(Corrects pronoun in paragaph 18. The error also appeared in
earlier versions of Global Markets.)
* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Nikkei fall 2.3%, Asia shares ex-Japan -2%
* Yields, emerging currencies dive amid safe-haven rush
* Yuan under pressure as trade war escalates
* Gold jumps to highest since April 2013, oil skids
By Wayne Cole
SYDNEY, Aug 26 (Reuters) - Asian shares sank on Monday as
the latest salvo in the Sino-U.S. trade war shook confidence in
the world economy and sent investors steaming to the safe
harbours of sovereign bonds and gold, while slugging emerging
market currencies.
Yields on benchmark 10-year Treasury debt US10YT=TWEB
dropped to their lowest since mid-2016, while gold hit its
highest since April 2013 as risk was shunned.
There was some relief that China fixed the yuan's midpoint
at a relatively steady 7.0570 per dollar when it had been
trading as weak as 7.1850 offshore CNH=D3 , countering concerns
Beijing would let the currency slide to keep exports
competitive.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS still shed 2.0%, and Australia .AXJO 1.5%.
Japan's Nikkei .N225 lost 2.3%, while Shanghai blue chips
.CSI300 fell 1.2%. E-Mini futures for the S&P 500 ESc1 eased
0.8%, and EUROSTOXX 50 futures STXEc1 1.1%.
Wall Street nose-dived on Friday when President Donald Trump
announced a 5% additional duty on $550 billion in targeted
Chinese goods, hours after China unveiled retaliatory tariffs on
$75 billion worth of U.S. products. At the G7 meeting in France over the weekend, Trump caused
some confusion by indicating he may have had second thoughts on
the tariffs.
But the White House said on Sunday that Trump wished he had
raised tariffs on Chinese goods even higher last week, even as
he signalled he did not plan to follow through with a demand
that U.S. firms close operations in China. Trump is now set to hold a joint news conference with French
President Emmanuel Macron later on Monday. "There is an uneasy feeling that the very fragile
negotiations are spiralling out of control," wrote analysts at
ANZ in a note.
"The escalation suggests uncertainty will continue to weigh
on global trade, industrial production and investment, with no
sign of a resolution."
The latest broadside overshadowed a pledge by Federal
Reserve Chair Jerome Powell to "act as appropriate" to keep the
U.S. economy healthy, although he stopped short of committing to
rapid-fire rate cuts. The markets clearly believe, however, the Fed will have to
act aggressively and are fully priced for at least a
quarter-point cut in September and more than 110 basis points of
easing by the end of 2020. FEDWATCH
"Trump shows no signs of moderating his destructive trade
policies," said JPMorgan analyst Adam Crisafulli.
"Central banks can't fully ameliorate the downside of a
global trade war," he added. "Companies will enter lockdown mode
in terms of spending, and eventually hiring, until at least the
November 2020 election amid all the uncertainty."
YIELDS RACE LOWER
Yields on 10-year Treasury notes US10YT=RR were down at
1.48%, having dived from a top of 1.66% on Friday, leaving them
almost matching two-year yields.
"We continue to remain long 10's, targeting 1.3% due to a
combination of weakness in the global economy and trade war
uncertainty filtering through into a weaker U.S. economy," said
Priya Misra, head of global rates strategy at TD Securities.
"This will force the Fed to ease beyond a 'mid-cycle
adjustment to policy'," she added. "We believe that the market
is underpricing the risks of additional rate cuts in 2020."
The drop in yields initially swept the legs out from under
the dollar, which slid 0.5% on Friday against a basket of
currencies and was last trading at 97.654 .DXY .
It took an early hit on the yen to touch 104.47, but pared
the losses as the session wore on and was last at 105.21. The
next major chart point is a low around 104.10 briefly touched
during the "flash-crash" of early January.
The euro was firm at $1.1143 EUR= , having climbed 0.6% on
Friday, although restrained somewhat by speculation the European
Central Bank will also have to ease aggressively next month.
The dollar fared better elsewhere, making inroads on most
emerging market currencies. The Turkish lira TRY=D3 briefly
tumbled as far as 6.4700 per dollar at one stage.
Spot gold got a boost from the slide in yields, rising 1.1%
to $1,544.23 per ounce XAU= and touching its highest since
April 2013.
Oil prices went the other way on worries the tariffs dispute
would crimp world demand. O/R
Brent crude LCOc1 futures slid 68 cents to $58.66, while
U.S. crude CLc1 lost 79 cents to $53.38 a barrel.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>