Asian shares slumped on Tuesday as fears about a drawn out Sino-US trade war, protests in Hong Kong and a crash in Argentina’s peso currency drove investors to safe harbors like bonds, gold, and the yen.
MSCI’s broadest index of Asia-Pacific shares outside Japan skidded 1 percent. Chinese stocks fell 1 percent, while Hong Kong’s main market index tumbled 1.7 percent to a seven-month low.
“The protests in Hong Kong are negative for stocks, which were already in an adjustment phase because there is talk that the trade war will trigger a recession,” said Kiyoshi Ishigane, chief fund manager at Mitsubishi UFJ Kokusai Asset Management Co.
Hong Kong’s airport, the world’s busiest cargo airport, reopened on Tuesday after protesters managed to close it down the previous day. The mood remained cautious as the increasingly
violent demonstrations have plunged the Chinese-ruled territory into its most serious crisis in decades.
The weeks-long protests began in opposition to a bill allowing extraditions to mainland China but have quickly morphed into the biggest challenge to China’s authority over the city since it took Hong Kong back from Britain in 1997.
Japan’s Nikkei was also hit hard, down a sharp 1.2 percent and on course for its biggest daily decline in a week.
Stocks in Singapore shed 1.1 percent to reach their lowest since June 6 after the government slashed its full-year economic growth forecasts. The city state is often seen as a bellwether for global growth because of its importance as a key trade hub.
The selling in regional markets came as Wall Street stocks took a beating on Monday, with the S&P 500 losing 1.23 percent.
Sentiment was already weak due to increasing signs that the United States and China will not quickly resolve their year-long trade war. Markets were hit with further turbulence after protesters managed to close down Hong Kong’s airport on Monday.
Analysts said that trading could be subdued as many investors are off for summer holidays. Yet, there was no shortage of gloomy news for investors looking to catch their breath from several months of market ructions.
The grim backdrop was enough to push investors into safe-havens, and US Treasury yields dropped across the board on Monday as trade worries and political tensions supported safe-haven assets.
In Asia on Tuesday benchmark 10-year Treasuries yields fell to 1.6403 percent. On August 7 yields had skidded to 1.5950 percent, the lowest since October 3, 2016.
Spot gold rose 0.47 percent to $1.518.43 per ounce, near the highest in six years.
The yen last fetched 105.41 per dollar, and was within striking distance of 105.03, its strongest since the January 3 flash crash.
Oil prices edged slightly lower in Asian trading as expectations that major producers will continue to reduce supplies ran into worries about sluggish economic growth.
US West Texas Intermediate futures fell 0.22 percent to $54.81 a barrel.
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