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TOKYO (Reuters) – Asian shares dropped in tentative sentiment on trade relations between the United States and major economies, with investors braced for another potential rocky day for Chinese markets.
Investors, worried the trade row could derail a rare period of synchronized global growth, have pulled out of riskier assets in the past month or so.
The Asia Pacific MSCI index ex-Japan dropped 0.66 percent on early Tuesday trade, while Japan's Nikkei was slightly changed.
In China, the Shanghai Composite Index shed 0.23 percent and the blue chip CSI300 index fell 0.19 percent.
The Shanghai Fellowship hit more than two-year lows on Monday, and the yuan fell ahead of a July 6 deadline when the United States is set to impose tariffs on $ 34 billion worth of goods from China, the epicenter of a heated trade dispute between Washington and major economies that has convulsed financial markets.
Beijing is expected to respond to tariffs of its own on U.S. goods as trade between the world's two largest economies.
"I report a lot of alarms and a lot of nervousness about a full blown trade war, which comes at a bad time for China where the economy is undergoing a change at the same time the United States is seeing a sharp upturn , "Said Aninda Mitra, Singapore-based senior sovereign analyst at BNY Mellon Investment Management, who visited Shanghai last week.
"There is undoubtedly cause for concern, but not alarm on the prospects for the Chinese yuan. A lot of people are not thinking about the range of outcomes and limitations on the subject of a seemingly inexorable slide into an escalating trade war. "
On Monday, the Chinese yuan, fresh off its worst month on record, lost more ground against the dollar to close at 6.6660. In early deals on Tuesday, the yuan came under more pressure.
Chancellor Angela Merkel's Chancellor Angela Merkel's Chancellor Horst Seehofer dropped his threat to quit.
The euro was fetching $ 1.1630 after shedding 0.45 percent overnight.
The Reserve Bank of Australia (RBA) has maintained its monthly rate at 1.5 percent, where they have been since mid-2016.
Focus was on whether the RBA makes mention of the recent U.S.-China trade tensions.
The Aussie was steady at $ 0.7338 after dropping to $ 0.7311 overnight, its lowest since January 2017.
The dollar was steady at 110.895 yen after edging up 0.2 percent the previous day, supported by stronger US economic data, higher Treasury yields and a bounce in shares on Wall Street.
Brent crude rose 0.41 percent to $ 77.30 per barrel and West Texas Intermediate (WTI) crude was up 0.32 percent to $ 73.94 a barrel.
Reporting by Tomo Uetake; Editing by Shri Navaratnam
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