* Trump imposes 10 pct tariffs on $200 bln goods from China
* China says will retaliate, but markets shrug
* China bluechip shares up 2 percent as Asia rallies
* European stocks, U.S. futures nudge higher
* Dollar flat in FX markets, government bonds make ground
* Graphic: World FX rates in 2018 LONDON, Sept 18 (Reuters) - Who's afraid of the big badtrade war? Not world stock markets, it seems.The response to U.S. President Donald Trump's decision to goahead next week with collecting 10 percent tariffs on another$200 billion of Chinese goods, ratcheting up to 25 percent inJanuary, was unusual and unexpected on Tuesday.Trump's measures initially hit U.S. stocks, Treasuries andthe dollar while stirring a rally in Chinese equities and the yuan. China then retaliated just before U.S. markets were due toopen with $60 billion worth of tariffs of its ownbut still traders barely flinched.
European stocks wobbled slightly but Wall Street futuresstill pointed to a steady startand even copper and the Aussie dollar , which have been highlysensitive to the trade tensions, made good ground."In a way it is remarkable that the market is holding up sowell," said Rabobank's Head of Macro Strategy Elwin de Groot."This is clearly a further ratcheting up of the trade warand we are now getting close to a situation where you can almostspeak of a full-fledged trade war. Clearly that is notpositive."
One theory for the becalmed reaction was that the $200billion U.S. move had been largely priced in to marketsfollowing weeks of hinting reports and social media speculation.Chinese shares had initially dipped as Asia digested thedetails but then rallied to close up 2 percent as somelocals bet on Beijing stepping up infrastructure investment tokeep the economy humming. Japan's Nikkei also ended 1.4 percent higher andMSCI's 24-country emerging market index was up for the fourthday in the last five as 1.3 percent gains in Poland andRussia added to Asia's rebound.Trump's announcement "is largely consistent with the claimsmade earlier," Citi analysts said in a note, estimating a 33basis point drag on China's economic growth from the 10 percenttariff.Taking a bigger picture view, Dutch bank ING estimated that2.5 percent of world trade was now affected by the tariffs andit will be 4 percent if Trump carries out threats to put levieson all of the U.S.'s Chinese imports."Although this percentage may seem small, the tariffs willdisrupt Sino-American supply chains, and may, therefore, triplethe effects on world trade," ING also warned.
LIQUIDATING SHORTSU.S. stock exchange futures were all around 0.2 percenthigher, with a rise in oil prices expected to lift oil majorsand on relief that the tariffs on Chinese goods had sparedhigh-tech gadgets like smart watches. China's promise to respond to the moves also came as TheSouth China Morning Post newspaper reported that Beijing wasreviewing plans to send a delegation headed by Vice Premier LiuHe to Washington for trade talks.Foreign Ministry spokesman Geng Shuang told a daily newsbriefing later that the U.S. steps had brought "new uncertainty"to talks between the two countries."China has always emphasised that the only correct way toresolve the China-U.S. trade issue is via talks andconsultations held on an equal, sincere and mutually respectfulbasis. But at this time, everything the United States does doesnot give the impression of sincerity or goodwill," he added.Not to be outdone, Trump later tweeted "There will be greatand fast economic retaliation against China if our farmers,ranchers and/or industrial workers are targeted!"Despite all the noise, the widely-tracked dollar currencyindex was broadly flat at 94.438 although on anindividual basis it rose against the Japanese yen to just over112.20 and took 1.7 percent off Turkey's troubled lira.At the same time it was down slightly against the Chineseyuan in 'offshore' markets . The sensitive Australiandollar also moved up 0.3 percent to $0.72 having alsoinitially been hit when the tariff details broke. With FX participants wary that Beijing authorities mayquickly step in to markets at any point, investors were"spontaneously" liquidating their short yuan positions said atrader at one Chinese bank."China is likely to reject the invitation from the U.S.Treasury for the new round of trade talk," OCBC Bank also saidin a note on Tuesday.
Oil prices had been down in Asia and through most of theEuropean morning session but then went on a tear as fresh signsemerged that OPEC doesn't plan to raise output to offsetshrinking supplies from Iran.International benchmark Brent futures jumped over adollar to $79.21 per barrel, while U.S. crude futures bounced up to just shy of $70 a barrel.Copper prices surged 2 percent too and gold had alsoclawed itself into positive territory at $1,200 havingbeen struggling for most of the day.<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^Ramping up tariffs ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Marc Jones; Editing by Matthew Mpoke Bigg)