- Asian markets tumbled in Tuesday trade after Donald Trump directed officials to draw up a list of a further $US200 billion worth of Chinese imports that could be targeted with further tariffs.
- Chinese stocks were hit hard, with the small-cap and tech heavy indexes the CSI500 and ChiNext closing down 6.25% and 5.75% respectively. Commodity futures tanked and benchmark global bonds rallied hard as investors fled to safety.
- The sell-off looks set to spread to Europe, with most markets down around 1% in early trade. US stock futures are also down around 1.5%.
It’s been a torrid Tuesday session for financial markets across Asia.
Stocks, commodities and cyclical currencies have all been hammered, undermined by an escalation in trade tensions between the United States and China.
The tensions now looks like they have the potential to devolve into a full-blown trade war in the blink of an eye.
“Today I directed the United States Trade Representative to identify $US200 billion worth of Chinese goods for additional tariffs at a rate of 10%,” US President Donald Trump said in a statement on Monday night.
“After the legal process is complete, these tariffs will go into effect if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced.”
In the absence of a lessening in trade tensions, it looks like the carnage seen in Asia will continue into European trade.
Stocks across the region have fallen heavily in early trade with most major markets off more than 1%.
Only three days ago, the US government announced $US50 billion worth of Chinese imports that will be subject to 25% tariffs.
That statement kicked off a wave of selling across the region shortly after markets opened.
In response, China’s government vowed to retaliate should additional tariffs be announced.
“If the United States loses its senses and publishes such a list, China will have to take comprehensive quantitative and qualitative measures and retaliate forcefully,” China’s Ministry of Commerce said.
Given the statements, escalating back-and-forth over the past few days, it was never going to be an environment conducive to anything but selling of risk assets.
As seen in the scoreboard below, that’s exactly what investors did to stocks, especially in China.
Australia ASX 200 6102.10 , -0.03%
NZ NZX 50 8863.24 , -1.24%
Japan TOPIX 1743.92 , -1.55%
Shanghai Comp 2906.43 , -3.82%
Shenzhen Comp 1592.47 , -5.86%
HK Hang Seng 29417.88 , -2.94%
Sth Korea KOSPI 2340.11 , -1.52%
Sinagpore STI 3304.15 , -0.60%
Taiwan TAIEX 10904.19 , -1.65%
Philippines PSI 7290.84 , -1.66%
Indonesia JKSE 7290.84 , -1.85%
Thailand SET 1657.27 , -1.33%
India Nifty 50 10728.7 , -0.66%
S&P 500 Futures 2744.75 , -1.26%
Small-cap and tech-heavy stock indices in China suffered the brunt of the selling pressure with the CSI500 and ChiNext closing down 6.25% and 5.75% respectively.
The benchmark Shanghai Composite Index also had a session to forget, sliding 3.82% to 2,906.43 points, leaving it at the lowest level since July 2016.
It’s now fallen 19% since January 29, leaving in on the cusp of entering another technical bear market, defined as a decline of more than 20%. At its lows today, it had fallen 19.95% since late January.
Weighed down by a sharply stronger Japanese yen, the TOPIX in Tokyo also shed 1.55%.
Large losses were also seen across all major indices apart from those in Australia and Singapore.
Mirroring the carnage in stocks, crude oil and bulk commodity futures are also trading deep in the red.
Brent Crude $74.68 , -0.88%
Gold $1,280.97 , 0.24%
Silver $16.39 , -0.08%
SHFE Rebar ¥3,765 , -3.01%
DCE Iron Ore ¥449.00 , -4.87%
DCE Coking Coal ¥1,202.00 , -3.76%
DCE Coke ¥2,091.00 , -3.84%
Chinese commodity markets were closed on Monday for a public holiday. It’s likely many investors holding long positions wish it remained that way.
Gold was the one exception to the rule, benefiting from renewed safe haven flows.
Benchmark 10-year US government bonds were also sort by investors, seeing yields fall to 2.87%, a decline of 5.7 basis points for the session (so far).
The drop in US yields did little to harm the US dollar which rose against all major Asian currencies except the Japanese yen.
Be they commodity-linked or from emerging markets, all were under pressure.
AUD/USD 0.7357 , -0.86%
NZD/USD 0.6889 , -0.76%
USD/JPY 109.58 , -0.87%
USD/CNY 6.4690 , 0.48%
USD/CNH 6.4765 , 0.35%
USD/HKD 7.8495 , 0.00%
USD/KRW 1112 , 0.90%
USD/SGD 1.3576 , 0.49%
USD/TWD 30.23 , 0.27%
USD/PHP 53.47 , 0.26%
USD/IDR 13925 , 0.43%
USD/THB 32.79 , 0.43%
USD/INR 68.24 , 0.30%
US Dollar Index 94.93 , 0.13%
The Australian dollar fell to to fresh one-year lows, extending its drop over the past 10 trading sessions to over 4%.