Asian markets were mixed yesterday as investors are gripped by concerns about the US-China trade war after Donald Trump said he was prepared to walk away from next month’s planned talks.
The president’s comments spooked US investors and added to the sense of pessimism across world trading floors after the White House last week announced fresh tariffs on China and labelled it a currency manipulator.
Beijing responded by halting all purchases of US agricultural goods.
Trump said Friday it would be “fine” if the negotiations were called off, telling reporters: “We’re not ready to make a deal but we’ll see what happens.” He added: “We have all the cards. We’re doing well.”
Market negativity is providing support to safe haven gold, which is sitting at a six-year high around $1,500.
The downbeat mood is being slightly offset by central banks’ shift to softer monetary policy though there are growing concerns about the outlook for the global economy.
There was also some solace in remarks from key China hawk and top Trump adviser Peter Navarro, who said he still expected the talks to go ahead.
However, he raised concerns about Beijing’s weak yuan and warned officials needed to move on key issues including subsidies to state firms, forced technology transfer and cyber intrusion.
“Equities remain sensitive to trade headlines even as some of the initial shock announcement of a new offensive to be launched on September 1 has worn off,” said OANDA senior market analyst Alfonso Esparza.
“But with no clear olive branch being offered by either side the trade dispute has no end in sight, putting downward pressure on equities.”
Hong Kong ended down 0.4% at 25,824.72 and Cathay Pacific sank almost 5% after China imposed new rules banning airline staff involved in the city’s protests from flights to or over the mainland. Shanghai closed up 1.5% at 2,814.99 while Seoul put on 0.2% and Sydney added 0.1%. But Taipei, Wellington and Jakarta were slightly lower.
Tokyo, Mumbai, Bangkok, Manila, Kuala Lumpur and Singapore were closed for public holidays.
On currency markets the pound inched up against the dollar but remains under pressure after Britain last week said the economy contracted in the second quarter for the first time in nearly seven years, hit by the trade row and Brexit uncertainty.
Sterling is now wallowing around levels not seen since the start of 2017 and is headed for its lowest point in more than 30 years with the country looking set to leave the European Union without a divorce deal, which most observers say will be economically disastrous.
“The combination of a slowing economy, global economic weakness, the increasing chance of a cut to interest rates and the risk of a no-deal Brexit will continue to anchor sterling,” Neil Wilson, chief market analyst at Markets.com, said in a note.
“No-deal talk is the biggest concern – remove that and we get a big bounce even with the economic and monetary risks.”
The euro weakened after Italy’s far-right Interior Minister Matteo Salvini pulled his support for the coalition government Friday and called for snap elections.
The news fuelled a fresh political crisis and sent Italian bond yields in the deeply indebted country.
Oil prices dipped on worries about the impact of the trade war on demand and following Friday’s rally that came on the back of producer kingpin Saudi Arabia’s pledge to lower output.
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