Asia Markets: Asian Markets Pull Back On Fears Of Prolonged Trade Standoff

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Asian markets fell in early trading Thursday, following Wall Street’s lead as the U.S. and China appeared to brace for a prolonged trade standoff.

After last week’s escalation of tariffs, no new trade talks have been scheduled, and many analysts suspect a breakthrough will require an intervention at the top before the Group of 20 major economies meets next month in Osaka, Japan.

“For a deal, there needs to be a Trump-Xi call, which would enable a useful Lighthizer visit to Beijing,” said Derek Scissors, a China specialist at the conservative American Enterprise Institute. “Then the two leaders could meet in Osaka and compromise on at least one major issue: reinvigorating the talks.”

The U.S. has imposed 25% tariffs on $250 billion in Chinese imports and is planning to target another $300 billion. It has also mounted sanctions against Huawei and is threatening to do the same with other Chinese companies. China, meanwhile, has retaliated against $110 billion in U.S. products.

“The stalemate between the U.S. and China looks likely to last longer as both sides continued to ratchet up rhetoric,” Zhu Huani of Mizuho Bank said in a commentary.

“Despite potential significant negative spillover effect this might have on U.S. firms, the Trump administration seems determined to curb China’s rise in technology advancement,” she added.

U.S. Treasury Secretary Steven Mnuchin is talking to Walmart WMT, +1.10%   and other companies about finding ways to ease the pain if President Donald Trump goes ahead with plans to extend import taxes to the $300 billion in Chinese products that haven’t already been hit with tariffs, the Associated Press reported.

President Xi Jinping said China must prepare for difficult times, Reuters reported Wednesday, describing a “new Long March,” in which “we must overcome various major risks and challenges from home and abroad.”

Japan’s Nikkei NIK, -0.62%   fell 0.8% after a private survey suggested that manufacturing contracted in May. The Markit/JMMA flash purchasing managers’ index fell to 49.6 in May from 50.2 in the previous month. Numbers above 50 on the index show acceleration. Hong Kong’s Hang Seng Index HSI, -1.88%   slid 1.3%, and the Shanghai Composite SHCOMP, -1.36%   retreated 0.9% while the smaller-cap Shenzhen Composite 399106, -2.43%   dropped 0.6%. South Korea’s Kospi 180721, -0.26%   slipped 0.2%, and benchmark indexes in Taiwan Y9999, -1.42%  , Singapore STI, -0.76%   and Indonesia JAKIDX, +1.60%   were mixed. Australia’s S&P/ASX 200 XJO, -0.29%   fell 0.3%.

Among individual stocks, SoftBank 9984, -5.30%   tumbled in Tokyo trading after its U.K.-based ARM unit suspended business with Huawei. Sony 6758, -3.73%   and Mitsubishi UFJ 8306, -0.94%   also fell. In Hong Kong, Sunny Optical 2382, -7.95%  , Tencent 700, -4.48%   and Country Garden 2007, -3.14%   sank. SK Hynix 000660, -1.31%   declined in South Korea, but LG Electronics 066570, +3.01%   rose. Foxconn 2354, -0.49%   and Taiwan Semiconductor 2330, -3.36%   slid in Taiwan. In Australia, BHP BHP, -1.97%   and Westpac WBC, -2.26%   retreated.

On Wall Street, trade worries and mixed corporate earnings pulled stocks lower.

Minutes by the Federal Reserve had scant influence on trading. They showed that some central bank officials felt more interest rate hikes may be needed to keep low unemployment from triggering unwanted inflation.

The S&P 500 index SPX, -0.28%   was down 0.3% at 2,856.27 and the Dow Jones Industrial Average DJIA, -0.39%   retreated 0.4% to 25,776.61. The Nasdaq composite COMP, -0.45%   shed 0.5% to 7,750.84.

Benchmark U.S. crude CLN19, -0.80%   lost 36 cents to $61.06 per barrel in electronic trading on the New York Mercantile Exchange. It gave up $1.71 to settle at $61.42 per barrel on Wednesday. Brent crude BRNN19, -0.90%  , the international standard, shed 42 cents to $70.57 per barrel. The contract slipped $1.19 to $70.99 in the previous session.

The dollar USDJPY, -0.10%   eased to 110.26 Japanese yen from 110.34 yen late Wednesday.

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