Asia markets reverse gains as trade war feared

Asian markets largely reversed earlygains on Friday from a bargain-hunting push as investors remained cautious overthe intensifying US-China trade war, reports BSS/AFP.

Tokyo managed to hold on to its winnings as positive data helped drive theNikkei up 0.4 percent, after figures showed the world’s third-biggest economywas growing faster than analysts had predicted.

The data showed Japan’s gross domestic product grew 0.4 percent from theprevious quarter on robust consumer demand, beating analysts’ median forecastof 0.1 percent.

“The reading of the data itself was not a huge buying peg… butnonetheless it confirmed personal spending could pick up,” said MakotoSengoku, market analyst at the Tokai Tokyo Research Institute.

Shanghai shed 0.7 percent on news of the United States banning Huawei andother Chinese firms from government contracts, and weak economic data showingsluggish demand.

Hong Kong lost 0.7 percent as did Manila. Singapore and Bangkok were alsodown, but Sydney edged up 0.3 percent and Seoul climbed 0.9 percent.

European markets, which had advanced on bargain-hunting by investors afterseveral days of losses, fell in early trade, with London down 0.3 percent.Frankfurt dropped 0.5 percent and Paris slid 0.4 percent.

Safe-haven assets such as bonds, gold and the yen remained in demand,signalling that trade war fears were continuing to weigh on markets.

Interest rate cuts by central banks in India, Thailand and New Zealandthis week underscored investor anxiety, with analysts saying markets believefurther cuts are in the offing.

“The current market dynamics are such that the stabilisation of riskassets will remain a function of improvement on the trade front or the Fedturning increasingly more dovish,” said Stephen Innes at VM Markets.

“With a near term trade agreement little more (than) wishful thinking atthis stage the markets will lean on the dovish Fed narrative again as acritical circuit breaker to diffuse the markets’ stress overload from

escalating trade and currency war tensions.”

– Currency war worries –

Equities were hammered Monday after Beijing allowed the yuan to slidesharply against the dollar following President Donald Trump’s announcement offresh tariffs on Chinese goods starting September 1.

But Beijing’s push to stabilise the yuan helped to ease fears of a full-blown currency war on top of an escalating trade war.

That has done little to placate Trump, however, with Washington formallybranding China a currency manipulator earlier in the week.

On Thursday, he appeared to call for a weaker US dollar to help Americanexporters — a move that breaks with decades of US policy.

“As your President, one would think that I would be thrilled with our verystrong dollar. I am not!” he said on Twitter.

“The Fed’s high interest rate level, in comparison to other countries, iskeeping the dollar high, making it more difficult for our greatmanufacturers… to compete on a level playing field.”

– Key figures–

Tokyo – Nikkei 225: UP 0.4 percent at 20,684.82 (close)

Hong Kong – Hang Seng: DOWN 0.7 percent at 25,939.30 (close)

Shanghai – Composite: DOWN 0.7 percent at 2,774.75 (close)

London – FTSE 100: DOWN 0.3 percent at 7,261.61

Pound/dollar: DOWN at $1.2117 from $1.2138 around 2100 GMT

Euro/pound: UP at 92.25 pence from 92.12 pence

Euro/dollar: UP at $1.1187 from $1.1182

Dollar/yen: DOWN at 105.97 yen from 106.06 yen

Brent North Sea crude: UP nine cents at $57.47 per barrel

West Texas Intermediate: UP 10 cents at $52.64 per barrel

New York – Dow: UP 1.4 percent at 26,378.19 (close)