Tariffs, oil and currencies between the United States and China

SINGAPORE – Chinese stocks fell sharply on Tuesday afternoon as investors weighed a possible thaw in US-China trade relations after US President Joe Biden floated the idea of ​​tariff cuts in Chinese products.

Hong Kong’s Hang Seng Index trimmed earlier losses to close down 1.75% at 20,112.1, while the Hang Seng Tech Index fell more than 3%. Alibaba was down 2%, while Tencent was down 2.48%.

Shares of electric vehicle maker Xpeng plunged more than 9% after it reported on Monday that its first-quarter net loss widened to 1.7 billion yuan ($254.7 million) from 786.6 million. yuan from the previous year.

The Shanghai Composite fell 2.41% to close at 3,070.93, while the Shenzhen Component declined 3.34% to 11,065.92.

In Japan, the Nikkei 225 fell 0.94% to close at 26,748.14, while the Topix closed 0.86% to 1,878.26.

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Japan’s manufacturing activity in May rose at the slowest pace in three months as supply bottlenecks caused output to slow, according to Reuters.

In corporate news, Toyota Motor said on Tuesday it will cut global production by around 100,000 to 850,000 in June due to shortages of semiconductors. Shares of the Japanese automaker fell 0.56%.

South Korea’s Kospi dipped 1.57% to finish at 2,605.87. In Australia, the S&P/ASX 200 fell 0.28% to 7,128.80.

MSCI’s broader index of Asia-Pacific stocks outside of Japan fell 1.3%.

Markets seemed to take the news as an indication of a possible thawing of trade tensions between the United States and China, although it is not the first time that tariff reductions have been proposed.

taylor nugent

economist, National Bank of Australia

US markets offered some relief to investors as stocks rose after a week of heavy losses. During the regular trading session on Monday, the Dow was up 618 points, or almost 2%, the S&P 500 was up 1.9%, and the Nasdaq Composite was up 1.6%.

Sentiment appeared to have gained momentum after US President Joe Biden said he was considering lowering US tariffs on Chinese goods, at a news conference during his trip to Japan as part of his first tour of China. Asia.

As consumer prices rose, the White House said last month that it was looking at how those fees have contributed to inflation.

Those tariffs took effect in 2018 when the Trump administration slapped tariffs on billions of dollars worth of Chinese goods and Beijing retaliated with similar punitive measures, leading both sides into a protracted trade war.

“Markets appeared to take the news as a sign of a possible thaw in US-China trade tensions, although this is not the first time tariff reductions have been proposed,” wrote Taylor Nugent, an economist at National Australia Bank.While a tariff cut would help smooth US inflation at the margin, reports suggest administration officials are concerned about appearing soft on China ahead of November’s midterm elections.”

foreign exchange and oil

The US dollar index, which tracks the dollar against a basket of its peers, was at 101.827, falling from levels of around 102 previously.

The Japanese yen traded at 127.43 per dollar, strengthening from previous levels around 127.9. The Australian dollar was at $0.7095, up from around $0.706 earlier.

Oil prices were lower in afternoon Asian trading hours, with international benchmark Brent crude futures falling around 1% to $112.30 a barrel. US crude futures fell nearly 1% to $109.23 a barrel.

— CNBC’s Ted Kemp contributed to this report.

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