Asian stocks drop, Japan and South Korea lead losses

Nikkei 225 plunged 3.2%, extending losses for a third consecutive week, while KOSPI dropped 5.8%, threatening to erase gains made earlier in the week

Asian stocks fell sharply on Friday, with Japan and South Korea leading losses amid new U.S. tariffs, reviving concerns over world trade just as surging oil prices.

Meanwhile, brent crude held above $100 a barrel after Houthi attacks on Saudi oil tankers in the Red Sea deepened concerns over Middle East supply disruptions, while renewed tensions fuelled fears that the war could escalate further. The latest flare-up has reignited inflation concerns as investors assess the risk of prolonged disruptions across key energy shipping routes.

New U.S. tariffs on imports from 60 trading partners came into force on Friday, adding some headwind for Asia’s export-driven economies.

Nikkei 225 plunged 3.2%, extending losses for a third consecutive week, while KOSPI dropped 5.8%, threatening to erase gains made earlier in the week. Hang Seng and mainland China’s Shanghai Shenzhen CSI 300 each declined 1.3%, while S&P/ASX 200 shed 1.0%. STI slid 0.5%.

Japan’s decline came even as data showed core inflation picked up in June but remained below the Bank of Japan’s 2% target, keeping expectations intact that policymakers will proceed cautiously with further rate hikes.

South Korea also bore the brunt of the selloff, with heavyweight chipmakers tracking weakness in peers after investors reacted cautiously to this week’s technology earnings.

Despite Friday’s losses, CSI300 remained on track to snap a four-week losing streak, rising about 3.2% for the week as investors positioned for next week’s Politburo meeting, where policymakers are expected to unveil additional measures to support growth following weaker second-quarter economic data.

DBS economist Samuel Tse said markets will be looking for stronger policy support for employment and household consumption at next week’s Politburo meeting, alongside further details on China’s long-term consumption strategy under the 15th Five-Year Plan. State-backed buying has also helped underpin mainland equities in recent weeks, cushioning the market against broader weakness.

ASX200, meanwhile, remained trapped in its broad 8,500-9,000 trading range despite stronger labour market data this week. Attention has now shifted to next week’s second-quarter inflation report and comments from Reserve Bank of Australia Governor Michele Bullock, which could offer new clues on the policy outlook.

Looking ahead to next week, investors will monitor China’s July manufacturing PMI for latest clues on factory activity ahead of the Politburo meeting.