Technology counters bear brunt of Asian equities sell-off as trade fears grow

Tokyo — World stocks extended a sell-off on Tuesday as an escalating trade fight between the US and other major economies steered investors away from riskier assets, with markets in China bearing the brunt of investor anxiety.

The tense backdrop lifted safe-haven US Treasuries and kept the dollar on the defensive as financial markets worried about the wider global economic fallout of the Trump administration’s “America First’ agenda.

Asian equities were bathed in a sea of red after Wall Street tumbled overnight, with the S&P 500 and Nasdaq suffering their steepest losses in more than two months overnight.

Markets in China — the epicentre of the trade tension with the US — took the biggest knock.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.35%. Hong Kong’s Hang Seng retreated 0.4%, the Shanghai composite index slid 0.8% and Japan’s Nikkei shed 0.2%.

Equities from tech-heavy regions such as South Korea’s Kospi and Taiwan fell 0.9% and 0.75%, respectively.

Taiwan Semiconductor was down 1.8%, South Korean chip maker SK Hynix lost 1.55% and Japan’s Tokyo Electron was down 1.45%. Chinese tech giant Tencent Holdings tumbled 1.7%.

Asian tech shares slid after their US peers, which derive much of their revenue from China, took a battering overnight.

Sparking the drop in tech shares and souring broader sentiment was a report on Monday that the US Treasury Department was drafting curbs that would block companies with at least 25% Chinese ownership from buying US tech firms.

“Unlike the seemingly spur-of-the-moment tweets by President Trump and retaliatory exchange of tariffs, Washington’s bid to protect intellectual property is an issue at the heart of a trade row between two powers battling for future global supremacy,” wrote Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities in Tokyo.

Besides the trade spat with China, the US has recently upped the ante in a challenge to the European Union by threatening to impose tariffs on cars imported from the bloc.

“Increasingly hawkish trade rhetoric the US is employing could begin impacting the economy by cooling investor sentiment and curbing capital expenditure by corporations,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

“It’s turning out to be a long-term bearish factor for the financial markets, as the US is unlikely to back down at least through its midterm elections.”

The dollar index against a basket of six major currencies dipped 0.1% to 94.193 and headed for its fifth straight day of losses.

The greenback was pressured as long-term US Treasury yields declined to one-week lows amid the heightened risk aversion in financial markets.

The euro added to the previous day’s gains and reached a nearly two-week high of $1.1722.

The dollar was down 0.3% at ¥109.450, having fallen to a two-week low of ¥109.365 on Monday. The yen often attracts bids in times of political tensions and market turmoil.

Brent crude oil futures were up 0.07% at $74.78 on uncertainty over Libyan exports. The contracts had slid 1% overnight as receding investor risk appetite weighed on commodities.

Oil prices were capped after oil cartel Opec and its allies on Friday agreed to increase global supplies, albeit modestly.

Concern about trade kept copper on the London Metal Exchange near the two-and-a-half-month low of $6,702.5 a tonne that it brushed on Monday.

Spot gold shed 0.1% to $1,263.56 an ounce.

Reuters