Hong Kong (AFP) – Asian investors ended a tumultuous week on a cautious note Friday as the prospect of a debilitating global trade war hung over regional markets.
As European Union tariffs on key US goods — including jeans, bourbon and motorcycles — came into effect, there were fears China and the US will carry through with their own threats, locking the world’s three biggest economies in a potentially destructive face-off.
The EU move was in retaliation to Donald Trump’s decision to hit steel and aluminium imports from the bloc, and comes after the US and China traded tit-for-tat threats on hundreds of billions of dollars of goods.
That exchange sparked an international market retreat and fuelled worries a full-blown flare up could pummel the global economy just as it is getting back on its feet after the global financial crisis.
“We have a trade war — and it’s an escalating trade war,” SEB chief economist Robert Bergqvist told AFP in an interview.
“Investors… are more cautious today, they are waiting for the right time to reduce their exposure in stock markets.”
New York’s three main indexes ended down — with the Dow suffering an eighth straight loss — as investors were spooked by news that Daimler had cut its profit forecasts because of new levies on cars exported from the US to China.
“We heard from Daimler about the impact of the trade tensions on sales, and there are a growing number of stories about the chance of China directly targeting US firms who do business in the country,” said Greg McKenna, chief market strategist at AxiTrader.
“What comes to pass is still uncertain in that regard. What’s not uncertain, though, is the resolve of US Commerce Secretary Wilbur Ross to pursue China and try to change it — and other nations’ — actions.”
– Upbeat outlook –
Tokyo ended 0.8 percent lower and Sydney lost 0.1 percent, while Singapore and Taipei each dropped 0.4 percent.
But after fluctuating through the day Hong Kong was slightly higher in late trade, while Shanghai ended up 0.5 percent. Both markets took the brunt of selling pressure over the week.
Among other markets Seoul rose 0.8 percent, Wellington was flat, and Manila and Bangkok pushed higher.
In early European trade London rose 0.4 percent, Paris gained 0.3 percent and Frankfurt was flat.
While an air of negativity stalked trading floors, John Chong, head of the investment-banking arm Maybank Kim Eng, was more upbeat for the outlook.
“Asia is now better positioned to weather the volatility,” he said at a conference in London.
“We believe investors will see real value emerging in Asian corporates after the recent market tantrums and should capitalise on the opportunity.”
On currency markets, the pound extended gains after rising on the back of news that the Bank of England’s top economist had backed lifting interest rates despite Brexit uncertainty.
The euro was also higher after eurozone ministers declared the end of Greece’s eight-year debt crisis with debt relief and a big cash payout as part of a broad bailout exit deal.
Oil prices rallied more than one percent ahead of an output decision from the Organization of the Petroleum Exporting Countries, which kicks off a key meeting in Vienna later in the day.
Kingpin Saudi Arabia and non-member Russia are pushing to raise an 18-month-old ceiling but others want to keep the status quo.
But Benjamin Lu, a commodities analyst at Phillip Securities Singapore, told AFP: “We’re starting to see some consensus from the market on a slight production boost.
“Investor sentiment is shifting and they’re no longer expecting a one million barrel a day hike. In our perspective, we’re going to see a gradual, progressive increase.”
However, there are concerns of a split in the cartel — which accounts for about 40 percent of global production — with Iran’s oil minister walking out of a key meeting over the issue.
– Key figures around 0720 GMT –
Tokyo – Nikkei 225: DOWN 0.8 percent at 22,516.83 (close)
Hong Kong – Hang Seng: UP 0.2 percent at 29,363.19
Shanghai – Composite: UP 0.5 percent at 2,889.76 (close)
London – FTSE 100: UP 0.4 percent at 7,585.71
Euro/dollar: UP at $1.1633 from $1.1607 at 2100 GMT
Pound/dollar: UP at $1.3282 from $1.3245
Dollar/yen: UP at 110.00 yen from 109.96 yen
Oil – West Texas Intermediate: UP 89 cents at $66.42 per barrel
Oil – Brent Crude: UP 97 cents at $74.02 per barrel
New York – Dow Jones: DOWN 0.8 percent at 24,461.70 (close)