Stock markets plunge . . .
The convoluted G7 Summit in Biarritz, France this weekend left stock markets in a tailspin. Asian markets took a dive early Monday in all main stock exchange indexes: Japan’s Nikkei, Hong Kong’s Hang Seng, South Korea’s Kospi, the Shanghai Composite, and even the smaller-cap Shenzhen Composite. It affected other benchmark indexes as well, including those of Taiwan, Singapore, Indonesia, and Australia. It is the most significant signal to date that markets have stopped believing the end of the trade war is near. The loss of confidence meant at least a -3% average in losses in all stock markets across Asia.
China takes a back-seat approach . . .
After a deep dive of the U.S. stock exchange on Friday, U.S. President Donald Trump was quick to assert on Monday that he has “great respect for the fact that President Xi & his Representatives want ‘calm resolution’ (to the trade dispute).” However, the markets went up only slightly on Monday as China responded by letting the yuan sink to maintain export competitiveness. The Chinese media announced that the government would plan for the long term and wait until the U.S. government takes negotiations seriously. On Friday, China imposed new tariffs on US$75B worth of U.S. goods in response to the U.S.’s additional US$300B in tariffs on Chinese goods starting October 1.
A new trade deal in play . . .
Lost in trade war conversations during the G7 was the announcement that Japan and the U.S. had agreed to the framework of a new bilateral trade agreement. If the deal goes ahead, Japan will be the first of the CPTPP countries to strike a deal of this type with the largest economy in the world. Canada and Mexico will be trailing Japan if the USMCA is not ratified before Japan’s FTA with the U.S. The new U.S.-Japan deal could help Japan’s powerful automotive industry, probably the sector most affected by the trade war across the Pacific.
- Market Watch: Asian markets sink as Trump ratchets up trade tensions
- Business Insider: Leaders at the G7 made power moves…
- The Guardian: Trump and Abe heralded US-Japan deal in shadow of China trade war