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GLOBAL MARKETS-Asian shares flirt with 6-month lows as signs of tariff effects appear

Published 22/06/2018, 10:57 am
© Reuters.  GLOBAL MARKETS-Asian shares flirt with 6-month lows as signs of tariff effects appear
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* Daimler 's profit warning among first signs of tariff damage

* Philly Fed survey falls unexpectedly

* Emerging market shares at 6-month low

* Oil choppy ahead of crucial OPEC meeting

By Hideyuki Sano

TOKYO, June 22 (Reuters) - Asian shares were under pressure on Friday on signs U.S. trade battles with China and many other countries are starting to chip away at corporate profits, with oil prices choppy ahead of major producers meeting to discuss raising output.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was little changed in early trade, stuck barely above its six-month low hit on Tuesday. Japan's Nikkei .N225 lost 1.0 percent.

On Wall Street, the Dow Jones Industrial Average .DJI fell for an eighth straight session on Thursday and the S&P 500 .SPX lost 0.63 percent, with industrials .SPLRCI and materials shares .SPLRCM hit hard.

Even the high-flying Nasdaq Composite .IXIC shed 0.88 percent.

The Philadelphia Federal Reserve's gauge of U.S. Mid-Atlantic business activity published on Thursday fell to a 1-1/2 year low. speculated the ebb in business conditions was the result of escalating tensions between the United States and its trade partners, including the European Union, Canada, Mexico and Japan.

"The Philadelphia Fed's survey showed a drop in new orders. Investors are concerned that the trade frictions are starting to affect corporate sentiment and their activities," said Nobuhiko Kuramochi, chief strategist at Mizuho Securities.

On Wednesday German carmaker Daimler DAIGn.DE cut its earnings forecast, saying tariffs on cars exported from the United States to China would hurt Mercedes-Benz sales. budding signs of economic damage, trade frictions have shown no sign of abating.

U.S. Commerce Secretary Wilbur Ross said on Thursday the United States needs to make it harder for its trading partners to have high trade barriers in order to achieve President Donald Trump's ultimate goal of lower tariffs and a level playing field. joined the European Union and China in retaliating against Trump's tariffs on steel and aluminium, raising import duties on U.S. almonds by 20 percent and leveraging its position as the world's biggest buyer of the product.

While some investors still hope Washington and Beijing could work out a deal before July 6, when the first round of U.S. tariffs on Chinese goods as well as retaliatory tariffs by China are due to take effect, others see diminishing hopes of a early compromise.

Worsening sentiment pushed U.S. bond yields lower and triggered profit-taking in the dollar.

The 10-year U.S. Treasuries yield fell to 2.899 percent US10YT=RR from Thursday's high of 2.950 percent and its three-week high of 3.010 percent touched Wednesday last week.

As the dollar lost steam, the euro bounced back to $1.1606 EUR= after hitting an 11-month low of $1.1508 on Thursday.

The single currency had fallen on bets of a protracted period of monetary policy divergence between the U.S. Federal Reserve and the European Central Bank.

In addition, the Italian government's appointment on Thursday of two eurosceptics to head key finance committees reignited worries about anti-euro voices in the euro zone's third-largest economy. British pound jumped back from a seven-month trough after the Bank of England's chief economist, Andy Haldane, unexpectedly joined the minority of policymakers calling for rates to rise to 0.75 percent, citing concerns about growing wage pressure. pound GBP=D3 last fetched $1.3248, off Thursday's low of $1.3102.

The dollar changed hands at 109.91 yen JPY= , having slipped 0.65 percent so far this week.

MSCI emerging market index .MSCIEF fell to its lowest level in almost nine months this week as they were also hurt by rising U.S. interest rates, which could prompt fund outflows and also raise funding costs for many borrowers in those countries.

Some emerging market countries have recently raised interest rates to stem decline in their currencies. prices were volatile ahead of a meeting of the Organization of Petroleum Exporting Countries (OPEC) and other major producers including Russia starting later on Friday.

Saudi Arabia and Russia have said a production increase of about 1 million barrels per day (bpd) or around 1 percent of global supply had become a near-consensus proposal for the group and its allies but Iran held out against a deal amid the prospect of lower exports due to U.S. sanctions on Tehran. crude LCOc1 traded at $74.11 a barrel, up about a dollar, or 1.45 percent on Friday, a day after it had fallen $1.69.

U.S. West Texas Intermediate crude CLv1 for August delivery rose 92 cents to $66.46 per barrel.

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