Asia markets fall in morning trade as concerns over a US-China trade war rise

Asian markets traded mostly lower on Monday, following a global sell-off late last week amid fears that rising tensions between the United States and China could lead to a full-blown trade war.

In Australia, the benchmark ASX 200 was down 0.57 percent at 5,787.30 in afternoon trade. The heavily weighted financial sector was down 0.93 percent.

Major banking stocks in the country fell — shares of ANZ declined 0.94 percent, Commonwealth Bank was down 1.04 percent and the National Australia Bank dropped 1.02 percent. Westpac shares were down 0.64 percent.

In Japan, the Nikkei 225 retraced some of its early losses to trade down 0.4 percent in mid-morning trade. The Topix index was down 0.67 percent. Across the Korean Strait, the Kospi reversed early losses to climb 0.2 percent, bucking the general downward trend across the region.

Chinese mainland markets also opened lower, with the Shanghai composite down 1.17 percent while the Shenzhen composite fell 0.49 percent. In Hong Kong, the Hang Seng index declined 0.25 percent. Beijing on Friday said it may target 128 U.S. products with an import value of $3 billion in response to President Donald Trump’s executive order earlier this month that imposed broad duties on foreign aluminum and steel imports.

Trump had also announced tariff plans for up to $60 billion in Chinese imports, although China did not officially connect its Friday threats of retaliation to that White House action.

On Saturday, some of the world’s top economists and business leaders at the China Development Forum in Beijing warned about the risks of a trade war between the two economic powerhouses. Nobel-prize winning economists Robert Shiller and Joseph Stiglitzpredicted pain ahead for the U.S. economy if Beijing and Washington ramp up tit-for-tat trade penalties.

Still, Michael Froman, who served as U.S. Trade Representative during President Barack Obama’s second term in the White House, told CNBC that the Trump administration’s concerns about China were “legitimate.”

One market commentator said there was “clearly a fair amount of damage done” from the week’s developments, after markets sold off in Asia, Europe and the United States.

“Whether this is the sole cause of latest risk market ructions is debatable,” Ray Attrill, head of foreign exchange strategy at the National Australia Bank, wrote in a morning note. He added that others were suggesting confidence in continued strong synchronized global growth may be slipping, following disappointing economic data.

He added that “rising geopolitical tension” should also be noted, following the tapping of John Bolton to be Trump’s new national security advisor.

“This has heightened concerns that Trump will formally repudiate the 2015 nuclear deal with Iran that Bolton is on record as saying was a mistake,” Attrill said.

In the currency market, the dollar index traded at 89.434, falling from levels above 90.3 in the previous week.

Among currency majors, the Japanese yen traded at 104.94 to the dollar, strengthening from levels above 106 last week. Major export stocks in the country traded mostly lower — Toyota shares fell 0.44 percent, Honda declined 0.86 percent while Canon erased early gains to trade down 0.39 percent.

A relatively strong yen is usually a downside for exporters because it reduces their overseas profits when converted into the local currency.

Analysts at Singapore’s DBS Bank said in a morning note that risk aversion is likely to persist in the markets amid the U.S.-China trade tensions.

“As long as Washington and Beijing keep up their tit-for-tat trade war rhetoric and actions, safe haven play is likely to drive the Japanese yen stronger against the euro and the Australian dollar,” they said in the note.

The euro/yen pair traded at 129.79 while the Australian dollar/yen traded at 81.06.

Elsewhere, the Australian dollar fetched $0.7724 and the euro traded at $1.2368.

Oil prices were mostly lower on Monday morning with U.S. crude down 0.17 percent at $65.77 a barrel. Global benchmark Brent traded near flat.

Source: CNBC