Asian markets declined on Tuesday, with China markets lagging the region as investors weighed an escalating trade dispute between the U.S. and China.
Japan’s Nikkei 225 edged down by 0.52 percent, but was off its intraday low, as major sectors came under pressure. Technology stocks and automakers were mostly in negative territory, with blue chips Toyota and SoftBank Group down 0.27 percent and 2.93 percent, respectively.
Greater China markets underperformed their regional peers. The Shanghai composite fell 1.45 percent in morning trade and the smaller Shenzhen composite lost 0.53 percent. The benchmark will end the session in bear market territory, referring to a decline of 20 percent or more from a one-year high, if it finishes the day lower by at least 0.5 percent, according to Dow Jones.
Over in Hong Kong, the Hang Seng Index declined 1.28 percent as all sectors but telecommunications traded lower. The properties and construction index led losses in the early going, tumbling by 2.59 percent as developers such as Country Garden sank 6.92 percent.
Other major markets in Asia also put in poor showings, with South Korea’s Kospi sinking 0.92 percent and Australia’s S&P/ASX 200 edging down by 0.4 percent.
“There’s a risk of escalation, counter-threats and it’s political. Remember that mid-term elections [in the U.S.] are coming up. Does that remove the risk for maneuver and compromise in the U.S.? And the Chinese themselves have their own constraints … I think there’s still risk really that the debate gets away from the protagonists,” Frederic Neumann, co-head of Asian economics at HSBC, told CNBC’s “Squawk Box.”
Declines in Asia tracked sharp losses seen stateside on Monday. U.S. stocks tumbled in the last session following weekend news that U.S. President Donald Trump intends to block some Chinese companies from investing in U.S. technology. Treasury Secretary Steven Mnuchin said the investment restrictions, reported by the Wall Street Journal, were “false, fake news,” but said that the measures would apply to “all countries” instead of just China.
There were conflicting messages, however, from the Trump administration, with White House economic advisor Peter Navarro telling CNBC that there were “no plans” to impose restrictions targeting foreign investments. Stocks stateside pared some losses following Navarro’s comments.
The Dow Jones industrial average fell 1.33 percent, or 328.09 points, to close at 24,252.80. The index also ended the session below its 200-day moving average, a key technical level, for the first time since June 2016. Other major U.S. indexes also finished lower on the first trading day of the week.
European markets were weaker overnight on the back of investor concerns about trade tensions, with the pan-European Stoxx 600 losing more than 2 percent. Automaker stocks there took a hit after Trump last week threatened new duties on European autos.
Investors are concerned that a trade war could negatively affect global economic growth, with the intensification in trade tensions between the U.S. and its trading partners keeping markets on edge. The weaker investor sentiment is expected to persist in the immediate future, analysts indicated.
“Asian bourses are likely to remain handicapped in trading for the near term as investors prefer to de-risk into the heightened global trade war uncertainties and thinner summer trading conditions,” OCBC Bank analysts said in a note.
In currencies, the dollar index softened to trade at 94.191 after slipping in the last session. Against the safe-haven yen, however, the greenback extended last session’s losses to trade at 109.41 at 10:35 a.m. HK/SIN, compared to levels around the 190.7 handle seen in the last session.
The euro, meanwhile, extended its overnight gains, last trading above the $1.17 handle at $1.1716.
On the energy front, oil prices were slightly firmer after falling on Monday. Those moves came after OPEC said last week that it would increase oil production. U.S. West Texas Intermediate crude edged up by 0.21 percent to $68.22 per barrel and Brent crude futures was little changed at $74.74.
— CNBC’s Fred Imbert contributed to this report.
