Asian equities are changing in fear of the long trade war between the United States and China; oil rally

By Swati Pandey

SYDNEY (Reuters) – Asian stocks fell on Monday because of China's decision to cancel talks with the United States, which has heightened fears of a protracted trade war with neither side.

Oil prices jumped after major producers ruled out an increase in crude output.

US equity futures were a little weaker while the broadest index of MSCI's Asia-Pacific equities out of Japan <.MIAPJ0000PUS> fell 0.8 percent. Hong Kong was the worst performer with its Hang Seng Index <.HSI> down 1.3 percent.

The focus of Monday's limited action is on currencies, as stock markets in major Asian centers in Japan, China and South Korea were closed for holidays. But with domestic trade in the respective countries closed, even forex trading was light.

US investors focused on the Sino-US trade war as China added US $ 60 billion to its list of imported goods, in retaliation for US rights over $ 200 billion of Chinese goods that came into effect on Monday. 0:01 GMT.

China has also canceled middle-level trade talks with the United States, as well as Washington Deputy Premier Liu He's planned visit to Washington, initially scheduled for this week, the Wall Street Journal reported.

The United States does not have a date for further discussions.

The intensification of the conflict between the world's two largest economies has scared the financial markets worried about the fallout on global growth.

The Japanese yen , which forecasts cash flow in times of crisis, above a recent two-month low at 112.6 per dollar, while the trade-sensitive Australian dollar slipped from a 3-1 / 2 week high to $ 0.7268.

"The United States and China are digging deeper, and more and more the subtext seems to be as much about business ideology as about canceling commercial tariffs," said John Bilton, head of global multi-asset strategy at JPMorgan Asset Management.

"As a result, the extent and depth of the economic impact are being recalibrated," said Mr. Bilton.

"As we continue to be constructive on the global economy over the coming quarters, it is difficult to see the current upsurge of US business turning into a new era of coordinated global growth."

Chinese growth has sparked some optimism as Beijing authorities encourage stimulus measures to offset the economic impact of tariffs.

Chinese Premier Li Keqiang said over the weekend that China will reduce import and export costs for foreign companies to promote an image open to business.

Chart: Stock Market Performance in Asia (https://reut.rs/2MXrmTL)

BREXIT AND FED

Negotiations between Britain and the European Union will be another key issue for investors, with risks of "no deal" or "hard Brexit".

On Friday, British Prime Minister Theresa May said the negotiations with the European Union had stalled after the EU leaders rejected his "Checkers" plan without explaining why.

The pound dropped to 1.4% on Friday, its biggest loss since June 2017. It was last at $ 1.3076, slightly higher than Friday's ($ 1.3053), the lowest since mid-September .

L & # 39; euro released from a three-month high on Monday at the last transaction at $ 1,1739.

The dollar index <.DXY>, which measures the greenback against a basket of major currencies, was the last at 94.273 to exceed its weakest point since early July.

At the end of last week, the dollar was hammered as investors increased bets that the US Federal Reserve would be near the end of its rate hike cycle after an expected increase this week.

The Fed will end Wednesday at its two-day policy meeting.

Oil prices earned as the leader of OPEC in Saudi Arabia and its biggest oil-producing ally outside the group, Russia, have effectively rebuffed calls for action by US President Donald Trump to bring down prices.

Raw Brent futures contracts gained $ 1.03 to $ 79.83 per barrel, while US crude futures contracts increased by 80 cents to $ 71.58.

(Edited by Shri Navaratnam and Richard Borsuk)