Asian stocks sank Wednesday, tracking losses on Wall Street as investors grew anxious about a possible economic slowdown and the absence of any progress in resolving the US-China trade war.
Economists say the trade dispute between the world’s top two economic superpowers will have grim implications for consumers, who will have to bear the costs of punitive tit-for-tat tariffs, agency reports.
Although an index of US consumer confidence on Tuesday registered an unexpectedly strong jump for May, it was not enough to allay investor fears, as US stocks sank, sending major indices to their lowest levels in two months. May is now expected to be Wall Street’s first down month for the year.
“Unless we see a trade deal, negative sentiment in the market will likely continue,” Kyoko Amemiya, senior market advisor at SBI Securities, told AFP. A report in Chinese state media that suggested Beijing would restrict exports of rare earths, using the minerals as leverage in the trade dispute, also fanned anxiety.
Rare earths are a key component in devices ranging from smartphones and cameras to televisions, and any move to restrict their supply would have a devastating impact on manufacturers, with China producing more than 95 percent of the metals.
Tokyo sank 1.2 percent, while Hong Kong fell 0.6 percent. Seoul also plunged 1.3 percent while Sydney slipped 0.7 percent and Singapore edged down 0.4 percent. But Shanghai inched up 0.2 percent. – ‘Dark clouds’ – The gloom extended to Europe, where stocks slumped at the start of trading, with London slipping 0.7 percent, Frankfurt shedding 1.0 percent and Paris falling 1.2 percent.
Investors are concerned about a spat between the European Commission and Italy, where the far-right party of joint deputy prime minister Matteo Salvini topped European Parliament elections on Sunday.
An emboldened Salvini had said Tuesday he expected Brussels to hit Rome with a 3-billion-euro ($3.4-billion) fine over Italy’s rising public debt, which was 132 percent of the country’s GDP in 2018 — way above the 60 percent EU ceiling.
With Salvini determined to push back against the EU’s requirements on austerity, analysts said the future outlook for the bloc was precarious. “Populism is here to stay and will make future integration and budgetary decisions difficult to be agreed upon,” said OANDA senior market analyst Edward Moya.
The European Commission is expected to start disciplinary steps against Italy on June 5 by opening an excessive deficit procedure that could hand Rome a fine of up to 0.2 percent of the nation’s GDP. Fears over the US-China trade war also hit oil markets, where prices sank, coming after crude suffered its worst loss of the year last week.
“The dark clouds hanging over oil are unlikely to clear during today’s session”, said OANDA senior market analyst Jeffrey Halley.
“Oil will struggle to maintain any rally in the near-term today and may be vulnerable to a deeper pullback if the Asian stock market sell-off accelerates.” – Key figures around 0715 GMT –
Tokyo – Nikkei 225: DOWN 1.2 percent at 21,003.37 (close)
Hong Kong – Hang Seng: DOWN 0.6 percent at 27,235.71 (close)
Shanghai – Composite: UP 0.2 percent at 2,914.70 (close)
London – FTSE 100: DOWN 1.0 percent at 7,193.19
Pound/dollar: DOWN at 1.2635 from $1.2655 at 2100 GMT
Euro/pound: UP at 88.30 pence from 88.22 pence
Euro/dollar: DOWN at $1.1156 from $1.1162
Dollar/yen: DOWN at 109.29 yen from 109.37 yen
Oil – Brent Crude: DOWN 61 cents at $69.50 per barrel
Oil – West Texas Intermediate: DOWN 66 cents at $58.48 per barrel
New York – Dow: DOWN 0.9 percent at 25,347.77 (close)