AFP / Hong Kong
The increasingly fractious trade row between China and the United States was the main focus of Asian investor angst yesterday, with most markets down to extend the previous day’s steep losses, though oil edged back from a painful sell-off.
With little hope for a quick turnaround in the standoff the economic superpowers appear to be digging in their heels as they exchange barbs, blaming each other for the breakdown in tariff negotiations while the Huawei crisis shows no sign of letting up.
On top of that, investors have been spooked by weak economic data in Europe and the United States that reinforced concerns about a global slowdown, with the IMF warning the trade standoff will “jeopardise” 2019 growth.
“The trade war is going to cause growth to slow, both in the US and China, and therefore globally — there is no doubt about that,” Komal Sri-Kumar, founder of Sri-Kumar Global Strategies, told Bloomberg TV.
“The trade war is taking on new dimensions.”
Having taken a hammering on Thursday — with energy and tech firms among the worst hit — Asian markets continued to struggle yesterday. Tokyo closed 0.2% lower, Sydney lost 0.6% and Seoul fell 0.7%. Singapore and Wellington dipped 0.4% and Manila gave up 0.7%.
But Hong Kong rose 0.4% in the afternoon and Shanghai swung through the day to end marginally higher.
Mumbai climbed, Taipei and Singapore each added 0.2%, and Jakarta and Bangkok both edged up slightly. The tepid performance followed a sharp drop on Wall Street, where all three main indexes lost more than 1%.
Investors were also spooked by an index of US manufacturing activity hitting a nine-year low in May and Germany posting weak factory figures.
And there are warnings about the outlook for equities as China and the United States continue to hit out at each other.
“China’s stance on the talks has been clear — if the US wants to resume talks, they should show sincerity and correct their wrong practices,” commerce ministry spokesman Gao Feng said on Thursday.
Meanwhile US Secretary of State Mike Pompeo rejected Huawei’s statements about its relationship with China’s government and said any data touched by the company is “at risk” of falling into the wrong hands.
Huawei “is deeply tied not only to China but to the Chinese Communist Party”. Uncertainty on trading floors has fuelled a rally in bonds with yields on the 10-year Treasury touching their lowest level in 19 months, indicating rising demand for the safe-haven assets.
Oil enjoyed a bounce of more than 1% yesterday, but only made a slight dent in the huge falls suffered the day before — WTI shed 5.7% and Brent lost 4.5% — that were caused by concerns about the impact of the trade war on demand.
Angst over the tariffs row, along with surging US stockpiles and production, has overshadowed tensions in the Middle East, sanctions on Venezuela and Iran and and Opec output cap.
Sterling inched higher but continued to wallow around four-month lows against the dollar with Prime Minister Theresa May on the precipice after her revised Brexit deal was widely criticised and much of her party calling for her to step down.
In Tokyo, the Nikkei 225 closed down 0.2% to 21,117.22 points; Hong Kong — Hang Seng ended up 0.4% to 27,370.62 points and Shanghai — Composite ended flat at 2,852.99 points yesterday.
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