ICEC

Asian markets down on first trading day of Sept. on further trade worries

Asian markets were largely negative in midday trade on Monday, with Canada and the U.S. failing to come to a trade agreement on Friday, and worries on further escalation in the U.S.-China trade war.

Japan’s Nikkei 225 traded in negative territory, down by 0.65 percent as most of its major sectors were lower. South Korea’s Kospi also traded lower by 0.72 percent.

In Australia, the ASX 200 pared some of its earlier gains to trade largely flat.

The Greater China markets were down during midday trade as Hong Kong’s Hang Seng index fell 0.95 percent. On the mainland, the Shanghai composite was lower by 0.94 percent and the Shenzhen composite tumbled by 1.253 percent.

Some investors, however, say the slide in Chinese stocks is potentially unjustified.

“Companies that operate outside China, I think have been sort of, a bit unfairly hurt,” said Erwin Sanft, managing director and senior portfolio manager at E Fund Management, on CNBC’s “Squawk Box.”

“There’s been (this) assumption that, because we have trade disputes breaking out and being extended, that somehow these companies which do business outside China are all going to be hurt,” he added.

In reality, Sanft said: “A lot of them are much more robust.”

After going past a U.S.-imposed deadline last Friday for Canada to join a trade deal that had been reached between the U.S. and Mexico, more talks between Ottawa and Washington are set to continue this week.

U.S. President Donald Trump notified Congress last Friday that he wants to sign a trade agreement with Mexico, and potentially Canada, in 90 days — the legal period required for a deal to be reviewed.

And if trade tensions with China worsen, that might weigh on emerging market currencies.

“With heightened US-China trade tensions running in the background (with the consult on another $200bn of tariffs on China) any relief that NAFTA might present this Wed (assuming Canada reaches an agreement) could prove to be fleeting,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank.

“And if Trump tightens the screws on China, (emerging markets) risks could flare up again, with EM Asia currencies perhaps bearing the brunt of the burn,” he added.

Echoing this sentiment, Gavin Parry, managing director at the Parry Group, told CNBC’s “The Rundown” that “the trade side of things is still very much bringing a massive uncertainty to the table when it comes to, you know, underlying forecasts for growth.”

Despite the trade tensions, stocks saw their best August performance in years over on Wall Street.

The Dow Jones Industrial Average ended Friday down by 22 points, but was still up 2.1 percent for the month. The S&P 500 closed 0.01 percent higher that day and was up by 3 percent for the month.

Both the Dow and S&P 500 recorded their best performances for the month of August since 2014. The Nasdaq Composite saw even greater gains, closing Friday 0.26 percent higher and ending the month over 5.7 percent up — its best performance for August since 2000.

The U.S. dollar index, which tracks the greenback against a basket of currencies, was at 95.151 as of 12:18 p.m. HK/SIN, after reaching a low of around 94.52 last week.

The Japanese yen gained against the dollar at 110.89 yen while the Australian dollar was largely flat at $0.7190 as of 12:19 p.m. HK/SIN.

Source: CNBC

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