Asia: Equities, pound and oil sink on trade and Brexit woes

[HONG KONG] Asian equities tumbled on Thursday as China-US trade frictions continue to dog investors, while the pound hit a fresh-four-month low on Brexit worries and energy firms were battered by plunging oil prices.

Markets across the region were in the red as traders ran to the hills, with no signs of a break in the tariffs stand-off between the world's top two economies keeping optimism in check.

The heavy selling comes after a relatively sedate couple of days in Asia and follows losses on Wall Street, with warnings that more volatility is expected for some time.

Tensions between China and the US have increased after Donald Trump banned telecoms giant Huawei from the US market and prevented American firms from selling to it.

The move has led a number of companies around the world to cut back their business with the firm, including Google, Japan's Panasonic and BT in Britain, among others.

The row, which has seen the trade war widen to also become a battle over technology, has hammered the sector with major firms seeing their valuations tumble in recent weeks.

On Thursday, Hong Kong market heavyweight Tencent dived more than two per cent, Sony shed more than three per cent in Tokyo, Seoul-listed LG Display dived by a similar amount and TSMC shed almost three per cent in Taipei.

"As ever, the sentiment is vulnerable to headline flashes on trade, and we can expect this sort of flip-flopping in sentiment daily until more clarity emerges on any progress on the US-China trade front," said Oanda senior market analyst Jeffrey Halley.

"In the bigger picture, equities may find upward momentum difficult on a consistent basis, while the trade picture and its knock-on effects remain so cloudy."

MAY FACES ABYSS

Hong Kong was among the worst performers with the Hang Seng Index diving 1.4 per cent, Shanghai 1.1 per cent lower and Tokyo down 0.8 per cent at lunch.

Taipei was more than one per cent off while Seoul shed 0.6 per cent and Manila fell 0.4 per cent.

Still, many observers remain hopeful of an eventual China-US trade agreement.

"Markets are expecting something to happen around the G-20" next month, Steven Englander, at Standard Chartered bank, told Bloomberg TV.

"There is still the expectation that there is going to be a deal, even if it's not a terribly friendly deal."

Forex traders were offloading the pound as Prime Minister Theresa May faces being ousted after her revised plan to push through her Brexit agreement faced a barrage of criticism making it unlikely to be passed by MPs.

Her political career appeared to be in tatters after Andrea Leadsom - one of the cabinet's strongest Brexit backers - resigned over Mrs May's handling of the crisis, while members of her Conservative party are said to be planning ways to force a no-confidence vote in the premier.

With Mrs May expected to be gone even before June, there are concerns she will be replaced by a hardline Brexiter, making it increasingly likely Britain will leave the EU without a deal.

Energy companies were taking a hit after oil prices tanked on news of another sharp rise in US inventories, which added to worries about demand.

Both main contracts plunged Wednesday, and extended losses in Asia, on the surprise increase, with downward pressure also coming from concerns about the impact of the trade war on the global economy.

AFP