Asian investors were on course to end a tumultuous week with more losses on Friday as the prospect of a debilitating global trade war hung over regional markets.
As European Union tariffs on key US goods — including jeans, bourbon and motorcycles — came into effect, there were fears China and the US will carry through with their own threats, locking the world’s three biggest economies in a potentially destructive face-off.
The EU move was in retaliation to Donald Trump’s decision to hit steel and aluminium imports from the bloc, and comes after the US and China traded tit-for-tat threats on hundreds of billions of dollars of goods.
There are worries a full-blown flare up could pummel the global economy just as it is getting back on its feet after the global financial crisis.
“We have a trade war — and it’s an escalating trade war,” SEB chief economist Robert Bergqvist told AFP in an interview.
“Investors… are more cautious today, they are waiting for the right time to reduce their exposure in stock markets.”
New York’s three main indexes ended down — with the Dow suffering an eighth straight loss — as investors were spooked by news that Daimler had cut its profit forecasts because of new levies on cars exported from the US to China.
“We heard from Daimler about the impact of the trade tensions on sales, and there are a growing number of stories about the chance of China directly targeting US firms who do business in the country,” said Greg McKenna, chief market strategist at AxiTrader.
“What comes to pass is still uncertain in that regard. What’s not uncertain, though, is the resolve of US Commerce Secretary Wilbur Ross to pursue China and try to change it — and other nations’ — actions.”
– Optimistic view –
Tokyo ended the morning session 0.9 percent lowerâ€‹â€‹, while Hong Kong and Shanghai — which have led losses in Asia this week — were both 0.5 percent lower in the morning.
Singapore shed 0.4 percent and Sydney was flat, while Manila, Wellington, Taipei and Jakarta were also lower.
Seoul was up slightly.
However, while trading floors are mostly a place of gloom, John Chong, head of the investment-banking arm Maybank Kim Eng, was more upbeat for the outlook.
“Asia is now better positioned to weather the volatility,” he said at a conference in London.
“We believe investors will see real value emerging in Asian corporates after the recent market tantrums and should capitalise on the opportunity.”
On currency markets, the pound held its ground after rising on the back of news that the Bank of England’s top economist had backed lifting interest rates despite Brexit uncertainty.
And the euro was up slightly after eurozone ministers declared the end of Greece’s eight-year debt crisis with debt relief and a big cash payout as part of a broad bailout exit deal.
Oil prices rallied more than one percent ahead of an output decision from the Organization of the Petroleum Exporting Countries, which kicks off a key meeting in Vienna later in the day.
Kingpin Saudi Arabia and non-member Russia are pushing to raise an 18-month-old ceiling but others want to keep the status quo.
However, while an increase is widely expected there are concerns of a split in the cartel — which accounts for about 40 percent of global production — with Iran’s oil minister walking out of a key meeting with OPEC peers.