BIZ-STOCKS: SINGAPORE -Asian stocks rise amid fears of more China, US tariffs
People cross the road in front of an electronic board showing the Hong Kong share index outside a bank in Hong Kong. – AP
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SINGAPORE (AP) – Most Asian markets were higher yesterday despite signs that China and the US were preparing to impose more tariffs on each other’s products.
KEEPING SCORE: Japan’s Nikkei 225 bucked the regional trend, losing 0.3 per cent to 22,697.88. South Korea’s Kospi added 0.3 per cent to 2,288.57. Hong Kong’s Hang Seng gained 0.7 per cent to 28,212.37. The Shanghai Composite Index rebounded 2.1 per cent to 2,830.29. Australia’s S&P-ASX 200 increased 0.3 per cent to 6,283.90.
WALL STREET: US indexes finished mostly lower. The S&P 500 index lost 0.4 per cent to 2,804.49 on Thursday. The Dow Jones Industrial Average gave up 0.5 per cent to 25,064.50. The Nasdaq composite dipped 0.4 per cent to close at 7,825.30. The Russell 2000 index of smaller-company stocks gained 0.6 per cent to 1,701.31. Smaller companies tend to do better than larger ones when trade tensions flare up because they do a greater proportion of their sales in the US.
YUAN DECLINES: The People’s Bank of China set the Chinese currency’s central parity rate to 0.9 per cent weaker against the dollar yesterday. This sent ripples through Asian markets. If the yuan continues to depreciate, goods exported to China will become more expensive to consumers there. Chinese exports would also be relatively cheaper, possibly balancing out suggested increases in tariffs by the Trump Administration.
ANALYST’S TAKE: “One theory is that the PBOC is depreciating the yuan because it has not enough ammunition to fight a dollar-for-dollar increase in tariffs. The markets are very risk-off. There is a loss in confidence right now,” said Francis Tan, an economist at UOB Bank.
AUTO TARIFFS REJECTED: The US Commerce Department sought feedback on President Donald Trump’s plans to consider taxing auto imports on Thursday. Critics lined up to urge the administration to reject auto tariffs. They argued that the taxes would raise car prices, squeeze automakers by increasing the cost of imported components and invite retaliation from US trading partners – and allies – like the European Union and Canada. The Alliance of Auto Manufacturers rejected the levies on car, truck and auto parts imports, saying the view was shared by over 2,200 comments it had received.
WEEK AHEAD: Investors are keeping an eye on the European Central Bank policy meeting and data on how the US economy performed in the second quarter. They will also be looking out for more US corporate earnings, such as those from tech giants like Google, Amazon and Facebook.
INTEREST RATES: In an interview with CNBC on Thursday, President Trump said that he was “not happy” about Federal Reserve’s recent interest rate increases. The Fed has raised its benchmark rate for a second time this year and projected two more increases in 2018. Its rate hikes are meant to prevent the economy from overheating and igniting high inflation. But rate increases also make borrowing costlier for households and companies and can weaken the pace of growth. The president acknowledged that his comments about the Fed would likely raise concerns, as the central bank has long been operating free of political pressure.
CURRENCIES: Trump’s comments caused the greenback to decline slightly. The US dollar extended its losses yesterday, easing to 112.35 yen from 112.46 yen. The euro rose to USD1.1655 from USD1.1644.
OIL: Benchmark US crude added 10 cents to USD68.34 per barrel in electronic trading on the New York Mercantile Exchange. On Thursday, the contract settled at USD68.24 a barrel. Brent crude, used to price international oils, gained 30 cents to at USD72.88.
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