Picture: ISTOCK
Picture: ISTOCK

Sydney — Asian shares sank on Monday, the safe haven yen rose and gold jumped as fresh violence broke out in Hong Kong, while uncertainty still remained over whether the US and China could end their damaging trade war.

Hong Kong’s Hang Seng index led the losses in Asia, down more than 2%, after police fired live rounds at protesters on the eastern side of Hong Kong island. Cable TV and other Hong Kong media reported at least one protester being wounded. Video footage showed a protester lying in a pool of blood.

Chinese shares too faltered with the blue-chip CSI300 index down 1.3%. South Korea’s Kospi lost 0.4%.

Japan’s Nikkei gave up early gains to drift away from a recent 13-month high after data showed the country’s core machinery orders fell for a third consecutive month.

Australian shares bucked the downbeat trend, rising 0.55% to a two-week high.

That left MSCI’s broadest index of Asia-Pacific shares outside Japan down 0.5%.

“The China-US trade war and the Hong Kong protest are combining to cast a negative pall on Asian markets today,” said James McGlew, analyst at stockbroking firm Argonaut.

“Hong Kong protests have been dragging on for a while and the view from the financial world is that it’s really starting to bite now. The further this drags on it’s certainly going to be very negative.”

In Asian hours on Monday, E-minis for the S&P 500 were 0.25% lower indicating a weak open later in the day.

Gold rebounded

US bond markets are closed on Monday, but currency and equity markets are open.

Gold, which rises during times of uncertainty, rebounded from a three-month low touched on Friday to be last up 0.3% at $1,462.11 an ounce.

In currencies, the Japanese yen gained on the dollar to 109.01 while the Australian dollar, a liquid gauge for risk, was off slightly at $0.6853.

The dollar index was a touch softer at 98.33 while the euro ticked up to $1.1022.

Market attention was also on the US-China trade talks.

US President Donald Trump told reporters on Saturday that talks with China had moved more slowly than he would have liked, but added that Beijing wanted a deal more than he did.

That was a more upbeat tone than just a few days earlier when he had stressed that the White House would not agree to a full rollback of existing tariffs, remarks that hit stock prices and the dollar.

“Despite his bluster that ‘China wants a trade deal more than I do’, markets sense that Trump is likely quite keen to call a truce on what is becoming a serious US economic risk heading into the 2020 election year,” said David Bassanese, Sydney-based economist at Betashares.

Dow up

By the close of Wall Street on Friday, optimism had returned to the market as investors bet that Washington needs a deal and it is in the interest of China, too. All three major US indexes eked out record closing highs.

The Dow inched up while the S&P 500 climbed 0.3% and the Nasdaq composite added 0.5%. The record closing high by the S&P 500 was the fourth in six sessions.

“It will be the US-China trade talks that will continue to dictate the daily swings in sentiment this week,” said Jeffrey Halley, senior analyst at Oanda.

Halley noted the negotiations are “starting to drag on in a disturbingly Brexit-like manner”, referring to Britain’s divorce deal with the EU that is still up in the air almost three years after the country voted to leave the bloc.

US officials said a lot of work remained to be done when Trump announced the outlines of an interim deal last month, and Beijing has since pushed back on US demands for big agricultural purchases, among other issues.

Analysts said the outlook for equities depends highly on US economic data as a US-China trade agreement would help bolster manufacturing and industrial sectors.

“The Hong Kong protests have seen a knee-jerk rotation out of risk positioning,” Halley said. “The effects are more likely to be passing than permanent … as long as the trade talks stay on target.”

Data on October US industrial production and retail sales, with the National Federation of Independent Business’s monthly small business survey, are scheduled for release this week.

In commodities, benchmark Brent crude fell 57c to $61.94 a barrel while West Texas Intermediate (WTI) crude slipped 48c to $56.76 a barrel.

Reuters