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By CCNUpdate 09:40 EST:  The Dow Jones opened 208 points lower on Wednesday as China threw fierce words at Donald Trump.

As of 9.31 am ET, the Dow Jones Industrial Average (DJIA) is down 208 points (0.8 percent) at 25,143. The triple-digit slide extends Tuesday’s losses and puts the Dow on track for the first monthly loss of the year.

Dow Jones, Dow

Dow is due to post its first monthly loss in 2019. | Source: Yahoo Finance

The S&P 500 is faring little better, down 16.85 points (0.6 percent) at 2,785 while the tech-heavy Nasdaq Composite index flounders at 7,545, down 61.67 (0.67 per-

cent).

China’s People’s Daily newspaper published an editorial using a threatening phrase that carries enormous historical weight in China. Simply translated it reads:

“Don’t say I didn’t warn you.”

In the same editorial, China warned it could restrict the export of “rare earths,” which contain minerals vital to the US tech and defense industries.

Dow Jones poised for triple-digit loss on Wednesday

As of 7.04 am ET, Dow Jones Industrial Average (DJIA) futures are down 142 points (0.56 percent) at 25,227. The triple-digit slide points to a sharp loss when the US stock market opens.

Dow Jones futures chart

The Dow Jones is poised for a weak open on Wednesday as China threatens the US with a historically powerful phrase. Source: Yahoo Finance

S&P 500 futures are faring little better, currently down 14 points (0.51 percent) at 2790, while the tech-heavy Nasdaq Composite Index flounders at 7,245, down 50 points (0.69 percent).

Overnight, the Asian markets were mixed. China’s Shanghai Composite (SSE) rose 1.6 percent, partially on the back of rare earths stocks. Japan’s Nikkei, however, collapsed to a triple-digit loss, down 1.2 percent.

China’s threat: “Don’t say I didn’t warn you”

The phrase might sound relatively commonplace in English, but China’s choice of words is symbolic. The Chinese Global Times newspaper (associated with China’s communist party) explains:

“Those familiar with Chinese diplomatic language know the weight of this phrase.”

It has only been used a handful of times before by Chinese media. And always in the context of grand political threats or military importance. In 1962, it was uttered before China went to war with India. And again in 1979 before the violence in Vietnam. In other words, it’s a heavy threat.

The severity of the words are ringing in the ears of Dow traders.

Dow at risk as China threatens “rare earth” supply

In the same breath, China has threatened to unleash its most powerful move yet in the trade war: restricting rare earths.

Rare earths contain 17 elements essential for smartphones, fighter jets, batteries, and electric cars. China commands 70 percent of all rare earth production and 40 percent of total reserves. According to local reports, Xi Jinping is seriously considering an export restriction.

“Based on what I know, China is seriously considering restricting rare earth exports to the US. China may also take other countermeasures in the future.” – Hu Xijin, editor in chief Global Times (Chinese state-owned media)

The move could choke the US tech industry, not to mention defense firms.

Dow poised for worst month of 2019

The news comes as the Dow Jones Industrial Average (DJIA) careens towards its first monthly loss of 2019. Down more than 3.6 percent this month, the Dow looks set to break a four-month winning streak. 

China’s rhetoric towards the US has grown angrier in recent weeks. Yesterday, a Chinese state media publication slammed the “arrogant” requests from Donald Trump.

The clash is likely to be seen by traders as a negative sign. After hopes of a quick China trade deal helped balloon the Dow near record highs, the reality is now setting in. It may be months (or years, according to some analysts) before we see the tension resolved.

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