Asia stocks on slippery slope as Trump ups ante in trade war with China

US President Donald Trump (right) with Chinese President Xi Jinping in Florida last April. Asia shares faltered while the dollar climbed as Mr Trump raised the stakes in trade disputes with China.
US President Donald Trump (right) with Chinese President Xi Jinping in Florida last April. Asia shares faltered while the dollar climbed as Mr Trump raised the stakes in trade disputes with China.PHOTO: REUTERS

SYDNEY (REUTERS) - Asia shares started the week in the red on Monday (Sept 10), faltering for the eighth straight day while the dollar climbed as US President Donald Trump raised the stakes in the heated trade dispute with China.

MSCI's broadest index of Asia-Pacific shares outside Japan was last down 0.6 per cent, extending losses from last week when it dropped 3.5 per cent for its worst weekly showing since mid-March.

Japan's Nikkei opened lower but quickly pared losses after revised second-quarter gross domestic product data showed the world's third-biggest economy grew at its fastest pace since 2016.

Chinese shares weakened, with the blue-chip index off 0.6 per cent while Shanghai's SSE Composite stumbled 0.4 per cent. Hong Kong's Hang Seng index slipped 0.8 per cent.

Singapore's Straits Times Index was trading down 0.5 per cent at 3,118.22 as of 11:35am.

On Friday, Wall Street stocks ended lower while world share indexes registered their biggest weekly declines in almost six months after Trump threatened tariffs on a further US$267 billion (S$368.5 billion) worth of Chinese imports, on top of earlier promises to levy duties on US$200 billion worth of Chinese goods.

Beijing has warned of retaliation if Washington launches any new measures, but it is running out of room to match them dollar-for-dollar, raising concerns it could resort to other measures such as weakening the yuan or taking action against US companies in China.

"The overall sense is that the United States will continue to escalate the pressure until China submits to US demands which does not seem likely any time soon," JPMorgan said in a note.

"Overall, the impact of tariffs and high levels of uncertainty will both continue to weigh on markets into the end of the year."

Chinese trade data released on Saturday could give Trump more reason to turn up the heat. China's trade surplus with the United States widened to a record in August.

Trump, who is challenging China, Mexico, Canada and the European Union on trade issues, has now expressed displeasure about his country's large trade deficit with Japan.

BULL MARKET INTACT?

Also weighing on global shares was the prospect of faster rate rises by the Federal Reserve after data on Friday showed US job growth accelerated in August and wages notched their largest annual increase in more than nine years.

The Fed is all but certain to raise rates a third time this year in late September.

The strong employment report boosted the US dollar, which held on to Friday's gains at 95.43. The index is up 3.5 percent so far this year.

"The overall trend for the US economy remains positive," said Lachlan McPherson, Senior Investment Consultant at Charles Schwab Australia.

McPherson expects the US equity bull market to remain intact although there were some near-term risks.

"Trade uncertainty remains a significant concern for future business investment plans. That uncertainty could result in more stock market volatility as investors worry that the Fed may move too far in its normalisation campaign."

Investors will next focus on US inflation for August due Thursday and a stronger number could once again send the dollar surging.

The Australian dollar, a proxy for emerging market growth, hovered near its lowest in 2½ years. The currency fell 1.3 per cent on Friday and was last at US$0.7107.

The euro held at US$1.15505 after two straight sessions of losses while the yen traded in a narrow range, changing hands at 110.96.

In commodities, oil prices were firmer after three straight days of losses, with US crude futures up 44 cents at US$68.19 per barrel. Brent crude futures added 48 cents to US$77.31 a barrel.