Asian markets fall as the US and China talk, but also impose new tit-for-tat tariffs

Hong Kong — Asia’s major markets were mostly down on Thursday as China and the US exchanged new tit-for-tat tariffs on billions of dollars of goods while the two sides held talks on their long-running trade dispute.

Washington imposed levies on $16bn of imports, sparking an immediate retaliation in kind from Beijing, which said it “firmly opposes the tariffs and has no choice but to continue to make the necessary counter-attacks”.

It also said the US was “clearly suspected” of violating World Trade Organisation (WTO) rules and would file a lawsuit with the group.

The measures are the second after the world’s top two economies swapped tariffs on $34bn of goods in July.

They come as officials from each side hold their first talks since June aimed at easing a row that has dragged on equities for months. However, observers are cautious about what progress they will make initially.

Most stock markets were down in Asia.

While Tokyo edged up 0.2% in the afternoon, at the break Hong Kong was 0.7% down and Shanghai lost 0.3%. Seoul slipped 0.1% but Singapore surged 1.5%, after a one-day holiday.

Sydney fell 0.2% — and the local dollar shed 0.8% — as Australia’s Prime Minister Malcolm Turnbull fights for his political life following a leadership challenge. The S&P/ASX 200 was also being dragged by an almost 5% plunge in Qantas as a jump in the airline’s profits was offset by its worry about rising fuel costs.

Investors are keeping tabs on developments in Washington after President Donald Trump’s former personal adviser admitted a series of charges including illegal use of election funds, while his ex-campaign manager was convicted on several counts including bank and tax fraud.

On currency markets the dollar sprang back to life against the yen, pound and euro after this week’s travails, with Federal Reserve minutes signalling it is ready to lift rates again as the economy continues to improve.

“Many participants suggested that if incoming data continued to support their current economic outlook, it would likely soon be appropriate to take another step,” the minutes said.

The greenback had taken a hit this week from Trump’s comments criticising the central bank’s rate increases and accusing it of not backing his economic plan.

However, the Fed’s policy committee pointed to “ongoing trade disagreements and proposed trade measures as an important source of uncertainty and risks”.

In addition, most members said “an escalation in international trade disputes was a potentially consequential downside risk for real activity”.

Attention now turns to this week’s annual central bankers’ symposium at Jackson Hole in Wyoming, with investors hoping for some idea about governors’ plans in light of the China-US trade row.

The dollar index, which measures the greenback against a basket of major currencies, gained after the release of the Fed minutes.

The index was last up 0.3% at 95.394, after six consecutive sessions of losses took it to the lowest in three weeks.

The euro was last off 0.3% at $1.1553, not far from Wednesday’s two-week high of $1.1623 touched on Wednesday.

The Japanese yen weakened 0.3% to ¥110.85 to the dollar.

In commodities, Brent crude, the international benchmark, was flat at $74.78. US crude gained 11c to $67.97.

US gold futures for December delivery fell 0.5% while spot gold dipped 0.4% to $1,190.5/oz.

AFP, Reuters