Asia stocks drop, yen rises as Trump proposes more China tariffs

Traders and financial professionals work at the opening bell on the floor of the New York Stock Exchange on April 5, 2018.
Traders and financial professionals work at the opening bell on the floor of the New York Stock Exchange on April 5, 2018.PHOTO: AFP

TOKYO (REUTERS) - US stock futures slid and the yen rose against the US dollar on Friday (April 6) after US President Donald Trump proposed additional tariffs on China, aggravating trade tensions and smothering a revival in broader investor risk appetite.

MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.25 per cent. The index has spent the week swinging wildly in and out of negative territory amid the back-and-forth of the US-China trade dispute.

Australian stocks slipped 0.35 per cent and South Korea's Kospi lost 0.3 per cent. Japan's Nikkei fell 0.15 per cent.

The S&P 500 E-mini futures were down 1.2 per cent, pointing to a lower start for Wall Street later in the session.

The Dow and the S&P 500 posted gains for a third day in a row on Thursday, the longest stretch of gains in about a month, as investor fears of an escalating trade conflict between the United States and China abated, turning the focus to upcoming earnings.

Trade tensions, however, returned to the fore after Trump said late on Thursday that he had instructed US trade officials to consider US$100 billion in additional tariffs on China, fuelling the trade dispute between the world's two economic superpowers.

Trump said in a statement the extra tariffs were being considered "in light of China's unfair retaliation" against earlier US trade measures.

 

"Trump's order to consider whether US$100 billion of additional tariffs would be appropriate, and recent trade actions and rhetoric in recent weeks, is an example of how battles can turn to wars," said Dan Ivascyn, group chief investment officer at Pacific Investment Management Co (Pimco).

"This is another reason investors should be reducing risk."

The US dollar, which had risen to a one-month high against the yen on Thursday on an earlier easing of trade fears, slipped against its Japanese peer after Trump's latest trade offensive.

The greenback was down 0.3 per cent at 107.080 yen, pulling back from 107.490, its highest since March 1. It was up 0.8 per cent on the week.

The dollar had risen to a one-month peak versus the yen, bolstered by Wall Street's bounce on Thursday when the United States appeared to signal a willingness to resolve the trade dispute.

The yen, a perceived safe-haven currency, is often sought in times of market turmoil and political tensions.

The dollar dipped 0.15 per cent to 0.9621 Swiss franc, another safe-haven currency.

The euro rose 0.1 per cent to US$1.2248.

The dollar index against a basket of six major currencies was down 0.1 per cent at 90.359. The index has risen 0.4 per cent this week.

Treasury debt prices gained and yields declined as investors sought the safety of government bonds.

The 10-year Treasury note yield fell 2 basis points to 2.811 per cent, pulling back from Thursday's nine-day high of 2.838 per cent.

Crude oil prices fell as risk aversion gripped the broader markets.

US crude slipped 0.6 per cent to US$63.14 a barrel and Brent was down 0.55 per cent at US$67.94 a barrel. Oil had gained on Thursday, helped by higher equities and Saudi Arabia's unexpected hike in crude prices.

Beyond the trade turmoil, financial markets are focused on Friday's US non-farm payrolls report, which could determine the pace of future Federal Reserve interest rate rises and consequently the dollar outlook.

The US March employment report is expected to show non-farm payroll growth of 193,000 jobs versus 313,000 in the prior month, according to the latest Thomson Reuters poll of economists. The unemployment rate is expected to drop to 4.0 per cent from 4.1 per cent in February.