Chinese stocks tumble as trading resumes under a cloud

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United States and Chinese naval ships had a close encounter at sea, and speculation that the U.S. could further hike interest rates rattled emerging markets. "Any time you see concern about that, you'll see the reversal of that trade". Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.9523, 1.37 percent weaker than the midpoint.

U.S. Vice President, Mike Pence in his speech last week increased Washington's pressure crusade against Beijing on Thursday by hinting malign Chinese efforts to emasculate Donald Trump before congressional elections that are about to take place next month. Dealers were given a negative lead from Wall Street, where all three main indexes ended with sharp losses following news that unemployment had hit a 49-year low and wages saw healthy gains.

On Monday, the yuan sank to a 22-month low of 6.93 to the dollar, making one yuan worth about 14.4 cents. Tokyo was closed for a public holiday.

The "very timely" RRR cut is big enough to help boost confidence in the economy, said Xu Hongcai, deputy chief economist at the China Centre for International Economic Exchanges, a Beijing think tank.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., October 3, 2018.

Friday's US non-farm payrolls showed job creation slowed in September, likely from Hurricane Florence's impact on restaurant and retail payrolls, but the Labor Department report also showed a rise in wages that could keep the Federal Reserve on track for more interest rate hikes.

"There's a hangover from last week's rapid move in yields and just because the bond market's closed, doesn't mean investors are not anxious", said Michael Antonelli, managing director, institutional sales trading at Robert W. Baird in Milwaukee.

The row has hit China's stock market and currency, and there are tentative signs it is affecting China's economy.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.3 percent, after major stock markets around the world fell for a second straight day on Friday.

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On Monday, the blue-chip CSI300 index opened 2.3 percent lower and at midday was down 3.6 percent at 3,315.01 points.

In currency markets, the dollar was 0.1 percent stronger against the yen at 113.83, while the euro was 0.08 percent weaker against the dollar at $1.1514.

The dollar index rose 0.12 percent, with the euro down 0.25 percent to $1.1494.

Washington and Beijing have imposed punitive tariffs of up to 25 percent on billions of dollars of each other's goods in an escalating fight over US complaints China steals or pressures companies to hand over technology.

Foreign demand for another type of Chinese assets will be tested later this week, when the nation markets a sale of dollar bonds.

USA gold futures settled down 1.41 percent at $1,188.60 an ounce.

Oil dropped, pressured by expectations that some Iranian oil exports will keep flowing after the United States re-imposes sanctions, easing a strain on supplies.

USA crude was down 0.8 percent at $73.74 a barrel.

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