Asian Stocks Fall on New Round of US-China Tariffs

Asian stocks were mostly down on Tuesday as the US and China hit each other with their largest round of tariffs yet and the rise to four-year highs in oil prices further strengthened concerns about the risks to global expansion.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.02 percent to $523.96, although Japan’s Nikkei 225 climbed 0.1 percent to ¥23.928.50 and South Korea’s KOSPI gained 0.6 percent to ₩2,339.17.

Following the latest tit-for-tat- tariffs by the US, the Shanghai Composite index slipped 0.5 percent to CN¥2,781.14, while Australia’s S&P/ASX 200 declined 0.02 percent to A$6,185.90. The blue-chip CSI 300 shed 0.9 percent to CN¥3,379.80.

Hong Kong’s Hang Seng dropped 1.6 percent to HK$27,499.39.

US stocks also experienced losses on Monday, with the Dow 30 index down 0.6 percent to $26,562.05 and the S&P 500 falling 0.3 percent to $2,919.37. US shares showed optimism last week on hopes of the US and China finding a solution for the trade impasse.

Senior strategist Masahiro Ichikawa stated that the weakness of US equities amid the latest flare up in trade conflict concerns is a negative factor for stocks.

Some markets, like Japan’s, have positive factors to fall back on such the weaker yen, but such support could be negated if the Chinese market is hit by volatility, Ichikawa said.

US Imposes New Tariffs on $200B Chinese Goods

Weakness in Asian shares came after US President Donald Trump’s administration imposed new 10 percent tariffs on $200 billion of Chinese goods on Monday, with China retaliating immediately by levying duties of 5 percent to 10 percent on $60 billion of US products.

The moves further deepened the dispute between the world’s top two economies, increasing the risk of a long battle that could harm investment and global trade.   

The US latest tariffs on China now affect over $250 billion of Chinese imports, which is about half of the amount the country sell to the US.

The conflict is also expected to worsen, as the new round of US tariffs is due to increase by the end of the year from 10 percent to 25 percent.

Trump has also warned about implementing tariffs on another $267 billion of Chinese goods, meaning the US measures would effectively cover all China’s annual products exports to the US. The total for 2017 was approximately $506 billion.        

Brent Crude Hits Four-year High

Brent crude oil meanwhile, achieved a fresh four-year high amid looming US sanctions that targeted Iran’s oil exports and an apparent refusal by Russia and the Organization of the Petroleum Exporting Countries (OPEC) to raise production to offset a potential hit to supply.

December contract Brent futures climbed to $81.69 per barrel earlier in the session, a level that has not been reached since November 2014. Brent last stood with a gain of 0.6 percent to $81.08 per barrel.

US West Texas Intermediate (WTI) crude futures for November delivery added 0.4 percent to $72.42 per barrel.

The US sanctions against Iran is set to start on November 4 and Washington is calling for governments and companies around the globe to cut their purchases from Tehran.

OPEC’s reluctance to Trump’s call to raise output to lower prices is also expected to push the crude higher in the coming weeks, according to oil and gas research analyst Ashley Kelty.

Kelty stated that they do not believe the OPEC can actually increase production significantly in the near term, as the physical spare capacity in the system is not that high.

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