Asian stocks drop on trade concerns and tensions in South China Sea

Asian equities are flashing red as investor sentiment remains fragile, courtesy of trade tensions and due to the situation in the South China Sea.

Scorecard

• Japan's Nikkei is currently down 0.31%.
• Australia’s S&P/ASX 200 Index is shedding 0.22%.
• South Korea’s Kospi index is flashing 0.11% losses.
• The Hang Seng Index is down 0.38% and the Shanghai Composite is flattened.
• S&P 500 futures are reporting a 0.45% drop.

Last week, US President Donald Trump escalated trade tensions with China by tweeting additional tariff measures. As a result, the risk sentiment soured.

President Trump softened his tone earlier this week, but that did little to boost risk appetite. The US Treasury Secretary Steven Mnuchin was out on the wires earlier today, trying to calm market nerves by stating that the Chinese negotiators may visit Washington for negotiations.

Mnuchin, however, did not say whether a previously planned September meeting would take place, reinforcing the widespread belief that the Trump administration officials are in no hurry to resolve the trade fight.

So, as of now, there is little reason to snap up equities and other risk assets. Also, the heightened tensions in the South China Sea could be adding to the bearish pressures around equities.

The guided-missile destroyer USS Wayne E. Meyer reportedly entered South China Waters without China's permission. In response, the Chinese People's Liberation Army has asked the US to immediately cease such provocative actions and has pledged to take all necessary measures to defend China's sovereignty.

While equities are facing selling pressure, the anti-risk JPY is on the rise against most majors. The USD/JPY pair is currently down 0.22% at 105.88 and both WTI and Brent are reporting moderate losses. Gold is trading in a sideways manner around $1,250.