Asian shares stumble on cloudy trade outlook

Shanghai — Asian stock markets fell on Friday despite signs of greater government support for firms in China, with global trade tension clouding the outlook for demand.

The US dollar was near its highest levels in 13 months, while concern over disputes with Washington pushed the Turkish lira to record lows and piled pressure on the Russian rouble.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.5%. A drop in South Korean tech companies dragged Seoul’s Kospi down 0.7%, as the country’s finance ministry highlighted high oil prices and US interest rate hikes as risks.

Worry over the tit-for-tat China-US trade conflict dragged on shares in China, with the Shanghai Composite index dipping 0.1%. But the tech-heavy ChiNext Composite index rose 0.6%, extending Thursday’s strong gains.

Josh Sheng, chief investment officer at Shanghai Tongshengtonghui Asset Management, said that reflected moves by Beijing to boost local firms, such as revamping a government leadership group to focus on supporting homegrown technology.

“The market in China is ‘risk on’ thanks to government support policies and rising infrastructure investment. I am optimistic about the A-share market for the rest of 2018,” he said.

Elsewhere, Japan’s Nikkei stock index fell 0.5% even as data showed the country’s economy expanded at a faster than expected annualised rate in the second quarter.

US President Donald Trump is pushing Tokyo to sign a free-trade agreement and has threatened to impose higher tariffs on car imports including those from Japan.

Australian shares were flat after the nation’s central bank left growth forecasts largely unchanged, but trimmed its near-term estimates for inflation.

Wall Street provided little direction for Asian markets, with the Dow Jones Industrial Average falling 0.29% on Thursday, the S&P 500 ending 0.14% lower and the Nasdaq Composite adding 0.04%. On Friday, S&P e-mini futures were down 0.1% at 2,849.75.

US treasury yields also fell, with the yield on benchmark 10-year treasury notes at 2.9276% compared with 2.935% at its US close.

Investors were awaiting the release of the US consumer price index (CPI) data for July for possible clues on interest rates and any signs of an impact from new tariffs. The data is expected to show inflation accelerated by 0.2%, after rising 0.1% in June.

Rouble rout

Turmoil in some emerging currencies and the intensifying global trade tension helped support the dollar on Friday, keeping it near 13-month highs against a basket of its peers.

The dollar index, which measures the greenback’s strength against a group of six major currencies, was up 0.08% at 95.583, after gaining 0.5% overnight. A rise above 95.652 would take the index to its highest since July 14 2017.

The euro was flat at $1.1528 and the dollar was 0.15% lower at ¥110.90.

The rouble retreated overnight to its lowest since November 2016 on threats of new US sanctions, weakening beyond the psychologically important 65 to the dollar threshold.

Turkey’s lira fell to record lows against the dollar, with a meeting between a Turkish delegation and US officials in Washington yielding no apparent solution to a diplomatic rift over the detention in Turkey of a US pastor.

Deepening investor concerns about Turkey’s authoritarian trajectory under President Tayyip Erdogan and the economic fallout have also weighed on the currency.

On Friday the lira weakened nearly 2% to as far as 5.65 to the dollar.

Turkish Finance Minister Berat Albayrak is set to unveil the latest plan for Turkey’s economy on Friday.

“Other EM [emerging-market] currencies have held their ground against the dollar, having generally been weakening previously,” said analysts at Capital Economics.

“In most cases though, we suspect that this resilience will prove temporary,” they said, highlighting expectations of rising US interest rates and worries over growing US protectionism.

In commodities, US crude oil was flat at $66.82 a barrel, while Brent crude was less than 0.1% higher at $72.11 a barrel.

Spot gold was largely steady at $1211.96/oz.

Reuters