That level has no economic significance per se but might fuel trade tensions with the USA government, which complains a weak Chinese currency swells the country's exports and hurts foreign competitors.

Wall Street is also anxious over Washington's threat of higher tariffs on Beijing, following Trump's sudden announcement on Friday of a 10% tariff on an additional $300 billion worth of Chinese goods.

Chinese officials were reportedly stunned by Trump's latest salvo of tariffs, and is looking to hurt US farmers and weaken their support for the president.

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For global markets, the move opens up a new front that could dramatically raise volatility in the forex market after a prolonged period of calm, especially if it emboldens others to try to weaken their currencies to shield their economies from a global downturn.

The roots of the dispute come from USA president Donald Trump's "America first" project to protect the US' position as the world's leading economy, while encouraging businesses to hire more workers in the United States and to manufacture their products there. Earlier tariffs more heavily affected businesses, which have already pulled back on their investment given all the uncertainties about trade and the global economy.

Hit particularly hard were tech stocks.

"It appears the Chinese authorities no longer see the need to limit the tools at their disposal and that the currency is now also considered part of the arsenal to be drawn upon", Rob Carnell, chief economist and head of research, Asia Pacific at ING, said in a note.

Monday's plunge in bond yields dragged on banks by making lending less profitable. The central bank said in a statement that Monday's weakness was mostly because of "trade protectionism and new tariffs on China". "So one-sided, it should have been stopped many years ago!" he wrote.

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Companies are in the final stretch of the latest round of quarterly earnings reports and the results haven't been as bad as initially feared. Profit for companies in the S&P 500 is now expected to contract by roughly 1%.

Spot gold rose 1.4 percent to trade at $1,460.11 (£1201.67) per ounce at around 8:15 am ET (1.15pm BST) which marked its highest level since May 2013. Crude oil fell as a weaker global economy would mean less demand for energy. West Texas Intermediate crude fell 85 cents to $54.85 U.S. a barrel. Seoul's Kospi was 2.5% lower at 1,948.97. Brent crude, used to price worldwide oils, shed 72 cents to $61.17 in London.

The pan-European STOXX 600 index fell 2.13 per cent, putting it on pace for its largest two-day decline in over three years.

In Europe, France's CAC 40 fell 2.2%, and the German DAX lost 1.8%.

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