Asia: Markets down as trade fears linger

[HONG KONG] Asian markets were down Wednesday, though Hong Kong recovered slightly from an earlier tumble, as trade tensions between the US and China continued to weigh on investor sentiment.

Wall Street ended the session down in a shortened trading day ahead of Wednesday's Independence Day holiday, with falls in tech stocks pressuring the market.

Concerns remain for Shanghai, which is down more than 20 per cent from its January high on concerns about a slowing economy, even before new US tariffs threatened by Donald Trump kick in Friday.

China's yuan however stabilised after a rally on comments from central bank chief Yi Gang, who pledged to keep the exchange rate stable and avoid using the currency as a weapon in any trade war.

The unit has fallen around eight percent since the end of March, adding to fears about the economy as leaders struggle to cap massive debt while supporting growth.

Despite the central bank's reassurances, "the markets remain very bearish on China... well over and above trade tensions, as waning growth momentum has contributed to diverging economic indicators versus the US," said Stephen Innes, head of Asia-Pacific trade at Oanda.

"Unless there's compromise in the trade dispute, the yuan should remain under pressure," he added.

But there is little sign of an easing in the standoff between Beijing and Washington, with a Chinese court decision to temporarily ban chip sales by US tech company Micron Technology further souring the atmosphere.

While the case was primarily a dispute between Micron and a Taiwanese firm, the ruling comes after the US blocked China Mobile from the US market, "fuelling speculation the decisions were part of the tit-for-tat trade war," wrote David de Garis, director of economics and markets at National Australia Bank.

In share trading, Hong Kong was flat at the open, and later edged down 0.2 per cent, after a Tuesday sell-off that saw the market fall more than three percent at one point.

The benchmark Shanghai Composite Index was off 0.7 per cent, while Tokyo's Nikkei was down 0.7 per cent by the break.

Sydney fell 0.5 per cent, while Seoul was virtually flat, down just 0.05 per cent.

Oil prices edged up despite Saudi Arabia saying it was prepared to boost supply to balance the market, essentially confirming that it had been asked by Trump to increase production.

A disruption to supply from Libya was also pressuring prices, analysts said.

"Despite suggestions of more supplies coming to market, traders continue to buy dips as increased barrels may only act to prevent a more rapid increase in prices, given the global economy's insatiable demand for oil," wrote Innes.

AFP