Asian shares fall after Trump ruins the mood

Tokyo — Asian shares were mostly weak on Wednesday, as the mood turned cautious over US-China trade talks.

Comments from US President Donald Trump tempered optimism over progress made so far in the talks.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.2%, while Japan’s Nikkei lost as much as 1.4% to hit a one-and-a-half-week low and the Shanghai composite index retreated 0.6%.

On Wall Street, the S&P 500 shed 0.31% overnight, losing steam after hitting a two-month high.

Trump said on Tuesday he was not pleased with recent trade talks between the US and China, souring the improved market sentiment following weekend comments from US Treasury Secretary Steven Mnuchin that the “trade war” is “on hold”.

His remarks followed Beijing’s announcement that it would cut import tariffs for automobiles and car parts.

Trump also floated a plan to fine ZTE, and shake up its management as his administration considered rolling back more severe penalties.

“The market probably became overly optimistic on Monday. The reality is the talks are still continuing as they haven’t made headway on various issues, including intellectual property,” said Norihiro Fujito, senior investment analyst at Mitsubishi UFJ Morgan Stanley Securities.

Also weighing on the prices of risk assets, Trump said there was a “substantial chance” his summit with North Korean leader Kim Jong-un would not take place as planned on June 12, amid concern that Kim is resistant to giving up his nuclear weapons.

“There are many uncertainties in the air, we still don’t know whether the US-North Korea summit is possible and scandals continued to drag [Japanese] Prime Minister [Shinzo] Abe’s popularity,” said Yasuo Sakuma at Libra Investments.

Investors are worried Abe’s long-running cronyism scandal could attract more attention as the finance ministry is due to release related documents on Thursday.

“Many investors are sitting on the sidelines. Personally, I haven’t done much trading over the past week, after the earnings season.” Sakuma said.

“The current price levels are not really attractive. I’m waiting for a 5% correction.”

The cautious mood helped to underpin bonds. The 10-year US Treasuries yield stood at 3.054%, off Monday’s nearly seven-year high of 3.128%.

As lower US yields sap the appetite for the dollar, the euro traded at $1.1754, hovering above Monday’s five-month low of $1.1717.

Against the yen the dollar slipped 0.4% to ¥110.47 from Monday’s four-month high of ¥111.395.

The biggest mover in the currency market was the Turkish lira, which fell more than 2% early on Wednesday to a record low of 4.8450 after rating agencies sounded the alarm on Tuesday over plans by President Recep Tayyip Erdogan to tighten his grip on monetary policy.

The lira has fallen almost 15% so far this month.

In commodities, oil prices held firm near three-and-a-half-year highs on potential supply concerns surrounding Venezuela and Iran.

US West Texas Intermediate (WTI) crude futures traded little changed at $72.01 a barrel, a 0.26% loss.

They touched $72.83 a barrel, the highest since November 2014, on Tuesday.

Brent futures stood at $79.23 a barrel. Last week, the global benchmark topped $80 for the first time since November 2014.

Bitcoin dropped below $8,000 to five-week lows, entering a downtrend channel on technical charts.

The cryptocurrency last traded at $7903.61, down 1% on the day.

Reuters