Asian stocks fell on Friday after U.S.-China trade talks ended without progress, with the markets braced for a speech by Federal Reserve Chairman Jerome Powell for hints on the direction of U.S. monetary policy.
U.S. and Chinese officials ended two days of talks on Thursday with no major breakthrough. Meanwhile their trade war escalated with activation of another round of duelling tariffs on $16-billion worth of each country’s goods.
MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.6 per cent. It was still up about 0.85 per cent on the week.
Hong Kong’s Hang Seng fell 0.8 per cent and the Shanghai Composite Index dropped 0.65 per cent.
Australian stocks rose 0.2 per cent, South Korea’s KOSPI fell 0.35 per cent and Japan’s Nikkei climbed 0.3 per cent.
“Global risk sentiment remains somewhat jittery ahead of Fed Chair Powell’s speech with U.S.-Sino trade talks failing to yield any immediate progress,” strategists at OCBC Bank wrote.
The S&P 500 shed 0.17 per cent overnight to pull back slightly from a record high scaled midweek, with industrial shares sagging after the United States and China imposed a fresh round of trade tariffs on each other.
Shares of industrial giants Caterpillar Inc and Boeing Co, which have been bellwethers of trade sentiment, were among the biggest drags on the Dow, which lost about 0.3 per cent. Caterpillar shares fell 2.0 per cent, and Boeing shares fell 0.7 per cent.
In immediate focus was the speech by the Fed’s Powell to be given later on Friday at the Jackson Hole, Wyoming, meeting of central bankers.
Where Powell stands on the pace of interest rate hikes will be scrutinized after minutes from the Fed’s most recent policy meeting indicated the central bank would tighten monetary policy soon.
“For equities, the key point will be whether Powell indicates that the Fed is poised to hike rates two more times this year. That would fall in line with expectations and not cause much of a stir,” said Soichiro Monji, senior economist at Daiwa SB Investments in Tokyo.
“Any mention of recent turbulence in the emerging markets may also provide the risk asset markets with some relief.”
U.S. President Donald Trump reiterated his displeasure with the Fed’s rate hikes earlier this week and investors waited to see whether Powell would respond to such criticism.
The Fed should raise rates further this year and probably next year as well, despite Trump’s opposition to tighter policy, Kansas City Fed President Esther George said in interviews aired on Thursday.
Dallas Fed President Robert Kaplan also said Trump’s comments would not affect the central bank’s decision making.
The dollar index against a basket of six major currencies stood at 95.618, holding most of its gains after rising 0.55 per cent overnight to snap a six-day losing run.
The greenback extended its overnight surge to touch a two-week high of 111.48 yen. The euro was a shade higher at$1.1548 after retreating 0.5 per cent the previous day.
The Australian dollar dipped 0.05 per cent to $0.7245 . It had slumped 1.4 per cent overnight as political uncertainty mounted in Australia after several senior ministers resigned and put Prime Minister Malcolm Turnbull’s leadership back in play.
Onshore Chinese yuan slipped 0.1 per cent to 6.8833 per dollar, its weakest in a week.
Oil prices edged higher. While the trade conflict between Washington and Beijing darkens the economic outlook, the supply versus demand position in oil markets remains relatively tight –especially because of the looming U.S. sanctions against Iran.
Brent crude futures rose 0.27 per cent to $74.93 per barrel , while U.S. crude added 0.31 per cent to $68.04.