Asian shares tumbled to a one-month low on Thursday after the United States said it would impose tariffs on $7.5bn of European goods. Its threat of levying more duties has raised fears of an escalation in the global trade war.
Japan, South Korea and Australia’s major indexes fell by more than two percent in early trade with MSCI’s broadest index of Asia Pacific shares outside Japan declining up to 0.8 percent.
Hong Kong’s Hang Seng index was also down more than 0.5 percent as the city’s months-long protests hit economic performance. Data released on Wednesday showed retail sales for August plummeted by 23 percent and visits from mainland Chinese tourists were down by 42 percent.
Mainland China’s stock exchanges are closed for a week-long holiday.
The markets are showing the effects of an overnight decline on Wall Street and deeper economic concerns across Asia, Jeffrey Halley, a senior market analyst for Asia Pacific at OANDA in Singapore, told Al Jazeera.
Yields on two-year US Treasury notes approached their lowest levels in two years and the dollar fell against major currencies as weakening economic data exposed the damage that the trade war with China has already caused the US economy.
Oil futures were also badly hit after data showed US inventories increased more than expected, and signs that demand for energy could slow amid as global grownth slows.
And it could get worse.
Key market indicators, such as the Institute for Supply Management (ISM) data on the US non-manufacturing sector out on Thursday could be catalysts for a further stocks sell off if the numbers disappoint, Halley said.
“We could see a massive run for the exit,” he said.
The US and China have already hiked tariffs on each other’s goods in a year-long tit-for-tat trade row that has raised the risk of recession and caused major central banks to ease monetary policy.
The chance that Europe would respond in kind to US tariffs is likely to further raise concerns that global growth is set for a prolonged period of stagnation.
The US on Wednesday said it would impose a 10-percent tariff on European-made Airbus planes and 25-percent duties on French wine, Scotch and Irish whiskies, and cheese from across the continent as punishment for illegal European Union aircraft subsidies.
US stock futures were up 0.21 percent, but this did little to bolster sentiment after shares on Wall Street suffered their sharpest one-day decline in nearly six weeks on Wednesday.
The tariffs announced on Wednesday were approved by the World Trade Organization but could still cause friction across the Atlantic.
European Union manufacturers are already facing US tariffs on steel and aluminium and a threat from US President Donald Trump to penalise EU cars and car parts.