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Asia: Markets cautious amid US-China tensions

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A testy public interaction between Chinese Foreign Minister Wang Yi and US Secretary of State Mike Pompeo in Beijing on Monday refuelled market worries about China-US relations, which have taken a hefty knock from tit-for-tat tariffs.

[HONG KONG] The sell-off in Asian markets slowed on Tuesday, with markets seeing little movement as ongoing US-China tensions simmer.

A testy public interaction between Chinese Foreign Minister Wang Yi and US Secretary of State Mike Pompeo in Beijing on Monday refuelled market worries about China-US relations, which have taken a hefty knock from tit-for-tat tariffs.

"A possible train wreck on the negotiation front could completely derail global markets," said Stephen Innes, head of Asia-Pacific trading at Oanda.

"We should not underestimate the potentially destabilising effect... a weaker yuan will have on regional markets, if not global markets."

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Adding to economic uncertainty Tuesday morning was a bearish report from the International Monetary Fund, which lowered its forecast for Chinese economic growth in 2019 and warned that escalating trade tensions would drag on the world's second-largest economy.

The IMF's World Economic Outlook predicted China's economy would grow 6.2 per cent next year, down from an early forecast of 6.4 per cent.

Both of those figures would mark the slowest rate of expansion for China since 1990.

'SENNSE OF FOREBODING'

Stocks edged up in Hong Kong, rising by a modest 0.5 per cent through the morning.

After the biggest sell-off in three months on Monday Shanghai's stock market - which led the retreat following a week-long public holiday - saw modest gains on Tuesday of 0.3 per cent.

"For China to rally you really need the domestic picture to improve. The external picture is unlikely to help much," David Hauner, a cross-asset strategist at Bank of America Merrill Lynch, told Bloomberg Television.

Tokyo stocks opened lower on Tuesday, as traders returned from a long weekend, with stocks dragged down by a higher yen and worries over China.

The benchmark Nikkei 225 index fell 0.9 per cent through morning trading, following three straight days of falling stocks to Friday.

Other markets across Asia largely saw modest movement, with Taipei up 0.2 per cent. But Sydney fell one per cent.

"The relative calm in today's Asia session belies the eerie sense of foreboding that continues to hang over equity markets," said Mr Innes.

AFP

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