GLOBAL MARKETS-Stocks extend recent selloff, oil drops as China hits back after Trump tariffs

By Caroline Valetkevitch

NEW YORK, April 4 (Reuters) - Global stock markets and oil prices tumbled again on Friday as China struck back against U.S. President Donald Trump's tariffs and worries mounted about a prolonged global trade war.

The Nasdaq Composite was headed toward a bear market, while the pan-European STOXX 600 index confirmed it was in a correction as the trade war fanned global recession concerns.

Since Trump unveiled his tariffs late on Wednesday, S&P 500 companies have lost over $4 trillion in stock market value, a record two-day decline for the benchmark, exceeding a two-day loss of $3.3 trillion in March 2020, when the pandemic ripped across global markets, according to LSEG data compiled by Reuters.

Some investors fled to the safety of government bonds, while the dollar recovered from Thursday's weakness.

Responding to Trump's tariffs, China on Friday said it would impose additional levies of 34% on American goods, confirming investor fears that a full-blown global trade war is under way.

Trump slapped a 10% tariff on most U.S. imports and much higher levies on dozens of countries, erecting the steepest trade barriers in more than 100 years.

"It's sort of the worst fears of where the tariff program was headed," said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

"For those investors who were sure it was just a negotiation - while that still may be true at some point - it's getting awfully deeper into the detail and more dangerous for companies."

Data showing the U.S. economy added far more jobs than expected in March did little to brighten the mood.

Federal Reserve Chair Jerome Powell said in remarks at a business journalists' conference in Arlington, Virginia, that Trump's new tariffs are "larger than expected" and the economic fallout, including higher inflation and slower growth, likely will be as well.

He also said the U.S. central bank does not have a prediction of a downturn in its outlook but he recognized private-sector forecasters are shifting on that front.

"I think (Powell's) comments will be disappointing for those who believe that the Fed is going to step in anytime soon," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Companies with exposure to China also fell. Apple AAPL.O, Nvidia NVDA.O and Amazon.com AMZN.O were all down sharply.

Bank shares dropped across the globe as fears of a recession increased. The S&P 500 financial index .SPSY was down 6.8%, while energy .SPNY was down more than 8% as oil prices fell.

The Dow Jones Industrial Average .DJI fell 1,953.69 points, or 4.78%, to 38,601.34, the S&P 500 .SPX lost 288.97 points, or 5.35%, to 5,107.55 and the Nasdaq Composite .IXIC fell 871.79 points, or 5.25%, to 15,678.81.

MSCI's gauge of stocks across the globe .MIWD00000PUS dropped 41.22 points, or 5.1%, to 766.42.

The pan-European STOXX index .STOXX closed 5.1% lower, its biggest daily loss since the COVID-19-fuelled selloff in 2020. The index fell nearly 12% from its March 3 all-time closing high, confirming it was in correction territory.

Japan's Nikkei 225 .N225 fell 2.8% overnight for a second session running.

Brent crude futures LCOc1 fell 6.5% to settle at $65.58. U.S. crude futures CLc1 lost 7.4% to settle at $61.99, the lowest since April 2021.

The U.S. dollar recovered against the euro and yen, with Powell signalling a cautious tone on future easing. The dollar index =USD was last up 0.9% after its biggest fall since November 2022 on Thursday.

The euro EUR= was down 0.81% at $1.096. Against the Japanese yen JPY=, the dollar strengthened 0.58% to 146.9.

After years of huge flows into U.S. stocks and a booming American economy, investors are grappling with where to put their cash.

That helped drive a powerful rush towards government bond markets. The yield on the benchmark U.S. 10-year Treasury note US10YT=TWEB fell 12.2 basis points to 3.933% after falling to a six-month low of 3.86%. Yields move inversely to prices.

The German 10-year bond yield DE10YT=RR, the benchmark for the euro zone bloc, fell as much as 17 bps during the day.

Money market futures were pricing in cumulative rate cuts of 110 basis points from the Fed by the end of this year, compared with about 75 bps a week earlier.

Traders increased their bets on Bank of England and European Central Bank reductions too.

"A lot of investors I've talked to have just said in this kind of environment, let's go to cash and just wait it out," Meckler said.