Asian markets fall as trade war fears weigh on sentiment

US President Donald Trump and Chinese President Xi Jinping are embroiled in a trade war. (Photo composite: AFP)
US President Donald Trump and Chinese President Xi Jinping are embroiled in a trade war. (Photo composite: AFP)

Hong Kong - Asian markets fell Monday as fears of a global trade war continue to dog investors, with Donald Trump threatening fresh tariffs on European cars and reports he is considering curbs on Chinese investment the US.

There was little sign of relief after equities suffered a pummelling last week in response to tit-for-tat warnings by Beijing and Washington, which has fuelled concerns about the potential damage to the world economy.

The uncertainty overshadowed a modest increase in oil output agreed by OPEC and Russia - which sent energy firms surging with crude prices - and Chinese easing measures.

Tokyo ended the morning session 0.4% lower, while Hong Kong was off 0.3%. Shanghai eased 0.2% and Sydney lost 0.2%.

Singapore shed 0.5%, Seoul dipped 0.3%, Taipei was 0.8% lower and Wellington gave back 0.1%.

Concerns the tariff spat could turn into a full-blown trade war were stoked Monday following reports that the Treasury Department is looking at an emergency law beefing up scrutiny of investment by Chinese firms in sensitive US industries.

Treasury Secretary Steven Mnuchin is expected to push the plan this week, Bloomberg News reported.

"This one could well result in an escalating trade war," Lee Ferridge, a macro strategist at State Street Corp., told Bloomberg TV. "Volatility is going to continue to rise from here."

China easing 

While some observers are saying Trump's moves are part of a negotiating tactic, he has shown no sign of backing down and on Friday threatened to impose a 20% tariff on cars imported from the European Union. That came just after the bloc imposed levies on US products, including bourbon, jeans and motorcycles.

Still, late Sunday he tweeted: "The United States is insisting that all countries that have placed artificial Trade Barriers and Tariffs on goods going into their country, remove those Barriers & Tariffs or be met with more than Reciprocity by the U.S.A. Trade must be fair and no longer a one way street!"

The People's Bank of China on Sunday said it would lower the amount of cash lenders must keep in reserve as it looks to soothe investors worried about a trade conflagration.

The cut - which will free up more than $100bn (about R1.3bn) for banks - is set to come into effect on July 5, the day before new US tariffs are due to be imposed on Chinese imports worth $34bn (about R458bn).

While broad markets are taking another hit, energy firms in Asia were outperforming after OPEC agreed to increase oil production by around a million barrels a day from July.

But officials admitted actual output would likely be much lower as some countries' struggle to lift production.

Brent jumped more than three percent on Friday while WTI climbed more than four percent, though both contracts dipped Monday on concerns about the impact a trade war would have on demand.

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER

ZAR/USD
16.81
(-0.26)
ZAR/GBP
21.34
(-0.12)
ZAR/EUR
19.02
(-0.13)
ZAR/AUD
11.73
(-0.21)
ZAR/JPY
0.15
(+0.60)
Gold
1681.70
(+0.13)
Silver
17.39
(+0.17)
Platinum
815.55
(+0.35)
Brent Crude
41.90
(+5.78)
Palladium
1949.00
(+0.59)
All Share
54722.38
(+2.85)
Top 40
50199.80
(+2.79)
Financial 15
11467.53
(+4.66)
Industrial 25
74264.52
(+2.52)
Resource 10
49969.31
(+2.29)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
20% - 229 votes
I am taking a hit, but should be able to recover in the next year
25% - 298 votes
My finances have been devastated
29% - 343 votes
It's still too early to know what the full effect will be
26% - 301 votes
Vote