Asian stocks drop as Trump's new tariffs revive trade gloom

By Sujata Rao

LONDON (Reuters) – European shares opened higher on Tuesday, attempting to claw their way back from three days of falls though the mood remained gloomy after U.S. President Donald Trump showed he was ready to open new trade war fronts despite signs of economic damage.

The United States has threatened duties of up to 100% on French goods while Trump tweeted he would slap tariffs on Brazil and Argentina attacking what he saw as both countries’ “massive devaluation of their currencies.”

France said it would respond strongly to duties on its goods such as champagne, handbags and other products, mooted because of France’s new digital services tax that Washington says harms U.S. tech companies.

A pan-European equity index, which had slumped 1.6% on Monday for its biggest one-day loss in two months, edged up 0.3% though French shares were flat.

Shares in some luxury goods firms extended losses, however, with LVMH shedding almost 2% to one-month lows though others such as L’Oreal managed to rise modestly.

“Today you have a bounce, but it’s fairly mechanical,” said Stéphane Barbier de la Serre, macro strategist at Makor Capital Markets. “The fall was really steep yesterday, and now the biggest risk is that the market wakes up to the reality that macro is really bad.”

U.S. stock futures pointed to a firmer Wall Street open.

But that follows a gloomy session in Asia where an MSCI index of Asia-Pacific shares ex-Japan was down 0.4%, Japan’s shed 0.6% and Australian shares posted their worst day in two months with a 2.2% drop.

China’s response to U.S. support for Hong Kong pro-democracy protesters has also chilled sentiment. It said U.S. military ships and aircraft may not visit Hong Kong, and announced sanctions against some U.S. non-government organisations.

MSCI’s world stocks index

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