TOKYO, JUNE 26
Global stocks extended a sell-off on Tuesday as an escalating trade fight between the United States and other major economies steered investors away from riskier assets, lifting safe-haven US Treasuries and keeping the dollar on the defensive.
Markets in China—the epicentre of the trade tensions with the United States—were especially hard hit. Losses across Asian equities were broad-based after Wall Street tumbled overnight, with the S&P 500 and Nasdaq suffering their steepest losses in more than two months overnight.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.75 per cent. Hong Kong’s Hang Seng retreated 1.2 per cent, the Shanghai Composite Index slid 1.4 per cent and Japan’s Nikkei shed 0.5 per cent.
Equities from tech-heavy regions such as South Korea’s KOSPI and Taiwan fell 1 per cent and 0.9 per cent, respectively. Taiwan Semiconductor Manfucaturing Co was down 1.15 per cent, South Korean chipmaker SK Hynix Inc lost 0.8 per cent and Japan’s Tokyo Electron was down 1 per cent.
US technology shares were particularly hard hit. Chipmakers which derive much of their revenue from China had taken a battering on Monday, following a report that the US Treasury Department was drafting curbs that would block companies with at least 25 per cent Chinese ownership from buying US tech firms.
Besides the trade spat with China, the United States has recently upped the ante in a challenge to the European Union by threatening to impose tariffs on cars imported from the bloc. “Increasingly hawkish trade rhetoric the United States is employing could begin impacting the economy by cooling investor sentiment and curbing capital expenditure by corporations,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management. “It’s turning out to be a long-term bearish factor for the financial markets, as the United States is unlikely to back down at least through its midterm elections.”
The dollar index against a basket of six major currencies stood little changed at 94.240 after dipping 0.25 per cent overnight, when it fell for the fourth straight session. The greenback was pressured as long-term US Treasury yields declined to one-week lows amid the heightened risk aversion in financial markets.
The euro hovered just below an 11-day high of $1.1705 scaled overnight against the sagging dollar. The US currency was down 0.25 per cent at 109.490 yen , having fallen to a two-week low of 109.365 on Monday. The yen often attracts bids in times of political tensions and market turmoil.
Brent crude oil futures were up 0.3 per cent at $74.95 on the back of uncertainty over Libyan exports. The contracts had slid 1 per cent overnight as receding investor risk appetite weighed on commodities. Oil prices have seesawed after OPEC and its allies on Friday agreed to increase global supplies, albeit modestly.
Trade concerns drove copper on the London Metal Exchange down 0.3 per cent to $6,734.50 per tonne, though the tense global backdrop supported gold. Spot prices for the yellow metal edged up 0.1 per cent at $1,266.2 an ounce.