Asian Shares Dip Amid US-China Tariff Tensions
Global equity markets were mixed on Wednesday as investors weighed the effects of escalating tariffs between the United States and China.
In Japan, the Nikkei 225 lost 0.2% to 38,727.19, while Australia's S&P/ASX 200 gained 0.5% to 8,417.10.
The Hang Seng fell 0.6% to 20,659.41, and the Shanghai Composite declined 0.3% to 3,239.74. However, South Korea's Kospi surged 1.1% to 2,508.58, supported by bargain hunting and optimism fueled by the overnight rally on Wall Street.
Analysts believe Trump's tariffs on China may differ from his actions against other trading partners. He could potentially maintain tariffs on China indefinitely, as he did during his first term, to further separate the US from its geopolitical rival.
Trump has implemented a 10% tariff on US companies importing goods from China, prompting retaliation from China in the form of tariffs on US products and an antitrust investigation into Google. China's retaliatory tariffs, including a 15% levy on US coal and liquefied natural gas, will take effect on Monday.
"Trade tensions have yet to escalate into an outburst, but they are dangerously close to boiling over, and those who dismiss them do so at their own risk," said Stephen Innes, managing partner at SPI Asset Management.
On Wall Street, tech stocks led the S&P 500 higher by 0.7% after Palantir Technologies reported strong earnings. The Dow Jones Industrial Average rose 0.3% and the Nasdaq composite gained 1.4%.
Earlier this week, Trump agreed to postpone tariffs on Canadian and Mexican imports for a month, easing investor concerns that his tough stance on tariffs could escalate into a full-blown trade war.
However, the possibility of a trade war remains, and analysts urge caution as Trump's threats should be taken seriously. "Investors have suggested that the equity market is the US administration's scorecard, and any policy changes that hurt risk assets will be quickly reversed," wrote Bank of America strategists led by Mark Cabana. "We advise caution."
Shares of Google's parent company, Alphabet, climbed 2.5% despite China's antitrust probe. Pharmaceutical giant Merck tumbled 9.1% despite exceeding earnings and sales forecasts, as its revenue forecast fell short of expectations due to a shipment pause for one of its top-selling products to China.
Treasury yields eased on news that the US job market may be slowing, with fewer job openings advertised at the end of December than economists anticipated. The 10-year Treasury yield dropped to 4.51% from 4.56%, while the two-year yield declined to 4.21% from 4.25%.
In energy markets, US crude fell 20 cents to $72.50 per barrel, while Brent crude lost 31 cents to $75.89 per barrel. The US dollar weakened against the Japanese yen, trading at 153.41 yen, while the euro edged higher to $1.0386.