- Asian equities are down on Sino-US trade tensions.
- Sustained risk aversion may put pressure on the US central bank to ease further.
Asian stocks are flashing red courtesy of sudden re-escalation of US-China trade tensions.
As of writing, Japan’s Nikkei is down 540 points or 2.5% at 20,990. Stocks in Australia and South Korea are also down 0.46% and 0.86%, respectively. The Shanghai Composite index is shedding 1.4% or 42 points at 2,867.
In FX markets, the anti-risk Japanese Yen solidly bid with USD/JPY barely holding above 107.00, having registered its biggest single-day drop in two years on Thursday.
The US President Donald Trump said Thursday that the US will put 10% tariffs on another $300 billion worth of Chinese goods starting Sept. 1 as China is not living up to the promises made during the recent trade negotiations.
The sudden escalation of trade tensions caught investors off guard, forcing them to rotate money out of riskier assets and into safe havens like gold and Japanese Yen.
The US stocks dropped 1% with the Dow Jones Industrial Average falling 280 points. The futures on the S&P 500 index are currently down 0.28%.
It is worth noting that escalating trade tensions and an extended period of risk aversion will likely put pressure on the US Federal Reserve to deliver additional rate cuts before the end of the year.
The US central bank cut rates by 25 basis points on Wednesday. The first rate cut since 2008 was referred to as mid-cycle adjustment by Fed’s chairman Jerome Powell.
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