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Asian markets sink again ahead of crucial trade talks
HONG KONG, May 9, 2019 (BSS/AFP) – Asian markets once again fell into the
red on Thursday as investors anxiously await the start of high-stakes trade
talks between China and the United States.
After several rounds of negotiations, the two-day meeting in Washington,
which kicks off later in the day, has taken on huge significance after Donald
Trump threatened to ramp up tariffs on Chinese goods from Friday blaming
backsliding by Beijing.
The president’s remarks Sunday battered global equities and fuelled fears
the economic superpowers — who appeared just last week to be nearing a deal
— could become entangled in a brutal trade war with worldwide consequences.
While Trump has looked to soothe concerns — telling a rally Wednesday
that “whatever happens, don’t worry about it. It will work out. It always
does” — investors are on edge.
China, for its part, said an escalation was “not in the interests of the
two countries’ people” but warned it would impose “necessary countermeasures”
if the tariffs on $200 billion of goods were more than doubled Friday.
On Thursday it denied backtracking on the talks and said it had “kept
promises”.
Commenting on the visit to Washington of China’s top negotiator, Neil
Wilson, chief market analyst at Markets.com, said: “So is Liu He really
coming to do a deal? I think probably it’s (a) case of gaining a reprieve in
order to avert the rise in tariffs.
“It looks like we are yet a wee bit away from a comprehensive trade deal.
But the Vice Premier’s visit and the prospect of tariffs being hiked is all a
bit of an unknown right now and the market positioning is defensive as a
result.”
Hong Kong stocks were hammered more than two percent while Shanghai ended
1.5 percent lower and Tokyo sank 0.9 percent.
Seoul plunged more than three percent, while Singapore, Taipei, Jakarta,
Mumbai and Manila were also sharply lower. But Sydney and Wellington each
chalked up 0.4 percent gains.
London was 0.5 percent lower in the morning, Paris dived more than one
percent and Frankfurt slipped 0.7 percent.
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ASIA-MARKETS-UPDATE 2 LAST HONG KONG
– Both sides hungry –
OANDA senior market analyst Jeffrey Halley said that markets “could move
sharply, either way, depending on the news flows, with equities and oil the
most vulnerable to the outcome of the trade talks”.
Still, there is still some optimism that the talks will eventually end in
a deal.
“Both sides are so hungry to get this thing done,” said Welles Orr, a
senior trade official under President George H.W. Bush.
“The incentive is strong for the US, because they’ve made such good
headway. On the other hand, the Chinese want to show they can be serious
negotiators and deliver on their commitments.”
The uncertainty flowing through trading floors weighed on currency markets
with higher-yielding, riskier units such as the Australian dollar, South
Korean won and Indonesian rupiah all down against the greenback.
China’s yuan also extended losses and is sitting at a four-month low.
On oil markets both main contracts resumed their downward spiral with the
trade war fears overshadowing a drop in US inventories, which had helped
spark a pick-up in the market Wednesday.
However, there are expectations that prices will recover.
“As (the) trade war simmers, Asia’s unquenching demand for oil supply
stands tall, suggesting much stronger market conditions than initially
thought,” Stephen Innes of SPI Asset Management said in a note.
“From a fundamental point of view, OPEC supply discipline (in capping
output) is still in check, and US supplies show tighter markets than
expected, while Asia demand is still robust.”
– Key figures around 0810 GMT –
Tokyo – Nikkei 225: DOWN 0.9 percent at 21,402.13 (close)
Hong Kong – Hang Seng: DOWN 2.4 percent at 28,311.07 (close)
Shanghai – Composite: DOWN 1.5 percent at 2,850.95 (close)
London – FTSE 100: DOWN 0.5 percent at 7,233.61
Euro/dollar: UP at $1.1196 from $1.1193 at 2100 GMT
Pound/dollar: UP at $1.3008 from $1.3004
Dollar/yen: DOWN at 109.72 yen from 110.10 yen
Oil – West Texas Intermediate: DOWN 66 cents at $61.46 per barrel
Oil – Brent Crude: DOWN 69 cents at $69.68 per barrel
New York – Dow: FLAT at 25,967.33 (close)
BSS/AFP/HR/1445