SHANGHAI (Reuters) – US-China tariff war gusts have put pressure on Asian equities on Tuesday, but comments by US president Donald Trump expecting trade negotiations to succeed.
PHOTO PHOTO: A man reflects on an electronic card that shows a graph analyzing the recent change of the Nikkei stock index outside a brokerage firm in Tokyo, Japan, on 7 January 2019. REUTERS / Kim Kyung -Hoon
The Chinese markets that were beaten in the initial trade lost losses amid signs of state support.
China announced today that it would impose higher tariffs on $ 60 billion of US assets after last week's Washington decision to raise its $ 200 billion in Chinese imports.
The largest MSCI index of Asia-Pacific equities outside Japan fell by 0.9% as volatile Chinese markets took a break for the noon break. The index was already down to 1.25% at its lowest since January 30th.
A bit of support for Asian markets was Trump's comments late Monday that trade talks with China "will be very successful". This helped raise US equity futures over 0.5%, although sentiment remained fragile.
Prakash Sakpal, an Asian economist at ING in Singapore, said that Monday's volatility showed how a "180-degree turn" in US rhetoric about trade negotiations has frightened the markets.
"We do not see any rapid end to this state of the markets until we see some solution, a constructive dialogue and something very solid in terms of agreements. But the hopes for this are a little misplaced at the moment", has He said.
The broader Asian markets were dragged down by the decline in Chinese equities, with the MSCI China index losing 1.6%. The blue CSI300 index of China fluctuated between losses and gains amid possible signs of state support, before concluding the morning session down 0.2%.
"Politicians might be willing to focus less on the impact of the market until things get harsher, making the rapid resolution of the current breakdown of negotiations based simply on market moves questionable," said Kerry Craig, global market strategist at JP Morgan Resource Management.
"Furthermore, as there is no clear program for meetings between Chinese and US negotiators, markets will probably be more volatile."
Australian equities lost 0.9% while the Japanese stock index Nikkei slipped by 0.8%, reaching its lowest level since mid-February.
The United States representative's office announced Monday that it plans to hold a public hearing next month on the possibility of imposing duties of up to 25% on an additional $ 300 billion of imports from China.
The tariff escalation has shaken global markets, although Trump said he will meet with Chinese President Xi Jinping next month.
On Monday, the Dow Jones Industrial Average fell 2.38% to 25.324.99, the S&P 500 lost 2.41% to 2.981,87 and the Nasdaq Composite fell 3.41% to 7647.02.
As investors crowded into safe-haven assets, US Treasury yields remained near the six-week lows at the start of Tuesday, although they rose following Trump's comments. The notes of the 10-year Treasury reference gave a return of 2.4157% compared to a US closing of 2.455% on Monday.
The two-year yield, which rises with traders' expectations of higher federal funds rates, rose to 2.1945% from a 2.93% US close. But data from the CME group continued to show a probability of more than 70% of the Fed's cut rates by the end of 2019.
After a previous reversal, US 10-year yields rose against those of three-month Treasuries. A prolonged reversal of this part of the yield curve preceded any recession in the United States over the last 50 years.
On Monday, some operators were worried that China, the largest foreign creditor in the United States, would be able to download Treasury bonds to counter the mandatory commercial position of the Trump administration. But most analysts downplayed this possibility.
"If China had started selling Treasury securities, it would galvanize both sides of US policy against China and the Fed would be sent to the market to buy bonds," said McKenna Macro strategist Greg McKenna in a note to clients. .
"This would expand its budget but allow it to neutralize China's efforts to disrupt US financial markets. So I doubt they will try to sell Treasuries."
After falling previously against the yen, the dollar strengthened 0.25% against the Japanese currency to 109.57.
The single currency increased by around 0.1% to $ 1.1238, while the dollar index, which replicates the greenback against a basket of six main rivals, remained almost unchanged at 97.313.
The Chinese yuan at sea touched a new low in 2019 at the start of Asia on Tuesday before it bounced back. It was the last trade at 6.8933 per dollar, up 0.28% on the day.
Its onshore counterpart strengthened to $ 6.8733 per dollar after hitting the four-month lows on Monday, triggering speculation that the Chinese central bank could weaken the currency amid the intensification of trade war.
Oil prices rose higher, supported by tensions in the Middle East, although gains were controlled by trade war concerns. Saudi Arabia has stated that two of its tankers are among those attacked off the coast of the United Arab Emirates, describing them as an attempt to weaken the security of supply among the tensions between the United States and Iran.
US CLc1 was 0.33% higher at $ 61.24 a barrel, while Brent crude gained 0.36% to $ 70.48 a barrel.
Elsewhere, the gold lost gains after the previous rise among the wider market jitters. The gold spot was flat at $ 1,299.35 per ounce. (GOL /) Bitcoin gained 2.2% to $ 7,984.11.
GRAPHIC: Asian stock markets – tmsnrt.rs/2zpUAr4
Additional report by Richard Leong on NEW YORK; Editing by Sam Holmes and Jacqueline Wong
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