Asian shares stumble as China extends declines amid trade tensions

Elsewhere, Japan’s Nikkei 225 closed lower by 0.12 percent, or 26.39 points, at 21,785.54, extending Monday’s steep losses but finishing the session above its intraday low. Airlines and oil producers clung to gains, while most other sectors eased.

In South Korea, the Kospi finished above the flat line, advancing 0.05 percent to 2,272.76. Manufacturers and technology plays were mixed, with Samsung Electronics gaining 1.32 percent while steelmaker Posco lost 0.32 percent. The S&P/ASX 200 closed up 0.52 percent at 6,210.20.

Meanwhile, MSCI’s index of stocks in Asia Pacific excluding Japan was lower by 0.34 percent during Asia afternoon trade, retracing some losses after recording a decline of more than 1 percent earlier in the day.

Investor sentiment was cautious as markets continued to watch developments on the trade front. A looming July 6 deadline is set to see the U.S. impose a 25 percent tariff on $34 billion worth of Chinese goods from more than 800 product categories. China has also announced that it will retaliate with duties on the same value of U.S. products.

“While we still think that a full-blown trade war is unlikely, the harsh rhetoric and punitive measures have reached a point that warrants serious consideration of such eventualities,” Tamur Baig, chief economist at DBS Bank, said in a note. He added that the U.S. would likely be hurt more than China if a trade war ensues, given how China’s retaliation can be on multiple fronts and the U.S. is involved in more than one trade spat.

The U.S. is engaged in disputes on trade issues with other key trading partners, including Canada and the European Union. It could face tariffs from the European Union on as much as $300 billion in U.S. goods if the Trump administration proceeds with imposing duties on European cars, the Financial Times reported.

Markets in Europe and Asia closed lower in the previous session amid the concerns over trade, with the pan-European Stoxx 600 declining 0.84 percent on Monday. Asian stock indexes saw steeper losses in the previous session as China markets resumed their slide after getting some reprieve at the end of last week, with the Shanghai composite dropping 2.52 percent on Monday.

“In the short term, there will be volatility, but for volatility to escalate, it means we are in a bear market. I do not think we are in a bear market as yet. We think the global environment, global growth is stable, inflation under control, so these are really tailwinds for risk assets,” Hou Wey Fook, CIO at DBS Bank, told CNBC’s “Street Signs.”

Amid the market moves ahead of that July 6 deadline for tariffs, U.S. Commerce Secretary Wilbur Ross told CNBC there was no “bright line level of the stock market” that would change U.S. President Donald Trump’s mind on trade policy.

Those jitters also overshadowed the moderate gains made on Wall Street overnight, with U.S. stocks closing in positive territory after dipping early in the overnight session on trade concerns.

Investor concerns over trade, meanwhile, mostly supported the dollar, although the greenback slipped a little. The dollar index, which tracks the dollar against a basket of currencies, traded at 94.925 at 11:24 a.m. HK/SIN after rising above the 95 handle in the overnight session. Against the yen, the dollar traded at 110.86.

The yuan softened past the 6.7 level for the first time since August 2017, although the currency later pared some of those losses. The on-shore yuan traded at 6.6754 to the dollar at 3:14 p.m. HK/SIN while the offshore yuan, which is less tightly controlled, traded at 6.6910.

On the economic front, the Reserve Bank of Australia announced it would hold its cash rate steady at 1.50 percent, in line with what most economists surveyed in a Reuters poll expected.


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