Asian shares set for worst week since April after US tariff blitz

Reuters

4 days ago

SYDNEY, Aug 1 (Reuters) - Asian shares were headed for the worst week since April on Friday after the U.S. slapped dozens of trading partners with steep tariffs, while investors anxiously await U.S. jobs data that could make or break the case for a Fed rate cut next month.
European stock markets are on track for a lower open, with EUROSTOXX 50 futures down 0.5%. Both Nasdaq futures and S&P 500 futures slipped 0.2% after earnings from Amazon (AMZN.O), opens new tab failed to meet lofty expectations, sending its shares tumbling 6.6% after hours.
Late on Thursday, President Donald Trump signed an executive order imposing tariffs ranging from 10% to 41% on U.S. imports from foreign countries. Rates were set at 25% for India's U.S.-bound exports, 20% for Taiwan's, 19% for Thailand's and 15% for South Korea's.
He also increased duties on Canadian goods to 35% from 25% for all products not covered by the U.S.-Mexico-Canada trade agreement, but gave Mexico a 90-day reprieve from higher tariffs to negotiate a broader trade deal.
"The latest tariff announcement offers some surface-level clarity, but beneath it lies a fog of uncertainty," said Thomas Rupf, Chief Investment Officer, Asia of VP Bank.
"Despite some countries securing better terms, the overall impact is negative. We're entering an era of higher barriers to trade, which will have an impact and hurt growth."
MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab fell 1.1% to bring the total loss this week to 2.2%, the biggest since April. South Korea's KOSPI (.KS11), opens new tab plunged 3.5% while Taiwanese shares (.TWII), opens new tab fell 0.5%.
Japan's Nikkei (.N225), opens new tab dropped 0.6%. Chinese blue chips (.CSI300), opens new tab fell 0.7% and Hong Kong's Hang Seng index (.HSI), opens new tab lost 0.8%.
Overnight, Wall Street failed to hold onto an earlier rally. Data showed inflation picked up in June, with new tariffs pushing prices higher and stoking expectations that price pressures could intensify, while weekly jobless claims signalled the labour market remained on a stable footing.
Fed funds futures imply just a 39% chance of a rate cut in September, compared with 65% before the Federal Reserve held rates steady on Wednesday, according to the CME's FedWatch.
Much now will depend on the U.S. jobs data due later in the day and any upside surprise could price out the chance for a cut next month. Forecasts are centred on a rise of 110,000 in July, while the jobless rate likely ticked up to 4.2% from 4.1%.
The greenback found support from fading prospects of imminent U.S. rate cuts, with the dollar index up 2.5% this week against its peers to 100, in the biggest weekly rise since late 2022.
The Canadian dollar was little impacted by the tariff news, having already fallen about 1% this week to a 10-week low.
The yen was the biggest loser overnight, with the dollar up 0.8% to 150.7 yen, the highest since late March. The Bank of Japan held interest rates steady on Thursday and revised up its near-term inflation expectations but Governor Kazuo Ueda sounded a little dovish in the press conference.
Treasuries were largely steady on Friday. Two-year Treasury yields were flat at 3.9510%, while benchmark 10-year yields ticked up 2 basis points to 4.3781%, after slipping 2 bps overnight.
In commodity markets, oil prices were little changed after falling 1% overnight. U.S. crude rose 0.1% to $69.36 per barrel, while Brent was at $71.8 per barrel, up 0.1%.
Spot gold prices were up a fraction at $3,294 an ounce.