Asian stocks narrowly mixed, with wave of US-China tariffs on the horizon; oil slides

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Asian stocks were narrowly mixed on Monday, the first trading day of the second half of the year, with trade tensions between the U.S. and its trading partners still a key concern for investors.

In Tokyo, the Nikkei 225 slipped 0.23 percent as the consumer goods and utilities sectors logged declines. Retailer stocks were down 1.23 percent, with Fast Retailing lower by 1.16 percent. Some of the negativity was cushioned by gains in technology stocks and financials.

Over in Seoul, the Kospi was little changed, with the index last trading lower by 0.06 percent. Technology names held onto gains, with Samsung Electronics up 0.64 percent, but manufacturing stocks declined.

Down Under, the S&P/ASX 200 edged up by 0.14 percent, with the energy and information technology subindexes contributing to early gains. The heavily weighted financials sector was little changed in morning trade.

Markets in Hong Kong, meanwhile, will be closed on Monday for a holiday.

Although global markets notched gains in the previous session, investors have been cautious over trade tensions between the U.S. and its trading partners, most notably China. U.S. tariffs on $34 billion of Chinese products are expected to take effect on July 6, with China set to retaliate with duties of its own on the same value of American goods.

Uncertainty on trade policy, most recently related to foreign investment in U.S. technologies, as well as concerns that retaliation could intensify to the point that global economic growth is negatively affected, have weighed on investor sentiment in recent weeks.

“[U]ltimately, the proof will be in the pudding [on foreign investments] and in the meantime, there is still no sign of the U.S. and China restarting trade negotiations ahead of the July 6 start date for tariffs … Our base case remains that some form of negotiated solution will be reached, but things are likely to get worse before they get better,” Shane Oliver, chief economist at AMP Capital, said in a Saturday note.

Major Asian markets are lower for the year. As of Friday, the Shanghai composite was down 13.9 percent, on track for its worst year since 2011 when the index tumbled more than 20 percent. Other markets are faring slightly better, but still in negative territory for the year: Japan was down 2.02 percent this year and South Korea’s benchmark had declined 5.73 percent by Friday.

Despite that uncertainty, Wall Street closed slightly higher on Friday, with the Dow Jones Industrial Average rising 0.23 percent, or 55.36 points, to close at 24,271.41.

On the energy front, President Donald Trump unexpectedly announced what he claimed was a new agreement with Saudi Arabia. Trump said in a tweet that Saudi Arabia had agreed to raise production by up to 2 million barrels per day, while the White House somewhat tempered the president’s proclamation. Trump’s announcement came a week after OPEC reached a decision on increasing oil production after curbing output since 2017 in a bid to boost prices.

Oil prices were lower on Monday, with U.S. West Texas Intermediate crude futures falling 0.94 percent to trade at $73.45 per barrel and Brent crude futures dropping 0.93 percent to $78.49.

In economic news, China’s official manufacturing Purchasing Managers’ Index declined to 51.5 for the month of June, missing the 51.6 forecast, although the figure still came in above the 50-point level indicating growth.

Here’s the economic calendar for Monday (all times in HK/SIN):

  • 9:45 a.m.: China Caixin manufacturing PMI
  • 12:00 p.m.: Indonesia CPI

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