Most Asian Stocks Decline on Monday Amid Trade War Fears and U.S. Inflation Data Anticipation

Most Asian stock markets fell on Monday, with Chinese markets experiencing significant losses due to the potential for a trade war with the European Union. Additionally, anticipation of key U.S. inflation data kept investor sentiment cautious.

Regional markets received mixed signals from Wall Street, where a combination of profit-taking and concerns over interest rates caused U.S. stock indexes to slip from record highs on Friday. U.S. stock index futures remained subdued during Asian trading.

Stronger-than-expected purchasing managers index data from the U.S. heightened concerns that the resilience of the U.S. economy might keep interest rates elevated for an extended period.

Chinese Stocks Decline on EU Trade War Concerns

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes fell by 0.4% and 0.8%, respectively. These losses in mainland stocks also pulled down Hong Kong’s Hang Seng index by 1%.

Chinese markets have been struggling since the European Union imposed substantial tariffs on imports of Chinese electric vehicles earlier in June. This move provoked a strong reaction from Beijing and increased the likelihood of a trade war.

Chinese officials have warned of the potential for a trade war with the EU, as negotiations between ministers from China and Germany continue. Beijing is reportedly considering retaliatory tariffs on European automobile imports.

Chinese stocks have been facing steep declines over the past two weeks, with sentiment towards China and broader Asia remaining negative. The losses in Hong Kong were also exacerbated by declines in major technology stocks.

Weak industrial production data from China further dampened investor sentiment last week.

Other markets with significant exposure to China also retreated. Australia’s ASX 200 fell by 0.6%, and South Korea’s KOSPI dropped by 0.9%.

Japanese Stocks Rise Amid Yen Weakness and Potential Intervention

Japanese stocks were mild outliers on Monday, with the Nikkei 225 and TOPIX indexes both rising by 0.3%.

Local stocks were somewhat bolstered by the weakness of the yen, which is near its weakest level against the dollar in over 30 years. However, this yen weakness kept investors alert to the possibility of currency market intervention by Tokyo, especially after key Japanese finance ministers hinted at such a scenario.

Broader Asian Market Movements

Broader Asian markets moved in a flat-to-low range, with a focus on key U.S. inflation data expected this week for further indications on interest rates. The PCE price index data, which is the Federal Reserve’s preferred inflation gauge, is scheduled for release this Friday.

Futures for India’s Nifty 50 index indicated a weak open, following significant profit-taking after the index reached record highs earlier in June.