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Asia markets on course to end upbeat week with losses

Asia markets on course to end upbeat week with losses

HONG KONG, Aug 10: Most Asian markets dipped on Friday after a broadly positive week as traders await the latest developments in the China-US trade row, while the dollar retained its strength ahead of a key inflation report. After last week's turmoil, the past five days have seen investors a little more positive as they took in stride tit-for-tat threats of tariffs from the world's top two economies, though the fears of an all-out trade war are keeping everyone on their toes. Hong Kong stocks ended Friday with a loss, unable to build on its four-day winning streak, as investors took profits while keeping an eye on developments in the China-US trade row. The Hang Seng Index slipped 0.84 percent, or 240.68 points, to 28,366.62. The benchmark Shanghai Composite Index was barely moved, inching up 0.93 points to 2,795.31. The Shenzhen Composite Index, which tracks stocks on China's second exchange, rose 0.69 percent, or 10.32 points, to 1,515.96. Wellington and Jakarta were also higher. Tokyo stocks closed lower on Friday as investors held off on buying before holidays and awaited the outcome of US-Japan trade talks. The Nikkei 225 index fell 1.33 percent or 300.31 points to 22,298.08. Over the week, the benchmark lost 1.01 percent. The broader Topix index lost 1.15 percent or 20.00 points to 1,720.16, after falling 1.29 percent over the week. "On top of the US-China trade row, Japan-US trade negotiations are under way in Washington, making investors cautious," said Mutsumi Kagawa, chief global strategist at Rakuten Securities. After the first round of talks with US Trade Representative Robert Lighthizer on Thursday, Japan's economy minister Toshimitsu Motegi told reporters: "I think we had good discussions and I'm not pessimistic in any way." Motegi said he would announce the outcome after a second day of talks on Friday. Japan is hoping to win concessions on threatened US auto tariffs, which could pose a threat to the industry if implemented. "By taking auto tariffs hostage, Washington wants a bilateral free-trade agreement while Tokyo wants a multilateral framework," Kagawa at Rakuten noted. The dollar slipped to 110.94 yen from 111.09 yen in New York Thursday afternoon. The annual holiday season slowed trading and exacerbated the fall, said Seiichi Suzuki, senior market analyst at Tokai Tokyo Research Centre. "You can't buy before you go on holidays… Today's drop stemmed from calendar reasons rather than breaking news," he said. Many market players will be away next week as Japan marks its annual Buddhist holidays. Japan's solid growth data failed to boost the market. "It is good that the economy rebounded from its negative growth in the January-March term but it's about a past quarter," Kagawa at Rakuten said. "Looking forward, the effect from trade frictions could cast a shadow." Official figures showed the world's third-largest economy grew 0.5 percent quarter-on-quarter in the April-June period, bouncing back to growth following its first contraction in two years. In individual stocks trade, Toyota ended down 0.55 percent at 6,951 yen while Suzuki rallied 1.67 percent to 7,060 yen after sharp drops the previous day over its admission of improper inspections on some vehicles. Kyocera fell 2.63 percent to 6,653 yen as companies actively operating in Europe fell due to the yen's rise against the euro. Sydney was down 0.1 percent, Singapore shed 1.3 percent and Seoul dropped 0.6 percent. The tepid performance followed a broadly negative lead from Wall Street. With few major catalysts in the trade stand-off, focus is now on the release later in the day of US consumer price index data for July, which will give an idea about price pressures across the country and help guide the Federal Reserve in its interest rate plans. The central bank is tipped to lift borrowing costs twice more this year, having already hiked two times so far as Donald Trump's massive tax cuts kick in and the economy continues to hum along. Expectations for further hikes have sent the dollar rallying and the unit maintained its strength Friday after a top Fed official usually considered dovish indicated he would back more increases. Chicago Fed President Charles Evans backed "somewhat restrictive" rate levels to offset the fiscal stimulus, citing the possibility of inflation hitting 2.2 percent. Evans had previously voted against hikes on concerns that inflation would not hit the Fed's two percent target. "When doves are hawkish we have to take a little notice," said Greg McKenna, chief market strategist at AxiTrader. While the dollar was struggling against the safe haven yen owing to the trade uncertainty, it was up or holding gains against most other units. The South Korean won and Australian dollar were 0.6 percent down while Indonesia's rupiah and the Mexican peso were also well off. The Russian ruble tumbled again and is now five percent down since the US on Wednesday hit Russia with new sanctions over its alleged involvement in a nerve agent attack in Britain. Europe's stock markets sank in opening deals on Friday, as investors fretted over the region's exposure to Turkey's currency crisis and eyed the ongoing China-US trade row. In initial deals, London's benchmark FTSE 100 index of top blue-chip companies declined 0.4 percent to 7,708.46 points compared with the closing level on Thursday. In the eurozone, Frankfurt's DAX 30 dropped 0.8 percent to 12,574.20 points and the Paris CAC 40 also lost 0.8 percent to 5,455.96. "For some time now investors have been looking at the unfolding currency crisis in Turkey as a local difficulty," noted CMC Markets UK analyst Michael Hewson. "However, the accelerating speed of the declines appears to be raising concerns about European banks' exposure to the Turkish banking system." Turkey's embattled lira on Friday hit new record lows against the US dollar, losing some five percent in value as strains with the United States showed no sign of easing. The troubled currency collapsed 12 percent at one point on concerns about tensions with the United States linked to Ankara's detention of an American pastor as well as economic uncertainty. The losses Friday extended the previous day's sell-off as high-level talks seeking to slacken tensions with the US produced no apparent breakthrough. The stand-off has led both sides to slap sanctions on senior officials with concerns of graver measures to come. At the same time, the Turkish economy under President Recep Tayyip Erdogan is showing signs of overheating, with the country running a large current account deficit that makes it heavily dependent on foreign capital inflows. "The backdrop to endemic lira weakness is of course the familiar one of an economy suffering rising inflation and a burgeoning balance of payments crisis alongside a central bank that has in effect been stripped of much of its independence since Erdogan was re-elected… in June," Ray Attrill, head of forex strategy at National Australia Bank, said in a note. Concerns were intensified Friday by a report in the Financial Times that the supervisory wing of the European Central Bank (ECB) had over the last week begun to look more closely at euro zone lenders' exposure to Turkey. The report said the situation is not yet seen as "critical" but Spain's BBVA, Italy's UniCredit and France's BNP Paribas are regarded as particularly exposed.

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