Investors brushed aside claims from Donald Trump he was hopeful of resolving the bitter trade dispute between the US and China, with the American president set to meet his Chinese counterpart Xi Jinping at the G20 in Argentina next week.
“China wants to make a deal. If we can make a deal, we will,” Trump said, adding he was “very prepared” for the meeting.
But the fractious recent APEC summit — which for the first time ever failed to issue a joint statement after US-China trade tensions boiled over — has set an ominous tone for the high-stakes summit in Buenos Aires.
The world’s top two economies have been locked in a trade war for months, with the US imposing punitive tariffs on Chinese goods worth USD 250 billion per year. In retaliation, China imposed tariffs on USD 110 billion of US goods.
Washington has threatened to toughen measures even further if the issue is not resolved before January.
Speculation is growing that the People’s Bank of China will again cut the level of cash that banks must hold in reserve, in a fresh bid to lower financing costs and blunt the economic impact of the trade dispute with the US.
“The (Chinese) central bank is worried about external shocks in the wake of the cantankerous APEC summit which highlighted a considerable political divide,” said Stephen Innes, head of Asia-Pacific trade at trading group Oanda.
“But moves are unlikely to be substantial given the local markets are effectively in holiday mode.”
With markets in Japan and India closed for holidays, Hong Kong, Taipei, Seoul and Singapore all chalked up losses on Friday morning, as Asian stocks headed for a third week in the red.
Shanghai was the biggest loser, shedding over one per cent, while Sydney was a rare bright spot.
Asia-Pacific markets were also warily eyeing the prospect of financial conditions tightening with the Federal Reserve poised to keep hiking interest rates.
With New York markets shut Thursday for Thanksgiving, London, Paris and Frankfurt all closed down, with the FTSE dragged lower by the strengthening pound.
The UK currency jumped after Britain and the European Union struck a crucial draft deal on post-Brexit ties, ending the European session more than half a per cent higher against both the dollar and the euro.
The pound held onto its gains even as huge uncertainty remains over how the Brexit endgame will play out.
But analysts said many traders were biding their time.
“Asian currencies gained slightly on the open, though there was a lack of any meaningful driver given the US Thanksgiving holidays,” Khoon Goh, head of Asia research at ANZ in Singapore, told Bloomberg News.
“Currencies are also likely to stay within current ranges ahead of the Trump-Xi meeting next week, which could provide a deeper move depending on the outcome.”
The bearish mood was exacerbated by fresh falls in crude prices as traders took fright over risks of oversupply.
“The overhang from swelling US inventories which remain freshly minted in trader minds suggests the massive crude glut continues to outweigh OPEC output cut,” Innes said.
On other commodity markets, gold’s safe haven status saw the precious metal remain firm.