TOKYO (Reuters) – Asian stocks fell to a month low on Thursday as the already growing fear of global growth was exacerbated by the US announcement of new import tariffs on EU products.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.60%. Japan's Nikkei stock index. The N225 dropped 2.00%, the largest decrease in a day since August 26. Australian stocks fell 2.07% to a five-week low.
Pan region Euro Stoxx 50 futures were down 0.38%, while FTSE futures were down 0.34%.
US stock futures rose 0.22%, but that did little to bolster sentiment after Wall Street stocks hit their sharpest near-six-day low on Wednesday as the three major New York stock indices lost more than 1
"Stock markets have been counted on US production data a few days ago, and that is why they act like this before Friday's non-farm payroll solutions," said Sean Darby, global stock strategist at Jefferies in Hong Kong.
"On the positive side, there are indications that Brexit may not be as hard as we thought, but the markets appeared to be more focused on the negatives than the positives."
Returns on two-year US government yields fell as weakening industry and labor market data suggested that the trade war with China has harmed the US economy.
Oil futures widened their decline as a larger-than-expected increase in US commodity stocks and increasing evidence to slow economic growth point to lower energy demand.
The dollar was little changed at 107.13 yen JPY = EBS after slipping to a new week's low as investor fears deepened over fresh signs of slowing US economic growth and the expansion of world trade frictions.
The US-China trade war has cast a shadow over the global growth outlook, and on Wednesday there was an escalation of the Washington-EU trade conflict when President Donald Trump's administration announced that they would impose tariffs on $ 7.5 billion in goods.
Washington will adopt 10% tariff on Airbus ( AIR.PA ) aircraft and 25% tariff on French wine, Scotch and Irish whiskey and cheese from across the continent as punishment for illegal EU aircraft subsidies.
EU manufacturers are already facing US tariffs on steel and aluminum and a threat from Trump to punish EU cars and car parts.
(GRAPHIC: European earnings in the United States – here)
The tariffs announced Wednesday were approved by the World Trade Organization, but may still lead to friction across the Atlantic.
The chance for Europe to respond in form will raise concerns that there may be long-term damage to global growth.
"Customs rates can be a source of tension between the US and the EU," said Masayuki Kichikawa, chief of macro strategists at Sumitomo Mitsui Asset Management Co in Tokyo.
The two-year return fell to 1.4680%, nearing a two-year low of 1.4280%, after a weak US workplace report depressed increased expectations that the Federal Reserve would cut interest rates this month.
Traders see a 72.8% chance that the Fed will cut interest rates by 25 basis points to 1.75% -2.00% in October, up from 39.6% on Monday, according to CME Group's FedWatch tool.
Betting on an interest rate cut may increase further if US non-farm wage rules on Friday show weakness in the labor market.
Hong Kong shares .HSI fell 0.6% as protesters against the government clashed with police in the early hours of Thursday, venting anger over a police officer's shooting and wounding of a teenager.
The economic hub has been shaken by months of protests over China's rule by the former British colony.
China's financial markets are closed on Monday for a public holiday.
(GRAPHIC: Global demand for oil 2019 vs. oil prices – here)
Brent crude oil fell 0.21% to $ 57.60 per barrel. In addition to a declining global economy, energy dealers are concerned about an oversupply market and the chance of geopolitical friction in the Middle East.
Editing by Richard Borsuk