Equity benchmark indices were trading in the red on Thursday as investor concerns over escalating U.S.-China tensions grew.
Shares fell from Tokyo and Sydney to Hong Kong, Shanghai and Seoul. The MSCI Asia Pacific Index has dropped 6% since President Donald Trump pledged to ramp up tariffs on China earlier this month. S&P 500 futures declined and the yuan remained under pressure Thursday after China’s flagship People’s Daily published two commentaries assailing American moves to curb Chinese companies.
While market consensus has been that the world’s two economies will reach a deal, economists are shifting their baselines. Goldman Sachs Group Inc. now sees higher odds of a U.S.-China stalemate, and Nomura Holdings Inc. has shifted to forecasting a full-blown escalation of tariffs.
On the currency front, China’s yuan dipped in onshore trading even after the People’s Bank of China set its daily fixing for the yuan at a stronger-than-expected level for a fourth straight day. The Aussie slipped, and Australian government bond yields plumbed fresh all-time lows.
Treasuries rallied on Wednesday after minutes of the Federal Reserve’s last policy meeting showed officials judged their patient approach to interest-rate changes would be appropriate “for some time.” Lack of faith in a speedy resolution to the trade conflict helped lead Bank of America to cut its forecast for US yields.