Asia shares slump to four-month low on risk of interminable trade war
SYDNEY (Reuters) - Asian shares broke support and caved to a four-month low on Thursday, as concerns grew that the Sino-US trade conflict was fast morphing into a prolonged technology cold war between the world’s two largest economies.
In early European trading, futures for the pan-region Euro Stoxx 50 and German DAX were each down 0.8% while FTSE futures stumbled 0.6% and France’s CAC 40 futures slipped 0.7%.
U.S. stock futures also pointed to a weak start with the S&P 500 e-minis faltering 0.5%.
Investors worry that the U.S.-China trade dispute, which has already hurt global growth and business investment, could see a further sharp escalation with no signs of a resolution as yet.
Late Wednesday, Reuters reported the U.S. administration was considering Huawei-like sanctions on Chinese video surveillance firm Hikvision over the country’s treatment of its Uighur Muslim minority, according to a person briefed on the matter.
After the United States placed Huawei Technologies on a trade blacklist last week, British chip designer ARM has halted relations with Huawei in order to comply with the blockade.
Digging the knife in, the U.S. military said it sent two Navy ships through the Taiwan Strait on Wednesday.
“Both the U.S. and China appear to be preparing for a prolonged period of trade conflict,” wrote analysts at Nomura in a note on the standoff.
“We think domestic pressures and constraints will drive both sides toward further escalation,” they warned. “Without a clear way forward during an intensifying 2020 U.S. presidential election, we see a rising risk that tariffs will remain in effect through end 2020.”
In response, Shanghai blue chips shed 1.7% to be near their lowest since February. An index of major telecoms firms fell 3.7% as suppliers to Huawei suffered.
Treasury Secretary Steven Mnuchin said on Wednesday it would be at least a month before the United States would enact proposed tariffs on $300 billion in Chinese imports as it studies the impact on American consumers.
MSCI’s broadest index of Asia-Pacific shares outside Japan touched its lowest in four months and was last down 0.8%.
Japan’s Nikkei lost 0.6% and South Korea 0.3%.
The Indians market bucked the trend as Prime Minister Narendra Modi’s party scored a historic victory in the nation’s general election with official data showing Modi’s Bharatiya Janata Party (BJP) ahead in 292 of the 542 seats available.
At least 272 seats are needed for a majority in the lower house of parliament.
