US-China trade deal wobbles sends shares crashing
ASIAN shares slipped on Thursday as hopes waned for real progress in Sino-U.S. trade talks, while the U.S. dollar consolidated recent bumper gains after the Federal Reserve reaffirmed the outlook for more rate hikes.
Souring the mood were reports the Trump administration is considering executive action to restrict some Chinese companies' ability to sell telecoms equipment in the United States.
Talks between US Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He are due to kick off later today.
However, a breakthrough was viewed as highly unlikely, especially as the U.S. embassy said their delegation would leave as early as Friday evening.
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5 percent, while South Korean stocks eased 0.4 per cent.
The Fed sees little reason to be concerned with inflation marginally above its 2.0 percent target
Chinese blue chips lost 0.1 percent to be not far from an eight-month low hit in April. Japan's Nikkei was closed for a holiday, while E-Mini futures for the S&P 500 barely budged.
Wall Street had wobbled on Wednesday as the threat of US restrictions on Chinese telecom companies fuelled investor concerns about worsening trade relations.
The Dow ended down 0.72 per cent. The S&P 500 also lost 0.72 per cent and the Nasdaq 0.42 per cent.
The Fed policy meeting ended with no change, as expected, while the central bank expressed confidence a recent rise in inflation to near target would be sustained, leaving it on track to raise borrowing costs in June.
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“The statement carried only modest changes in wording, but they were meaningful nonetheless, highlighting that the Fed is optimistic on the outlook and intent on continuing to raise rates at a gradual pace,” said Westpac analyst Elliot Clarke.
Yet the Fed also emphasised the inflation target was “symmetric”, suggesting it was not inclined to speed up its tightening plans.
“The Fed sees little reason to be concerned with inflation marginally above its 2.0 percent target, particularly after such a long period of underperformance,” Clarke said.
Westpac, like the market, expects two more hikes this year.