Asian shares extended their losses on Wednesday after US President Donald Trump said a trade deal with China might have to wait until after the 2020 presidential election, dashing hopes for a quick preliminary agreement.
Fresh US tariffs on Argentina and Brazil, as well as threatened duties on French goods, also darkened the mood, as a trade war that investors had hoped was easing a week ago, now looks like ramping up.
“This shift is quite distinct,” said Vishnu Varathan, head of economics and strategy at Mizhuo Bank in Singapore, since it removes any sense of urgency around resolving the dispute.
Investors turned to safe-havens, boosting bond prices and sending gold to a one-month high, while MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.9 per cent.
Japan’s Nikkei dropped 1 per cent, matched by falls in Hong Kong and Korea, where stock markets touched their lowest since October.
Shanghai blue chips fell 0.2 per cent and Australia’s S&P/ASX200 tumbled 1.6 per cent, having shed almost 4 per cent since closing on Monday.
The yield on the benchmark US 10-year treasuries fell as low as 1.6930 per cent overnight, the sharpest fall since May. It stood at 1.7259 per cent on Wednesday. The futures markets pointed to a flat open on Wall Street, and for European shares to pare some losses, but to remain down for the week so far.
“Suddenly you can feel the market,” said Sean Taylor, chief investment officer the for Asia-Pacific at German asset management firm DWS, calling trade the top threat to the global outlook.
“It just takes one or two comments and then a bad feeling again,” he said. “It’s still quite uncertain.”
The US House of Representatives’ passage of a bill proposing a stronger response to a crackdown on Muslims in China’s west also added a yet another layer of tension, drawing