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Home / Business / Asian stocks, yuan fall as Chinese-US trade negotiations locked; investors expect China retaliation

Asian stocks, yuan fall as Chinese-US trade negotiations locked; investors expect China retaliation



SYDNEY (Reuters) – US stock markets and Asian stocks fell on Monday with increased anxiety over whether the US and China would be able to save a trade deal after Washington heavily hiked tariffs and Beijing promised to receive.

FILE PHOTO: A man on a bicycle stops in front of an electronic board showing the Nikkei index outside a brokerage in Tokyo, Japan, March 25, 2019. REUTERS / Kim Kyung-hoon

The United States and China appeared in a death over Sunday's trade negotiations when Washington demands promises of concrete changes in Chinese law, and Beijing said it would not devour any "bitter fruit" that harmed its interests.

Investors are losing out on threatened "countermeasures" from China in retaliation for Washington's tariff increase on Friday of $ 200 billion of Chinese goods. The move followed accusations of US President Donald Trump that Beijing "broke the deal" by renouncing past commitments.

S & P 500 shed e-mini futures 1.0%.

MSCI's widest index of Asia-Pacific shares outside Japan fell 0.5%, approaching two-month low markings on Thursday.

Chinese stocks tumblet, with the reference Shanghai Composite and blue-chip CSI 300 shedding as much as 1.6% and 1.9%, respectively, before mating some of the losses. Hong Kong's financial markets were closed for a vacation.

Japan's Nikkei average dropped as much as 1.0% to beat its lowest level since March 28. It was the last trade down 0.5%.

US .. benchmark 10-year government bond yield fell to 2,437%, partly as a refuge, but also on speculation that the growing trade war would put more pressure on global growth and thus keep the major central banks accommodating.

Belarusian economic advisor Larry Kudlow told a Fox News program that China needs to accept "very strong" enforcement provisions for a possible deal, saying Beijing was not willing to make legal changes that had been agreed.

Kudlow said US tariffs would remain in place while negotiations continue, and there is a "strong opportunity" that Trump meets Chinese President Xi Jinping at a G20 summit in Japan in late June.

"Our fundamental issue remains that trade between the United States and China is likely. But today's news suggests that this may take longer, and it is unlikely to be closed until the end of June," said John Woods, Hong Kong. -based chief investment officer in APAC at Credit Suisse AG.

Others were more pessimistic.

"Our fundamental issue is for limited progress and Chinese retaliation. We see a significant risk that all imports from China will be subject to tariffs in the next month or so, says Michael Hanson, head of global macro strategy at TD Securities.

"The market reaction will ultimately depend on whether China and the United States continue to negotiate the remaining $ 325 billion of US imports from China also receive tariffs, how China retaliates, and what happens to the (section) 232 car prices." 19659004] Under this scenario, the yuan was likely to fall between 5% -6% against the US dollar over the next three months, Hanson said as a shock to the financial consequences of heavier tariffs.

The Chinese yuan fell to its lowest levels for more than four months at $ 6.88. It last stood at 0.5% to 6.852 per dollar.

The other major currencies were relatively quiet, with the security harbor yen still being supported, but not aggressively. The dollar held at 109.75 yen, down 0.2% a day and just over a 14-week break of 109.46.

The euro was stable at $ 1.1233 while the dollar was slightly changed against a basket of currencies at 97,302.

"If there is a lack of progress (in the US and China) over the coming weeks, Asian currencies will come under further pressure," noted Khoon Goh, head of research at Asia at ANZ Research, adding that his team does not expect the yuan to break the psychological 7 per dollar level.

"While we hope for the best, our fundamental case is now for the United States and China to fail to reach an agreement, which means that tariffs will be raised on the rest of Chinese exports to the United States."

In commodity markets, oil prices were a relatively tight area, while US crude futures were down 0.1% at $ 61.62 per barrel, while Brent crude futures increased 0.3 percent at $ 70.81. [O/R]

Spot gold eased 0.1% to $ 1,283.61 per ounce.

On the other hand, digital currencies maintained most of their big gains over the weekend.

Bitcoin jumped 10 percent on Saturday and marked its nine-month high of $ 7,585.00 on Sunday before pairing the win. The last quoted at $ 7069.76, up 1.4% on the day.

GRAPHIC: Asian stock markets – tmsnrtrsrszzpUAr4

Reporting by Tomo Uetake and Wayne Cole; Editing by Kim Coghill

Our Standards: Thomson Reuters Trust Principles.

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