Hong Kong: Asian markets fluctuated on Monday as easing concerns about a sharp rise in US interest rates were tempered by growing fears about a potentially catastrophic China-US trade war.
US markets plunged on Friday after Donald Trump warned of tariffs on an additional $100 billion worth of Chinese imports, which Beijing responded to by saying it would stand firm.
The president’s announcement comes weeks after his decision to tax imports of steel and aluminium, followed by levies of $50 billion on goods from China over what Washington says is theft of intellectual property and technology.
China retaliated by unveiling planned levies on $50 billion worth of major US exports.
Trump’s moves, part of his protectionist “America First” agenda, have rattled world markets, fearing a trade war between the world’s top two economies could reverse the tentative global recovery.
“Much ink has been spilt over trade wars in the last few days, and we now wait to see what the Trump administration does next,” Stephen Innes, head of forex trading for Asia Pacific at OANDA, said in a note.
While there is hope Trump’s headline-grabbing tariffs are part of a plan to take a harsh line as a bargaining tactic towards a deal with China.
However, top advisor Larry Kudlow, who has often suggested the taxes might not go into effect, warned Friday the announcements were not negotiating tactics, while Treasury Secretary Steven Mnuchin said the White House hoped to negotiate but acknowledged a trade war was a possibility.
Trump at the weekend, however, tweeted that he saw an end to the dispute, saying: “China will take down its trade barriers because it is the right thing to do.”
Eyes on Xi speech
All three main indexes on Wall Street ended more than two percent down Friday.
However, markets in Asia swung at the start of this week, with Tokyo slightly higher by the break, Hong Kong up 0.5 percent and Seoul 0.2 percent higher.
But Shanghai dipped 0.3 percent and Singapore shed 0.8 percent while Sydney and Wellington were both flat.
“Focus this week will remain the trade issues between the US and China… as some people began to have an optimistic view on the outcome of the issue. It’s getting harder to predict what will come next,” SBI Securities said in a commentary.
Investors will be keeping a close eye on comments Tuesday by Chinese President Xi Jinping at the Boao Forum — dubbed the Asia Davao — to see if he comments on the brewing row.
“This is the event of the week for traders, investors, and markets,” said Greg McKenna, chief market strategist at AxiTrader. “Will Xi crank the handle on rhetoric or will he strike a more conciliatory tone?”
A report showing the US created far fewer jobs than expected in March provided some support.
Markets tanked in February on worries a stronger economy and rising inflation would prompt the Federal Reserve to lift borrowing costs more than initially thought, bringing an end to years of crisis-era stimulus.
Fed boss Jerome Powell signalled it still plans to press ahead with additional hikes this year but did not provide a timeline or idea about the number of increases.
The dollar held up against its main peers, with yen traders awaiting Bank of Japan governor Haruhiko Kuroda’s speech later in the day as he starts his second term.
Key figures around 0300 GMT
Tokyo – Nikkei 225: UP 0.1 percent at 21,580.42 (break)
Hong Kong – Hang Seng: UP 0.5 percent at 29,983.12
Euro/dollar: DOWN at $1.2274 from $1.2281 at 2100 GMT on Friday
Dollar/yen: UP at 106.94 yen from 106.92
Pound/dollar: UP at $1.4094 from $1.4088
Oil – West Texas Intermediate: UP 18 cents at $62.24 per barrel
Oil – Brent North Sea: UP 23 cents at $67.34 per barrel
New York – Dow: DOWN 2.3 percent at 23,932.76 (close)
London – FTSE 100: DOWN 0.2 percent at 7,183.64 (close)