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Stocks in Asia Fall on Worries About Trade Protectionism -- 2nd Update

2 Mar 2018 5:09 am
By Ese Erheriene 

Asian stocks fell Friday, dogged by rising worries over an escalation of trade protectionism after President Donald Trump unveiled steel and aluminum tariffs, though China benchmarks pared some of their initial losses.

Mr. Trump's latest move aimed at protecting his country's steelmakers from overseas competition pushed past concerns over the pace of U.S. interest-rate increases to become the day's dominant trading theme.

Shares in Japan were worst hit as concerns raised by the tariffs combined with a stronger yen to spark selling. The Nikkei Stock Average skidded 2.1%, having lost 3% in the previous two days.

Sharp declines in the dollar overnight continued against the yen in the morning, briefly taking the U.S. currency as low as Yen105.93, compared with Yen106.80 at the end of Tokyo stock trading Thursday.

Japanese steel stocks were down by more than 3%, in line with the early swoon for the Nikkei. "Japan exports quite a bit of steel," said Nomura strategist Takashi Ito. Although details of tariffs on various products weren't yet clear, "I can't say there won't be any impact" on Japanese companies, he added.

Among major users of steel, in South Korea car maker Hyundai was down 4%, while steelmaker Posco fell almost 5%.

In Hong Kong, steelmakers Maanshan Iron & Steel and Angang Steel hit three-week lows, after the U.S. decision, briefly slipping by 4% or more, compared with the Hang Seng Index's 1.6% drop.

Elsewhere, declines were more modest, with benchmarks in Australia and Singapore falling about 1%. South Korea's Kospi played catch-up after a holiday Thursday, declining 1.5%.

The U.S.'s tariff plans prompted nervous investors to take risk off the table against a backdrop of concern over possible retaliation by major trading partners.

"The matter has overtaken the obsession with U.S. monetary policy, although, both exert weight upon Asian equity markets," said Jingyi Pan, a market strategist at IG Group.

Already, the government of Ontario--Canada's biggest province and home to the bulk of the country's steel production--has urged Prime Minister Justin Trudeau to "aggressively explore all options" in the event the Trump administration pushes ahead with the broad tariffs.

Markets in China, a country specifically targeted by the tariffs, soon bounced back from initial sharp declines Friday. Stocks there have shown more resilience than those elsewhere in the region ahead of next week's session of the National People's Congress. Stocks in Shanghai, where most of China's heavy industrials are listed, were down just 0.3% after an early 1% decline.

One reason for this is that Canada, not China, is the biggest steel exporter to the U.S. With U.S. companies' cost of production likely to increase as a result of the tariffs, they may question whether to keep production in the U.S. If they don't, a likely destination would be China, said Iris Pang, greater China economist at ING.

"So, is it really bad for China?" said Ms. Pang. "Overall, it may not be."

While there is uncertainty around metals stocks, further fueled by weak official manufacturing data from China, Goldman Sachs said it was still "cautiously optimistic" on Chinese equities before the country's coming political meetings.

Haven stocks were trading higher, with Australian gold-mining company Resolute Mining up 1.1%.

Indian markets were closed Friday for a holiday.

Kosaku Narioka in Tokyo and Paul Vieira in Ottawa contributed to this article.

Write to Ese Erheriene at ese.erheriene@wsj.com

(END) Dow Jones Newswires

March 02, 2018 00:09 ET (05:09 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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