Asian shares started the week in the red on Monday faltering for the eighth straight day while the dollar climbed as US President Donald Trump raised the stakes in the heated trade dispute with China.
MSCI’s broadest index of Asia-Pacific shares outside Japan was last down 0.6 per cent, extending losses from last week when it dropped 3.5 per cent for its worst weekly showing since mid-March.
Japan’s Nikkei opened lower but quickly pared losses after revised second-quarter gross domestic product data showed the world’s third-biggest economy grew at its fastest pace since 2016.
Chinese shares weakened, with the blue-chip index off 0.6 per cent while Shanghai’s SSE Composite stumbled 0.4 per cent. Hong Kong’s Hang Seng index slipped 0.8 per cent.
On Friday, Wall Street stocks ended lower while world share indexes registered their biggest weekly declines in almost six months after Trump threatened tariffs on a further $267 billion worth of Chinese imports, on top of earlier promises to levy duties on $200 billion worth of Chinese goods.
Beijing has warned of retaliation if Washington launches any new measures, but it is running out of room to match them dollar-for-dollar, raising concerns it could resort to other measures such as weakening the yuan or taking action against US companies in China.
“The overall sense is that the United States will continue to escalate the pressure until China submits to U.S. demands which does not seem likely any time soon,” JPMorgan said in a note.
“Overall, the impact of tariffs and high levels of uncertainty will both continue to weigh on markets into the end of the year.”
Chinese trade data released on Saturday could give Trump more reason to turn up the heat. China’s trade surplus with the United States widened to a record in August.
Trump, who is challenging China, Mexico, Canada and the European Union on trade issues, has now expressed displeasure about his country’s large trade deficit with Japan.
Bull market intact?
Also weighing on global shares was the prospect of faster rate rises by the Federal Reserve after data on Friday showed US job growth accelerated in August and wages notched their largest annual increase in more than nine years.
The Fed is all but certain to raise rates a third time this year in late September.
The strong employment report boosted the dollar, which held on to Friday’s gains at 95.43. The index is up 3.5 per cent so far this year.
“The overall trend for the U.S. economy remains positive,” said Lachlan McPherson, Senior Investment Consultant at Charles Schwab Australia.
McPherson expects the US equity bull market to remain intact although there were some near-term risks.
“Trade uncertainty remains a significant concern for future business investment plans. That uncertainty could result in more stock market volatility as investors worry that the Fed may move too far in its normalization campaign.”
Investors will next focus on US inflation for August due Thursday and a stronger number could once again send the dollar surging, Reuters reported.
The Australian dollar, a proxy for emerging market growth, hovered near its lowest in 2-1/2 years. The currency fell 1.3 per cent on Friday and was last at $0.7107.
The euro held at $1.15505 after two straight sessions of losses while the yen traded in a narrow range, changing hands at 110.96.
In commodities, oil prices were firmer after three straight days of losses, with US crude futures up 44 cents at $68.19 per barrel. Brent crude futures added 48 cents to $77.31 a barrel.
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