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Asian stocks bruised on Trump's fresh trade war threats


Traders work on the floor of the New York Stock Exchange, (NYSE). Photo: Reuters

Traders work on the floor of the New York Stock Exchange, (NYSE). Photo: Reuters

Traders work on the floor of the New York Stock Exchange, (NYSE). Photo: Reuters

Asian shares came under renewed pressure on Friday as a report US President Donald Trump was preparing to step up a trade war with Beijing sent Chinese stocks lower and partially erased gains made in this week's global rally.

Many emerging market currencies were also frail after Argentina's peso sank on Thursday despite the central bank's interest rate hike.

European shares are expected to open lower, with major European stock index futures falling 0.2pc in early trade.

MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.7pc, for monthly drop of 1.5pc.

The index has underperformed MSCI ACWI, a gauge of the world's 47 markets, for four months in a row as Sino-US trade worries hit Chinese shares.

The Shanghai composite index had fallen to near a two year low hit earlier in the month but recovered some of the day's losses later in the session.

"China's stock market has priced in a very bad situation as if the Chinese economy was going into a hard landing, which I don't think will be the case," said Chi Lo, an economist at BNP Paribas Asset Management.

While trade jitters dominated market sentiment, indicators suggests activity in the world's second largest economy remained firm.

The official Purchasing Managers' Index (PMI) on Friday showed growth in China's manufacturing sector unexpectedly picked up in August after a two-month slide.

Still, investors remained cautious as they expect more risks from the trade frictions down the road.

Japan's Nikkei closed down 0.02pc.

US S&P500 e-mini futures were slightly weaker a day after the S&P 500 lost 0.44pc from Wednesday's record close of 2,914.

Pouring cold water on a rally in global shares that started in the middle of the month were hostile comments from Trump on trade.

Bloomberg reported that Trump said he was ready to impose more tariffs on $200bn worth of goods from China as soon as the public comment period on the plan ends next week.

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"So far, Trump has carried out what he said he would do," said Ayako Sera, market economist at Sumitomo Mitsui Trust Bank. "Even though there are some doubts the US trade representative could come up with new tariffs so quickly, I suspect worries about a trade war will start to eclipse optimism based on strong US economic data."

Trump also threatened in an interview with Bloomberg on Thursday to withdraw from the World Trade Organization if "they don't shape up" -- a move that would further undermine one of the foundations of the modern global trading system.

In addition, he said the European Union's proposal to eliminate auto tariffs is not good enough and called its trade policies "almost as bad as China."

Those remarks hosed down any positive sentiment following negotiations over the North American Free Trade Agreement (NAFTA).

The cautious mood helped lift the yen, which rose 0.6pc on Thursday, its biggest daily rise in about six weeks. In Asian Friday trade, it stood flat at 110.98 per dollar .

The euro was little changed at $1.1665, having shed 0.33pc in the previous session.

The common currency has recovered from a 13-1/2-month low of $1.1301 hit in mid-August but looks set to end the month little changed from end-July.

Emerging market currencies had less luck, with currencies relying on foreign capital to finance their current account deficit hit the hardest.

The peso, the world's worst-performing currency this year due to the country's poor economic health, fell 10pc on the day, bringing its month-to-date losses to 27pc.

Argentina's central bank at an emergency meeting on Thursday voted unanimously to raise its benchmark rate to 60pc from 45pc, however, the unexpected move failed to stabilise the peso.

That knocked the Brazilian real to near its record low touched in September 2015. It is down almost 10pc this month.

The Turkish lira, which has been hit by concerns over President Tayyip Erdogan's interference in monetary policy and his diplomatic spats with Washington, also slipped towards record low marked about two weeks ago.

The lira bounced back more than 2pc to 6.4992 per dollar in volatile trade, though it has fallen 9pc so far this week. It was hit lately by reports central bank deputy governor was leaving the bank.

In Asia, the Indonesian rupiah fell to three-year low even as the country's central bank said it was "decisively" intervening to support the currency. The rupiah has lost two percent so far this month.

The Indian rupee hit a record low, having fallen 3.4pc so far this month.

Oil prices steadied after hitting their highest levels in more than a month the previous day on growing evidence of disruptions to crude supply from Iran and Venezuela and after a fall in US inventories.

Brent crude oil traded almost flat at $77.70 a barrel while US crude stood at $70.26 a barrel, little changed from previous close.

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