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POST TIME: 4 September, 2018 00:00 00 AM
Asian markets start week with losses as trade fears return
AFP

Asian markets start week with losses as trade fears return

The China-US trade row is back on investors' minds this week as Donald Trump looks to impose tariffs on a further $200 billion of imports. AFP file Photo

Asian markets opened the week on a negative note as trade tensions returned to the fore, with Donald Trump eyeing fresh tariffs on a swathe of Chinese goods and NAFTA talks with Canada hitting a wall, reports AFP from Hong Kong.

The optimism that permeated trading floors at the start of last week has been replaced by a now-familiar sense of dread after the US president hit out at Ottawa over the weekend as the two sides struggle to hammer out a new deal.

In a tweet over the weekend, Trump threatened to exclude Canada from a new North American Free Trade Agreement after negotiations to rewrite the 1994 pact ended without agreement.

He said there was “no political necessity to keep Canada in the new NAFTA deal. If we don’t make a fair deal for the US after decades of abuse, Canada will be out”.

While talks will resume Wednesday, his outburst seemed designed to ramp up pressure on Canadian negotiators.

The comments threw a spanner in the works for investors after the US and Mexico said earlier in the week they had agreed a revised pact.

Trump also roiled markets last week by saying he wanted to impose tariffs on $200 billion of Chinese imports as soon as public consultation ends on Thursday, adding to the $50 billion already targeted.

That rekindled fears of an all-out trade war between the world’s top two economies, while European Commission chief Jean-Claude Juncker on Friday warned the EU would retaliate in kind if Trump pushes through duties on foreign cars.

The end of the month sees the Federal Reserve’s next policy meeting at which it is expected to lift interest rates for a third time this year, with analysts poring over its statement for an idea about a possible fourth rise before January.

“Batten down the hatches as the main feature that stands out about this week—and the month of September for that matter—is (that) the market risk is massive as the central bank and the political worlds collide,” said Stephen Innes, head of Asia-Pacific trading at OANDA.

“Indeed, such collisions tend to escalate volatility exponentially, and I expect some episodic moments that will have traders looking for the exits or end up over the barrel.”

Japan’s Nikkei ended 0.7 percent lower, Hong Kong was down 0.6 percent and Shanghai fell 0.2 percent. Singapore lost 0.4 percent, Seoul shed 0.7 percent and Sydney was 0.1 percent off.

There were also losses in Wellington, Taipei, Manila and Jakarta.

In early European trade London rose 0.5 percent but Paris dropped 0.3 percent and Frankfurt fell 0.4 percent.

On currency markets, the Turkish lira halved earlier losses to sit one percent lower as the central bank said it will take the “necessary actions to support price stability” in September after recent developments suggested “significant risks to price stability”.

The comment followed data showing inflation hit a 15-year high of 17.9

per cent last month as a dive in the currency—it is down about 40 percent this

year—filters through to consumers.

However, the bank has refused to lift interest rates to combat the surging prices, putting pressure on the embattled economy.

The Indonesian rupiah is also hovering around lows last seen during the Asian financial crisis 20 years ago, hit by a ballooning current account deficit.

Other emerging-market and high-yielding currencies were mixed, with the Australian dollar 0.3 percent up, South Korea’s won 0.2 percent higher, the South African rand 0.1 percent lower and the Russian ruble down 0.4 percent.