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Asian markets rally loses steam as trade fears dog investors
HONG KONG, Aug 8, 2018 (BSS/AFP) – A rally in Asian markets stuttered on
Wednesday, with early gains pared as the US-China trade row erodes investor
confidence.
Wall Street had provided another strong lead with the Nasdaq approaching a
record high, while energy firms in Asia pressed on with their rally following
more gains in oil prices.
But after two days of gains across the region, Asia could not maintain its
morning momentum and key markets were mixed in the afternoon, despite
forecast-beating Chinese trade figures.
Tokyo ended 0.1 percent lower, Shanghai shed 1.3 percent and Singapore was
down 0.8 percent, while Wellington was also off.
Hong Kong ended up 0.4 percent, Sydney closed up 0.2 percent and Seoul put
on 0.1 percent, with Taipei, Manila and Jakarta also higher.
After months of tensions, traders remain on edge for any new developments
in the trade saga involving the world’s top two economies.
On Tuesday the US said Donald Trump’s 25 percent tariffs on a further $16
billion of Chinese goods would kick in on August 23. That is on top of the
measures imposed on $34 billion of imports last month.
The move had been widely expected. But with China putting retaliatory
measures in place, it reinforced fears the two sides are heading for an all-
out trade war that could hammer the global economy.
The White House has also lined up another $200 billion in Chinese imports
to target in future.
Kerry Craig, global markets strategist at JPMorgan Asset Management in
Melbourne, said the trade row was the biggest risk to the global economy,
adding: “We don’t expect it to fade any time soon and we do think it’s a big
worry about the sentiment it creates in the markets.”
– ‘Herd behaviour’ –
Still, China released figures showing its trade surplus with the US dipped
only slightly in July. Globally its exports rose a better-than-forecast 12.2
percent and imports surged 27.3 percent, also beating expectations.
The yuan got some support after a Bloomberg News report said the Chinese
central bank had emphasised the need for currency stability to the country’s
lenders as it looks to halt a slide in recent months.
It said officials called on them to prevent “herd behaviour” and momentum-
chasing moves in the forex markets, fearing a run on the yuan similar to
2015-16. This hammered the unit and sent global markets into a tailspin.
The report comes after Friday’s move by the People’s Bank of China to make
it harder to bet against the currency.
“This move is consistent with what the PBoC did earlier — it can be
considered as preemptive efforts made to slow the yuan’s depreciation,
prevent one-sided bets on weakness and avoid a sense of panic,” Eddie Cheung,
Asia foreign-exchange strategist at Standard Chartered in Hong Kong, told
Bloomberg.
Energy firms remain popular as oil prices rise on worries about the trade
row and a drop in Saudi Arabian output.
Both main contracts were flat in Asia after clocking up big gains on
Tuesday.
Prices also got support after the US reimposed a first round of sanctions
on Tehran after leaving the nuclear deal, with an embargo on the country’s
crude exports in November.
Trump warned other countries against doing business with Iran in the face
of the sanctions, saying they would be barred from trading with the United
States.
“The entreaty of the Americans that anyone who will do business with them
(Iran) won’t be able to do business in the US is something to watch,” said
Greg McKenna, chief markets strategist at AxiTrader.
In early European trade London dipped 0.1 percent, while Frankfurt and
Paris each fell 0.2 percent.
– Key figures at 0810 GMT –
Tokyo – Nikkei 225: DOWN 0.1 percent at 22,644.31 (close)
Hong Kong – Hang Seng: UP 0.4 percent at 28,359.14 (close)
Shanghai – Composite: DOWN 1.3 percent at 2,744.07 (close)
London – FTSE 100: DOWN 0.1 percent at 7,709.22
Euro/dollar: UP at $1.1614 from $1.1597 at 2130 GMT
Pound/dollar: DOWN at $1.2934 from $1.2938
Dollar/yen: DOWN at 111.12 yen from 111.37 yen
Oil – West Texas Intermediate: DOWN one cent at $69.16 per barrel
Oil – Brent Crude: UP two cents at $74.67 per barrel
New York – Dow Jones: UP 0.5 percent at 25,628.91 (close)
BSS/AFP/HR/1450