Asian shares extend losses as US-China trade war heats up
SHANGHAI: Shares in Asia extended losses on Tuesday (May 14) following sharp falls on Wall Street overnight, the yen strengthened and US Treasury yields ticked lower as the trade war between China and the United States escalated.
In early trade on Tuesday, MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.4 per cent, touching its lowest level since Feb 15.
Australian shares were down 1.2 per cent while Japan's Nikkei stock index slid 1.9 per cent.
U.S. S&P 500 e-mini stock futures were flat near seven-week lows.
China on Monday announced it would impose higher tariffs on US$60 billion of US goods following Washington's decision last week to hike its own levies on US$200 billion in Chinese imports.
The US Trade Representative's office also said it planned to hold a public hearing next month on the possibility of imposing duties of up to 25 per cent on a further US$300 billion worth of imports from China.
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The tariff escalation has rattled global markets, even as US President Donald Trump said he would meet with Chinese President Xi Jinping next month.
The two-year yield, which rises with traders' expectations of higher Fed fund rates, ticked down to 2.1782 per cent from a U.S. close of 2.193 per cent, with data from CME Group showing a more than 75 per cent chance of the Fed cutting rates by the end of 2019.
(see cap #3- imo they will do it at September Mtg-almost even odd's say then)
Underscoring market concerns over the economic impact of the trade war, 10-year yields remained below those on three-month Treasury bills. A sustained inversion of this part of the yield curve has preceded every US recession in the past 50 years.
On Monday, some traders had been concerned that China, the largest foreign US creditor, could dump Treasuries to counter the Trump administration's hardening trade stance. But most analysts downplayed such a possibility.
"If China did start to (sell Treasuries) it will galvanize both sides of politics in the US against China and the Fed would be sent into the market to buy bonds," Greg McKenna, strategist at McKenna Macro said in a note to clients.
"That would expand its balance sheet but it would allow it to neutralize China's efforts to disturb US financial markets. So I doubt they'll try to sell Treasuries."
See this:
4 reasons why China won’t use ‘nuclear option’ of selling Treasurys to retaliate against U.S.
https://www.marketwatch.com/story/4-reasons-why-china-wont-use-nuclear-option-of-selling-treasurys-to-retaliate-against-us-2019-05-13
The dollar dropped 0.1 per cent against the yen to 109.20.
The single currency was up 0.1 per cent on the day at US$1.1234, while the dollar index, which tracks the greenback against a basket of six major rivals, was slightly lower at 97.285.
Worries over an escalating trade war also hit commodity markets, sending US crude down 0.11 per cent to US$60.97 a barrel. Brent crude was off 0.3 per cent at US$70.01 per barrel.
Gold rose amid broader market jitters, with spot gold trading up 0.25 per cent at US$1,302.96 per ounce. Bitcoin gained 1.9 per cent to US$7,959.16.
https://www.reuters.com/article/us-global-markets/asian-shares-extend-losses-as-us-china-trade-war-heats-up-idUSKCN1SK02Q
https://www.cnbc.com/asia-markets/
https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html