Markets fall on fears of trade war

Trade threats from US President Donald Trump that were swiftly greeted by a response from China sent Asian stock markets lower yesterday, as nervous investors fear the prospect of an all-out trade war.

The Straits Times Index declined 2.12 per cent, while Hong Kong's Hang Seng Index ended 2.19 per cent down. South Korea's Kospi fell 1.41 per cent, while Bursa Malaysia lost 1.88 per cent. Shanghai Shenzhen CSI 300 was lower at 0.2 per cent.

China said yesterday that it would impose additional tariffs of 25 per cent on 106 US products, including soya beans, on top of its initial 128-strong list unveiled previously.

Soya bean futures plunged almost 4 per cent, and the US dollar and Chinese yuan were both hit. The yuan suffered its biggest daily fall against the greenback in two weeks, slipping 0.4 per cent to 6.3015 to the US dollar. Sentiment in Europe was no better, with key indices in London, France and Germany down. On Wall Street, stocks opened sharply lower. At the opening bell, the Dow Jones Industrial Average was down 1.9 per cent, while the broad-based S&P 500 dropped 1.4 per cent.

The negative sentiment affected commodities, with WTI crude falling 1.4 per cent to US$62.65 a barrel, the lowest in more than two weeks, while gold, traditionally seen as a safe haven, rose 0.8 per cent to US$1,342.99 an ounce, the highest in over a week.

"China's response was tougher than what the market was expecting - investors didn't foresee the country levying additional tariffs on sensitive and important products such as soya beans and airplanes," said Mr Gao Qi, Singapore-based strategist at Scotiabank.

For now, most analysts agree it is not the best time to start buying stocks. "You don't want to catch the falling knife," said Ms Jane Fu, sales trader at CMC Markets in Singapore.

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A version of this article appeared in the print edition of The Straits Times on April 05, 2018, with the headline 'Markets fall on fears of trade war'. Print Edition | Subscribe