Asian, European stocks plunge as China-US trade war fears brew

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HONG KONG, June 19, 2018 (BSS/AFP) – Hong Kong and Shanghai stocks led a
sell-off across Asian and European markets Tuesday on rising trade war fears
after Donald Trump threatened fresh tariffs on Chinese imports and Beijing
warned of countermeasures.

Trump said he had asked the US Trade Representative to identify $200
billion worth of imports to be targeted, adding he would hit a further $200
billion if Beijing retaliates.

Investors were already on edge after the world’s top two economies on
Friday announced tit-for-tat measures on goods valued at about $50 billion as
the US president pushes ahead with his protectionist America First agenda.

“The trade relationship between the United States and China must be much
more equitable,” he said in explaining his decision.

China slammed the threats as “blackmail” and warned that if the US followed
through with the tariffs it would “have no choice but to take comprehensive
measures of a corresponding number and quality and take strong, powerful
countermeasures”.

The development took some by surprise and stoked fears of a potentially
damaging trade war between the world’s top two economies.

“That was quick and sudden, reminding us just how quickly things can get
right out of hand,” said Stephen Innes, head of Asia-Pacific trading at
OANDA.

“Indeed, this is moving beyond ‘tit-for-tat’ levels and, predictably,
investors are running for cover under the haven umbrellas as global equity
indices are crumbling under the weight of an escalating trade war.

“Buckle up as this could get messy.”

– ZTE tanks again –

Trading floors were a sea of red as Hong Kong dived 3.1 percent and
Shanghai plunged 3.8 percent — ending around its lowest since mid-2016 — as
traders on both markets returned from a long weekend.

Hong Kong-listed shares in Chinese telecoms equipment maker ZTE dived 24
percent after US senators voted to reimpose a seven-year ban on high-tech
chip sales to the company.

The move defied the White House’s decision this month to replace the ban
with a $1.4 billion fine, providing a lifeline to the firm, which was
threatened with collapse as it relies on the crucial US hardware.

ZTE has now lost around 60 percent since trading in it resumed last week
after a two-month suspension that came in following the initial ban.

Tokyo was 1.8 percent lower while Seoul sank 1.5 percent, Singapore slipped
0.1 percent and Taipei fell 1.7 percent while Manila lost 1.7 percent.
Bangkok and Wellington were also sharply lower. Sydney was marginally down.

And in early European trade London fell 0.8 percent, Paris shed 1.3 percent
and Frankfurt was 1.5 percent off.

“Will it escalate from here? We’d certainly hope not, but it’s certainly a
risk,” said Craig Vardy, head of fixed income in Australia for BlackRock.

“The numbers we think at the moment are pretty small. These are just
warning shots going across the bows as some of these countries try and
correct some of the trading numbers.”

Concerns about the effects of a trade war on the US economy weighed on the
dollar, which fell against the yen, pound and euro.

“The market is expected to remain nervous for a while as we can’t see an
end to the dispute,” Masakazu Satou, senior analyst at Gaiame Online, told
AFP.

Oil prices edged down on concerns about the impact on demand from a
collapse in trade, while dealers are also looking ahead to a crucial OPEC
meeting that starts Friday.

Crude got a bounce Monday on hopes that a hike in an output ceiling will be
more gradual than first feared.

– Key figures around 0720 GMT –

Tokyo – Nikkei 225: DOWN 1.8 percent at 22,278.48 (close)

Hong Kong – Hang Seng: DOWN 3.2 percent at 29,353.13

Shanghai – Composite: DOWN 3.8 percent at 2,907.82 (close)

London – FTSE 100: DOWN 0.8 percent at 7568.17

Euro/dollar: DOWN at $1.1593 from $1.1615 at 2100 GMT

Pound/dollar: DOWN at $1.3224 from $1.3243

Dollar/yen: DOWN at 109.66 yen from 110.56 yen

Oil – West Texas Intermediate: DOWN 52 cents at $65.33

Oil – Brent Crude: DOWN 60 cents at $74.74 per barrel

New York – Dow Jones: DOWN 0.4 percent at 24,987.47 (close).

 

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