Asian shares slip after US tariffs revive worry about trade war

Shanghai — Asian shares tumbled on Tuesday after US President Donald Trump stunned markets with tariffs against imports from Brazil and Argentina, recharging fears about global trade tensions, while weak US factory data added to the investor gloom.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.37%, with Australian shares dropping more than 2%, on track for their worst day in two months.

China’s blue-chip CSI300 index fell as much as 0.62% before clawing back to end the morning session flat. Japan’s Nikkei shed 0.61%.

In tweets on Monday, Trump said he would impose tariffs on steel and aluminium imports from Brazil and Argentina, attacking what he saw as both countries’ “huge devaluation of their currencies”.

Contrary to his remarks, Brazil and Argentina have been trying to strengthen their respective currencies against the dollar.

Steven Daghlian, market analyst at CommSec in Sydney, said while the South American tariffs dominated market worries on Tuesday, China’s response to US support for anti-government protesters in Hong Kong has also chilled sentiment.

“Markets are extremely sensitive to any good or bad news on the US-China dispute front, but also the US relationship with other nations,” he said.

China said on Monday US military ships and aircraft would not be allowed to visit Hong Kong, and announced sanctions against several US non-government organisations for encouraging protesters to “engage in extremist, violent and criminal acts”.

Worsening the mood, data from the Institute for Supply Management (ISM) showed the US manufacturing sector contracted for a fourth straight month in November as new orders slid. That erased the market cheer from upbeat Chinese factory surveys released over the past few days.

While trade war headlines have been a driver of markets in recent weeks, sentiment has broadly held up. The US S&P 500 index, the Dow Jones Industrial Average, the Nasdaq Composite and Australia’s S&P/ASX 200 index all touched record highs last week.

On Monday, the Dow Jones index fell 0.68% to 27,861.52, the S&P 500 lost 0.59% to 3,122.45 and the Nasdaq dropped 0.94% to 8,584.20.

“I think some sort of of breathing or consolidation probably is needed,” said Joanne Goh, Asia equity strategist at DBS in Singapore, noting that some data releases, such as China’s factor surveys, are suggesting bottoming out.

“I think investors should pick quality stocks not really affected by the trade war,” she said.

Falling yields

Bearish sentiment on Tuesday pushed bond prices higher. The yield on benchmark 10-year Treasury notes fell to 1.8258% from a US close of 1.836% on Monday, and the policy-sensitive two-year yield, dipped to 1.608% from its US close of 1.614%.

In currency markets, the dollar rose 0.15% against the yen to 109.15 and the euro was off 0.05%, buying $1.1072.

The dollar index, which tracks the greenback against a basket of six rivals, was up 0.08% at 97.934 amid the risk-off mood.

Oil prices continued to rise on expectations that the Organisation of the Petroleum Exporting Countries (Opec) and its allies may agree to deepen output cuts at a meeting this week.

Global benchmark Brent crude added 0.33% to $61.12 a barrel, and US West Texas Intermediate crude was up 0.39% to $56.18 a barrel.

Gold was a touch lower on the spot market, shedding 0.02% to trade at $1,462.07 an ounce.