Asia stocks slide after Trump throws cold water on China trade talks – Financial Times


Wednesday 07.00 GMT

What you need to know

  • Equities sell-off hits Asia, Europe expected to follow
  • Concerns rise over trade truce, economic growth
  • Oil slips on rising US inventories
  • Renminbi lower

Hot topic

Global stocks fell on Wednesday after concern over US-China trade relations and worrying signals of economic health from the US bond market fuelled a sell-off on Wall Street overnight.

European bourses were also expected to track falls across Asia which followed one of the biggest sell-offs in US stocks in recent years. Opening calls in London pointed to a decline of 1.2 per cent for Frankfurt’s Xetra Dax 30 and 0.9 per cent for the FTSE 100.

China’s stocks fell across the country, with the CSI 300 index of major Shanghai and Shenzhen stocks down 0.5 per cent. the Hang Seng China Enterprises index was off 1.5 per cent while Hong Kong’s Hang Seng index dropped 1.8 per cent. Tokyo’s Topix shed 0.5 per cent and in Sydney the S&P/ASX 200 was 0.8 per cent lower.

The reaction in Asia followed a 3.2 per cent fall in the S&P 500 index on Tuesday, one of only eight declines of more than 3 per cent in the past five years. The Nasdaq Composite dropped 3.8 per cent, returning to correction territory — defined as a 10 per cent fall from the most recent peak.

In the US, industrials, technology and financial stocks the worst performers. And the yield curve — which reflects the difference between shorter and longer-term US borrowing rates and is a closely followed bond market barometer of economic sentiment — is flattening, often a harbinger of slower economic growth.

The difference between two and 10-year Treasury yields dropped to less than 12 basis points on Tuesday, a gap not seen in 11 years.

“The market decline in the US overnight and the flattening of the yield curve reflect that economic growth momentum is taking over as the primary concern for investors,” said Tai Hui, a JPMorgan Asset Management strategist.

Investors were also worried about the durability of the US-China trade war truce with Donald Trump casting doubt on whether a long-term deal between Washington and Beijing could be struck.

China’s commerce ministry said on Wednesday it was “confident” that a trade agreement with the US could be reached “within 90 days”, in Beijing’s first acknowledgment of the three-month deadline set by Mr Trump.

But on Tuesday night in the US, Mr Trump wrote on Twitter: “We are either going to have a REAL DEAL with China, or no deal at all — at which point we will be charging major Tariffs against Chinese product being shipped into the United States.”

The president added: “Ultimately, I believe, we will be making a deal — either now or into the future . . . China does not want Tariffs!”

Forex

Major currencies mostly lost ground against the dollar.

China’s onshore renminbi exchange rate, which moves within a trading band of 2 per cent either side of a daily mid point set by the People’s Bank of China, was 0.5 per cent weaker at Rmb6.8663. The currency had reached its highest level in more than two months on Tuesday. The offshore rate was 0.3 per cent weaker at Rmb6.8692.

The Australian dollar was down 0.7 per cent at $0.7289 against its US counterpart after third-quarter GDP missed forecasts. The New Zealand dollar slipped 0.2 per cent to $0.6912.

The Japanese yen, which typically acts as a haven for nervous investors, was 0.2 per cent weaker against the dollar at ¥113.02. The pound also slipped 0.2 per cent to $1.2693.

The dollar index, which tracks the greenback against a basket of peer currencies, was 0.2 per cent higher at 97.136.

Commodities

Oil prices fell after data showed a surprise bump in US crude inventories. International benchmark Brent crude was down 1.9 per cent at $60.92 barrel while the US marker West Texas Intermediate was off by 1.8 per cent at $52.32.

Gold was 0.3 per cent lower at $1,235 an ounce.

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