Daily Times

Asian markets were down Wednesday as trade tensions between the US and China continued to weigh on investor sentiment ahead of the imposition of new tariffs.

Wall Street ended the session down in a shortened trading day ahead of Wednesday’s Independence Day holiday, with falls in tech stocks pressuring the market.

Concerns remain for Shanghai, which is down more than 20 percent from its January high on concerns about a slowing economy, even before new US tariffs threatened by Donald Trump kick in Friday.

China’s yuan is also under pressure, though it levelled after a rally on comments from central bank chief Yi Gang, who pledged to keep the exchange rate stable and avoid using the currency as a weapon in any trade war.

The unit has fallen around eight percent since the end of March, adding to fears about the economy as leaders struggle to cap massive debt while supporting growth.

Despite the central bank’s reassurances, “the markets remain very bearish on China… well over and above trade tensions, as waning growth momentum has contributed to diverging economic indicators versus the US,” said Stephen Innes, head of Asia-Pacific trade at OANDA.

“Unless there’s compromise in the trade dispute, the yuan should remain under pressure,” he added.

But there is little sign of an easing in the standoff between Beijing and Washington, with a Chinese court decision to temporarily ban chip sales by US tech company Micron Technology further souring the atmosphere.

While the case was primarily a dispute between Micron and a Taiwanese firm, the ruling comes after the US blocked China Mobile from the US market.

The move fuelled “speculation the decisions were part of the tit-for-tat trade war,” wrote David de Garis, director of economics and markets at National Australia Bank.

In share trading, Hong Kong was flat at the open and later fell 1.0 percent, after a Tuesday sell-off that saw the market fall more than three percent at one point.

The benchmark Shanghai Composite Index also closed down 1.0 percent, with while Tokyo’s Nikkei was off 0.31 percent.

Tokyo traders were cautious about the trend in Chinese stocks but “with the prospects that the yuan’s depreciation is bottoming out… buying back supported the Japanese market later,” Okasan Online Securities strategist Yoshihiro Ito said in a commentary.

Zhang Gang, analyst at Cental China Securities warned that investors remain “worried that the US-China trade tensions could further escalate.”

“The market may not easily rebound before July 6th when things may become clearer.”

Oil prices edged down slightly after earlier climbs on a tightening US market along with potential US sanction actions against major producer Iran.

Saudi Arabia has said it is prepared to boost supply to balance the market, but traders are also weighing factors ranging from a disruption to supply from Libya to a fall in US crude inventories.

The prospect of Iranian oil being shut out of the market from November is also causing volatility, analysts said.

“Despite suggestions of more supplies coming to market, traders continue to buy dips as increased barrels may only act to prevent a more rapid increase in prices, given the global economy’s insatiable demand for oil,” wrote Innes.

Key figures

Tokyo – Nikkei 225: DOWN 0.31 percent at 21,717.04 (close)

Shanghai – Composite: DOWN 1 percent at 2,759.13

Hong Kong – Hang Seng: DOWN 1 percent at 28,239.58

Euro/dollar: UP at $1.1671 from $1.1667

Pound/dollar: UP at $1.3219 from $1.3204

Dollar/yen: DOWN at 110.35 yen from 110.41 yen

Oil – West Texas Intermediate: DOWN 40 cents at $74.23 per barrel

Oil – Brent Crude: DOWN 17 cents at $78.00 per barrel

New York – Dow: UP 0.2 percent at 24,307.18 (close)

London – FTSE 100: DOWN 0.3 percent at 7,570.25.

Published in Daily Times, July 5^th 2018.