HONG KONG, Aug 5, 2019 (BSS/AFP) – Asian markets plummeted Monday as the
Chinese yuan fell sharply, days after US President Donald Trump’s vow to
impose fresh tariffs on goods from China sent trade war fears soaring.
Trump’s announcement, which came on Thursday, means virtually all of the
$660 billion in annual merchandise trade between the world’s two biggest
economies will be subject to punitive tariffs, with the latest duties due to
take effect September 1.
The news saw all three major Wall Street indices slump to their lowest
levels since June, with the S&P 500 and Nasdaq recording their worst weekly
losses of 2019 on Friday.
In China, the yuan dropped to its lowest level to the dollar since August
2010, fuelling speculation that Beijing was devaluing its currency to support
exporters and offset Trump’s latest threat to hit $300 billion in Chinese
goods with 10 percent tariffs.
The US leader regularly accuses the Chinese central bank of artificially
weakening the yuan — charges long denied by Beijing.
The onshore yuan tumbled to 7.0307 against the dollar — its lowest level
since 2008 — while the more freely traded offshore yuan tumbled to 7.1085,
breaching the 7.0 level which investors see as a key threshold in currency
value.
Multiple rounds of tit-for-tat tariffs between the world’s top two
economies have already battered trade, with China’s American imports
shrinking 30 percent in the first half of the year.
Beijing has vowed to hit back if Washington goes ahead with its latest
threat, while news that demand for US exports had weakened underscored
concern that trade was becoming a trouble spot for economies worldwide.
– ‘A lot messier’ –
“China is likely to drag out their response and retaliate in many ways
against the US trade measures,” warned Edward Moya, senior market analyst at
OANDA.
Although negotiators from both nations are expected to reconvene in
Washington in early September for another round of talks after last week’s
discussions in Shanghai, investors remain nervous, Moya said.
“Financial markets are still working on pricing in a complete collapse of
trade talks amongst the Chinese and Americans,” he said.
“The base case still remains for a deal to get done, but talks are likely
to get a lot messier before we see anything… that resembles a deal.”
The yuan’s depreciation spurred a sell-off across Asian markets, with Hong
Kong losing more than three percent as pro-democracy protesters targeted the
financial hub’s transport network, launching a city-wide strike aimed at
forcing concessions from its embattled pro-Beijing government.
Tokyo and Seoul shed 2.4 percent while Shanghai fell 0.8 percent.
Singapore dropped 1.9 percent while Taipei and Bangkok were also down.
– Key figures around 0300 GMT –
Tokyo – Nikkei 225: DOWN 2.4 percent at 20,590.87 (break)
Hong Kong – Hang Seng: DOWN 3.1 percent at 26,097.07
Shanghai – Composite: DOWN 0.8 percent at 2,844.38
Pound/dollar: DOWN at $1.2153 from $1.2162 at 2100 GMT Friday
Euro/dollar: UP at $1.1127 from $1.1106
Dollar/yen: DOWN at 105.88 yen from 106.59 yen
Brent North Sea crude: DOWN seven cents at $61.19 per barrel
West Texas Intermediate: DOWN 59 cents at $55.07 per barrel
New York – Dow: DOWN 0.4 percent at 26,485.01 (close)
London – FTSE 100: DOWN 2.3 percent at 7,407.06 (close)