Asian equities resume decline, Saudi tensions push up oil prices

TOKYO (Reuters) – Asian stocks lost value on Monday because of worries over Sino-US trade disputes, a possible slowdown in the Chinese economy and a rise in prices. US borrowing costs, which moderated optimism despite the rebound in global equities late last week.

Spreadbetters expected a mixed opening of European equities, with the UK FTSE .FTSE up 0.15%, the German DAX .GDAXI 0.1% and the French CAC .FCHI 0.3%.

Oil prices jumped and Saudi shares fell in the face of rising diplomatic tensions between Riyadh and the West after warning the monarchy against threats of punishment for the disappearance of A journalist criticizing his policy.

The MSCI's largest share of Asia Pacific shares outside Japan .MIAPJ0000PUS lost 1%, while that of Shanghai .SSEC lost 0.75%.

Japan's Nikkei .N225 fell 1.8% as shares of automaker .ITEQP.T hit record lows in 13 months after Washington announced plans to call for currency manipulation provisions in future agreements with Japan.

MSCI .MIWD00000PUS 'broadest indicator of global equity markets had lost 0.25%, after a sharp drop of 3.87% last week – its highest level since March – at a nadir of one year.

The market meltdown was attributed to a number of factors, including concerns over the impact of the US-China trade war, soaring US bond yields, and caution before the earnings season.

Although sales were apparently down on Friday, partly after Chinese trade data posted strong growth in September, many investors remained cautious.

"Some people say the markets have benefited from Chinese export data. But for me, it seems so obvious that the numbers have been inflated upstream of the introduction of tariffs, "said Norihiro Fujito, chief investment analyst at Mitsubishi UFJ Morgan Stanley Securities.

Fujito said the trade war was beginning to weigh heavily on growth in China, noting that data released later on Friday showed that auto sales in China had recorded the largest decline in seven years.

Over the weekend, the governor of China's central bank, Yi Gang, said he still saw a lot of possibilities for adjusting interest rates and the reserve requirement ratio ( RRR), the downside risks to trade tensions with the United States remain significant.

Also beginning to draw public attention, Saudi Arabia has doubled the pressure of the West on the disappearance of Jamal Khashoggi, US resident and Washington Post columnist, after joining the Saudi consulate in Istanbul on 2 October.

US President Donald Trump threatened to "severely punish" it was proven that Khashoggi was killed while many company executives had canceled plans to attend a conference of more Saudi investors. late this month.

Investors suspect that the latest development could undermine the leadership of Crown Prince Mohammed bin Salman and risk destabilizing the oil-rich kingdom.

Shares of Saudi Arabia .TASI plunged 7% Sunday and closed down 3.5% to its lowest level since early January.

Oil prices have reversed their downward trend since the beginning of this month.

The Brent crude futures price, lCOc1, rose 1.3% to $ 81.50 a barrel, rebounding from the low of $ 79.23 hit nearly three weeks Friday.

"Concerns over Saudi Arabia could drive oil prices up to $ 100," said Kazuhiko Fuji, senior researcher at the Institute for Research on Economics, Trade and Economics. industry, think tank affiliated with the Japanese government.

"People thought that the Saudis would compensate for the fall of Iranian production. If they start using oil as a weapon, it will be a whole new chapter, "he said.

Rising oil prices could boost global inflation and lead to higher borrowing costs in the United States, which are also detrimental to weak borrowers, especially those in emerging markets.

Although the 10-year US yield posted its first significant decline in the past two months last week on the stock market rally, it rose slightly on Monday to 3.15% US10YT = RR.

Investors were also preparing for a summit of the European Union as of Wednesday.

Sterling GBP = D3 lost 0.3% to 1.3114 USD after EU and UK negotiators failed to reach Brexit deal before crucial summit.

The euro traded at 1.1552 USD =, down slightly after Chancellor Angela Merkel's Bavarian allies had their worst election result since last Sunday.

For its part, the dollar is under pressure against the yen after US Treasury Secretary Steven Mnuchin said Saturday that Washington wanted to include a provision to discourage monetary manipulation in future trade agreements, including with Japan.

This has caused the Japanese political community to fear that it would give Washington the right to call currency manipulation of any future Tokyo currency intervention to contain the rise in the yen.

The dollar slipped 0.2% to 112.00 yen JPY =.