By Stanley White
TOKYO (Reuters) – Asian stocks tumbled to a one-month low on Thursday as already-growing market fears about global growth were fanned by the United State announcement of new import tariffs on products from the European Union.
MSCI’s broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> dropped 0.60%. Japan’s Nikkei stock index <.N225> closed down 2.00%, the biggest one-day decline since Aug. 26. Australian shares <.AXJO> slumped 2.07% to a five-week low.
The pan-region Euro Stoxx 50 futures U.S. stock futures “The stock markets have been spooked by the U.S. manufacturing data a few days ago, and that is why they are trading like this before non-farm payrolls on Friday,” said Sean Darby, global equities strategist at Jefferies in Hong Kong. “On the positive side, there are signs that Brexit may not be as hard as we thought, but the markets seemed to be focused more on the negatives than the positives.”
Yields on two-year U.S. Treasury yields fell as weakening data on manufacturing and the jobs market suggested the trade war with China has damaged the U.S. economy.
Oil futures extended their decline as a bigger-than-expected increase in U.S. crude inventories and growing evidence of slowing economic growth point to lower energy demand.
The dollar was little changed at 107.13 yen The U.S.-China trade war has cast a shadow over global growth prospects and on Wednesday there was an escalation of the trade dispute between Washington and the EU as President Donald Trump’s administration announced it would impose tariffs on $7.5 billion of goods. Washington will enact 10% tariffs on Airbus EU manufacturers are already facing U.S. tariffs on steel and aluminum and a threat from Trump to penalize EU cars and car parts.
(GRAPHIC: European vs US earnings – https://fingfx.thomsonreuters.com/gfx/mkt/12/6832/6763/earnings1.png)
The tariffs announced Wednesday were approved by the World Trade Organization but could still cause friction across the Atlantic.
The chance that Europe will respond in kind will fuel worries there could be prolonged damage to global growth.
“Tariffs could be a source of tension between the United States and the EU,” said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management Co in Tokyo.
The two-year yield Traders see a 72.8% chance the Fed will cut rates by 25 basis points to 1.75%-2.00% in October, up from 39.6% on Monday, according to CME Group’s FedWatch tool.
Bets on a rate cut could rise further if U.S. non-farm payrolls due on Friday show weakness in the labor market.
Hong Kong shares <.HSI> fell 0.6% as anti-government demonstrators clashed with police into the early hours of Thursday, venting anger over a policeman’s shooting and wounding of a teenager.
The financial hub has been rocked by months of protests over China’s rule of the former British colony.
China’s financial markets are closed until Monday for a public holiday.
(GRAPHIC: Global oil demand 2019 vs. oil prices – https://fingfx.thomsonreuters.com/gfx/mkt/12/6735/6666/demand%20growth_o…) Brent crude (Editing by Richard Borsuk)
