Asian markets sink as Trump further stokes trade war fears

Asian markets sink as Trump further stokes trade war fears

Global markets have been hit by volatility since Donald Trump said last week he would more than
Global markets have been hit by volatility since Donald Trump said last week he would more than double tariffs on Chinese goods, sparking response in kind from Beijing. (Photo: AFP/Brendan Smialowski)

HONG KONG: Asian markets were mixed on Thursday (May 16) as investors weighed hopes for trade talks against Donald Trump's ban on US firms from using foreign telecoms equipment, which has been seen as a kick against China.

Investors were jolted in the morning after the president issued an executive order, citing national security grounds, that effectively bars Chinese giant Huawei from the US market.

It was also added to a blacklist restricting US sales to the firm, which will likely ramp up tensions with Beijing as the two economic titans engage in a drawn-out trade war that threatens global growth.

The Trump administration has for months tried to persuade allies not to allow China a role in building next-generation 5G mobile networks, warning that doing so would result in restrictions on sharing of information with the United States.

The announcement comes after the US last week hiked tariffs on US$200 billion of Chinese goods, to which Beijing retaliated in kind, fanning fears their trade war - which seemed all but over just weeks ago - could worsen.

"Earlier, the US Commerce Department had added Huawei to a list of entities that prohibits them from acquiring US-made technology and components without a government licence," said OANDA senior market analyst Jeffrey Halley.

"If that's not an escalation in trade tensions, then I don't know what is."


Regional markets retreated in early trade but some saw a turnaround as the day went on, taking on a positive lead from Wall Street and Europe, where investors cheered reports the White House was planning to delay tariffs on auto imports while seeking agreements with key trading partners.

Also Wednesday, US Treasury Secretary Steven Mnuchin repeated to senators his expectation that US officials would meet their Chinese counterparts in Beijing to continue their trade talks.

Hong Kong ended flat, although ZTE - another Chinese telecoms equipment provider - shed more than six per cent.

Shanghai closed 0.6 per cent higher while Sydney put on 0.7 per cent and Singapore added 0.4 per cent. Wellington and Mumbai were also up.

Tokyo was rooted in the red, however, closing 0.6 per cent lower, while Seoul and Manila lost more than one per cent and Taipei dropped 0.8 per cent. Bangkok and Jakarta also slipped.

In early trade, London and Paris each dipped 0.3 per cent, while Frankfurt shed 0.4 per cent.

The dollar fell against most of its major peers and most higher-yielding currencies, with speculation swirling that the Federal Reserve could cut interest rates to fend off the effects of the trade war and slowing economic growth.

Such talk comes just months after some commentators had been predicting up to three hikes this year.

"Depending on how long this standoff with China lasts, that impacts growth for longer and might force the Fed's hand," Esty Dwek, at Natixis Investment Managers, told Bloomberg TV.

"I wouldn't expect any big change in the short term, but the possibility of a cut much later in the year has risen."

- Key figures around 0810 GMT -

Tokyo - Nikkei 225: DOWN 0.6 per cent at 21,062.98 (close)

Hong Kong - Hang Seng: FLAT at 28,275.07 (close)

Shanghai - Composite: UP 0.6 per cent at 2,955.71 (close)

London - FTSE 100: DOWN 0.3 per cent at 7,274.07

Euro/dollar: UP at US$1.1211 from US$1.1200 at 2050 GMT

Pound/dollar: UP at US$1.2843 from US$1.2840

Dollar/yen: DOWN at ¥109.46 from ¥109.58

Oil - West Texas Intermediate: UP 22 cents at US$62.24 per barrel

Oil - Brent Crude: UP 18 cents at US$71.96 per barrel

New York - Dow: UP 0.5 per cent at 25,648.02 (close)

Source: AFP/ec