SHANGHAI: Asian shares fell today as relief over a pause in escalation of the trade war between the US and China gave way to doubt over the two countries’ ability to resolve differences.
Adding to market worries, an inversion at the short end of the US yield curve raised the spectre of a possible US recession. The sell-off appeared likely to extend into European trading, with spreadbetters expecting London’s FTSE 100 to fall 0.2% at the open, and both Frankfurt’s DAX and Paris’ CAC 40 to fall 0.4%.
MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.3% lower. Australia shares gave up 1% for the day and Seoul’s Kospi ended 0.8% lower.
Japan’s Nikkei stock index tumbled, closing 2.4% lower on profit taking and as foreign investors and hedge funds reduced their positions on risky assets.
But Chinese blue-chip shares in Shenzhen and Shanghai added 0.2% after struggling to break into positive territory for much of the day.
The temporary freeze on further hostilities in the trade war between the United States and China had sparked a global rally in equity markets on Monday, pushing MSCI’s all-country world index up 1.3%.
But even before the trading day ended, major US indexes pulled back from intraday highs on scepticism that Washington and Beijing can resolve their deep-seated differences in the three-month negotiating window that was agreed, after which tariffs could escalate again.
“It seems that more details and signs of progress will be needed if the initial trade truce warm fuzzy feeling is to be sustained,“ National Australia Bank analysts said in a note to clients.
Already, there was confusion over when the 90-day period would start. A White House official said it started on Dec1, while earlier, White House economic adviser Larry Kudlow told reporters it would start on Jan 1.
Moreover, none of the commitments that US officials said had been given by China, including reducing its 40% tariffs on autos, were agreed to in writing.
Source: The Sun Daily