Asian markets face fresh pressure, Hong Kong dives

New York - Asian markets struggled on Tuesday, with Hong Kong briefly tumbling more than 3%, as investors fret over looming China-US trade tariffs that bring a potential trade war a step closer

Dealers brushed off a late rally on Wall Street to continue a selling frenzy that has hammered equities across the globe, while high-yielding currencies are also under pressure against the dollar.

There are particular fears for Shanghai, which has plunged more than 20% from its January high as the colossal Chinese economy is already showing signs of slowing, even before Donald Trump's threatened tariffs kick in.

The yuan extended losses and has fallen around 8% since the end of March - and is now at an 11-month low - adding to fears about the mainland as leaders struggle to get a cap on a debt mountain while also supporting growth.

Analysts dismissed some claims that authorities are allowing the Chinese currency to weaken in order to offset the impact of any tariffs.

"We have already seen the impact on Chinese investors' anxiety over a weaker currency and subsequent capital outflow in 2015-16," said Tai Hui, JP Morgan Asset Management chief market strategist for Asia-Pacific. "This is not a can of worms that Beijing wants to open again."

In share trading Hong Kong sank more than 3% at one point as traders returned from a long weekend break to play catch up with the rest of Asia's retreat on Monday. The HSI then edged back to sit 2.4% lower.

Crude edged back

Shanghai shed 0.2% and Singapore lost 0.5%, while Tokyo ended the morning marginally lower after fluctuating through the morning.

Sydney added 0.5%, Seoul rose 0.3% and Wellington jumped more than 1%. Jakarta fell but Manila rose.

While the focus this week is mainly on the hundreds of billions worth of goods targeted by China-US tariffs, Trump has also taken aim at the European Union and Canada, which have both announced retaliatory measures, adding to global trade war warnings.

Oil prices edged up in Asia after taking a hit on Monday from a tweet by Trump at the weekend saying Saudi Arabia had agreed to his request to ramp up output.

Despite the possible increase in output, analysts said they saw prices continuing to rise.

"The market remains supported by a production outage in Libya and the overhang from recent US... data which suggest US supplies are running very tight," said Stephen Innes, head of Asia-Pacific trade at OANDA.

The euro held up against the dollar after German Chancellor Angela Merkel reached a compromise deal on immigration with her coalition partners, keeping her government intact for now and averting a crisis in Europe's biggest economy.

London - FTSE 100: DOWN 1.2% at 7 547.85 (close)