By Gregor Stuart Hunter
Asian stock markets fell Tuesday as a selloff of tech shares deepened in the U.S. and escalating trade tensions with China dampened investor confidence.
Traders took cues from Wall Street after the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -1.78% fell 2.7% Monday, leading a 2.2% decline for the S&P 500 /zigman2/quotes/210599714/realtime SPX -1.04% and marking a damp start to the month after U.S. stocks logged the worst quarterly performance since mid-2015.
The Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -0.04% ended down 0.5% — after earlier being down as much as 1.6% — with tech exporters including electronics company TDK /zigman2/quotes/208948266/delayed JP:6762 +0.20% and Fanuc /zigman2/quotes/202054799/delayed JP:6954 -0.04% , a maker of industrial robots, leading the declines.
In Hong Kong, the Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI +0.05% reversed course and finished up by 0.3%, as heavyweight Tencent Holdings /zigman2/quotes/204605823/delayed HK:700 +0.77% pared its loss to 0.5%. The Hang Seng’s intraday decline nearly wiped out the index’s gains for the year.
Hong Kong investors returned from a holiday but without access to money from mainland China, as the Stock Connect trading link remains closed until Monday. Many other markets in the region are observing a shortened trading week.
The prospect of a trade war between the U.S. and China, as well as presidential tweets hinting at regulatory changes which could affect Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN -2.65% , weighed on tech stocks, which tend to be more sensitive to economic growth.
China’s imposition of import duties on $3 billion worth of U.S. products had raised fears among investors, said Eric Robertsen, global head of foreign exchange, rates and credit research at Standard Chartered.
“Clients in China take little comfort so far from their government’s measured response,” he wrote. “They fear a full-blown escalation of trade tensions.”
Investors are awaiting a response from the U.S. later this week, and some speculate it may include fresh trade measures targeting products in the tech sector, said Jane Fu, sales trader at CMC Markets.
“China is still quite reserved on their retaliation measures, so it depends how the U.S. responds,” she said. “If the U.S. response is more hawkish, we’ll see the trade war escalate to an even bigger scale.”
The Shanghai Composite /zigman2/quotes/210598127/delayed CN:SHCOMP -0.59% fell 0.8% Tuesday while the startup heavy ChiNext index fell 1.5%.
South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 -0.61% fell 0.1%, while Australia’s S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO +0.02% pared its loss to 0.1% as investors there returned from their long weekend. The Reserve Bank of Australia kept interest rates on hold at a record low 1.5% for an 18th straight meeting, as analysts had expected, without indicating when it might start raising rates.
In foreign exchange markets, the U.S. dollar /zigman2/quotes/210561418/realtime/sampled JPYUSD -0.6485% bought ¥105.90, little changed from Monday’s close in New York.
The yield on the U.S. 10-year Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +3.39% was at 2.7389% after reaching a two-month low of 2.717% on Monday.
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