HONG KONG • Asian investors yesterday largely brushed off China's tit-for-tat response to US President Donald Trump's latest tariff threats, with most markets rising, but concerns about the impact of an all-out trade war are keeping optimism in check.
Beijing said on Wednesday that it would impose 25 per cent tariffs on US$16 billion (S$21.8 billion) of US goods from Aug 23, retaliating in kind to a warning from US officials the day before and escalating a crisis that pits the world's top two economies against each other.
While the row has sent global markets into convulsions this year, the latest development had been widely expected, with Wall Street ending mixed.
Hong Kong rose 0.9 per cent, extending a rally into a fourth day, while Shanghai surged 1.8 per cent following healthy Chinese inflation data. Seoul was 0.1 per cent higher, Sydney added 0.5 per cent, and Wellington rose 0.8 per cent while Bangkok gained 0.1 per cent.
However, Tokyo dropped 0.2 per cent on a stronger yen. Manila was down 0.4 per cent after data showed that the Philippine economy massively undershot growth expectations in April-June, with the government citing the temporary closure of popular holiday island Boracay as a key reason.
Energy firms fell in line with a sharp sell-off in oil, following a report showing US stockpiles fell less than expected, while investors also fretted over the effects of a China-US trade war on demand. Both main contracts dropped more than 3 per cent on Wednesday, with analysts saying figures pointing to a fall in Chinese imports from the US were also detrimental. WTI and Brent were slightly higher yesterday.
"Oil fell out of bed last night as worries over Chinese demand surfaced after the trade data and in the wake of China's hitting back in the tariff war targeting energy products," said Mr Greg McKenna, chief markets strategist at AxiTrader.
On currency markets, the rouble extended Wednesday's losses and is now down more than 4 per cent against the US dollar after the US imposed fresh sanctions over Russia's alleged role in the attempted killing of a former spy in Britain.
The pound also remains rooted near one-year lows on fears that Britain would leave the European Union next year with no deal to trade with the bloc, with the country's trade secretary and central bank boss recently warning that the chances of such a scenario are increasing.
"The market is clearly getting more nervous over the possibility of a no-deal Brexit, which would be a messy outcome for the UK economy," said Mr Rodrigo Catril, a senior foreign exchange strategist at National Australia Bank.
In early trade yesterday, London fell 0.5 per cent, Paris shed 0.3 per cent and Frankfurt was off 0.1 per cent.