Asian stocks rebounded from a five-week low on Tuesday, but they are still fragile; former US President Trump threatened to raise tariffs on Chinese exports to the US, shocking the financial market and igniting fears that trade negotiations might break.
MSCI's Asia Pacific (excluding Japan) index rose 0.5%, reversing the earlier decline. Trump’s tariff threats weighed the index down 2% on Monday.
China's stock market rebounded and it hit its biggest one-day drop in more than three years on Monday. Shanghai Composite Index. SSEC rose 0.6%, CSI 300 Index. CSI300 rose 1.0%. Hong Kong's Hang Seng Index. HSI rose 0.7%.
The Nikkei.N225 fell 0.8% and suffered a late blow as the Japanese financial market resumed trading after 10 consecutive days.
US E-mini S&P 500 index futures fell 0.8% in Asian time on Tuesday, as US senior trade officials said on Monday that China’s important commitments in trade negotiations have retreated.
Trump issued a tweet on Sunday saying that this week will increase the tariff of 200 billion US dollars on Chinese exports to the United States from 10% to 25%, and "very soon" will impose tariffs on the remaining Chinese exports to the United States.
Yasuo Sakuma, chief investment officer at Libra Investments in Tokyo, said he believes the stock market has started a new downtrend as investors increasingly doubt whether China and the US can quickly reach a trade agreement.
“Investors have been too complacent since the beginning of the year. It’s time to sell in May and then leave,” he said.
However, some investors still hope that the tariff threat is only a negotiation strategy.
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