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Asian stock markets fall on China-US trade jitters; Japan yields rise

Asian stocks markets extended its decline as trade worries came back to the fore, while Japan’s 10-year bond yield continued to rise on Thursday to the highest in almost 18 months following the central bank’s decision earlier this week to allow for wider movements. Treasury yields held just under 3%.

China and Hong Kong equity indexes led losses across the region, while emerging-market currencies fell with developing nation stocks. The 10-year JGB yield touched 0.145%, its highest since February 2017. Ten-year Treasury yields edged down after reaching 3% this week for the first time since June as the Federal Reserve unanimously decided to leave rates unchanged while making it clear borrowing costs are headed higher. The offshore yuan stabilized.

Higher US tariffs on Chinese goods look increasingly likely. President Trump asked the US Trade Representative to consider increasing proposed levies on $200bn in imports to 25% from 10%, which could be implemented as soon as next month. The move comes just as Washington and Beijing are exploring ways to get back to the negotiating table.

With the Bank of Japan and Fed now out of the way, focus turns to the Bank of England. Later Thursday, the central bank is expected to raise its key rate by 25bps to 0.75%, with Bloomberg Economics projecting an 8-1 vote.

Elsewhere, oil steadied around a two-week low after a surprise gain in US crude inventories exacerbated supply concerns. Turkey’s lira hit a record low as the US imposed sanctions on its NATO ally over the imprisonment of an American pastor.

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