Asia stocks sag, bonds advance amid simmering trade worries

Tokyo (Reuters): Asian stocks sagged on Thursday while government bonds attracted safe-haven demand amid mounting investor concerns that growing trade tensions will hurt the global economy.

Spreadbetters expected European equities to fare slightly better at the open, with Britain’s FTSE starting unchanged, Germany’s DAX gaining 0.3% and France’s CAC rising 0.25%.

MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.13%.

The Asian markets took their cues from Wall Street shares, which fell for the third straight session overnight after US President Donald Trump sought to impose fresh tariffs on China, intensifying fears of a trade war.

Boeing Co, seen as particularly vulnerable to retaliation from US trade partners, fell 2.5%, leading the losers on the Dow.

Shanghai lost 0.3%, Hong Kong’s Hang Seng was flat and Australian stocks fell 0.25%. Japan’s Nikkei erased earlier losses and crawled up 0.12%.

Japan’s equity market “has been holding up relatively well, but it will have to decline some more if US shares deepen their losses,” said Yutaka Miura, senior technical analyst at Mizuho Securities in Tokyo. The benchmark 10-year Treasury yield dipped to 2.806% and headed for a fourth day of declines amid rising diplomatic tension between Britain and Russia, soft US retail sales data and concerns over Washington’s political and trade issues.

The spectre of a trade war also boosted demand for European debt. The German 10-year bund yield was at 0.594% after falling to a 1-1/2-month low of 0.583%. Yields on British gilts and French government bonds were also lower.

In the currency market, the dollar came under pressure again after the greenback managed a modest bounce overnight following three days of losses.

The dollar index, which measures it against a basket of six major currencies, was a shade lower at 89.698. So far this week, it has fallen about 0.5%, dogged by trade tensions and perceived political turmoil in Washington.

The euro edged up 0.05% to $ 1.2373 after being pulled back from a six-day high of $ 1.2413 when European Central Bank President Mario Draghi on Wednesday struck a dovish tone on monetary policy.

The yen, often sought in times of risk aversion, gained against a variety of peers.

The dollar slipped 0.35% to 105.960 yen after taking a hit the previous day on Trump’s firing of US Secretary of State Rex Tillerson.

The euro fell 0.4% to 131.045 yen and the Australian dollar shed 0.5% to 83.36 yen.

Oil prices held steady, supported by healthy global demand but capped by a relentless rise in US production that is undermining efforts led by producer cartel OPEC to cut supplies and prop up markets.

Brent crude futures were flat at $ 64.89 per barrel.

Safe-haven gold rose, with spot prices gaining 0.1% to $ 1,326.16 an ounce.