Asian Markets Waver Amid Trade War and Wall Street Shift

• Asian markets showed mixed performance due to a break in Wall Street’s winning streak and the ongoing trade war.
• The trade war has led to a 145% increase in tariffs on U.S. imports of Chinese products, affecting logistics and shipping.
• Despite challenges, Chinese markets showed resilience with the Shanghai Composite index and the Hang Seng in Hong Kong increasing.
• The U.S. economy has shown signs of strain from tariffs, with the economy shrinking 0.3% in the first quarter.

Asian markets experienced a mixed performance on Tuesday, following a break in Wall Street’s nine-day winning streak. This shift in the market was accompanied by a partial recovery in oil prices from a four-year low, while U.S. stock futures experienced a slight dip. A significant factor contributing to this shift was a survey indicating a record low in future activity in China’s services sector, excluding the pandemic period. This is seen as a clear indication of the impact of the escalating trade war initiated by U.S. President Donald Trump on the world’s second-largest economy.

The trade war has led to a drastic increase in tariffs on U.S. imports of Chinese products, now standing at 145%. This has resulted in a sharp decline in shipping and other logistics. According to a report by Caixin, a financial media group, Overall optimism among Chinese firms weakened to the lowest level since this series began in April 2012, resulting in further job cuts in April.

Despite these challenges, Chinese markets showed signs of resilience after reopening from the Golden Week holidays. The Shanghai Composite index rose by 1% to 3,311.89, while the Hang Seng in Hong Kong increased by 0.7% to 22,651.65. However, not all Asian markets shared this upward trend. Taiwan’s Taiex experienced a slight dip, and in Australia, the S&P/ASX 200 lost 0.2% to 8,148.40.

Oil Market and Wall Street’s Performance

In the oil market, U.S. benchmark crude oil increased by 93 cents to $58.08 per barrel, while Brent crude, the international standard, surged $1 to $61.23 per barrel. This comes after the OPEC+ group of eight oil-producing nations announced that it would raise its output by 411,000 barrels per day as of June 1. This expected increase led to a dip in U.S. crude prices by as much as 4% on Monday.

The increase in oil production comes at a time when many producers are struggling to turn a profit with oil prices falling below $60. Prices have been on a downward trend this year due to concerns about an economic slowdown. On Wall Street, the S&P 500 fell 0.6% to 5,650.38, marking the end of its longest winning streak since 2004. The Dow Jones Industrial Average declined by 0.2%, and the Nasdaq composite shed 0.7%. Technology companies and other big stocks were among the heaviest weights on the market. Apple slumped 3.1%, while Amazon fell 1.9% and Tesla slipped 2.4%.

In other news, Berkshire Hathaway fell 5.1% after legendary investor Warren Buffett announced he would step down as its CEO by the end of the year after six decades at the helm. However, Buffett will continue to serve as its board chairman. The markets have been grappling with the shock of tariffs and the escalating trade war. A three-month delay in many of the severest tariffs that were supposed to take effect in April, excluding China, has provided some relief to Wall Street. However, uncertainty about the impact of current and future tariffs remains.

Trade War Impact and Economic Concerns

Concerns about inflation reigniting have also deepened. These issues are expected to overshadow the Federal Reserve ’s meeting on Wednesday, where it is anticipated to hold its benchmark interest rate steady. The Fed cut the rate three times in 2024 before taking a pause to monitor inflation, which has been hovering just above the Fed’s target rate of 2%.

The U.S. economy, while still resilient, has shown signs of strain from tariffs and the lack of clarity about how Trump’s policies will evolve. The U.S. economy shrank 0.3% in the first quarter, marking the first drop in three years. Ford Motor Co. announced on Monday that it expects to take a $1.5 billion hit to its operating profit from tariffs this year. Its shares fell 2.5% in after-hours trading.

The unpredictable nature of tariffs, which have been imposed, only to be pulled or delayed, sometimes on a daily basis, has left businesses, households, and economists at a loss in trying to forecast where the economy might be headed and planning accordingly. In the latest development in the trade war, Trump announced on his Truth Social platform on Sunday night that he has authorized a 100% tariff on movies that are produced outside of the U.S. The impact of this move is unclear, as it is common for films to include production at multiple locations around the world.

In response to this announcement, Netflix slumped 1.9% and Warner Bros. Discovery fell 2%. However, shoemakers posted gains following the announcement that Skechers is being acquired for $9 billion and taken private by the investment firm by 3G Capital. Skechers jumped 24.3%.

The mixed performance in the Asian markets and the break in Wall Street’s winning streak is reminiscent of similar events in the past. This historical event underscores the interconnectedness of global markets and the potential impact of geopolitical events on market performance. The current market scenario, marked by the ongoing trade war and its repercussions, continues to be a significant factor influencing global economic trends.