Local shares followed their regional peers down yesterday after United States President Donald Trump slapped 10 per cent duties on another US$300 billion (S$413 billion) worth of Chinese goods.
The decline capped a grim period for the Straits Times Index (STI). The fall of 0.93 per cent or 30.64 points to 3,261.11 left it down 3.05 per cent or 102.65 points over the five-day trading week.
The latest tariff announcement follows hot on the heels of a 25-basis point rate cut by the US Federal Reserve on Wednesday, which raised the possibility of further easing from central banks around the world to combat the trade war's threat to economic growth.
Investors had been hoping for a deeper cut or at least indications from the Fed that the trend would continue - and in a roundabout way, Mr Trump's actions may deliver what they want.
Mr Paul Chew, head of research at Phillip Securities, believes President Trump has forced the Fed's hand and it would have to cut rates at least three times this year, given that it had cited concerns over global growth and trade tensions as reasons for lowering interest rates.
The tariff hike escalates these concerns, and Mr Trump has been vocal about wanting interest rate cuts to boost the economy, he noted.
Turnover here was 1.16 billion shares worth $1.42 billion, with losers thumping gainers 314 to 153.
Telecommunications service provider mDR led the active counters, losing 50 per cent to 0.01 cent on a volume of 55.6 million.
Most STI counters finished in the red, dragged down by Hutchison Port Holdings Trust and Keppel Corp.
DBS equity market strategist Yeo Kee Yan expects the cyclical offshore and marine sector to suffer as trade uncertainty worsens.
OCBC Bank and United Overseas Bank both reported higher earnings yesterday but they could not escape the market gloom. OCBC closed down 1.84 per cent to $11.21, while UOB shed 1.07 per cent to $26. DBS gave up 0.98 per cent to $26.25.
DBS Group Research analysts on Thursday noted that August has been the weakest month seasonally for the past 12 consecutive years, with a median return of minus 2.85 per cent month on month.
They expect this August to be no different, citing a weak results season, consolidation of STI heavyweights Singtel and the three banks after going ex-dividend and the weakening of the Singdollar against the greenback heading to the October policy meeting.