Asian stocks shaky as Sino-U.S. trade war begins

SHANGHAI / TOKYO (Reuters) – Asian stocks wobbled on Friday, as Washington slapped tariffs on Chinese imports, a move may be the start of a full-scale trade between the world's two largest economies.

The US tariffs on more than 800 goods from China worth $ 34 billion took effect at 0401 GMT . President Donald Trump has warned the United States may well target over $ 500 billion worth of Chinese goods, an amount that roughly matches its total imports from China last year.

China's trade ministry said that it was forced to retaliate, meaning $ 34 billion worth of imported U.S. goods including autos and agricultural products are also subject to 25 percent tariffs.

MSCI's broadest index of Asia-Pacific shares outside Japan was 0.1 percent lower, pulling back from a modest early rise. The index composite has been reduced to 9 percent since June 7.

The Shanghai Composite index ended up trading down 0.3 percent, before the price, and trading will resume at 0500 GMT. Earlier on Friday, the index fell as much as 1.6 percent to 2,691, getting close to its January 2016 low of 2,638.

"China will surely take retaliatory steps, to which US President Donald Trump has threatened more tariffs," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ's Morgan Stanley Securities.

A trade war "now has become a reality," he said.

"If this was a boxing match, the first round has just begun. It is going to be a long process. Trump is unlikely to back down ahead of the U.S. mid-term elections (in November), especially given the recent rise in his popularity, "Fujito said.

Seoul's Kospi index, down in the morning, was flat fell 0.25 percent and shares in Taiwan were 0.e percent lower. Shares of Singapore, a major trading hub for the region, dropped more than 2.0 percent to 14-month lows.

Japan's Nikkei stock index rose 1.1 percent from Thursday's three-month low, helped by a boost in automaker shares on Washington and the European Union may be seeking a compromise on tariffs on cars.

"How are you going to go out, I think that's still going to be a major point of contention. But at least they're talking and I'm thinking that that's the positivity that's emanated from the markets, "said Stephen Innes, APAC head of trading at OANDA.

Japanese carmaker shares rose 1.4 percent, with Toyota Motor up 1.6 percent and Honda Motor up 1.5 percent. Korea South Hyundai Motor jumped 2.9 percent.

In Europe, automakers' shares jumped 3.4 percent on Thursday.

Still, many market players remained under the threat of further escalation in the trade between China and the United States.

Copper, seen as barometer of the world's economic strength because of its wide-ranging use, extended its losses to $ 6,236 per ton, down 1.7 percent on the day. It has fallen 15 percent from its peak hit just a month ago.

In the currency market, the yuan eased slightly in a choppy trade, though it kept some distance from its 11-month-old touched earlier this week.

The renminbi traded at 6.6534 per dollar, down 0.25 percent on the day, compared to Tuesday's low of 6.7204.

Newly released minutes from the U.S. Federal Reserve's policy on the subject of international trade. The yield on 10-year benchmark Treasury notes was at 2.8364 percent, compared with a close U.S. of 2.840 percent.

The two-year yield, which is higher than that of the Fed, was 2.553 percent compared with a US close of 2.561 percent.

The dollar was little changed over the yen at 110.67.

The single currency was down at $ 1.1685, while the dollar index, which tracks the greenback against a basket of six major rivals, was flat at 94.474.

After ticking slightly higher than average oil prices after an unexpected jump in crude oil stockpiles.

However, the market remains nervous on the subject of tarrying an important oil market.

Tensions between the U.S. and Iran Continued to Rise the U.S. Navy said it was steadfast in the aftermath of Iran's Revolutionary Guards threatened by the Strait of Hormuz.

U.S. crude fell 0.1 percent at $ 72.85 at barrel. Brent crude was 0.25 percent lower at $ 77.20 per barrel.