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Asian markets down as US tariffs spark fresh trade war fears
HONG KONG, June 1, 2018 (BSS/AFP) – Asian markets fell on Friday as fears
of a trade war blasted back to the fore after Donald Trump imposed stiff
tariffs on European, Mexican and Canadian steel and aluminium.
The move sparked immediate countermeasures by Mexico and Canada, while the
European Union threatened a similar response, throwing up the prospect of a
painful conflict between some of the world’s biggest economies.
French President Emmanuel Macron labelled the move “illegal”.
It also overshadowed news that Italy’s populist parties had reached a deal
to revive a coalition government and avoid a snap election that many had
feared could be used as a referendum on the country’s euro membership.
However, while some say the measures — which followed US warnings that
tariffs on some Chinese goods were still up in the air — are a White House
ploy to gain the upper hand in ongoing talks, others warn the issue could
escalate further.
“While markets overreacted to the Italian mess a couple of days back, it
strikes me they might be under-reacting to the real — distractive —
negatives of this trade skirmish developing into a trade war,” said Greg
McKenna, chief market strategist at AxiTrader.
“My guess is that many traders and investors see this as another
negotiating tactic from the Trump Administration,” he said.
“But we are now genuinely faced with the type of tit-for-tat trade spat,
of which there will be few winners and which could materially impact global
growth and relations.”
– Eyes on jobs and G7 –
McKenna also warned Trump was at risk of being overwhelmed as he fights
several battles at once, with North Korea, Iran and the Russia investigation
at home among the other pressing issues demanding his attention.
Hong Kong was slightly lower and Tokyo ended down 0.1 percent while Sydney
lost 0.4 percent.
Shanghai fell 0.7 percent, with no early boost to the companies listed for
the first time on MSCI’s emerging market index.
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Their inclusion means major investors wanting to track the index will now
have to buy stocks in the more than 200 mainland firms, though their
weighting for now is miniscule, making up just 0.4 percent.
“In the future, we will see more funds pour in, but not initially,” said
Jackson Wong, securities analyst with Huarong International Securities. He
added that foreign investors remain cautious over China’s volatile equities,
where government meddling and the irrational decisions of millions of
individual retail punters often trump fundamentals.
“The upside is limited. A lot of people are playing the wait-and-see game
and they are in no rush to get into A-shares right away,” he said.
Singapore was 0.1 percent off and Wellington dropped 0.3 percent, but
Seoul edged up 0.7 percent and Taipei was 0.7 percent higher.
Investors are now looking ahead to the Friday release of US jobs data,
hoping for an idea of Federal Reserve interest rate policy.
A Group of Seven finance ministers meeting is due to take place at the
weekend, with analysts looking for a possible fracture as Trump embarks on a
unilateral “America First” agenda.
On currency markets the euro was holding its ground, having surged from
10-month lows on the news from Rome, which brought some much-needed relief
after days of uncertainty.
However, the single currency was facing pressure as Spanish lawmakers
appeared set to kick out Prime Minister Mariano Rajoy in a no-confidence vote
after his party was hit by a series of corruption scandals.
In early European trade Milan surged 2.3 percent, while London and
Frankfurt each jumped 0.6 percent, and Paris climbed 0.7 percent.
– Key figures around 0720 GMT –
Tokyo – Nikkei 225: DOWN 0.1 percent at 22,171.35 (close)
Hong Kong – Hang Seng: FLAT at 30,461.08
Shanghai – Composite: DOWN 0.7 percent at 3,075.14 (close)
Milan – FTSE MIB: UP 2.3 percent at 22,281.06
London – FTSE 100: UP 0.6 percent at 7,725.38
Euro/dollar: DOWN at $1.1680 from $1.1695 at 2100 GMT
Pound/dollar: DOWN at $1.3286 from $1.3293
Dollar/yen: UP at 109.18 yen from 108.81 yen
Oil – West Texas Intermediate: DOWN one cent at $67.03 per barrel
Oil – Brent Crude: UP five cents at $77.61 per barrel (new contract)
New York – Dow Jones: DOWN 1.0 percent at 24,415.84 (close)
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