Asian shares tumbled Monday after the latest escalation in the US-China trade war renewed uncertainties about global economies, as well as questions over what President Donald Trump might say next.
Japan's benchmark Nikkei 225 started plummeting as soon as trading began and stood at 20,234.87 in the morning session, down 2.3 percent. Australia's S&P/ASX 200 slipped 1.5 percent to 6,427.20. South Korea's Kospi lost 1.7 percent to 1,916.14. Hong Kong's Hang Seng dropped 3.3 percent to 25,309.37, while the Shanghai Composite was down 1.2 percent at 2,862.87.
Stephen Innes, managing partner at Valour Markets in Singapore, compared the difficulty of assessing the volatile market situation to reading tea leaves.
"Nobody understands where the president is coming from," he said, adding that the best thing Trump can do for market stability is to "keep quiet."
"The problem that we're faced right now is that we are making a lot of assumptions ahead of the economic realities."
The market is now dominated by fears of a portending U.S. recession, although the American economy is actually holding up, and much of the US economy is made up of consumption, Innes said. If interest rates come down, he added, consumer spending is likely to go up, working as a buffer for the economy.
"What the market's really waiting for is for them to drop interest rates," Innes said. "Right now, we are still sitting on that uncertainty."
The Dow Jones Industrial Average plunged more than 600 points Friday after the latest escalation in the trade war between the US and China rattled investors. The broad sell-off sent the S&P 500 to its fourth straight weekly loss.
The tumbling began after Trump responded angrily on Twitter following China's announcement of new tariffs on $75 billion in US goods. In one of his tweets he "hereby ordered" US companies with operations in China to consider moving them to other countries — including the US.
Trump also said he'd respond directly to the tariffs — and after the market closed he delivered, announcing that the US would increase existing tariffs on $250 billion in Chinese goods to 30 percent from 25 percent, and that new tariffs on another $300 billion of imports would be 15 percent instead of 10 percent. Those announcements are likely to influence stock markets in Asia when trading opens there Monday.
The ongoing trade dispute between Washington and Beijing, and especially its unpredictability, is certain to have damaging effects on Asia. The unpredictability affects the real decisions central banks make on fiscal policy and companies make on their strategies and investments, setting off ripples of uncertainty.
Zhu Huani of Mizuho Bank in Singapore said what he called Trump's "tariff tantrum" was setting off "the sense that tariffs could continue to rise," with the "the unpredictability of timing and extent of these trade actions risk accentuating the paralysis of business decisions and big-ticket business spending."
"No matter which way you cut the cake, it is nearly impossible to construct a bullish, or even neutral scenario for equity markets today," said Jeffrey Halley, senior market analyst at Oanda.
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