Asian shares began the week in the red on Monday, slipping for the eighth consecutive day. The dollar perked up as US President Donald Trump raised the stakes in the worsening trade dispute with China.
MSCI’s broadest index of Asia-Pacific shares outside Japan was last seen 0.6 percent down, extending its losses from the previous week when it lost 3.5 percent for its worst weekly recording since mid-March.
Japan’s Nikkei opened lower but it hastily pared losses after the revised second quarter gross domestic product data showed that the world’s third biggest economy grew at its fastest pace since 2016.
Chinese shares also softened. The blue-chip index was off 0.6 percent while Shanghai’s SSE Composite slipped 0.4 percent. Hong Kong’s Hang Seng index dropped 0.8 percent.
Last Friday, Wall Street stocks ended lower while world share indexes registered their largest weekly decline in nearly six months after Trump threatened tariffs on a further $267 billion worth of Chinese imports. This was on top of earlier warnings to levy duties on $200 billion worth of Chinese goods.
Beijing has warned of retaliation if Washington starts any new measures. However, it is already running out of wiggle room to match the US dollar-for-dollar, sparking worries that it could resort to other measures such as weakening the yuan or taking action against those US companies that are located in China.
“The overall sense is that the United States will continue to escalate the pressure until China submits to US demands which does not seem likely any time soon,” said JPMorgan. “Overall, the impact of tariffs and high levels of uncertainty will both continue to weigh on markets into the end of the year.”
The Chinese trade data that was released on Saturday could provide Trump more reason to turn up the heat. China’s trade surplus with the United States widened to a record in August.
Trump, who is challenging China, Mexico, Canada, and the European Union on trade issues, has now expressed displeasure about his country’s large trade deficit with Japan.
Further, an additional drag on global shares was the prospect of faster rate increases by the Federal Reserve, following the data released on Friday that showed US job growth sped up in August and wages recorded their largest annual increase in more than 9 years.
The Fed is all but certain to increase rates for a third time this year in late September.
The strong employment report bolstered the dollar, which hovered on Friday’s gains at 95.43. The index was up 3.5 percent so far this year.
“The overall trend for the US economy remains positive,” said Lachlan McPherson, who is the senior investment consultant at Charles Schwab Australia.
According to McPherson, the US equity bull market would remain intact even though there would be some near-term risks.
“Trade uncertainty remains a significant concern for future business investment plans. That uncertainty could result in more stock market volatility as investors worry that the Fed may move too far in its normalization campaign,” he explained.