Asian stocks slide as US imposes more tariffs on EU products

Asian stocks tumbled to a one-month low on Thursday as already-growing market fears about global growth were fanned by the US announcement of new import tariffs on products from the European Union.

MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.60 per cent. Japan's Nikkei stock index closed down 2.00 per cent, the biggest one-day decline since August 26. Australian shares slumped 2.07 per cent to a five-week low.

The pan-region Euro Stoxx 50 futures were down 0.38 per cent, while FTSE futures were off 0.34 per cent.

US stock futures were up 0.22 per cent, but this did little to bolster sentiment after shares on Wall Street suffered their sharpest one-day decline in nearly six weeks on Wednesday, when the three major New York share indexes all lost more than 1.5 per cent.

“The stock markets have been spooked by the US manufacturing data a few days ago, and that is why they are trading like this before non-farm payrolls on Friday,” said Sean Darby, global equities strategist at Jefferies in Hong Kong.

“On the positive side, there are signs that Brexit may not be as hard as we thought, but the markets seemed to be focused more on the negatives than the positives.”

Yields on two-year US Treasury yields fell as weakening data on manufacturing and the jobs market suggested the trade war with China has damaged the US economy.

Oil futures extended their decline as a bigger-than-expected increase in US crude inventories and growing evidence of slowing economic growth point to lower energy demand.

The dollar was little changed at 107.13 yen after sliding to a fresh one-week low as investor anxiety deepened over fresh signs of slowing US economic growth and the broadening of global trade frictions.

The US-China trade war has cast a shadow over global growth prospects and on Wednesday there was an escalation of the trade dispute between Washington and the EU as President Donald Trump's administration announced it would impose tariffs on $7.5 billion of goods.

Washington will enact 10 per cent tariffs on Airbus planes and 25 per cent duties on French wine, Scotch and Irish whiskies and cheese from across the continent as punishment for illegal EU aircraft subsidies.

EU manufacturers are already facing US tariffs on steel and aluminium and a threat from Trump to penalise EU cars and car parts.

The tariffs announced on Wednesday were approved by the World Trade Organisation but could still cause friction across the Atlantic.

The chance that Europe will respond in kind will fuel worries there could be prolonged damage to global growth.

“Tariffs could be a source of tension between the US and the EU,” said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management Co in Tokyo.

The two-year yield fell to 1.4680 per cent, approaching a two-year low of 1.4280 per cent, after a weak US private sector jobs report depressed boosted expectations that the Federal Reserve will cut interest rates this month.

Traders see a 72.8 per cent chance the Fed will cut rates by 25 basis points to 1.75 per cent-2.00 per cent in October, up from 39.6 per cent on Monday, according to CME Group's FedWatch tool.

Bets on a rate cut could rise further if US non-farm payrolls due on Friday show weakness in the labour market.

Hong Kong shares fell 0.6 per cent as anti-government demonstrators clashed with police into the early hours of Thursday, venting anger over a policeman's shooting and wounding of a teenager.

The financial hub has been rocked by months of protests over China's rule of the former British colony.

China's financial markets are closed until Monday for a public holiday.

Brent crude fell 0.21 per cent to $57.60 per barrel. In addition to a slowing global economy, energy traders are worried about an oversupplied market and the chance of geopolitical friction in West Asia.

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