November 13, 2019: Asian markets sank on Wednesday after US President Donald Trump failed to reassure investors over the progress of China trade talks, and as violent Hong Kong protests show no sign of letting up.
In a much-anticipated speech on Tuesday, the Trump went into election mode — hailing a strong economy and saying a trade deal was close, but also warning that he could ramp up tariffs if he did not get his way.
Global equities have been on a roll for weeks on optimism the economic superpowers will hammer out a mini deal as the first part of a wider agreement.
However, with a planned signing ceremony between Trump and Xi Jinping seemingly put back to December and scant news of fresh developments, traders are becoming nervous.
“We're close. A significant phase one trade deal with China could happen, it could happen soon,” Trump said at the Economic Club of New York.
But he then warned: “If we don't make a deal, we're going to substantially raise those tariffs”. He added “that's going to be true for other countries that mistreat us too”.
The remarks were seen as a big letdown for markets — which had hoped he would provide some updates on the trade talks — after being jolted by Trump's denial of China's claim last week that the two had a plan to remove some tariffs as negotiations progress.
“The president avoided commenting on whether a rollback in tariffs is part of a phase one deal, merely saying that he will only agree to what is beneficial for US businesses,” said Stephen Innes at AxiTrader.
“At this point, the market may have to wait until the actual signing of a deal (or not) to get confirmation on tariff rollbacks. And while the markets are still in the demilitarised trade war zone, investors remain in tariff rollback limbo.”
Tokyo and Seoul each ended 0.9 percent lower, Shanghai shed 0.3 percent and Sydney fell 0.8 percent.
Singapore was off 0.8 percent and Manila retreated more than one percent, while Wellington, Mumbai Taipei and Jakarta were also down.
In early trade London dropped 0.4 percent, Paris fell 0.1 percent and Frankfurt was off 0.2 percent.
– Hong Kong's night of rage –
Also darkening the mood was concern about fresh unrest in Hong Kong after the city suffered a night of rage as months of protests enter a more violent phase.
Police on Tuesday warned that the rule of law in the territory was on “the brink of total collapse”.
Hong Kong's Hang Seng Index plunged 1.8 percent, having dived a similar amount on Monday, with a small rebound Tuesday.
Bloomberg News said speculation on trading floors that Alibaba's plans for a $15 billion share sale in the city — which reports said Wednesday were approved by regulators — could be affected by the unrest. The firm had already called off a summer listing owing to the protests and the China-US trade war.
Regionally, there are worries that the increasingly violent demonstrations could lead China to step in.
“The situation in Hong Kong has taken a decidedly dark turn this week, with the violence and economic disruption seemingly gathering pace,” said OANDA senior market analyst Jeffrey Halley, adding that nervousness about Hong Kong was weighing on other Asian markets.
“The worries about direct intervention by Beijing and its implications for the region has ratcheted materially higher.”
Property firms were among the worst affected with New World Development down nearly five percent and Henderson Land falling almost three percent. Sino Land and Swire Properties both dived three percent.
Casino operators in Macau were also sharply lower, while Hong Kong Exchanges and Clearing sank more than two percent as trading volumes tumble.
On currency markets, the trade talks uncertainty weighed on the yuan, which was hovering around 7.02 per dollar, having dropped below 7.0 earlier this month for the first time since early August.
And the New Zealand dollar rallied more than one percent after the country's central bank held off cutting interest rates, confounding expectations, as it said it saw signs of life in the economy.
– Key figures around 0820 GMT –
- Tokyo – Nikkei 225: DOWN 0.9 percent at 23,319.87 (close)
- Hong Kong – Hang Seng: DOWN 1.8 percent at 26,571.46 (close)
- Shanghai – Composite: DOWN 0.3 percent at 2,905.24 (close)
- London – FTSE 100: DOWN 0.4 percent at 7,337.02
- Pound/dollar: UP at $1.2855 from $1.2852 at 2100 GMT
- Euro/pound: UP at 85.66 pence from 85.63 pence
- Euro/dollar: UP at $1.1011 from $1.1009
- Dollar/yen: UP at 109.07 yen from 108.97 yen
- West Texas Intermediate: DOWN 25 cents at $56.55 per barrel
- Brent North Sea crude: DOWN 28 cents at $61.78 per barrel
- New York – Dow: UNCHANGED at 27,691.49 (close).