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Trade fears stalk Asian dealers but oil surge lifts energy firms

Jun 28 2018 07:29
A woman looks at a share prices board in Tokyo, as

A woman looks at a share prices board in Tokyo, as the benchmark stock index, the first major market to open after Greeks voted to reject austerity measures demanded by the cash-strapped nation's creditors, dropped 1.65%. (Yoshikazu Tsuno)

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Hong Kong - Trade war worries again permeated markets across Asia on Thursday, with mixed signals from the White House fuelling uncertainty, but energy firms kicked higher thanks to another surge in oil prices.

Concerns about the Chinese economy are also hurting confidence, with the yuan continuing to weaken and mainland stocks now in bear market territory having fallen more than 20% from recent highs.

Dealers are struggling to get a handle on the situation owing to confusion about Donald Trump's trade strategy.

The president seemed to back off a plan to impose tough new restrictions on Chinese investment in the United States, soothing concerns about a conflagration between the world's top economies.

But later his economic advisor and trade hawk Larry Kudlow warned that stern measures were still being contemplated.

"If the administration doesn't understand what the president is trying to achieve from his trade policy, that is hardly a sign of confidence for investors," said Stephen Innes, head of Asia-Pacific trade at OANDA.

"It would be entirely natural if investors were a bit confused as indeed confusion reigns supreme."

Equity markets fluctuated through the morning and by the break in Tokyo the Nikkei was down 0.4%, while Hong Kong was flat and Shanghai gave up 0.6%.

Sydney and Singapore each rose 0.2%, Seoul slipped 0.6% and Manila sank more than 1%.

Yuan weakens

With no sign of the trade spat easing any time soon there are growing concerns about the impact on the Chinese economy, with growth already showing signs of slowing and stocks plunging 22% since its 2018 peak in January.

The yuan is also at its weakest level against the dollar since December, having endured one of its worst runs since its mid-2015 devaluation that sparked a global market meltdown.

But speculation the People's Bank of China is allowing the currency to weaken to offset the effects of any US tariffs were dismissed by Capital Economics.

The consulting firm said: "While a weaker currency could offset some of the economic damage done by US tariffs, the wider risks to financial stability would not be ones worth taking."

While broader markets are swinging, energy firms continued their rally after crude prices hit a new three-and-a-half year high on the back of data showing US stockpiles plunged by the most since 2016.

The news sent Brent up 1.7% and WTI more than 3% higher.

The jump, which followed similar climbs on Tuesday, was aided by an outage at a key Canadian heavy-oil production facility as well as a US warning to allies that they would be hit with sanctions if they did not halt Iran oil purchases by November.

While both contracts dipped on Thursday, the latest oil gains provided further support to energy firms. CNOOC, Sinopec and PetroChina were all up more 3% in Hong Kong, while Woodside Petroleum was 1.8% higher in Sydney and Tokyo-listed Inpex climbed 0.79%.

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equities  |  currencies  |  asian markets


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