Asian stock market: A sea of red as China retaliates US order on Houston

Asian shares stand on slippery ground as risk-off gains momentum.
China pushes the US consulate off Chengdu in response to humiliation in Houston.
Off in Japan, mixed data from New Zealand and Australia struggle to limit losses but Chinese blue-chips bleed out.
Preliminary readings of July PMIs will decorate the calendar, US response to Beijing’s order awaited.

Anil Panchal FXStreet

Asian equities print heavy losses as US-China tussle intensifies after Beijing ordered the US to shut the consulate office in the city of Chengdu. The move was well anticipated as a reaction to the US order of leaving the Houston office to the Chinese Consulate. Earlier during the day, Reuters came out with the news citing multiple American diplomats’ travel to the dragon nation, with indirect hints on re-staffing due to Chinese threats. Also adding fuel to the risk-off mood are fiery speeches from US President Donald Trump and Secretary of State Mike Pompeo.

Elsewhere, coronavirus (COVID-19) worries in the US and Australia adds to the market worries and so does the Financial Times (FT) headline conveying delay in the American fiscal package. With over 4.0 million new cases and news of limited resources in Florida, policymakers in Washington shrugs of US President Trump’s push for economy re-start. On the other hand, Victoria marked the highest daily death toll on Thursday, which in turn supersedes any optimism from the upbeat Commonwealth Bank PMIs.

Against this backdrop, the MSCI index of Asia-Pacific shares outside Japan drops 1.42% while China’s blue-chip index losses over 3.0% ahead of the European session on Friday. Australia’s ASX 200 declines 1.26% to 6,017 whereas New Zealand’s NZX 50 stays a bit lesser in the red, down 0.53%, as yearly Trade Balance improves. Further, Hong Kong’s Hang Seng flashes 2.23% losses with South Korea’s KOSPI and Indonesia’s IDX Composite below 1.0% in red by the press time.

On a broader scale, S&P 500 Futures print the second day of losses in six but moves of the US 10-year Treasury yields remain confined around 0.58% due to Tokyo’s closure. It’s worth mentioning that the risk aversion helps the US dollar index (DXY) to bounce off the fresh lows since September 2018.

Although the US reaction to Chinese play and virus headlines will be the key to watch, preliminary readings of the global PMIs for July could also entertain the markets on busy Friday.

Author

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

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