Asian stocks slip to 14-month lows on simmering trade worries

Reuters TOKYO | Updated on September 12, 2018 Published on September 12, 2018

MSCI's index of emerging market shares has fallen to its lowest level since May 2017.   -  Reuters

MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.05 per cent

Asian stocks were pinned near 14-month lows on Wednesday, as investor confidence was chilled by the latest round of verbal threats in an intensifying US-China trade conflict.

MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.05 per cent, hovering near its lowest levels plumbed since July 2017 on Monday. Tokyo's Nikkei fell 0.25 per cent and Australian stocks gave up 0.3 per cent, while South Korea's KOSPI managed to eke out a modest 0.15 per cent gain.

The mood was dimmed by the verbal sparring between Washington and Beijing as the months-long escalation in trade tensions between the world's two biggest economies took their toll on riskier assets.

China told the World Trade Organization (WTO) on Tuesday it wanted to impose $7 billion a year in sanctions on the United States in retaliation for Washington's non-compliance with a ruling in a dispute over US dumping duties. Separately, US President Donald Trump told reporters on Tuesday that the United States was taking a tough stance with China.

Asian equities and the broader emerging markets have continued to sag in the wake of the trade tensions and concerns about the crises in Turkey and Argentina. MSCI's index of emerging market shares has fallen to its lowest level since May 2017. Still, other markets have shown resilience. Wall Street gained on Tuesday as Apple led a jump in technology shares and a gain of more than 2 per cent in oil prices drove up energy stocks.

“In thinking of the prospects of the trade war, it is important to distinguish the journey from the destination. The journey will remain very noisy and unsettling. But I suspect the destination will be less so,” Mohamed A. El-Erian, Chief Economic Advisor at Allianz SE, told the Reuters Global Markets Forum on Wednesday. El-Erian expects the United States to eventually secure trade concessions. He sees a 60 per cent probability of “slightly fairer but and still free trade,” a 25 per cent possibility of a global trade war and 15 per cent likelihood of a “Reagan Moment” that significantly improves the landscape for international trade.”

Forex market

In currencies, the dollar index against a basket of six major currencies was 0.15 per cent lower at 95.128, handing back the previous day's modest gains. The euro dipped 0.1 per cent to $1.1593.

The Australian dollar was down 0.25 per cent at $0.7102 after hitting $0.7085 on Tuesday, its lowest since February 2016, on concerns that any damage to the Chinese economy from a trade war could hurt Australia's exporters. The pound eased 0.1 per cent to $1.3017, pulling back from a one-month peak of $1.3087 scaled on Monday hopes over prospects for a Brexit trade deal with the European Union subsided.

Commodities market

Crude oil stretched their gains from the previous day, when the market rallied as US sanctions squeezed Iranian crude exports and after US crude oil production in 2019 was forecast to grow at a slower rate than previously expected. Brent crude futures were 0.3 percent higher at $79.31 per barrel after surging more than 2 per cent on Tuesday.

Published on September 12, 2018
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