Picture: GALLO IMAGES/ GETTY IMAGES
Picture: GALLO IMAGES/ GETTY IMAGES

Tokyo — Stocks and commodities recovered slightly on Thursday, as markets tried to consolidate from the previous session’s steep losses, when fear of an escalation in the US-China trade war jolted investor sentiment.

MSCI’s broadest index of Asia-Pacific shares outside Japan inched up 0.05%. The index slumped 1% on Wednesday along with a slide in global equities after US President Donald Trump’s threat to imposing tariffs on another $200bn of Chinese goods deepened the trade row between the world’s two largest economies.

Hong Kong’s Hang Seng rose 0.2% and the Shanghai composite index bounced 1.1%. Australian stocks were up 0.7%, South Korea’s Kospi added 0.35% and Japan’s Nikkei gained 1.1%.

Pointing to a moderately higher opening for Wall Street shares later in the day, S&P 500 futures and Dow Jones industrial average futures were both up by 0.3%.

“The markets had some time to digest the latest trade war developments and are poised to begin consolidating. It has become a pattern of reacting to each new development and hoping that trade strains ease in the next few months through negotiations,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

The focus has turned to the next potential steps in the tit-for-tat trade conflict. China has accused the US of bullying and warned it could hit back, although it was unclear how it would retaliate.

“The retaliatory options available to China include boycotting American goods, sharply devaluing the yuan, and selling off US Treasury holdings,” wrote Xiao Minjie, senior economist at SMBC Nikko Securities in Tokyo.

“But we believe none of these moves are realistic or productive … the wisest move in our view is for China to accelerate the opening of its market rather than continue to trade blows with the US.”

The dollar was buoyant, supported by mounting trade tensions and Wednesday’s strong US inflation data.

The dollar index against a basket of six major currencies was steady at 94.765 after gaining 0.6% overnight.

Against the yen, which usually gains in times of political tension and market turmoil, the greenback stretched its overnight rally and rose to ¥112.355, its highest since January.

“The dollar has managed to gain even against the yen due to ongoing trade concerns, with commodity-linked currencies having slid along with the downturn in commodities and providing a broad lift for the dollar,” said Ichikawa at Sumitomo Mitsui Asset Management.

Commodity-linked currencies such as the Australian dollar suffered deep losses on Wednesday. The Aussie traded little changed at $0.7368 after dropping 1.2% overnight.

The Canadian dollar was steady at C$1.3212 to the US dollar following a loss of 0.75% the previous day.

The euro was flat at $1.1674 after shedding 0.6% on Wednesday.

In commodities, Brent crude futures rose 1.35% to $74.38 a barrel after tanking 6.9% overnight, the biggest one-day percentage drop since February 2016, as trade tensions threatened to hurt oil demand and news that Libya would reopen its ports raised expectation of growing supply.

Copper on the London Metal Exchange rose 0.5% to $6,175.00 a tonne. The industrial metal sank nearly 3% on Wednesday, plumbing a one-year low of $6,081.00.

Reuters

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