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GLOBAL MARKETS-Stocks jolted by Trump's threat of longer, broader trade war

Published 04/12/2019, 05:42 pm
Updated 04/12/2019, 05:43 pm
© Reuters.  GLOBAL MARKETS-Stocks jolted by Trump's threat of longer, broader trade war
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* Trump flags delaying trade talks until after 2020 election

* Asian stocks follow Wall St lower, safe-havens rise

* ASX, Kospi, Hang Seng and Nikkei all drop about 1%

* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Tom Westbrook

SINGAPORE, Dec 4 (Reuters) - Asian shares extended losses on Wednesday after U.S. President Donald Trump said a trade deal with China might have to wait until after the 2020 presidential election, dashing hopes for a quick preliminary agreement.

Fresh U.S. tariffs on Argentina and Brazil as well as threatened duties on French goods also darkened the mood, as a trade war that investors had hoped was easing a week ago now looks like ramping up.

"This shift is quite distinct," said Vishnu Varathan, head of economics and strategy at Mizhuo Bank in Singapore, since it removes any sense of urgency around resolving the dispute.

Investors turned to safe-havens, boosting bond prices and sending gold to a one-month high, while MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.9%.

Japan's Nikkei .N225 dropped 1%, matched by falls in Hong Kong .HSI and Korea .KS200 , where stock markets touched their lowest since October.

Shanghai blue chips .CSI300 fell 0.2% and Australia's S&P/ASX200 .AXJO tumbled 1.6%, having shed almost 4% since closing on Monday.

The yield on benchmark U.S. 10-year US10YT=RR treasuries fell as low as 1.6930% overnight, the sharpest fall since May. It stood at 1.7259% on Wednesday. Futures markets pointed to a flat open on Wall Street ESc1 , and for European shares to pare some losses, but to remain down for the week so far STXEc1 .

"Suddenly you can feel the market," said Sean Taylor, chief investment officer for Asia-Pacific at German asset management firm DWS, calling trade the top threat to the global outlook.

"It just takes one or two comments and then a bad feeling again," he said. "It's still quite uncertain."

The U.S. House of Representatives' passage of a bill proposing a stronger response to a crackdown on Muslims in China's west also added yet another layer of tension, drawing swift condemnation from Beijing on Wednesday. DEADLINE

Trump had told reporters in London that there is "no deadline" for an agreement with China to end the tit-for-tat tariff war, which the International Monetary Fund has said will push global growth to its slowest in a decade. some ways, I like the idea of waiting until after the election for the China deal," he said.

U.S. Commerce Secretary Wilbur Ross said if no substantial progress was made soon, another round of duties on Chinese imports including cell phones, laptops and toys would take effect on Dec. 15.

No high-level meetings are scheduled and the parties still needed to sort out details about Chinese purchases of U.S. farm products and an enforcement mechanism, he told Reuters. had put the brakes on a rally that had lifted the S&P 500 almost 10% since early October, when top diplomats from China and the United States met and outlined an initial agreement that Trump said he hoped could be sealed within weeks.

In currency markets positive economic news from China's services sector saved the yuan from a further thrashing, after it tumbled overnight.

The Japanese yen and Swiss franc stood tall, while the Australian dollar AUD=D3 tumbled after softer-than-expected growth figures backed prospects of further rate cuts.

However the trade-exposed New Zealand dollar mostly held on to gains won against the greenback after disappointing manufacturing data weakened the U.S. currency on Monday. might be that apart from the global risky stuff, the market is thinking about the U.S. economy maybe slowing," said Westpac FX analyst Imre Speizer.

The dollar last traded for 108.57 yen JPY= , while a euro bought $1.1075 EUR= . The Aussie slipped 0.4% to $0.6822.

Gold XAU= rose slightly to $1,480.10 per ounce.

Oil steadied after slipping overnight. crude LCOc1 futures rose 0.64% to $61.21 a barrel while U.S. West Texas Intermediate crude CLc1 gained 0.64% to $56.46 per barrel.

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