Trade War Erupts: Markets Spiral as China Retaliates

Hong Kong and Chinese stocks plummeted on Monday following China's retaliatory tariffs against the U.S., sparking fears of a recession. Major indices suffered significant losses, reflecting investor anxiety over the escalating trade war and its potential impact on global growth and the economies of the world's largest nations.

Hong Kong and Chinese stocks plummeted on Monday as Beijing retaliated against U.S. tariffs with its own trade levies, igniting fears of an escalating trade war that could trigger a global recession.

Hong Kong's Hang Seng index dropped nearly 9%, with technology, solar, banking, and online retail shares hit hard. HSBC shares in Hong Kong plunged 13%, heading towards their worst daily decline since 2009, while Standard Chartered fell over 16%.

China's CSI300 blue-chip index slid more than 5%, pressured by broad-based selling across sectors. The yuan hit its lowest since January, and the bond market rallied as China's response to U.S. tariffs reached over 50% on imported goods.

This intensifying dispute between the world's two largest economies threatens trade flow stability and could curtail Chinese earnings, worsening global demand amid China's slow growth. Heavy trading volumes marked Monday's sessions, exacerbated by Friday's global market sell-off during China's market holiday.

The situation remained dire across sectors, with solar companies and household appliance manufacturers recording losses around 10%, and oil and gas shares taking a hit on recession fears impacting oil prices. The Hang Seng volatility index reached its highest point since October.

With no indication of a compromise from Washington, investors focused on Beijing's potential measures to bolster Chinese exports and support the domestic economy. Shares of online giants Alibaba and Tencent dropped over 10%.

(With inputs from agencies.)