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By Luoyan Liu and Andrew Galbraith
SHANGHAI, May 6 (Reuters) - Chinese investors dumped stocks and sold the country’s yuan in early trade on Monday, while seeking safety in bonds, as U.S. President Donald Trump’s tariff threats roiled Asian financial markets.
China’s blue-chip CSI300 index tumbled 3.5 percent at the opening bell, while the Shanghai Composite Index shed 3.0 percent. Hong Kong’s Hang Seng index plunged 2.5 percent.
China’s currency, the yuan, dropped to 6.7980 to the dollar in early trade, its weakest level in 3-1/2 months , while the 10-year treasury futures opened up 0.41 percent.
Trump dramatically increased pressure on China to reach a trade deal by announcing on Sunday he would hike U.S. tariffs on $200 billion worth of Chinese goods this week and target hundreds of billions more.
The move marked a major escalation in trade tensions between the world’s two largest economies and a shift in tone from Trump, who cited progress in talks as recently as Friday.
He also said he would target a further $325 billion of Chinese goods with 25 percent tariffs “shortly”.
Escalating tensions, the Wall Street Journal reported on Monday that China was considering cancelling trade talks scheduled for this week following Trump’s threats.
Chinese officials were scheduled to meet their U.S. counterparts in Washington on Wednesday after meeting in Beijing last week for a round that Treasury Secretary Steven Mnuchin described as “productive.”
Investors have been particularly concerned about a re-escalation in Sino-U.S. trade relations, especially since robust gains in Chinese equities this year were partly due to optimism they would reach a deal.
“In the near term, investors are rightfully worried since the lingering threat of a trade war weighed on risk assets in 2018, especially in Asia,” Tai Hui, Chief Market Strategist, Asia Pacific, J.P. Morgan Asset Management, said in a note. (Luoyan Liu, Andrew Galbraith and Samuel Shen; Editing by Sam Holmes)