Asian markets in reverse as China-US row returns to fore

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HONG KONG, Aug 31, 2018 (BSS/AFP) – Asian markets sank Friday as the
China-US trade row burst back into view with a report that Donald Trump wants
to impose tariffs on $200 billion of goods as early as next week.

After starting the week with three days of rallies — fuelled by hopes for
a new Canada-US-Mexico trade pact and easing Brexit fears — investors were
sent running for the hills as the row with Beijing shows no sign of letting
up.

Bloomberg News said Trump wanted to tax $200 billion of goods as soon as
public consultation ends next week, adding to the $50 billion already levied.

The report follows talks last week between the world’s top two economies –
– the first on trade since they began exchanging tit-for-tat tariffs in July
— ended with no breakthrough and will rekindle fears of a painful trade war.

Dealers were also spooked by Trump’s repeated threat to leave the World
Trade Organization if it does not “shape up”.

“One thing’s for sure – Sino-US trade developments are destined to be the
defining feature of September’s markets,” said Ray Attrill, head of foreign-
exchange strategy at the National Australia Bank.

“We are inclined to take the headlines that Trump is minded to announce
his intentions to ratchet up tariffs on China as early as next week at face
value.”

The latest comments come ahead of a summit between Trump and Chinese
President Xi Jinping in November, with some observers saying they are part of
a strategy by the tycoon to win concessions.

– Optimism takes back seat –

All three major Wall Street indexes ended down, with the S&P 500 and
Nasdaq ending a streak of four straight days of records.

The losses filtered through to Asia, where Tokyo ended the morning session
0.2 percent lower, while Hong Kong sank 1.5 percent and Shanghai lost 0.9
percent. A better-than-forecast reading on Chinese manufacturing activity was
unable to lift the gloom.

Sydney fell 0.3 percent, while Singapore and Seoul were each off 0.1
percent. Wellington, Taipei, Manila and Jakarta were also sharply lower.

“The optimism from earlier in the week after a fast negotiation led to the
US-Mexico trade agreement and positive Brexit news are now in the rearview
mirror as investors worry that global growth might be in jeopardy,” Alfonso
Esparza, senior currency analyst at OANDA, said.

In foreign exchanges the Indonesian rupiah hit its lowest level since the
Asian financial crisis 20 years ago as financial crises in Argentina and
Turkey fuel concerns about other emerging markets.

The rupiah hit 14,750 to the dollar at one point. However, Prakash Sakpal,
Singapore-based economist at ING Groep NV, told Bloomberg News “things now
are far different than 20 years ago when the crisis originated in Asia and
rupiah’s external creditworthiness was much weaker”.

The Turkish lira tumbled 1.7 percent to 6.77 to the dollar in Asia,
extending this week’s sell-off as a deputy central bank governor resigned,
with the economy facing a possible recession made worse by US sanctions. The
unit has lost about half its value this year.

High-yielding currencies are back under pressure after a brief rally
against the greenback caused by dovish comments from the head of the Federal
Reserve.
– Key figures around 0230 GMT –

Tokyo – Nikkei 225: DOWN 0.2 percent at 22,830.03 (break)

Hong Kong – Hang Seng: DOWN 1.5 percent at 27,755.90

Shanghai – Composite: DOWN 0.9 percent at 2,713.26

Euro/dollar: UP at $1.1670 from $1.1666 at 2100 GMT

Pound/dollar: UP at $1.3022 from $1.3009

Dollar/yen: UP at 111.02 yen from 111.01 yen

Oil – West Texas Intermediate: DOWN six cents at $70.19

Oil – Brent Crude: DOWN 22 cents at $77.55 per barrel

New York – Dow Jones: DOWN 0.5 percent at 25,986.92 (close)

London – FTSE 100: DOWN 0.6 percent at 7,516.03 (close)

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