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July 25, 2019, 11:05 p.m. EDT

Asian markets pull back as Japan-South Korea trade tensions escalate

Japan reportedly will diminish South Korea’s trade status

By Associated Press and Marketwatch


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South Korean protesters hold up posters reading “No Abe” during a rally denouncing the Japanese government's trade policy on July 20 in Seoul.

Asian shares were lower Friday as investors continued to watch the brewing trade conflict between China and the U.S., and any signs of what’s in store from central banks.

Stocks fell the most in South Korea, after a report Friday by Kyodo News that Japan will remove the country from its list of most-favored trading partners, effective Aug. 2. Trade tensions between the two countries have been rising since a Korean court ruled last year that Japanese companies must pay compensation for forced-labor practices before and during World War II, a verdict that Japan claimed was illegal under international law.

South Korea’s Kospi (KOREA:KR:180721)   fell 0.7%, while Japan’s benchmark Nikkei 225 (NIKKEI:JP:NIK)   slid 0.5% in morning trading. Australia’s S&P/ASX 200 (S&P:AU:XJO)   lost 0.2%. Hong Kong’s Hang Seng (HONG:HK:HSI)   was down about 0.5%, while the Shanghai Composite (SHG:CN:SHCOMP)   was about flat.

Among individual stocks, IT equipment company Fujitsu (TKS:JP:6702)   soared in Tokyo trading, while Honda Motor (TKS:JP:7267)   and Nissan (TKS:JP:7201)  , which announced 12,500 global layoffs as its quarterly profit plunged, fell. SoftBank (TKS:JP:9984)   was barely changed after announcing a new $108 tech billion venture fund, backed by Apple (NAS:AAPL)   and Microsoft (NAS:MSFT)  , among others. In Hong Kong, food processor WH Group (HKG:HK:288)   rose, while tech-component maker AAC (HKG:HK:2018)   and oil producer CNOOC (HKG:HK:883)   declined. LG Electronics (KRX:KR:066570)   sank in South Korea while Kia Motors (KRX:KR:000270)   gained. Beach Energy (ASX:AU:BPT)   and Rio Tinto (ASX:AU:RIO)  advanced in Australia.

“Investors continue to digest green shoots of upcoming U.S.-China trade talks amid persisting anxiety about the likely turn economic policies in the developed world take. The ECB failed to deliver any easing yesterday and the focus now shifts to the Fed policy,” Nicholas Mapa and Prakash Sakpal, analysts at ING, wrote in their report.

U.S. and Chinese envoys are set to meet in Shanghai next week for talks aimed at ending a tariff war.

China’s Ministry of Commerce said Thursday that Chinese companies are willing to import more U.S. farm goods.

That announcement followed President Donald Trump’s criticism that Beijing was backsliding on a promise to narrow its trade surplus with the United States by purchasing more American farm products.

U.S. stocks retreated from record highs on Wall Street Thursday as large companies delivered weak earnings and disappointing forecasts.

The S&P 500 index (S&P:SPX)   fell 15.89 points, or 0.5%, to 3,003.67. The Dow Jones Industrial Average (DOW:DJIA)   fell 128.99 points, or 0.5%, to 27,140.98. The Nasdaq composite (AMERICAN:COMP)   fell 82.96 points, or 1%, to 8,238.54.

More than 36% of S&P 500 companies have reported their latest financial results and investors are still expecting a contraction in overall profit. That would mark the second quarter in a row of lower earnings.

Benchmark crude oil   gained 9 cents to $56.11 a barrel. It rose 14 cents to settle at $56.02 a barrel Thursday. Brent crude oil  , the international standard, fell 3 cents to $63.23 a barrel.

The dollar (XTUP:USDJPY)   rose to 108.66 Japanese yen from 108.10 yen on Thursday.

Link to MarketWatch's Slice.