Asia stocks are negative across the board as region follows suit from Wall St. where the majors posted their 3rd consecutive losing streak after reports of incoming Trump tariffs stoked trade war fears and amid raised prospects of 4 Fed hikes this year. The announcement by President Trump to set tariffs on aluminium and steel imports next week also resulted to global backlash in which EU, Canada and Mexico vowed countermeasures or retaliation against the US, while the China Iron and Steel Association labelled the measure as ‘stupid’. As such, ASX 200 (-1.2%), Nikkei 225 (-2.9%) and KOSPI (-1.6%) saw commodity-related pressure with steel names in Asia’s top US-bound steel exporters Japan and South Korea suffering the brunt of the impending tariffs, while heavily-exposed automakers were also reeling from the news. Elsewhere, Hang Seng (-1.7%) and Shanghai Comp. (-0.5%) conformed to the downbeat tone, although weakness in the mainland was to a lesser extent as China is said to only export a limited amount of steel to US and after another weekly net liquidity injection by the PBoC.
In FX markets, the USD was the main fallout of the trade war concerns and subsequent retaliation fears which underpinned all its major counterparts and saw EUR/USD gain a firm foothold of the 1.2200 handle. Elsewhere, USD/JPY briefly declined below 106.00 amid the weakness in the greenback and safe-haven flows into JPY, while CNH bucks the trend and has lost ground to USD after a tepid reference rate setting by the PBoC which kept the fix relatively stable and amid some speculation that currency devaluation could be used as one of the weapons by China in the event of a full-on trade war.
Finally, 10yr JGBs are higher with demand spurred amid upside in T-notes and a broad risk-averse tone, while the BoJ are also present in the market for 1yr-10yr JGBs with the amounts of its Rinban operation kept unchanged from prior.