ASEAN BIZ-STOCK MARKET: Hong Kong – Asian markets mostly down as US tariffs spark new trade war fears

A man looks at an electronic stock board showing Japan’s Nikkei 225 index at a securities firm in Tokyo. – AP

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HONG KONG (AFP) – Asian markets fell yesterday as fears of a trade war blasted back to the fore after Donald Trump imposed stiff tariffs on European, Mexican and Canadian steel and aluminium.

The move sparked immediate countermea-sures by Mexico and Canada, while the European Union (EU) threatened a similar response, throwing up the prospect of a painful conflict between some of the world’s biggest economies.

French President Emmanuel Macron labelled the move “illegal”.

It also overshadowed news that Italy’s populist parties had reached a deal to revive a coalition government and avoid a snap election that many had feared could be used as a referendum on the country’s euro membership.

However, while some say the measures – which followed US warnings that tariffs on some Chinese goods were still up in the air – are a White House ploy to gain the upper hand in ongoing talks, others warn the issue could escalate further.

“While markets overreacted to the Italian mess a couple of days back, it strikes me they might be under-reacting to the real – distractive – negatives of this trade skirmish developing into a trade war,” said Greg McKenna, chief market strategist at AxiTrader.

“My guess is that many traders and investors see this as another negotiating tactic from the Trump Administration,” he said.

“But we are now genuinely faced with the type of tit-for-tat trade spat, of which there will be few winners and which could materially impact global growth and relations.”

McKenna also warned Trump was at risk of being overwhelmed as he fights several battles at once, with North Korea, Iran and the Russia investigation at home among the other pressing issues demanding his attention.

Tokyo ended down 0.1 per cent while Sydney lost 0.4 per cent.

Shanghai fell 0.7 per cent, with no early boost to the companies listed for the first time on MSCI’s Emerging Markets Index.

Their inclusion means major investors wanting to track the index will now have to buy stocks in the more than 200 mainland firms, though their weighting for now is miniscule, making up just 0.4 per cent.

“In the future, we will see more funds pour in, but not initially,” said Jackson Wong, securities analyst with Huarong International Securities. He added that foreign investors remain cautious over China’s volatile equities, where government meddling and the irrational decisions of millions of individual retail punters often trump fundamentals.

“The upside is limited. A lot of people are playing the wait-and-see game and they are in no rush to get into A-shares right away,” he said.

Singapore was 0.1 per cent off and Wellington dropped 0.3 per cent, but Seoul edged up 0.7 per cent.

Hong Kong recovered in the afternoon to end up 0.1 per cent.

Investors were looking ahead to yesterday’s release of US jobs data, hoping for an idea of Federal Reserve interest rate policy.

A Group of Seven finance ministers meeting is due to take place at the weekend, with analysts looking for a possible fracture as Trump embarks on a unilateral “America First” agenda.

On currency markets the euro was holding its ground, having surged from 10-month lows on the news from Rome, which brought some much-needed relief after days of uncertainty.

However, the single currency was facing pressure as Spanish lawmakers appeared set to kick out Prime Minister Mariano Rajoy in a no-confidence vote after his party was hit by a series of corruption scandals.

In early European trade Milan surged 2.3 per cent, while London and Frankfurt each jumped 0.6 per cent, and Paris climbed 0.7 per cent. / June 2, 2018

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