Asian markets plunge with Wall Street as Trump sparks trade war fears

A pedestrian walks past at an electronics stock indicator, including a share prices in Tokyo. (Photo: AFP/Kazuhiro Nogi)

Trump signed a presidential memorandum on Thursday that could impose tariffs on up to US$60 billion of imports from China, although the measures have a 30-day consultation period.

Investors fear that the US measures could escalate into a trade war, with potentially dire consequences for the global economy.

China unveiled plans on Friday to impose tariffs on up to US3 billion of US importsin retaliation against US tariffs on Chinese steel and aluminium products.

"The economic impact on both China and the US will be determined by what form the tariffs end up taking. The effects are likely to be felt more strongly in the US and increase both consumer and producer prices," wrote Hannah Anderson, global market strategist at JP Morgan Asset Management.

Hong Kong and mainland Chinese stocks plunged at open.

The Hang Seng Index plunged 3.67 per cent, or 1,140.82 points, to 29,930.23, while the benchmark Shanghai Composite Index fell 2.78 per cent, or 90.71 points, to 3,172.77 and the Shenzhen Composite Index, which tracks stocks on China's second exchange, dropped 3.09 per cent, or 57.22 points, to 1,792.38.

MSCI's broadest index of Asia-Pacific shares outside Japan tracked a large overnight drop in Wall Street shares and fell 2.4 per cent.

Australian stocks lost 1.9 per cent and Japan's Nikkei dropped 3.2 per cent. South Korea's KOSPI retreated 2.3 per cent and Taiwan shares slid 2 per cent.

Singapore's Straits Times Index fell about 2 per cent at open, then climbed back slightly to 3,431.41 by 10am. At 9.05 am, the benchmark FTSE Bursa Malaysia KLCI stood at 1,858.84, down 18.03 points from Thursday’s close of 1,876.87.

The Dow shed 2.9 per cent, the S&P 500 dropped 2.5 per cent and the Nasdaq fell 2.4 per cent on Thursday.

Analysts also said the traders were also spooked by the fact China is the biggest buyer of Treasuries, which the US needs to keep its economics wheels greased.

As equities took a beating, the yen, often sought in times of market turmoil, rallied against the dollar.

The greenback fell roughly 0.5 per cent to as low as 104.635 yen, its weakest since November 2016. The dollar was down more than 1 per cent on the week.

"In the longer run, protectionist policies touted by the United States could be watered down, in turn limiting the negative effect on trade and the global economy," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo, referring to the decision by the United States to exempt some countries from steel and aluminium tariffs.

"But until the United States makes such concessions, global stocks will be under pressure and the yen will appreciate, especially if China decides to confront the US measures."

The euro was 0.2 per cent higher at US$1.2352.

The dollar index against a basket of six major currencies slipped 0.2 per cent to 89.688. It has lost 0.6 per cent on the week, weighed down by a steady decline in US Treasury yields.

Yield on the benchmark 10-year Treasury yield fell 7.5 basis points overnight as bond prices rose on jitters gripping the broader financial markets.

The yield closed Thursday at 2.832 per cent after going as low as 2.799 per cent. It was the 10-year note's biggest fall in yield since September 2017.

Oil prices recouped overnight losses after Saudi Arabia said that OPEC and Russian-led production curbs introduced in 2017 will need to be extended into 2019.

US crude futures were up 1.2 per cent at US$65.08 per barrel after losing 1.3 per cent on Thursday and Brent gained 1 per cent to US$69.58 per barrel.

Other commodities did not fare as well amid the trade war fears, with copper on the London Metal Exchange extending a big overnight drop and falling to a three-month low of US$6,640.00 per tonne.