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Mar 26, 2018

Asia, Europe and U.S: Stock Markets Report on March 26, 2018.


US, China trade war fears in focus

Saheli Roy Choudhury

Some Asian markets recovered in late-afternoon trade on Monday as news emerged that the United States agreed to exempt South Korea from steel tariffs.
That followed a global sell-off late last week amid fears that rising tensions between the U.S. and China could lead to a full-blown trade war. Even in morning trade on Monday, most Asian markets struggled for gains.
In Australia, the benchmark ASX 200 closed down 30.20 points, or 0.52 percent, at 5,790.50. The heavily weighted financial sector was down 0.84 percent.
Major banking stocks in the country fell — shares of ANZ declined 0.65 percent, Commonwealth Bank was down 1.09 percent and the National Australia Bank dropped 0.66 percent. Westpac shares were down 0.62 percent.
In Japan, the Nikkei 225 retraced losses to climb late in the trading session, closing up 148.24 points, or 0.72 percent, at 20,766.10. The Topix index rose 6.38 points, or 0.38 percent, to 1,671.32.
Across the Korean Strait, the Kospi climbed 20.32 points, o
r 0.84 percent, to 2,437.08.
Reuters reported that the U.S. agreed to exempt South Korea from steel tariffs and instead would impose a quota on steel imports. In return, South Korea said it would improve access for U.S. carmakers under the bilateral trade agreement deal known as the U.S.-Korea Free Trade Agreement.
Elsewhere, Chinese mainland markets finished mixed, with the Shanghai composite down 18.83 points, or 0.6 percent, at 3,133.92 while the Shenzhen composite rose 23.74 points, or 1.34 percent, to 1,790.35.
In Hong Kong, the Hang Seng index erased losses to climb 239.48 points, or 0.79 percent, to 30,548.77.
Beijing on Friday said it may target 128 U.S. products with an import value of $3 billion in response to President Donald Trump's executive order earlier this month that imposed broad duties on foreign aluminum and steel imports.
Trump had also announced tariff plans for up to $60 billion in Chinese imports, although China did not officially connect its Friday threats of retaliation to that White House action.
On Saturday, some of the world's top economists and business leaders at the China Development Forum in Beijing warned about the risks of a trade war between the two economic powerhouses. Nobel-prize winning economists Robert Shiller and Joseph Stiglitzpredicted pain ahead for the U.S. economy if Beijing and Washington ramp up tit-for-tat trade penalties.
Still, Michael Froman, who served as U.S. Trade Representative during President Barack Obama's second term in the White House, told CNBC that the Trump administration's concerns about China were "legitimate."

148.24 0.72%
HSI HSI 30548.77
239.48 0.79%
ASX 200 S&P/ASX 200 5790.50
-30.20 -0.52%
SHANGHAI Shanghai 3133.92
-18.84 -0.60%
KOSPI KOSPI Index 2437.08
20.32 0.84%
CNBC 100 CNBC 100 ASIA IDX 8629.70
54.02 0.63%
One market commentator said there was "clearly a fair amount of damage done" from the week's developments, after markets sold off in Asia, Europe and the United States.
"Whether this is the sole cause of latest risk market ructions is debatable," Ray Attrill, head of foreign exchange strategy at the National Australia Bank, wrote in a morning note. He added that others were suggesting confidence in continued strong synchronized global growth may be slipping, following disappointing economic data.
He added that "rising geopolitical tension" should also be noted, following the tapping of John Bolton to be Trump's new national security advisor.
"This has heightened concerns that Trump will formally repudiate the 2015 nuclear deal with Iran that Bolton is on record as saying was a mistake," Attrill said.
In the currency market, the dollar index traded around 89.333 at 3:48 p.m. HK/SIN, falling from levels above 90 in the previous week.
Among currency majors, the Japanese yen traded at 105.1 to the dollar, weakening from an earlier high of 104.55.
Major export stocks in the country finished mixed — Toyota shares rose 0.59 percent, Honda added 0.46 percent while Canon was up 0.16 percent. Sony shares fell 0.33 percent.
A relatively weak yen is usually a positive for exporters because it increases their overseas profits when converted into the local currency.
Analysts at Singapore's DBS Bank said in a morning note that risk aversion is likely to persist in the markets amid the U.S.-China trade tensions.
"As long as Washington and Beijing keep up their tit-for-tat trade war rhetoric and actions, safe haven play is likely to drive the Japanese yen stronger against the euro and the Australian dollar," they said in the note.
The euro/yen pair traded at 130.1 at 3:51 p.m. HK/SIN while the Australian dollar/yen traded at 81.3. Elsewhere, the Australian dollar fetched $0.7736 and the euro traded at $1.2380.
Oil prices fell on Monday with U.S. crude down 0.77 percent at $65.37 a barrel at 3:52 p.m. HK/SIN. Global benchmark Brent declined 0.58 percent to $70.03.


European stocks mixed amid tense Russia relations

Sam Meredith, Ryan Browne

European stocks closed lower Monday, after the U.S. and several European Union nations expelled Russian diplomats in a show of solidarity with the U.K.

EU nations expel Russian diplomats

The Wall Street Journal reported Monday that Beijing and Washington had begun to quietly negotiate U.S. access to Chinese markets, easing concerns of a full-blown trade war. Stocks initially showed signs of a rally earlier in the session following the news.
But equities pared gains sharply after the U.S. and multiple EU nations moved to expel Russian diplomats on Monday. The move follows hot on the heels of the U.K.'s decision to expel Russian diplomats after the country determined that the Kremlin was responsible for the poisoning of an ex-spy on British soil.
Looking at individual stocks, Fresnillo surged to the top of the European benchmark after a ratings upgrade from Goldman Sachs. The U.S. investment bank raised its stock recommendation to "buy" and added the stock to its conviction list. Shares of Fresnillo closed 4.5 percent higher.
Meanwhile, Smurfit Kappa said it had rejected a revised bid from International Paper company, on Monday. The U.S. company had previously made an unsolicited offer at the beginning of March. Shares of Smurfit Kappa closed down more than 3 percent.

Trade war fears ease

Stateside, stocks traded higher, bouncing back from strong losses in the previous session as investors monitored reports of talks between the U.S. and China.
President Donald Trump signed a memorandum on Friday that could see charges implemented on up to $60 billion of imports from Beijing, though the measures have a 30-day consultation period before they take effect.
The tariffs follow additional duties on steel and aluminum imports on a number of countries worldwide, including China, with the world's second-largest economy hitting back with its own plans to impose charges on up to $3 billion of U.S. imports.

Dow closes more than 650 points higher as trade tensions ease

Fred Imbert, Alexandra Gibbs

Stocks closed sharply higher on Monday, bouncing back from strong losses in the previous session as trade tensions between the U.S. and China appeared to ease.
The Dow Jones industrial average surged 669.40 points to 24,202.60, with Microsoft as the best-performing stock in the index. The S&P 500 gained 2.7 percent to close at 2,658.55 — bounce off its 200-day moving average— with technology and financials leading all sectors higher. The Nasdaq composite advanced 3.3 percent to 7,220.54 with Apple and Amazon both rising.
Financials rose sharply, with the Financial Select Sector SPDR S&P Fund (XLF) up 3.3 percent. The XLF posted its biggest one-day gain since November 2016.
The Financial Times reported China has offered to buy more semiconductors from the U.S. to help cut its trade surplus with the U.S. Shares of Qualcomm and Intel rose 4.6 percent and 6.3 percent, respectively, on the news.
The Wall Street Journal also reported that U.S. and Chinese officials are working to improve U.S. access to China's markets.
Traders work on the floor of the New York Stock Exchange. Lucas Jackson | Reuters
Traders work on the floor of the New York Stock Exchange.
Investors "have apparently recognized that a trade war is in no one's best interests and therefore extremely unlikely," said Jeremy Klein, chief market strategist at FBN Securities, in a note. "Specifically, the President merely wants to fulfill a campaign promise while China will only enact token countermeasures to appease its citizens."
Markets overseas also jumped on Monday. In Asia, some indexes rose after news surfaced that the U.S. had agreed to excuse South Korea from steel levies. Meantime in Europe, stocks were lower as investors failed to shake off trade war worries.
Wall Street finished Friday's session deep in the red on Friday, with the Dow dropping more than 400 points by the close — closing at its lowest level since November and finishing in correction territory, as it was 11.6 percent down from its 52-week high. The S&P 500 ended Friday's session just outside of correction territory.
Last week, President Donald Trump signed an executive memorandum that would inflict tariffs on Chinese imports — of up to $60 billion. China retaliated with their own set of levies, drawing up a list of 128 U.S. products that could be possible retaliation targets.
"The S&P 500 is having difficulty keeping its head above water this year," said Jack Ablin, founding partner of Cresset Wealth. "While fundamentals are conducive for growth, policy uncertainties related to trade are keeping investors off balance."
Social media firms continue to be under fire, as abuse of people's data remains a key topic of discussion. Last week, reports emerged alleging that Cambridge Analytica, an analytics company, had gathered data from 50 million Facebook profiles without the permission of its users. The stock tanked more than 10 percent last week, pressuring the broader tech sector.
While Facebook have since come out to apologize and try to rectify the matter, concerns remain.
Facebook shares for most of the session after the Federal Trade Commission announced it was investigating the company's data practices. Shares of Google-parent Alphabet also declined on the news, before rebounding to close 2.7 percent higher.
In other corporate news, Boeing shares rose 2.5 percent after the company announced it delivered its first 787-10 Dreamliner jet to Singapore Airlines over the weekend. Boeing had been under pressure lately because it was seen as vulnerable to a trade war.
Meanwhile, Dollar Tree rose 3.6 percent after Piper Jaffray upgraded the stock to "overweight" from "neutral," citing, among other factors, good investments at its Family Dollar unit.
Microsoft led the way for tech stocks, rising 7.6 percent after Morgan Stanley said the company could reach $1 trillion in market cap because of its cloud adoption.