China shares, yuan fall as United States tariff deadline looms

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Gold and yuan

The risk aversion selloff triggered across the board, with forty-seven of the 50 blue-chip stocks fell as Chinese currency took another beating, with traders gripped by fears of an all-out trade war of China with the U.S., and anxious about the dimming outlook for the Chinese economy. US tariffs on $34 billion of Chinese products are expected to take effect on July 6, with China set to retaliate with duties of its own on the same value of American goods.

Uncertainty on trade policy, most recently related to foreign investment in US technologies, as well as concerns that retaliation could intensify to the point that global economic growth is negatively affected, have weighed on investor sentiment in recent weeks. After the comments, the onshore yuan gained 0.2% to 6.6500 per dollar.

The benchmark CSI300 Index .CSI300 was down 1.3 percent by 0637 GMT, and the Shanghai Composite Index .SSEC was off 1 percent.

On equity markets, Hong Kong dived as much as 3.3 percent at one point to nine-month lows, hit also by a USA move to block China Mobile from offering services to the US market.

MSCI's broad index of shares in Asia Pacific excluding Japan edged down by 0.69 percent, but it remained above the nine-month lows it touched last week.

Hong Kong's markets were closed for a holiday.

The sustained fall in stocks and the yuan appeared to be rattling the authorities. "I think this will continue at least until the July 6 deadline".

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TOKYO, July 4 (Reuters) - Major currencies marked time on Wednesday while the Chinese yuan recovered from 11-month lows, after efforts by authorities the previous day to calm financial markets which had been rattled by worries about trade wars.

"It feels like the state-owned banks are stocking up on bullets to prevent the yuan from falling too much", said one trader at a Chinese bank in Shanghai.

Traders and economists say major state-owned banks sometimes act on behalf of the central bank in the foreign exchange interbank market.

The yuan was last traded at 6.6960 per dollar. Analysts expect China to reciprocate, marking the official start of a trade war.

In a move that may further inflame trade tensions, President Donald Trump's administration has recommended blocking China Mobile from offering telecommunications services from within the US citing security concerns. But prices came off the $75 level, triggered initially by rumours of US Strategic Petroleum Reserve (SPR) drawdown, then moved lower after Saudi Arabia said it's prepared to use its spare production capacity, estimated at 2 million barrels per day, to balance the global oil market and all but confirming President Trump's weekend tweets that he asked Saudi Arabia to increase oil production.

Elsewhere in currency markets, the euro, which had been pressured by political uncertainty in Germany, pared losses after Chancellor Angela Merkel's conservatives settled a row over migration that threatened to topple her governing coalition after interior minister Horst Seehofer dropped his threat to quit.

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