Precise Investors

Thursday, May 13, 2021

Asian stocks fall before U.S. deadline to impose tariffs on Chinese imports

Asian stocks fell for the fourth day on Thursday, with financial markets jittery before a U.S. deadline to impose tariffs on Chinese imports

Asian stocks fell for the fourth day and major currencies traded in tight ranges on Thursday, with financial markets jittery before a U.S. deadline to impose tariffs on Chinese imports just a day away.

MSCI’s broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS>, which has been drifting lower since Monday, was down 0.5 percent. The index has lost about 2 percent this week, during which it plumbed a nine-month low.

S&P 500 futures edged up 0.1 percent while Dow futures lost 0.1 percent, pointing to a mixed start for Wall Street later in the day when trading resumes following Wednesday’s Independence Day holiday.

Japan’s Nikkei <.N225> lost 1 percent, South Korea’s KOSPI <.KS11> slipped 0.75 percent, Hong Kong’s Hang Seng <.HSI> was off 0.9 percent and the Shanghai Composite Index <.SSEC> fell 0.9 percent.

Senior strategist at Sumitomo Mitsui Asset Management in Tokyo, Masahiro Ichikawa said the markets lack strong direction without incentives from the United States, where their markets were closed yesterday. Moves by Chinese shares and the Yuan remain a key factor in the meantime.

The United States plans to implement tariffs on $50 billion worth of imports from China as both nations remained locked in a bitter trade dispute that has convulsed global financial markets in recent weeks.

On July 6, tariffs on $34 billion worth of imports will take effect, and Beijing has promised to retaliate in kind.

However, China’s finance ministry did say on Wednesday that it will “absolutely not” fire the first shot in a trade war with the United States and will not be the first to levy tariffs.

China has put pressure on the European Union to issue a strong joint statement against U.S. President Donald Trump’s trade policies, European officials said.

Ichikawa said the $34 billion U.S. tariffs figure has been mostly factored by the markets and focus is now on what the United States says on the remaining $16 billion.

In currencies, the Chinese Yuan was slightly lower, its recovery from an 11-month low stalling. A rebound in the Yuan was triggered in the past two sessions after the central bank sought to calm nervous markets midweek and stem the currency’s recent tumble.

The Yuan <CNY=CFXS> was a touch lower after gaining 0.2 percent against the dollar on Wednesday.

The longer term direction for the Yuan was still unclear. China appears broadly comfortable with a weakening Yuan and would intervene only to prevent any destabilising declines or to restore market confidence, policy insiders said.

Strategists at Bank of America Merrill Lynch wrote in a note that the July 6 deadline for the imposition of U.S. tariffs on China imports looms large. Although it does not believe China will weaponise its currency, it does believe the current trajectory of Chinese Yuan depreciation is justified.


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