Yen Gains, Stocks to Drop as Trade-War Ramps Up

(Aug 26): The yen climbed and stocks were headed for steep losses in Asia after the U.S.-China trade war ratcheted up. The yuan retreated.

Equity futures indicated losses of more than 2% in Tokyo and Hong Kong. On Friday, President Donald Trump announced additional levies on Chinese imports and called for American companies to pull out of Asia’s largest economy after China said it would impose retaliatory tariffs on U.S. goods. Trump acknowledged having second thoughts on escalating the trade war, only for his top spokeswoman to clarify he meant he regretted not raising tariffs even more. The yen touched a fresh 2019 high against the greenback. The Aussie and kiwi dipped.

The latest turn in the trade war comes during an already tumultuous August for financial markets amid concerns of slowing global economic growth. On Friday, Trump bumped existing tariffs on Chinese goods to 30% from 25% and planned duties to 15% from 10%. That followed retaliatory levies from China, which indicated it will follow through with tariffs on $75 billion of U.S. goods it announced Friday and fight the trade war to the end, according to an editorial in the state-run People’s Daily.

“Friday’s events raise the risk of an all-out economic war between the U.S. and China,” said Thomas Harr, global head of fixed-income and commodity research at Danske Bank.

Here are the main moves in markets:
Stocks

    The S&P 500 sank 2.6% on Friday.
    Futures on Japan’s Nikkei 225 fell 2.6%.
    Hang Seng futures declined 2.4%.
    Futures on Australia’s S&P/ASX 200 Index lost 1.3%.

Currencies

    The yen rose 0.3% to 105.03 per dollar.
    The offshore yuan dropped 0.6% to 7.1752 per dollar.
    The euro gained 0.1% to $1.1152.
    The Aussie fell 0.3% to 67.40 U.S. cents.

Bonds

    The yield on 10-year Treasuries fell seven basis points to 1.54% on Friday.

Commodities

    West Texas Intermediate crude fell 2.1% to $54.17 a barrel.
    Gold surged 1.9% to $1,526.96 an ounce.