Asian equities reached their lowest level in four months with regard to the risk of an endless trade war

SYDNEY (Reuters) – Asian stocks have broken their support and dropped Thursday to a four-month low, as worries grew over the Sino-US trade dispute quickly turning into a technological cold war. extended between the two largest economies worldwide.

Reuters announced on Wednesday that the US administration plans to impose similar sanctions to those of Huawei to the Chinese video surveillance company Hikvision for treatment by the country of its Uyghur Muslim minority, according to a person informed about it .

After the United States placed Huawei Technologies on a blacklist last week, the British chipmaker ARM ended its relationship with Huawei in order to comply with the blockade.

In digging the knife, the US military said it sent Wednesday two naval ships in the Taiwan Strait.

"The United States and China seem to be preparing for a long period of trade conflict," Nomura's analysts wrote in a note on the standoff.

"We believe that national pressures and constraints will lead the two sides to a new escalation," they warned. "Without a clear solution in the intensification of the US presidential election of 2020, we see a growing risk of maintaining tariffs until the end of 2020".

Shanghai blue chips lost 1.2% in response to their lowest level since February. An index of major telecommunications companies fell 2.7%, as Huawei's suppliers suffered.

The largest MSCI index of Asia-Pacific equities outside Japan hit a four-month low and was down 0.7%.

Japan's Nikkei lost 0.7% and South Korea 0.3%. Also feeling the pain, E-Mini futures for the S & P 500 fell 0.4%.

The Indian market should resist the trend as the media reported that Prime Minister Narendra Modi's party was well ahead of the vote count.

Treasury Secretary Steven Mnuchin said on Wednesday that it would take at least a month in the United States to enact the proposed tariffs on Chinese imports for $ 300 billion at the time of the study. the impact on US consumers.

The minutes of the latest US Federal Reserve meeting on Wednesday underscored his willingness to be patient about politics "for a while", given the uncertain outlook for the global situation.

The odds of a rate cut seemed to diminish, with many Fed policymakers believing that the recent weakness in inflation was "transitory," although the latest escalation of the trade war meant that markets still bogged down. on a possible easing.

The two-year Treasury yields of 2.277% are also well below the current effective rate of funds at 2.39%.

BREXIT WITHOUT END

In currencies, constant trade tensions once again boosted the yen's demand, a safe haven, as the dollar dipped to 110.24 yen and moved away from the 110.67 peak of the week.

The dollar was better behaved than the euro at $ 1.1151 and remained stable on a currency basket at 98.111.

Sterling had its own problems at $ 1.2646 after hitting a four-month low of $ 1.2625 a night.

British Prime Minister Theresa May has been under intense pressure after her latest Brexit gambit turned against her and won many calls.

Andrea Leadsom, a prominent Brexit supporter, resigned Wednesday from the government, and British media announced that May could announce her departure date on Friday.

"Uncertainty is the only obvious certainty in the short term," said Tim Riddell, Westpac's macro-financial strategist.

"The risk of a hard Brexit replacement for May has increased the chances of a hard Brexit outcome or even a forced exit without agreement," he added. "Such an event would probably force down the GBP, increase the risk of asset slippage and force the BOE (Bank of England) to take action to support the assets."

In commodity markets, spot gold was little changed at $ 1,273.12 per ounce.

Oil prices added to overnight losses as a result of an unexpected increase in crude oil inventories in the United States, which compounded investors' concerns about demand.

US crude lost 33 cents to 61.09 dollars a barrel, while Brent crude lost 40 cents to 70.59 dollars.