HONG KONG (AFP) – Asian markets fell yesterday 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 in 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 and Chinese easing measures.
Tokyo ended 0.8 per cent lower, while Hong Kong and Shanghai were both off more than one per cent. Sydney lost 0.2 per cent and Singapore shed 0.8 per cent.
Manila was one per cent lower, while Seoul and Wellington barely moved.
n early European trade London fell 0.7 per cent, while Paris and Frankfurt each shed 0.6 per cent.
Concerns the tariff spat could turn into a full-blown trade war were stoked yesterday 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.”
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 per cent tariff on cars imported from the European Union. That came just after the bloc imposed levies on US products, including 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 USA. 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 USD100 billion 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 USD34 billion.
While broad markets are taking another hit, energy firms in Asia were mostly up 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 per cent on Friday while WTI climbed more than four per cent, though both contracts dipped yesterday on concerns about the impact a trade war would have on demand.
On currency markets the Turkish lira, which had lost some 20 per cent in value against the dollar this year, surged about three per cent after President Recep Tayyip Erdogan scored a decisive election victory, soothing worries of a prolonged period of political uncertainty. /
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