Asia Markets

China markets extend losses, Shenzhen stocks dive beyond 5% as U.S.-China tensions flare

Key Points
  • Chinese stocks led losses in Asia Pacific markets.
  • Over in the U.S., a sell-off in tech stocks and worse-than-expected jobless claims hit sentiment.
  • Markets in Japan are closed for a holiday on Friday.

Mainland Chinese stocks mostly deepened losses by the close, with other Asia Pacific markets also moving lower as U.S.-China tensions worsened on Friday.

In mainland China, the Shanghai composite pared some losses, but still ended the day 3.86% lower at 3,196.77, while the Shenzhen composite tumbled 5% to close at 2,138.36. The Shenzhen component dived 5.31% to close at 12,935.70.

The Chinese yuan, a barometer of Sino-U.S. tensions, looks set for its worst week in two months, according to Reuters. The offshore yuan was last at 7.0224 per dollar, and the onshore yuan was at 7.0166.

Over in Hong Kong, the Hang Seng index declined 2.51% in the afternoon. Tech stocks fell across the board, with Tencent tumbling 5.57% and Alibaba down 3.16%. Gaming stocks also saw steep losses.

Tensions between U.S. and China took center stage this week. China announced on Friday that it ordered the United States to shut its consulate in Chengdu, following the U.S. demanding the closure of the Chinese consulate in Houston.

Preceding that, Secretary of State Mike Pompeo also slammed China in a speech on Thursday. He said Washington will no longer tolerate Beijing's attempts to usurp global order.

"For now, US-China conflict risks are poised to reinforce pre-existing negative bias in the Asia session, derived from 1.2%-1.3% drop in Wall St that had predated Pompeo's remarks," Mizuho Bank's Vishnu Varathan, head of economics and strategy, wrote in a note.

He said regarding China's response to the escalating tensions, that it's likely to try to keep currency and stock markets stable.

"We expect the PBoC (People's Bank of China) to double down on CNY (Chinese yuan) stability," Varathan wrote. "What's more, this will be complemented by policies that support 'reasonable' buoyancy in equity markets, which help boost wider wealth creation, increase access to capital for industry champions (to better position against US), and crucially underpin capital stability."

Other Asia markets

Other Asia Pacific markets also chalked up losses on Friday afternoon.

Australia's S&P/ASX 200 tumbled 1.16% to close at 6,024.00, with losses seen in the heavily weighted financials sector and oil stocks. 

Over in South Korea, the Kospi slipped 0.71% to 2,200.44.

Markets in Japan are closed for a holiday on Friday.

Overall, MSCI's broadest index of Asia-Pacific shares outside Japan lost 1.89%.

Over in the U.S., a sell-off in tech stocks and worse-than-expected jobless claims also hit sentiment.

Apple fell 4.5% and Microsoft tumbled 4.3%, pushing the broader market lower. The Dow Jones Industrial Average dropped 353.51 points, or 1.3%, to 26,652.33. The S&P 500 slid 1.2%, or 40.36 points, to 3,235.66, snapping a four-day winning streak. The Nasdaq Composite fell 2.2%, or 244.71 points, to 10,461.42.

Apple shares slid after reports surfaced that a number of states investigating the tech giant's potential violations of a consumer protection law. Apple is facing antitrust scrutiny in the U.S. and abroad and its CEO will face Congress on Monday alongside Big Tech peers.

U.S. weekly jobless claims came in at 1.416 million for last week, marking the 18th straight week in which initial claims totaled more than 1 million. That was worse than the 1.3 million expected by economists in a Dow Jones poll. 

Currencies and oil

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 94.611, continuing its steady decline this week. It slipped below the 95 level on Thursday.

The Japanese yen traded at 106.25 per dollar, strengthening after wavering between 106 and 107 for most of this week. The Australian dollar slipped below the 0.71 level, last changing hands around 0.7077.

Oil prices dropped in the afternoon after rising earlier during Asian trading hours. International benchmark Brent crude futures dipped 0.58% to $43.05 per barrel. U.S. crude futures declined 0.72% to $40.78 per barrel.