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Asia: Stocks under more pressure on trade-war angst

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[SYDNEY] Asian stocks began the week on the back foot in the wake of trade-war jitters from US moves against Mexico and India to China's retaliation against American measures. The yen held near a six-month high.

US futures retreated and equities in Tokyo slumped, with losses more modest in Korea and Australia. The yield on 10-year Treasuries slipped to 2.12 per cent early Monday. Stocks are reeling and bonds rallying after the Trump administration threatened Mexico with tariffs over immigration concerns late last week. China implemented tariff hikes Saturday and announced it will take action against "unreliable" foreign companies, with a list of violators pending. Crude oil continues to slide amid global demand worries, trading near US$53 a barrel.

May marked a brutal month for just about every asset class except bonds, with money managers seeking out the relative safety of Treasuries. As June began, China said it really doesn't want a trade war but won't shy away from one. Also, China is investigating FedEx because the company failed to deliver items to the correct addresses, possibly a reaction to reports that packages destined for Huawei were redirected to the US.

"Trade is a tail risk that's becoming bigger by the day," Jun Bei Liu, a portfolio manager at Tribeca Investment Partners, told Bloomberg TV in Sydney. "Investors right now are looking more at capital preservation before stepping into buy."

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Market voices on:

India became the latest country to be targeted by the Trump administration Friday evening, eliminating the country's eligibility to export a number of products to the US duty-free.

Traders have gotten so gloomy on the growth outlook that they're betting the Federal Reserve will cut its target rate by a half-percentage point by year-end. Meantime, Morgan Stanley forecast a global recession is brewing, and could begin in as soon as nine months if Mr Trump pushes to impose 25 per cent tariffs on additional US$300 billion of Chinese imports and China retaliates.

Here are some notable events coming up:

The US ISM manufacturing PMI is released Monday.

US President Donald Trump meets UK Prime Minister Theresa May in London Monday.

Tuesday sees the Reserve Bank of Australia policy meeting, with many expecting an interest-rate cut.

China President Xi Jinping begins a two-day visit to Russia on Wednesday.

Theresa May steps down on Friday as leader of the Conservative Party.

Friday's US jobs report is projected to show payrolls rose by 190,000 in May, unemployment held at 3.6 per cent, a 49-year low, and average hourly earnings growth sustained a 3.2 per cent pace.

G-20 finance ministers and central bankers gather in Fukuoka Saturday and Sunday for meetings.

Stocks

Japan's Topix index fell 1.4 per cent as of 9.05am in Tokyo.

South Korea's Kospi index dropped 0.4 per cent.

Australia's S&P/ASX 200 Index lost 0.3 per cent.

S&P 500 Index futures fell 0.6 per cent. On Friday, the S&P 500 Index sank 1.3 per cent.

Currencies

The yen was at 108.24 per US dollar, after appreciating 0.9 per cent last week.

The offshore yuan was steady at 6.9474 per US dollar.

The euro was flat at US$1.1174.

Bonds

The yield on 10-year Treasuries decreased to 2.12 per cent.

Australia's 10-year yield edged up to 1.47 per cent.

Commodities

West Texas Intermediate crude decreased one per cent to US$52.98 a barrel.

Gold gained 0.3 per cent to US$1,309.13 an ounce.

BLOOMBERG