HONG KONG – Fresh fears of a trade war between the world's top two economies sent most Asian markets tumbling on Monday, June 18, after the United States and China imposed tit-for-tat tariffs on billions of dollars of imports.
Energy firms were among the biggest losers as oil prices plunged ahead of a key OPEC meeting, where Saudi Arabia and Russia are expected to lift a two-year-old production cap.
Donald Trump's decision to hit China with 25% levies was met with an immediate retaliation, moving the two closer to a trade war that could potentially batter the global economy.
The announcement came despite weeks of talks between the two sides.
The developments sent stocks into the red across Europe and on Wall Street, and Asian investors followed suit on Monday.
Tokyo ended 0.8% down, while Singapore sank more than 1%, Seoul dropped 1.3%, and Manila tumbled 2.5%.
Wellington and Bangkok were both down but Sydney eked out a 0.2% gain.
Hong Kong and Shanghai were closed for public holidays.
"Many folks will tell you this isn't a trade war. But when one side whacks a bunch of tariffs and the other side retaliates with its own set of tariffs against the other side, that looks very much to me like the battle has been joined," said Greg McKenna, chief market strategist at AxiTrader.
"Whether it escalates is a different question."
Oil prices sink
With traders fleeing to safer assets, the yen rose against the dollar, while the greenback rallied against most high-yielding currencies with the Australian dollar, South Korean won, and Mexican peso all sharply down.
After losing around 4% last week, oil plunged again Monday as investors fret over Russia and Saudi Arabia's expected move to ramp up output at an OPEC meeting that starts Friday, June 22.
The two major producers have kept a ceiling in place since late 2016, which has helped ease a supply glut and lift prices, which had fallen to multi-year lows.
"Russia has been aggressively affirming itself by adding oil to market ahead of the upcoming meeting and is pushing for a significant output hike, Saudi Arabia is suggesting for a modest increase, and others are in favor of the status quo," said Stephen Innes, head of Asia-Pacific trade at OANDA.
"While most industry observers are expecting a production rise, the magnitude and timing of the boost remain uncertain."
Benjamin Lu, a commodities analyst at Phillip Futures Singapore, said crude was also being weighed by trade war fears.
"We expect for global trade tensions to weigh on prices sporadically as populist sentiments pervade the financial markets," he said.
"Enhanced volatility can be expected... as markets worry about the prospect of weaker trade activity, with economic battle lines being drawn."
In early European trade London rose 0.1% but Paris fell 0.3% and Frankfurt was 0.4% off. – Rappler.com