Asian shares see moderate losses after meltdown on Wall St

15-May-2019 Intellasia | AP | 6:00 AM Print This Post

Shares declined moderately in Asia on Tuesday after a dismal day on Wall Street as investors fled uncertainty over the China-US trade standoff.

The Shanghai Composite index slipped 0.2 percent to 2,896.60 while Japan’s Nikkei 225 gave up 0.6 percent to 21,067.23. The Hang Seng index in Hong Kong, reopening after a market holiday on Monday, sank 1.5 percent to 28,112.60.

Elsewhere in Asia, South Korea’s Kospi climbed 0.2 percent to 2,082.83 while the S&P ASX 200 in Australia dropped 0.9 percent to 6,238.40. Shares fell in Taiwan and Southeast Asia.

Investors already rattled by mounting tensions between Beijing and Washington got an extra jolt when China announced late Monday that it was raising tariffs on $60 billion of imports from the United States in retaliation for the Trump administration’s latest hike in import taxes on Chinese exports.

“A clear hardening of attitudes, with state media blaring that China ‘will fight to the end,’ has stirred concerns of a protracted and widening trade war,” Mizuho Bank said in a commentary.

Still, since Beijing’s tariff increases only take effect on June 1 and those raised by Washington apply only to goods shipped after May 10, which will take a couple weeks or more to reach the US, there is still time available to find a compromise in the festering dispute over Chinese efforts to gain a lead in advanced technologies through means that the Trump administration says are unfair and violate world trade rules.

The Dow Jones Industrial Average plunged more than 600 points on Monday and the benchmark S&P 500 index suffered its biggest loss since January. The sell-off extended the market’s slide into a second week and helped erased the market’s gains from April.

Technology companies, which do a lot of business with China, led the way lower. Chipmakers were among the biggest decliners. Apple also took heavy losses, tumbling 5.8 percent. Farming equipment maker Deere drove losses in the industrial sector.

Hopes the world’s two largest economies were on track to resolve their dispute over trade and technology helped push the market to its best yearly start in decades.

That has given way to concern that a full-blown trade war could crimp what is otherwise a mostly healthy economy.

“The larger issue with the tariffs isn’t the specific amounts of tariffs at any given time, but the uncertainty that’s surrounding these tariffs and the ‘what’s-next?’ of an escalating trade war,” said Willie Delwiche, investment strategist at Baird. “That weighs on the global economy and could then weigh on the US economy.”

The Dow lost 2.4 percent to 25,324.99, at one point dropping 719 points. Apple and Boeing, which both get significant revenue from China, were the Dow’s biggest decliners.

Ride-sharing company Uber tumbled another 10.8 percent on its first full day of trading following its rocky debut on the stock market Friday. The stock had priced at $45 at its initial public offering. It closed at $37.10.

The broader S&P 500 index fell 2.4 percent, to 2,811.87, while the Nasdaq, which is heavily weighted with technology stocks, slid 3.4 percent to 7,647.02.

The Russell 2000 index of small company stocks lost 3.2 percent, to 1,523.

Trade talks between the US and China concluded Friday with no agreement and with the US increasing import tariffs on $200 billion of Chinese goods to 25 percent from 10 percent. Officials also said they were preparing to expand tariffs to cover another $300 billion of goods.

Another sign of investor jitters, the VIX index, which measures how much volatility the market expects in the future, spiked 28.1 percent.

The increase in tariffs announced in Beijing on Monday includes commodities like soybeans, putting pressure on US farmers. The price of soybeans slid 0.8 percent to $8.04 a bushel Monday. They were trading around $9 a bushel last month and are now at their lowest price since December 2008. The falling price has put pressure on US farmers.

Prices for US government bonds, which are considered ultra-safe investments, rose sharply, sending yields lower. The yield on the 10-year Treasury fell to 2.41 percent from 2.45 percent late Friday.

Energy futures recovered, with US crude gaining 18 cents to $61.22 per barrel in electronic trading on the New York Mercantile Exchange. It lost 62 cents or 1 percent to settle at $61.04 per barrel on Monday. Brent crude, the international standard, picked up 29 cents to $70.52 per barrel.

The dollar rose to 109.58 Japanese yen from 109.31 yen on Monday. The euro rose to $1.1236 from $1.1223.


Category: FinanceAsia

Print This Post