Asia equities drop on rising trade tensions

by Jonathan Adams
US equities

MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.63%, with a sub-index of IT stocks down 2.5%

Asian equities slipped on Thursday, led by chip stocks as investors considered the prospect of growing trade tensions between the U.S. and China, while the yen was solid after scaling a six-week high following suspected interventions by Tokyo.

The U.S. dollar stayed near its lowest in four months against other major currencies as comments from Fed officials bolstered the case for a rate cut in September, keeping gold near record highs.

MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.63%, with a sub-index of IT stocks down 2.5%. Tech-heavy South Korean shares dropped 1.5%, while Taiwan stocks were 2% lower.

The yen’s strength and the sharp decline in chip stocks took Japan’s Nikkei down more than 2%.

A report that the US was considering tighter curbs on exports of advanced semiconductor technology to China sparked a sharp sell-off in chip stocks, with the Nasdaq slumping overnight.

I think this volatility spike is now leading to some wider risk reduction as investors worry about stretched positioning, according to Ben Bennett, Asia-Pacific investment strategist at Legal and General Investment Management.

The European bourses were due for a mixed open, with Eurostoxx 50 futures down 0.14% while German DAX futures were little changed and FTSE futures rose 0.5%.

Investor attention will be on the policy decision from the ECB later in the day, where the central bank is expected to stand pat, although comments from officials will be crucial in gauging the timing of next rate cut.

Wider risk sentiment also took a hit after Republican presidential candidate Donald Trump said on Wednesday Taiwan “did take about 100% of our chip business” and should pay the U.S. for its defence as it does not give the country anything.

China stocks wavered as investors awaited policy news from a key leadership gathering in Beijing. The Shanghai Composite index was 0.12% lower and the blue-chip CSI300 index up 0.12%.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Trading and Investment News. The information provided on Trading and Investment News is intended for informational purposes only. Trading and Investment News is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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