Asian shares hit 14-month low as markets brace for new salvo in trade war

Sydney — Asian shares carved out a 14-month trough on Friday, on fear that a new salvo of China-US tariffs could come at any moment, while a slump in US chip stocks rippled through the tech-heavy region.

MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.4%, having earlier reached its lowest since mid-July 2017.

Tokyo’s Nikkei shed 1%, undermined by a rising yen and reports that Japan could be US President Donald Trump’s next trade target.

Chinese blue chips managed a 0.8% bounce as beaten-down healthcare stocks found buyers after taking a savaging in recent months amid vaccine scandals.

Emerging markets in the region were struggling to steady after a punishing week, with Indonesia and the Philippines still badly scarred by fear of capital flight following crises in Argentina and Turkey.

Nerves are likely to be frayed further as the public comment period for proposed tariffs on an additional $200bn worth of Chinese imports ends at 4am GMT. The tariffs could go into effect shortly afterward, though there was no clear timetable.

China has warned of retaliation if Washington launches any new measures.

“It seems unlikely the tariffs are not implemented as the US administration believes they are winning the trade war and will be in a stronger position to negotiate if they put more pressure on China,” JPMorgan analysts wrote in a note.

“The tech sector was also very weak overnight, with a slide in Micron of almost 10% and further weakness in the Chinese Internet ADRs.”

Wall Street suffered sharp losses in chip makers on Thursday. Concern about increased regulation of social media companies also put pressure on share prices.

The S&P 500 index lost 0.37% and the Nasdaq composite index fell 0.91%, while the Dow Jones industrial average eked out a 0.08% gain.

Watching wages

Eyes will now turn to the US payrolls report for August, which is expected to show a robust rise of 191,000, in part as July was temporarily depressed by the closure of the Toys R Us chain that month.

Still, analysts at NatWest Markets cautioned: “Despite employment indicators pointing to another strong report, it is worth noting that there is a tendency for August payrolls to initially disappoint and then be revised up noticeably later.”

Just as important will be figures on US wages, where a rise above the 0.2% forecast would probably boost the dollar and pressure treasury prices.

The dollar could do with the lift, having lost out to the safe-haven yen and Swiss franc. It was changing hands at ¥110.58 after falling 0.7% on Thursday, the sharpest one-day loss in seven weeks.

Part of the decline came after a Wall Street Journal columnist reported Trump had mused about starting a trade fight with Japan.

The dollar also hit a four-month low on the franc of $0.9645. Against a basket of currencies, the dollar index was flat at 95.022 and off the week’s top of 95.737.

The euro was holding steady at $1.1620, while sterling idled at $1.2926 amid ongoing uncertainty over Brexit negotiations.

In commodity markets, the dip in the dollar left gold a touch higher at $1,202.81 an ounce.

Crude oil was subdued after falling more than 1% on Thursday, when US data showed petrol inventories rose unexpectedly last week.

Brent was 5c lower at $76.45 a barrel, while US crude edged up 2c to $67.79.