SHANGHAI: Asian shares skidded on Tuesday after U.S. President Donald Trump stunned markets with tariffs against Brazil and Argentina, recharging fears about global trade tensions, while weak U.S. factory data added to the investor gloom.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.45per cent in early trade, with Australian shares dropping nearly 2per cent, on track for their worst day in two months. Japan's Nikkei shed 1.1per cent.
In tweets on Monday, Trump said he would impose tariffs on steel and aluminum imports from Brazil and Argentina, attacking what he saw as both countries' "massive devaluation of their currencies."
Contrary to his remarks, both Brazil and Argentina have been trying to strengthen their respective currencies against the dollar.
Steven Daghlian, market analyst at CommSec in Sydney, said while the South American tariffs dominated market worries on Tuesday, China's response to U.S. supporting for anti-government protesters in Hong Kong has also chilled sentiment.
"Markets are extremely sensitive to any good or bad news on the U.S.-China dispute front, but also the U.S. relationship with other nations as well," he said.
China said on Monday U.S. military ships and aircraft won't be allowed to visit Hong Kong, and also announced sanctions against several U.S. non-government organizations for encouraging protesters to "engage in extremist, violent and criminal acts."
Worsening the mood, data from the Institute for Supply Management (ISM) showed the U.S. manufacturing sector contracted for a fourth straight month in November as new orders slid.
That erased the market cheer from upbeat Chinese factory surveys released over the past few days.
Bearish sentiment pushed bond prices higher. The yield on benchmark 10-year Treasury notes fell to 1.8172per cent from a U.S. close of 1.836per cent on Monday, and the policy-sensitive two-year yield, dipped to 1.606per cent from its U.S. close of 1.614per cent.
In currency markets, the dollar rose 0.06per cent against the yen to 109.04 and the euro was a touch lower at US$1.1075.
The dollar index, which tracks the greenback against a basket of six major rivals, was at 97.856.
Oil prices continued to rise on expectations that the Organization of the Petroleum Exporting Countries (OPEC) and its allies may agree to deepen output cuts at a meeting this week.
U.S. West Texas Intermediate crude was up 0.25per cent to US$56.10 a barrel.
Gold was flat on the spot market, trading at US$1,462.21 per ounce.
(Reporting by Andrew Galbraith; Editing by Sam Holmes)