Asia report: Markets slide in response to Trump tariffs

(Sharecast News) - Asia-Pacific markets fell on Monday as investors reacted to US president Donald Trump's new tariffs on Canada, Mexico, and China. The measures, which include a 25% tariff on imports from Canada and Mexico and a 10% tariff on goods from China, are set to take effect Tuesday.

"The collar is broadly bid across G10 FX following president Trump's announcement to impose tariffs on goods from Canada, Mexico, and China," noted TickMill market strategy partner Patrick Munnelly.

"In contrast, stock markets and cryptocurrencies experienced sharp declines overnight, although most markets are stabilising in early London trade.

"This development underscores the sensitivity of both domestic and international markets to policy decisions and trade policies by the US government, impacting the broader global economic landscape."

Munnelly said calls were planned on Monday morning between Trump and representatives from Canada and Mexico, although Trump had indicated that he did not expect any "dramatic" outcomes, making a retreat from the tariffs appear improbable.

"China is facing 10% tariffs as well, and Trump has mentioned that the European Union could be targeted next with tariffs that 'will definitely happen'.

"Various analyses predict that the impact on US GDP could reduce growth by over a percentage point, alongside a projected rise in inflation.

"Although Canada and Mexico are imposing their own tariffs in retaliation, the effects of US tariffs on their economies will be significantly larger than their retaliatory measures against the US."

Markets tumble in response to Trump tariffs

In Japan, the Nikkei 225 dropped 2.66% to 38,520.09, while the broader Topix fell 2.45% to 2,720.39.

Major exporters suffered heavy losses, with NH Foods plunging 10.96%, Seiko Epson declining 9.98%, and TDK Corporation losing 8.92%.

Markets in China remained closed for the Lunar New Year holiday, but Hong Kong's Hang Seng Index was nearly flat, edging down 0.04% to 20,217.26.

Casino operators and consumer stocks bore the brunt of the pressure, with Sands China falling 6.99%, JD Health International losing 6.71%, and Galaxy Entertainment Group dropping 5.86%.

South Korea's Kospi 100 fell 2.63% to 2,448.33, weighed down by sharp declines in manufacturing and materials stocks.

POSCO Future M tumbled 9.66%, LF Co dropped 9.31%, and SKC fell 8.54%.

In Australia, the S&P/ASX 200 shed 1.79% to 8,379.40, with Westgold Resources leading losses, plummeting 12.4%.

Magellan Financial Group and Fisher & Paykel Healthcare Corporation also struggled, dropping 9.71% and 7.42%, respectively.

New Zealand's S&P/NZX 50 declined 1.42% to 12,810.32, with Fisher & Paykel Healthcare down 6.65% and dairy producer Synlait Milk sliding 5.17%.

Currency markets reflected the trade concerns, with the dollar last down 0.19% on the yen to trade at JPY 154.90, while it gained 1.19% against the Aussie to AUD 1.6272, and advanced 1.3% on the Kiwi, changing hands at NZD 1.7981.

Oil prices moved higher, with Brent crude futures last up 1.44% on ICE to $76.76 per barrel, and the NYMEX quote for West Texas Intermediate rising 2.43% to $74.29.

Bank of Japan discussing possible further rate hikes

In economic news, Bank of Japan officials discussed the possibility of further interest rate increases during their January policy meeting, citing inflation risks and the economic strain of a weakening yen, according to a newly released summary of opinions.

Policymakers indicated that if economic conditions continued to align with projections, additional rate hikes would be necessary.

One BoJ member emphasized the need to raise rates to prevent excessive yen depreciation and to curb potential overheating in financial markets.

The discussion highlights growing concerns within the central bank over the impact of prolonged monetary easing, as inflationary pressures persist.

Reporting by Josh White for Sharecast.com.