Asian shares suffered their steepest daily drop in nine months on Monday, as Sino-U.S. trade friction sent the yuan slumping to a more than decade trough and stampeded investors into safe harbors including the yen, bonds and gold.
Markets have been badly spooked since U.S. President Donald Trump abruptly declared he would slap 10% tariffs on $300 billion in Chinese imports, ending a month-long trade truce. China vowed on Friday to fight back.
In response, China’s yuan CNH= CNY= burst beyond the psychological 7-per-dollar threshold in a move that threatened to unleash a whole new front in the trade hostilities – a currency war.
“Everything is selling off right now,” said Ray Attrill, head of forex strategy at National Australia Bank in Sydney. “We have no reason to expect any cessation in selling unless we see any strong action to defend any CNY or CNH weakness.”
“Our working assumption is that we are unlikely to see any meaningful resolution to the trade dispute anytime soon.”
Asian share markets were a sea of red with Japan’s Nikkei .N225 shedding 2.3% to the lowest since early June. It was the sharpest daily drop since March and led Japanese officials to call a special meeting to discuss market turmoil.
Australian shares slipped about 1.5% to spend their fourth straight session in the red, and South Korea’s KOSPI .KS11 tumbled 2.1% to hit its lowest since December 2016.
MSCI’s broadest index of Asia-Pacific shares outside Japan sank 2.2% to depths not seen since late January.In China, the blue-chip index .CSI300 fell 1% while the troubled Hong Kong market .HSI hit a seven-month trough.
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