Employees of Toyota Motor Corp. work on the assembly line of Mirai fuel cell vehicle (FCV) at the company's Motomachi plant in Toyota, Aichi prefecture. Toyota Motor Corp. led shares of Asian automakers lower. - Reuters
NEW YORK: Asian equities declined Thursday (March 27) after President Donald Trump’s latest trade salvo scuppered demand for riskier investments.
Indexes in China, Hong Kong and Japan all fell as did equity-index futures for US stocks in early Asian trading. The Mexican peso and the Canadian dollar slipped. Toyota Motor Corp. led shares of Asian automakers lower while General Motors Co. and Ford Motor Co. dropped in after-market trading in the US.
The quickly shifting stance on US trade sanctions on the nation’s allies and foes alike adds to already heightened market concerns as investors race to assess the impact on global trade and economic growth. Two months into Trump’s presidency, the mood in the market has turned wary as investors temper their bullish views and the Federal Reserve signals it’s in no rush to adjust its interest-rate policy.
Trump’s move "rocked the confidence of markets once again,” wrote Kyle Rodda, a senior market analyst at Capital.com. The tariffs added "another impost on a significant industry and raising the question whether the Trump administration’s crusade against global trade will continue beyond so-called ‘Liberation Day.’”
Trump signed an order to slap a 25 per cent tariff on all cars not made in the US that’s effective from April 2. However, reciprocal duties that are set to be announced next week will be "very lenient,” Trump said. China may also get a tariff reduction to secure a deal on the sale of ByteDance Ltd.’s social video platform TikTok to an American company, Trump added.
The tariffs are a "hurricane-like headwind” for automakers and will ultimately push the price of cars by up to US$10,000, said Daniel Ives, senior analyst at Wedbush Securities.
"We continue to believe this is some form of negotiation and these tariffs could change by the week, although this initial 25 per cent tariff on autos from outside the US is almost an untenable head scratching number for the US consumer,” he said.
US equities dropped Wednesday with the S&P 500 down more than one per cent, led by the group of megacaps known as "Magnificent Seven” - whose quarterly selloff is shaping up to be the worst since 2022. Nvidia Corp. and Tesla Inc. dropped at least 5.5 per cent. The Nasdaq 100 slipped around two per cent. A gauge of big banks snapped a streak of eight straight days of gains.
Worries over the economic effects of the global trade war are sapping liquidity in US stocks, creating a headache for institutional investors that may also boost volatility in broader markets. Liquidity in S&P 500 stock-index futures, as measured in the most-active contract, stands at a two-year low, data compiled by Deutsche Bank AG show.
In Asia, investors will be keeping a close eye on Indonesian markets as the central bank defended the nation’s economic fundamentals as solid. Elsewhere, a member of the Chinese central bank’s monetary policy committee, told Bloomberg TV that a stimulus package announced September had stabilised the economy and is allowing policymakers to focus on structural reforms.
The dollar gained 0.3 per cent on Wednesday while the yield on ten-year Treasuries advanced four basis points to 4.35 per cent. Federal Reserve Bank of St. Louis President Alberto Musalem said it’s not clear the impact of tariffs will prove temporary, and cautioned that secondary effects could prompt officials to hold interest rates steady for longer.
"While we consider material increases in US tariffs will weigh on the US economy, we do not predict a US recession,” said Carol Kong, a strategist at Commonwealth Bank of Australia. "That said, market participants may still price a higher risk of a US recession as more tariffs are announced” which will push up the dollar against major currencies, she said.
In commodities, oil held a gain after US crude inventories fell the most since December. Gold steadied near a record high. - Bloomberg
