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Lack of US-China trade deal weighs on Asian markets
HONG KONG, May 13, 2019 (BSS/AFP) – Markets in Asia were down on Monday as
the lack of a US-China trade deal cast a cloud over nervous traders.
Investors watched the latest developments warily in the trade war between
the world’s top two economies, after negotiations in Washington ended Friday
without agreement and a tariff hike on Chinese imports went into effect.
Almost all Asian markets were lower as the week’s trading began, with
Tokyo’s benchmark Nikkei 225 index closing down 0.7 percent.
Shanghai was down 1.2 percent, Singapore shed one percent, while Taiwan
and Seoul both dropped 1.4 percent.
White House economic advisor Larry Kudlow said US President Donald Trump
and China’s Xi Jinping could meet next month on the sidelines of the G20
summit to hash out their differences on trade — but no new talks are yet
scheduled.
With another round ending without a deal, markets are underpricing how
long the US-China trade talks may drag on, Eleanor Creagh, a Sydney-based
Australia market strategist at Saxo Capital Markets, told Bloomberg
Television.
The “underlying relationship is going to be fraught with much deeper
tensions,” she said.
Trump had accused Beijing of reneging on its commitments and ordered new
punitive duties — which took effect Friday — on $200 billion worth of
Chinese imports, raising them to 25 percent from 10 percent.
He then ordered a tariff hike on almost all remaining imports from China,
which are worth about $300 billion, according to US Trade Representative
Robert Lighthizer.
– Retaliatory measures –
Beijing’s top trade negotiator, Vice Premier Liu He, had warned earlier
that Beijing “must respond” to any US tariffs — while China’s state media
blamed Washington for the lack of progress.
“US-China trade relations will continue centre stage this week with most
other data and events relegated to a distant second place,” said OANDA senior
market analyst Jeffrey Halley.
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“China will no doubt announce retaliatory measures while the US may
provide more concrete start dates for the newly-imposed tariffs. Markets can
expect short-term whipsaw price action as the street hangs on every little
comment emanating from Washington DC and Beijing.”
Amid nervousness in China markets, state funds reportedly intervened to
prop up shares on Monday and again Friday, when the Shanghai Composite closed
up more than 3 percent.
“Trade talks have come to a deadlock and it’s unlikely we’ll see the
situation turn for the better in the near term,” said Raymond Chen, a
portfolio manager with Keywise Capital Management Beijing Ltd.
“Now all eyes will turn to China’s policies and how it will stimulate
domestic consumption to maintain its growth.”
The yuan dropped 0.6 percent in offshore trading Monday after having lost
about 2.4 percent in May, making it one of the worst performing currencies in
the world.
Japan yen — often a safe haven in time of crises — extended gains after
capping its fourth weekly advance against the dollar on Friday.
Traders will also be watching this week for earnings reports from Chinese
tech giants Tencent and Alibaba, and key data on China’s industrial
production and retail sales slated for Wednesday — the same day figures are
due for US retail sales and industrial production.
In Europe, stock markets rose at the start of trading on Monday, with
London and Frankfurt both opening up 0.1 percent.
– Key figures around 0720 GMT –
London – FTSE 100: UP 0.1 percent at 7,212.68 points
Tokyo – Nikkei 225: DOWN 0.7 percent at 21,191.28 (close)
Shanghai – Composite: DOWN 1.2 percent at 2,903.71 (close)
Hong Kong – Hang Seng: closed for a public holiday
Euro/dollar: DOWN at $1.1232 from $1.1239 at 2100 GMT Friday
Pound/dollar: DOWN at $1.3001 from $1.3006
Dollar/yen: DOWN at 109.70 yen from 109.96 yen
Oil – West Texas Intermediate: UP 20 cents at $61.85 per barrel
Oil – Brent Crude: UP 55 cents at $71.17 per barrel
New York – Dow: UP 0.4 percent at 25,942.37 (close)
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