Asian stocks skid as trade war intensifies and feeds bond rush By Reuters

By Wayne Cole

SYDNEY (Reuters) – Asian stocks tumbled on Monday, as the latest salvoes of the Sino-US trade war shook confidence in the global economy and pushed investors to seek sovereign bond security and security. Gold, while curbing the currencies of emerging markets.

But the stock markets subsequently reduced their losses, with E-Minis for a positive result, after US President Donald Trump said China had contacted Washington overnight to signal its intention to return to Washington. the negotiating table.

Speaking on the sidelines of a summit of leading French industrialized nations, Mr. Trump hailed Chinese President Xi Jinping as a great leader and praised his desire to reach a trade agreement. and calm.

Despite the positive advance for Wall Street, European stock markets still seemed ready to follow the decline in Asia, with EUROSTOXX 50 futures contracts down about 1%, a decline of 0.9% in Germany and 0.7% in France.

The benchmark 10-year Treasury yields dropped to their lowest level since mid-2016, while gold reached its highest level since April 2013 as risk was avoided.

On Friday, Trump announced an additional $ 550 billion worth of targeted Chinese goods a few hours after China unveiled US $ 75 billion worth of retaliation for US goods.

"The latest trade escalation increases the risk of recession in addition to a synchronized global slowdown," said Eleanor Creagh, market strategist at Saxo Capital Markets.

"For investors, the hope of a trade agreement is currently totally misplaced," she added. "Precious and gold mines will continue to outperform, with investors looking for safe havens to ward off volatility."

China fell 0.7% at one point, reaching a new low in 11 years of 7.15 to the dollar, and reached a record level in offshore trading, before reducing losses after last comments of Trump.

The widest index of MSCI, composed of shares of the Asia-Pacific outside Japan, fell 1.9% and Australia's 1.3 %.

Japan lost 2.2%, while Shanghai blue chips lost 1.2%.

"The downside risks are increasing for both the global economy and markets," said Mark Haefele, Global Head of Investment at UBS. "As a result, we are reducing the risk of our portfolios by underweighting equities to reduce our exposure to political uncertainty."

"We continue to favor carry strategies in the credit and foreign exchange markets, which benefit from the easing of central bank conditions in a context of weak growth."

Trump's new pricing measures were announced after the US markets closed on Friday. But Wall Street had poked earlier in the session after Trump said that US companies should "immediately start looking for an alternative to China," in response to the latest reprisals in Beijing.

At the G7 meeting in France this weekend, Trump sowed confusion by stating that he had perhaps had doubts about the tariffs.

But the White House said Sunday that Trump wanted to have increased tariffs on Chinese products last week, even though he said he was not considering following up on demand from US companies shut down their operations in China.

The latest trade escalation eclipsed Federal Reserve Chairman Jerome Powell's pledge to "behave appropriately" to maintain the health of the US economy, even though he has not commitment to lower rates quickly.

The markets clearly believe that the Fed will have to act more aggressively and that prices will be fully taken into account for a reduction of at least a quarter point in September and a relaxation of more than 120 basis points from the previous year. here the end of 2020.

"Central banks can not fully mitigate the disadvantages of a global trade war," said Adam Crisafulli, an analyst at JPMorgan (NYSE :). "Companies will enter lockdown mode in terms of spending or even hiring, at least until the November 2020 election, despite all the uncertainty."

THE BREED IS LOWER

Yields were down 1.443%, after plunging 1.66% to a high on Friday, leaving them just below two-year yields and reversing the curve.

"We continue to stay on target, targeting 1.3% due to a combination of weakness in the global economy and uncertainties related to the trade war, which is impacting a weaker US economy," he said. Priya Misra, Head of Global Interest Rate Strategy at TD Securities.

"This will force the Fed to calm down beyond a" mid-cycle policy adjustment, "she added." We believe the market is underestimating the risks of further rate cuts. in 2020 ".

The decline in yields hurt the dollar, but steadily rose throughout the session, in part due to large purchases from emerging market currencies.

After a quick blow to the yen at 104.44, he recovered most of the ground lost to return to 105.2. The next major point of the map is a low point around 104.10 briefly touched during the "flash crash" of early January.

Against a basket of currencies, it remained broadly unchanged at 97.637, after rebounding 97.477.

The euro was solid at $ 1.117 billion, after rising 0.6% on Friday, although somewhat curbed by speculation, the European Central Bank will also have to aggressively ease off next month.

The dollar rose on most emerging market currencies, with the Turkish lira briefly down to 6.4700 for a dollar at one point.

benefited from lower yields, which rose 0.9% to $ 1,539.33 and hit its highest level since April 2013.

"For gold, the party is just beginning and we are maintaining bullish prospects for gold, especially the AUD gold," said Creagh of Saxo.

Oil prices have done the opposite, fearing that the tariff dispute will dampen global demand.

futures slipped 52 cents, or 0.88%, to $ 58.82, while they lost 59 cents to $ 53.58 a barrel.

At a joint press conference with French President Emmanuel Macron, Mr Trump declined to say he would renounce oil sanctions to bring Iran to the negotiating table.