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Asian markets tumble as China-US trade tariffs loom

Asian markets tumble as China-US trade tariffs loom

HONG KONG, July 2: Asian markets kicked the week off with sharp losses Monday as investors prepare for the US to impose hefty tariffs on a range of Chinese imports, taking their trade row to another level, reports AFP. The levies on billions of dollars of goods, which are due Friday, come after data at the weekend showed Chinese manufacturing activity slowed in June as the world’s number two economy shows signs of struggling. Fears of a trade war have rattled world markets and particularly China’s, which are now in bear territory having fallen 20 percent from their recent highs. “China’s economy will slow down for the rest of the year, but we don’t need to worry about any stall yet,” Zhu Qibing, chief macroeconomy analyst at BOC International China in Beijing, said. “The key is how international trade and the dispute between China and the US will evolve.” On Monday, Shanghai dived 2.5 percent, while the Chinese yuan extended a retreat that has led some observers to suggest the country’s central bank is weakening the unit to offset the impact of a trade war. While China is a key target in Donald Trump’s protectionist America First agenda, he has also set his sights on allies including the European Union and Canada, which on Friday imposed hefty tariffs on $12.6 billion of US goods in retaliation for US measures on aluminium and steel. Tokyo stocks closed down over two percent on Monday as Chinese stocks tumbled ahead of the expected imposition of US tariffs and confidence among Japan’s biggest manufacturers slipped. The benchmark Nikkei 225 index dropped 2.21 percent, or 492.58 points, to end at 21,811.93, while the broader Topix index was down 2.06 percent, or 35.60 points, to 1,695.29. “Caution remains strong over the Trump administration’s trade policy towards China,” said Makoto Sengoku, market analyst at Tokai Tokyo Research Institute. “It is hard to predict exactly how the real economy as well as market sentiment would be affected” with the US administration poised to roll out tariffs on some $34 billion of Chinese imports on Friday, he told AFP. A quarterly survey from the Bank of Japan showed confidence among major manufacturers slipping for the second straight quarter, but Sengoku said its negative impact on markets was small compared with the broader concerns over global trade. The headline reading in the June report came in at a slightly worse-than-expected 21, down from 24 in March. “The reading was not a positive factor but didn’t fall so deeply, despite the tough conditions in the April-June period ranging from the US-China trade spat to concerns over Europe” after the political shake-up in Italy, Sengoku said. The yen has not strengthened enough to dampen Japanese exports, underpinning exporters’ sentiment, he added. The dollar was trading at 110.73 yen against 110.61 yen in New York on Friday. In Tokyo share trading, Nissan dropped 2.31 percent to 1,053 yen while Toyota fell 1.42 percent to 7,068 yen. Nintendo was down 1.24 percent to 35,750 yen and Sony lost 1.21 percent to 5,595 yen. Telecom giant SoftBank rose 0.33 percent to 8,000 yen while electronics components maker Murata inched up 0.13 percent to 18,645 yen. The Bank of Japan’s Tankan report — a quarterly survey of about 10,000 companies — showed a dip in confidence from the previous three months, though economists pointed out that it is still around its highest level in more than a decade. In other markets Seoul dropped 2.4 percent, Sydney shed 0.3 percent and Singapore retreated 0.9 percent, while Taipei gave up 0.5 percent and Wellington was flat. Hong Kong was closed for a public holiday. In early European trade London fell 0.7 percent, Paris shed one percent and Frankfurt lost 1.3 percent. On currency markets the euro dipped slightly but held most of Friday’s gains following data showing inflation rising and news that European Union leaders had reached a migration deal. However there are worries about the future of German Chancellor Angela Merkel’s coalition government after her conservative interior minister offered to resign on Sunday over the issue. Merkel had warned last week the issue of migration could decide the very future of the EU itself. The Mexican peso rose one percent against the dollar as anti-establishment leftist Andres Manuel Lopez Obrador swept to the presidency, with his main rivals conceding defeat and removing the risk of any dispute. Oil prices retreated after Trump tweeted at the weekend that Saudi Arabia’s King Salman had agreed to his request to open the taps wider. The price drop comes after last week’s surge on the back of figures indicating surging US demand and OPEC’s decision to hike output by a more modest amount than initially thought. Investors are also awaiting the release Friday of US jobs data, which will provide another snapshot of the US economy and could provide the Federal Reserve with more ammunition to hike interest rates. Meanwhile, US stock index futures were lower on the first trading day of the second half of this year, as worries of a trade war between the United States and other major economies did not let up. Shanghai’s blue chip index .CSI300 fell 2.9 percent, days before the U.S. tariff on $34 billion worth of Chinese goods comes into effect, posing threats of a similar response from Beijing. U.S.-listed shares of Chinese technology companies were in the red. Alibaba was down 1.7 per cent, while JD.com fell 2.2 percent. Chipmakers, which depend on China for a large portion of their revenue, also slipped with Intel down 0.2 percent and shares of both Qualcomm and AMD falling about 1 percent. Trade war worries were also being compounded by a threat from the European Union to hit the United States with almost $300 billion in retaliatory tariffs. On Friday, Canada struck back at the Trump administration over U.S. steel and aluminum tariffs, vowing to impose punitive measures on C$16.6 billion ($12.63 billion) worth of American goods. It was the first day of the new month, quarter and half-year but there was no respite for bruised investors after the worst start to a year for world shares since 2010. “The trading in the new quarter is getting off to an ugly start as hostile trade talks and retaliation by trading partners weigh on the markets. These effects are sending shock waves across the global markets,” Peter Cardillo, chief market economist at First Standard Financial in New York, wrote in a note. Also weighing on the sentiment was lower crude prices, as Trump said Saudi Arabia has promised to raise oil production if needed. Brent crude LCOc1 fell 0.9 percent, after gaining more than 5 percent last week. The Mexican peso whipsawed after Andres Manuel Lopez Obrador was elected president on Sunday, setting the stage for the most left-wing government in the country’s democratic history at a time of tense relations with the United States. At 7:05 a.m. ET, Dow e-minis 1YMc1 were down 148 points, or 0.61 percent. S&P 500 e-minis ESc1 were down 14.5 points, or 0.53 percent and Nasdaq 100 e-minis NQc1 were down 48.25 points, or 0.68 percent. Dell Technologies Inc jumped 14.7 percent after the world’s largest privately held technology company said it would buy out the holders of shares that track the performance of VMware Inc using a mix of cash and equity in Dell. VMware shares had risen 14.3 percent in premarket trading. Tesla shares were up 6.3 percent after the electric carmaker produced 5,000 Model 3 sedans in the last week of its second quarter, hours after deadline, two workers at the factory told Reuters.

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