Asian stocks continued to decline almost across the board Tuesday, after heightened trade tensions hit U.S. equity markets again overnight. U.S. equity futures were flat during Asian trading and looked set to take a breather after a 300-point tumble for the Dow industrials DJIA, -1.38% to start the week. China’s Shanghai Composite SHCOMP, +1.37% overcame earlier deeper losses to close down 0.5% and Hong Kong’s Hang Seng index HSI, +0.77% fell 0.3%. The tumble comes in response to news that the White House favors further restrictions on Chinese investment in U.S. technology firms. Chinese President Xi Jinping has suggested his country would “punch back” against further trade restrictions. Tuesday’s drop also leaves the Shanghai Composite index in a bear market intraday by most measures, having declined more than 20% from its January highs. It joins Vietnam and the Philippines, where benchmark equity indexes have already fallen by more than one-fifth from peak levels earlier this year. Responses to recent trade rhetoric are divided into two camps. The first includes analysts and investors see the current tit-for-tat retaliation as something which will continue to escalate and impact markets. “Partly due to Xi’s aggressive rhetoric, Trump probably won’t be able to back down, or else he will look weak. Note his tactics are almost always to raise the ante, not to back off,” said Michael Every, Senior Asia-Pacific strategist at Rabobank. Of course, other investors see trade tensions as a chance to buy stocks while they’re more cheaply valued. “This is the beginning of an opportunity to buy equities at a discount,” said Chris Zaccarelli, chief investment officer at the Independent Investor Alliance. “There should be areas like technology, especially semiconductors, on sale as well as the banks which are going to be driven lower as the U.S. and China continue down this path before eventually pulling back.” Major Asian indexes were down including Taiwan’s Taiex XX:Y9999 at 0.4%, Korea’s Kospi 180721, +1.71% by 0.3%, also off much deeper early losses. Japan’s Nikkei NIK, +3.12% ended virtually flat, scratching its way back from an early loss, even as the yen mostly firmed. Brent crude prices UK:LCOQ8 tipped higher, at $74.80 per barrel. In foreign exchange markets, the ICE U.S. Dollar Index DXY, -0.02% was up 0.2%, and the greenback fell 0.1% to ¥109.66 against the yen.
Rising trade tensions have caused Chinese stocks to continue falling. Chinese markets were mostly in the red on 26 June, with a 1.8% drop in the Shanghai Composite and a 1.5% fall for Hong Kong's Hang Seng index. This came after a deepening US stock sell-off, following the announcement that the Trump administration was seeking more restrictions on Asian investment in US tech companies.