TOKYO, April 10 — Asian shares slipped from eight-month highs today as the International Monetary Fund lowered its global growth outlook and as tensions over tariffs between the United States and Europe escalated.
MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.3 per cent, a day after it hit its highest since August 1.
The Shanghai Composite Index fell 0.55 per cent and Japan's Nikkei lost 0.7 per cent. On Wall Street, the S&P 500 gave up 0.61 per cent and the Nasdaq Composite declined 0.56 per cent yesterday.
MSCI's broadest gauge of the world's stock markets was down slightly from yesterday's six-month peak but it was still up roughly 19 per cent from a near two-year trough marked in December.
Although earnings forecasts have been pegged back recently, share markets have been propped up by hopes of a trade deal between Washington and Beijing and optimism that the Chinese economy may be bottoming out as policy support kicks in.
“The gap between the strength in global shares and sluggishness in the real economy has been widening,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
That view was reinforced yesterday when the IMF cut its forecast for world economic growth this year, saying the global economy is slowing more than expected and that a sharp downturn could require world leaders to coordinate stimulus measures.
US data overnight added to the cautious mood, with job openings dropping to an 11-month low in February and raising doubts about the strength of US labour market, which has so far been one of the few bright spots in the economy.
Global trade anxiety was another sore point for risk asset markets.
US President Donald Trump threatened to impose tariffs on US$11 billion (RM45 billion) worth of European Union products, heightening tensions over a long-running transatlantic aircraft subsidy dispute.
The move came as markets remain on edge as negotiators try to hammer out trade deals with China and neighbours Mexico and Canada.
“This time it's the United States and the European Union trading words and announcing retaliatory tariffs over subsidies to aircraft makers,” wrote economists at ANZ.
“Watch this space. It's small-fry versus the US-China spat, but unhelpful for sentiment.”
Global debt yields held mostly steady, with the 10-year US Treasury yield at 2.48 per cent, off its 15-month low of 2.340 per cent touched late last month.
In a possible sign of investors' strong appetite for bonds, Saudi Aramco is set to raise US$12 billion with its first international bond issue after receiving more than US$100 billion in orders.
It was a record breaking vote of market confidence for the oil giant despite concerns sparked after the murder of Saudi journalist Jamal Khashoggi in October.
Major currencies were little moved with an immediate focus on the European leaders' summit and the European Central Bank's policy meeting.
EU leaders are likely to grant British Prime Minister Theresa May a second delay to Brexit but they could demand she accepts a much longer extension as France pushed for conditions to limit Britain's ability to undermine the bloc.
The euro held firm at US$1.1258, extending its slow recovery from a four-week low of US$1.1183 touched on April 2.
The British pound was little changed at US$1.3052.
The dollar was flat at 111.14 yen, having fallen 0.5 per cent so far this week.
Oil prices held firm after hitting five-month highs the previous day as fighting in Libya raised supply disruption concerns.
US crude futures stood at US$64.12 per barrel, up 0.2 per cent after rallying to a five-month high of US$64.79 yesterday.
Brent crude futures were at US$70.69 per barrel and in reach of yesterday's five-month peak of US$71.34. — Reuters
