Asian shares extend rout to eight days as Donald Trump ratchets up trade tension

Sydney — Asian shares started the week in the red on Monday, faltering for the eighth straight day, while the dollar climbed as US President Donald Trump raised the stakes in the heated trade dispute with China.

MSCI’s broadest index of Asia-Pacific shares outside Japan was last down 0.6%, extending losses from last week, when it dropped 3.5% for its worst weekly showing since mid-March.

Japan’s Nikkei opened lower but quickly pared losses after revised second-quarter gross domestic product data showed the world’s third-biggest economy grew at its fastest pace since 2016.

Chinese shares weakened, with the blue-chip index off 0.6% while Shanghai’s SSE composite stumbled 0.4%. Hong Kong’s Hang Seng index slipped 0.8%.

On Friday, Wall Street stocks ended lower while world share indices registered their biggest weekly declines in almost six months after Trump threatened tariffs on a further $267bn worth of Chinese imports, on top of earlier promises to levy duties on $200bn worth of Chinese goods.

Beijing has warned of retaliation if Washington launches any new measures, but it is running out of room to match them dollar-for-dollar, raising concern it could resort to other measures such as weakening the yuan or taking action against US companies in China.

“The overall sense is that the US will continue to escalate the pressure until China submits to US demands, which does not seem likely any time soon,” JPMorgan said in a note.

“Overall, the impact of tariffs and high levels of uncertainty will both continue to weigh on markets into the end of the year.”

Chinese trade data released on Saturday could give Trump more reason to turn up the heat. China’s trade surplus with the US widened to a record in August.

Trump, who is challenging China, Mexico, Canada and the European Union on trade issues, has now expressed displeasure about his country’s large trade deficit with Japan.

Bull market intact?

Also weighing on global shares was the prospect of faster rate rises by the Federal Reserve after data on Friday showed US job growth accelerated in August and wages notched their largest annual increase in more than nine years.

The Fed is all but certain to raise rates a third time this year when it meets later in September.

The strong employment report boosted the dollar, which held on to Friday’s gains at 95.43. The index is up 3.5% so far this year.

“The overall trend for the US economy remains positive,” said Lachlan McPherson, Senior Investment Consultant at Charles Schwab Australia.

McPherson expects the US equity bull market to remain intact although there were some near-term risks.

“Trade uncertainty remains a significant concern for future business investment plans. That uncertainty could result in more stock market volatility as investors worry that the Fed may move too far in its normalisation campaign.”

Investors will next focus on US inflation for August, due on Thursday. A stronger number could once again send the dollar surging.

The Australian dollar, a proxy for emerging-market growth, hovered near its lowest in two-and-a-half years. The currency fell 1.3% on Friday and was last at $0.7107.

The euro held at $1.15505 after two straight sessions of losses while the yen traded in a narrow range, changing hands at ¥110.96/$.

In commodities, oil prices were firmer after three straight days of losses, with US crude futures up 44c to $68.19 a barrel. Brent crude futures added 48c to $77.31 a barrel.

Spot gold was little changed at $1,194.84.

Reuters