HONG KONG, China (AFP) — The increasingly fractious trade row between China and the United States was the main focus of Asian investor angst Friday, with most markets down to extend the previous day’s steep losses, though oil edged back from a painful sell-off.
With little hope for a quick turnaround in the standoff the economic superpowers appear to be digging in their heels as they exchange barbs, blaming each other for the breakdown in tariff negotiations while the Huawei crisis shows no sign of letting up.
On top of that, investors have been spooked by weak economic data in Europe and the United States that reinforced concerns about a global slowdown, with the IMF warning the trade standoff will “jeopardise” 2019 growth.
“The trade war is going to cause growth to slow, both in the US and China, and therefore globally — there is no doubt about that,” Komal Sri-Kumar, founder of Sri-Kumar Global Strategies, told Bloomberg TV.
“The trade war is taking on new dimensions.”
Having taken a hammering Thursday — with energy and tech firms among the worst hit — Asian markets continued to struggle in early trade.
Shanghai slipped 0.2 percent, Tokyo went into the break 0.7 percent lower, Sydney lost 0.7 percent and Seoul fell 0.8 percent. Singapore and Wellington each dipped 0.3 percent and Manila dived 1.5 percent.
But Hong Kong rose 0.3 percent, Taipei added 0.2 percent and Jakarta edged up 0.1 percent.
The tepid performance followed a sharp drop on Wall Street, where all three main indexes lost more than one percent, with investors also spooked by an index of US manufacturing activity hitting a nine-year low in May.
And there are warnings about the outlook for equities as China and the United States continue to hit out at each other.
“China’s stance on the talks has been clear — if the US wants to resume talks, they should show sincerity and correct their wrong practices,” commerce ministry spokesman Gao Feng said Thursday.
Oil prices edge up
Meanwhile US Secretary of State Mike Pompeo rejected Huawei’s statements about its relationship with China’s government and said any data touched by the company is “at risk” of falling into the wrong hands.
“To say that they don’t work with the Chinese government is a false statement,” he said. Huawei “is deeply tied not only to China but to the Chinese Communist Party”.
Uncertainty on trading floors has fuelled a rally in bonds with yields on the 10-year Treasury touching their lowest level in 19 months, indicating rising demand for the safe-haven assets.
Oil enjoyed a bounce of more than one percent Friday, but only made a slight dent in the huge falls suffered the day before — WTI shed 5.7 percent and Brent lost 4.5 percent — that were caused by concerns about the impact of the trade war on demand.
Angst over the tariffs row, along with surging US stockpiles and production, has overshadowed tensions in the Middle East, sanctions on Venezuela and Iran and and OPEC output cap.
Sterling continued to wallow around four-month lows against the dollar with Prime Minister Theresa May on the precipice after her revised Brexit deal was widely criticised and much of her party calling for her to step down.
Reports said May would set out her timetable for leaving later Friday at a meeting with party grandees, but markets are increasingly worried her successor will be a hardline Brexiter who will drag Britain out of the EU without a divorce deal.
“May’s departure is fully priced into the pound but what follows from that is not, in particular once we — presumably — have a ‘hard Brexit’ Tory holding the prime ministership,” said National Australia Bank’s Ray Attrill.
“Markets will almost inevitably have to move to price in a much greater chance of a no-deal Brexit even if this is not what ultimately eventuates, suggesting lower levels ahead for all things sterling.”
Key figures around 0230 GMT
Tokyo – Nikkei 225: DOWN 0.7 percent at 21,004.47 (break)
Hong Kong – Hang Seng: UP 0.3 percent at 27,338.62
Shanghai – Composite: DOWN 0.2 percent at 2,848.31
Pound/dollar: UP at $1.2663 from $1.2660 at 2100 GMT
Euro/pound: DOWN at 88.31 pence from 88.32 pence
Euro/dollar: DOWN at $1.1180 from $1.1182
Dollar/yen: UP at 109.71 yen from 109.59 yen
Oil – West Texas Intermediate: UP 60 cents at $58.51 per barrel
Oil – Brent Crude: UP 70 cents at $68.46 per barrel
New York – Dow: DOWN 1.1 percent at 25,490.47 (close)
London – FTSE 100: DOWN 1.4 percent at 7,231.04 (close)
© Agence France-Presse