Most Asian stocks fell on Monday, led by Chinese markets amid the potential for a trade war with the European Union. The markets also received negative signals from Wall Street, where a combination of profit-taking and concerns about interest rates led to a drop in U.S. stock indices from record levels on Friday.
Stronger-than-expected U.S. PMI data increased fears that the resilience of the U.S. economy would keep interest rates high for longer. Chinese markets suffered extended losses after the European Union imposed hefty tariffs on imports of Chinese electric cars earlier in June. This move angered Beijing and increased the potential for a trade war.
Chinese officials warned of a possible trade war with the European Union as ministers from China and Germany met to negotiate a way forward. Observers expect that Beijing may consider imposing retaliatory tariffs on imports of European cars.
Chinese stocks have suffered significant losses over the past two weeks, with sentiment towards the country and Asia generally remaining negative. Losses in Hong Kong were also driven by a decline in tech stocks. Weak industrial production data from the country further impacted sentiment last week.
In contrast, Japan’s Nikkei indices rose, but the weak yen made investors largely cautious about any potential currency market intervention by Tokyo, especially as Japan’s key finance ministers warned of such a scenario.
