China’s actions extend recession and moderate Asian rebound as trade war anxiety grows

SHANGHAI (Reuters) – China's stock markets fell on Wednesday, extending a loss from the previous day, as the prospect of a trade war between China and the United States would hurt the rest of Asian stocks, even as they handled a modest bounce.

Investors look at an electronic plaque that displays stock information at a brokerage house in Shanghai, China, June 20, 2018. REUTERS / Aly Song

The broadest MSCI index of Asia and the Pacific shares outside of Japan .MIAPJ0000PUS, up 0.4 percent, though that came after a 2.1 percent drop on Tuesday. The Nikkei .N225 of Japan rose 0.1 percent after falling earlier in negative territory. KOSPI .KS11 from South Korea rose 1 percent.

In China, the Shanghai Composite Index .SSEC fell 0.6 percent in the hectic trade, a day after falling 3.8 percent to a two-year low. The fall on Wednesday occurred despite the fact that 30 listed companies announced plans to buy shares by major shareholders, and state media expressed confidence in the country's stock markets.

China's blue-chip CSI300 index .CSI300 was 0.5 percent lower after flirting briefly with earnings, and the Shenzhen composite index .SZSC remained stable at noon.

The prolonged mbadive sale in China comes despite indications that the country's central bank could move to cut reserve reserve ratios (RRR) of banks to increase market liquidity, highlighting concerns about trade. The People's Bank of China (PBOC) recommended the change in the working document on Tuesday.

"It's fair to say that a RRR (cut) seems imminent … the only question is the magnitude," Sue Trinh, director of Asia FX Strategy at RBC Capital Markets in Hong Kong, said in a note.

An apparent bias towards a more flexible policy "goes against the regional bias towards higher rates to protect the currency's fall," he said, adding that the growing divergence of policies indicates the possibility of depreciation of the onshore yuan and Offshore

Trade tensions between the United States and China showed little sign of relief after a White House business adviser said on Tuesday that Beijing had underestimated the US president's determination to impose more tariffs.

Washington threatened Monday to impose a 10 percent tariff on $ 200 billion of Chinese products after Beijing decided to raise tariffs on $ 50 billion in US goods, in response to similar tariffs on Chinese products announced on Friday.

The weakening of appetite for risk caused the yield on 10-year Treasury bonds US10YT = RR to fall to 2.8894 percent, after having risen to 2.9 percent.

The two-year performance US2YT = RR, which increases with the expectations of the operators of higher rates of funds from the Federal Reserve, was 2.5451 percent after touching 2.5530 percent before.

The future S & P 500 ESc1 remained stable, suggesting a limited rise for Wall Street after the main US indices. UU They closed down on Tuesday.


By contrast, Australian stocks gained 0.8 percent, supported by a weak local dollar, AUD =, which rose 0.2 percent after touching a low One year on Tuesday.

A more attractive dividend proposal and a weaker Australian dollar have made the market more attractive to foreign investors, said Ryan Felsman, senior economist at CommSec.

"Last year, the Australian market only rose 7 percent from the United States with 25 percent, we did not get the sugar hit from the corporate tax plan, so there is also some recovery in game, "he said.

The US dollar remained almost flat against the yen, rising 0.05 percent against 110.10 JPY =, still some distance from its peak of 113.38 on January 8.

The EUR = EUR fell one hair to $ 1.1581, while the dollar index .DXY, which tracks the dollar against a basket of six main rivals, barely dropped to 95.040.

U.S. CLc1 gross rose 0.4 percent to $ 65.31 per barrel. But ANZ badysts said in a note that rising trade tensions and disagreement within the Organization of the Petroleum Exporting Countries (OPEC), which meets on Friday, are likely to affect oil prices.

Iran said on Tuesday that OPEC is unlikely to reach an agreement on oil production this week.

Gold remained almost flat after falling near six-month lows on Tuesday with a strong dollar. Spot gold XAU = was marketed at $ 1274.50 per ounce. [GOL/]

Investors in cryptocurrencies were also affected by the losses after South Korea's virtual currency exchange Bithumb said it had been hacked and that 35 billion won of virtual money was stolen in the exchange.

Bitcoin BTC = BTSP was 1.8 percent lower at $ 6,615.46.

Andrew Galbraith report; Edited by Sam Holmes & Shri Navaratnam


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