ECONOMY
On Tuesday, Asia Market extended losses following sharp falls on Wall Street overnight, the yen strengthened and U.S. Treasury yields ticked lower as the trade war between China and the United States escalated. In early trade, MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.4%, touching its lowest level since Feb. 15.
The tariff escalation has rattled global markets, even as U.S. President Donald Trump said he would meet with Chinese President Xi Jinping next month.
China on Monday announced it would impose higher tariffs on $60 billion of U.S. goods following Washington’s decision last week to hike its own levies on $200 billion in Chinese imports.
The U.S. Trade Representative’s office also said it planned to hold a public hearing next month on the possibility of imposing duties of up to 25% on a further $300 billion worth of imports from China.
On Monday, the Dow Jones Industrial Average fell 2.38% to 25,324.99, the S&P 500 lost 2.41% to 2,811.87 and the Nasdaq Composite dropped 3.41% to 7,647.02.
On Monday, some traders had been concerned that China, the largest foreign U.S. creditor, could dump Treasuries to counter the Trump administration’s hardening trade stance. But most analysts downplayed such a possibility.
BONDS
As investors flocked to safe-haven assets, U.S. Treasury yields remained near six-week lows early on Tuesday. Benchmark 10-year Treasury notes yielded 2.3962% compared with a U.S. close of 2.405% on Monday.
The two-year yield, which rises with traders’ expectations of higher Fed fund rates, ticked down to 2.1782% from a U.S. close of 2.193%, with data from CME Group showing a more than 75 percent chance of the Fed cutting rates by the end of 2019.
Underscoring market concerns over the economic impact of the trade war, 10-year yields remained below those on three-month Treasury bills. A sustained inversion of this part of the yield curve has preceded every U.S. recession in the past 50 years.
CURRENCY
China's offshore yuan hit a fresh 2019 low early in Asia on Tuesday and the safe-haven yen remained supported as a fresh escalation in Sino-U.S. trade tensions hit sentiment, with each country raising tariffs on the other's goods.
The Japanese yen, the dollar edged up to 109.58 yen, recovering slightly after falling as low as 109.15 yen in early trade. The Japanese currency tends to benefit during geopolitical or financial stress as Japan is the world's biggest creditor nation.
The Australian dollar tacked on 0.16% to $0.6955, having hit its weakest against the greenback since early January overnight.
Sterling and the euro both firmed 0.03% - 0.08% to $1.2959 and $1.1233, respectively.
COMMODITY
Oil prices inched higher on Tuesday, though gains were checked amid an escalation in the trade war between the United States and China.
Brent crude futures were at $70.27 a barrel up 0.1%, from their last close. Brent ended the previous session little changed. U.S. West Texas Intermediate (WTI) crude futures were at $61.17 per barrel, up 0.2%, from their previous settlement. WTI closed the last session steady on the day.
Bitcoin gained 1.9% to $7,959.16.
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