Asian benchmarks were broadly lower on Wednesday morning, pressured by concerns about a hard Brexit and concerns that the trade war between the United States and China will lag on for the foreseeable future. Japan’s Nikkei 225 eased 0.98 percent as of 10:38 a.m. HK/SIN, while Hong Kong’s Hang Seng Index and South Korea’s Kospi suffered greater losses, trading down 1.50 percent and 1.18 percent respectively. Even Australia’s ASX 200 which often bucks the trend was down 0.29 percent. The losses in Asia followed a day of losses on Wall Street where all three benchmark indexes ended lower on Tuesday.
A fresh round of trade negotiations began in Shanghai on Tuesday and U.S. President Donald Trump promptly took to Twitter, tweeting that if he is re-elected the result could be no trade agreement or a harsher agreement. Trump’s tone came across as highly inflammatory, causing traders to question whether a deal will be forthcoming in the shorter term. Data out on Wednesday morning revealed that China’s factory activity contracted for the third consecutive month in July, impacted directly by the trade war between the two economic superpowers. The country’s official Purchasing Managers’ Index (PMI) sat at 49.7 in July, just under the 50 point that distinguishes expansion from contraction.
Markets Stable as Traders Wait for Fed
On Tuesday President Trump also called on the Federal Reserve to cut interest rates more than the expected quarter point and repeated his criticism that the Fed should have acted sooner. The U.S. dollar index was stable in early Asian trade, up a modest 0.01 percent to 98.06 .DXY. The dollar eased against the yen, down 0.04 percent to 108.55. It was stable against the dollar, but the greenback eased against the Canadian dollar, falling 0.08 percent.
U.S. gold futures were also stable in advance of the Fed announcement, trading slightly lower at $1,428.80 per ounce.