Shares of Asia are downgraded by China skid, oil expands earnings

SYDNEY (Reuters) – Asian stock markets came under pressure on Wednesday as Chinese stocks plummeted and the yuan made waves in the region, while the US relied on its allies to stop trading. buy Iranian crude.

Chinese blue chips .CSI300 sank 2.2 percent to be a mustache over 13-month lows as a resolution of Sino-US tensions remained a distant prospect.

The widest MSCI index of Asia Pacific shares outside Japan .MIAPJ0000PUS lost another 0.6 percent after hitting a two-year low on Tuesday.

The Nikkei .N225 from Japan was doing better but quickly succumbed to risk aversion and dropped by 0.3%.

European equities should remain unchanged, while the E-mini futures of the S & P 500 ESc1 lost 0.18%.

The fragile mood in Asia has overshadowed the gains in energy stocks made after the news broke that Washington has pushed allies to stop imports of Iranian crude oil.

US crude Clc1 rose 17 cents to $ 70.70, jumping 3.6% overnight, while Brent LCoC1 rose 18 cents to $ 76.49 per barrel.

The jump in oil propelled the Wall Street energy sector to 1.4% .SPNY, making it the biggest winner on the S & P 500.

But the S & P .SPX still managed to add 0.22% to the total, while the Dow Jones rose 0.12% and the Nasdaq .IXIC 0.39 %.

Confusion remained the word of the American commercial policy.

The US House of Representatives on Tuesday passed a bill to tighten the rules on foreign investment, boosted by bipartisan concerns over Chinese bids to acquire sophisticated technology in the United States.

Yet President Donald Trump has also endorsed a measured approach to curtailing Chinese investment in US technology companies, saying that a stronger merger review panel could protect sensitive technologies.

"We remain of the opinion that a large-scale" trade war "remains a low probability, although the odds that it has seemed to have increased," said David Hensley, JPMorgan Economist.

He noted that the latest White House tariff threats would cover more than 30% of US imports, or nearly 5% of annual economic output (GDP).

"If all of this happens, and the US trading partners retaliate, it will result in a major supply shock for the global economy, which will increase inflation and reduce growth." .

RETURN TO YUAN WATCHING

In foreign exchange markets, trade-sensitive currencies, including the Australian and New Zealand dollars, lost ground while the safe-haven yen found demand. The kiwi dollar hit a seven-month low of 0.6812 NZD = D4.

The US dollar was broadly stable against a basket of currencies at 94.661 after jumping 94.171 on Tuesday. The EUR = Euro was back at $ 1.1650 after taking profits at a high of $ 1.1720 overnight.

Still, the dollar could not support gains on the yen and it returned to 109.85 against a start of 110.12 JPY.

The dollar was helped in part by recent gains on the Chinese yuan, which stirred speculation that Beijing was allowing its currency to weaken to support exports.

The People's Bank of China (PBOC) set the midpoint of the CNY = PBOC yuan at a six-month low of 6.5569 per dollar on Wednesday. This was down 0.6 percent from the previous one, but actually a little stronger than market expectations.

However, the spot rate continued to plummet, with the yuan exceeding 6.6600 per dollar for the first time since December.

"The PBOC's preference could be to allow a moderate weakening, retreating if the depreciation pressures begin to intensify.But it's a hard-to-reach balance.The chances of a significant depreciation have increased, "economists at Capital Economics said in a note.

In commodities markets, gold was apparently no longer considered a safe haven by investors and hit its lowest level in more than six months.

The spot gold XAU = was the last at $ 1,255.93 having hit its lowest since mid-December at $ 1,253.00.