The global equities swoon rolled over to Asia on Friday, where markets reacted negatively to the Trump administration’s trade broadside against China.
Although the import tariffs had been telegraphed for weeks, Thursday’s package, covering about $60 billion in goods, sent investors running for havens. Bonds and gold prices rose and the Japanese yen hit its highest point against the U.S. dollar since Donald Trump won the presidential election.
“Yes, the news was out for a while, but the actual action was a bit of a surprise to the market,” said Shinchiro Kadota, a senior forex and rates strategist at Barclays . “Maybe they thought it would be smaller, maybe later.”
China’s commerce ministry responded Friday morning and announced it would levy tariffs against $3 billion worth of U.S. goods including pork and recycled aluminum.
Japan’s Nikkei Stock Average NIK, -4.51% closed down 4.5% as the yen’s sharp gains on Thursday also pressured stocks lower. The yen rose further on Friday, hitting 16-month highs as the dollar went below ¥105.
The WSJ Dollar Index BUXX, -0.29% fell 0.2% in Asia, extending the afternoon pullback seen during U.S. trading.
Stocks in China also fell with the Shanghai Composite Index SHCOMP, -3.39% closing down 3.4%, the Shenzhen Composite Index 399106, -4.49% down 4.5% and the small-cap-heavy Chinext Index losing 5%.
Hong Kong’s Hang Seng Index HSI, -2.45% skidded 2.4% as index heavyweight Tencent 0700, -4.42% added to Thursday’s 5% post-earnings drop with a 4.4% decline. The drop for the Chinese internet giant, Asia’s biggest company by market value, came as major shareholder Naspers said it would sell a small portion of its one-third stake in the company.
Also, Hong Kong-listed, China-based pork producer WH Group 0288, -4.65% slumped 4.6%. It owns U. S-based Smithfield, and its imports of U.S. pork into China will be hit by the new tariffs.
Others indexes in the region were down about 2%, though New Zealand’s benchmark NZ50GR, -0.99% closed just 1% lower and finished the week with a 0.5% gain. The NZX-50 will be one of the few regional markets to log a weekly advance.
S&P 500 futures ESM8, +0.23% were recently down 0.4% after the index skidded 2.5% skid on Thursday while U.S. Treasurys rallied further. The 10-year yield TMUBMUSD10Y, +0.55% has fallen to 2.83% after hitting 2.93% on Wednesday during Federal Reserve Chairman Jerome Powell’s press conference after the central bank’s meeting.
Asia companies, many of which are export-reliant, could get caught in the middle of tit-for-tat trade actions between the U.S. and China. While market sentiment is expected to remain downbeat in the short term, some analysts are cautioning about the longer-term impact.
“Given the high costs of escalation on both sides, and also for the broader Asian supply chain, an extended and comprehensive trade war remains unlikely,” said Hannah Anderson, global market strategist at J.P. Morgan Asset Management. She noted while there may be some negotiating before the tariffs go into effect, “investors should be prepared for headlines to continue to rock markets” in the meantime.
Industrial commodities remained under pressure. The sector “reacted very badly to this news overnight, so we are seeing a focus on material and energy stocks” in Asia, said Michael McCarthy, CMC’s chief market strategist in Australia.
Furthermore, China’s reaction to the Trump administration’s announcement has so far not been as substantial as many had feared. Beijing, for example, hasn’t announced tariffs on the two largest U.S. exports to China—soybeans and airplane parts.
“We retain the view that China is willing to negotiate and is likely to offer concessions,” said Citibank. However, “uncertainty and the fear of escalation will likely hold back market sentiment in the short run.”
Oil prices CLK8, +0.28% rebounded by about 1% in Asian trading.
Chinese metals futures slumped 5%, and Shanghai rubber futures for a time were down the 7% daily limit. But oil futures rebounded 1% in Asia, essentially erasing Thursday’s decline during U.S. trading. And soybeans and soybean meal are trading higher in China as investors worry potential tariffs on the oilseed could impact supplies. The commodity is used for animal feed.
— Suryatapa Bhattacharya contributed to this article.