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Asian markets are getting smoked as geopolitical risks flare again

David Scutt
  • Risk sentiment in Asia has taken a turn for the worse following the arrest of a senior Chinese executive in Canada.
  • Stocks, currencies and crude prices are under pressure while safe havens are in demand.
  • US stock futures are down more than 1% having been halted earlier in the session due to disorderly price movements.

At the start of the week markets were rejoicing about the prospect of a lasting trade truce between the United States and China.

Fast-forward four days and that rejoice has turned to despair.

A lack of specifics on what exactly the trade deal contained kicked things off, then Trump reminded the world via Twitter that he is a "Tariff Man", and now a senior Chinese executive has been arrested in Canada for allegedly circumventing US sanctions on Iran.

Huawei’s Chief Financial Officer, Sabrina Meng Wanzhou, was detained by Canadian authorities at the request of the US government for allegedly attempting to evade newly-implemented US sanctions that kicked in at the start of November.

Understandably, at a time when markets are ultra-sensitive to any trade-related news, risk assets have taken a beating on the news, those deemed to be most susceptible to an escalation in the trade conflict.

"So much for a pause in the action, as 'Sell All' battle cries are ringing out across trading floors again," said Stephen Innes, Head of Trading Asia-Pacific at OANDA.

"As if the market needs more headline risk, this news is quite significant as the US government is attempting to persuade allies to stop using Huawei equipment due to security fears, is triggering a sell-off in tech stocks."

As the scoreboard below reveals, Asian stocks have taken a beating on the news with broad-based and large losses seen across the region.

Australia ASX 200 5639.60 , -0.51%
NZ NZX 50 8758.22 , -0.27%
Japan TOPIX 1603.65 , -2.25%
Shanghai Comp 2615.82 , -1.28%
Shenzhen Comp 1362.55 , -1.32%
HK Hang Seng 26117.28 , -2.62%
Sth Korea KOSPI 2069.59 , -1.51%
Sinagpore STI 3120.11 , -1.13%
Taiwan TAIEX 9705.12 , -2.13%
Philippines PSI 7565.68 , -0.85%
Indonesia JKSE 6103.79 , -0.48%
Malaysia KLCI Index 1678.40 , -0.58%
Thailand SET 1652.43 , -1.19%
India Nifty 50 10659.55 , -1.14%
S&P 500 Futures 2665.5 , -1.34%

US S&P 500 futures are also sharply lower, currently sitting down 1.34% having been down close to 2% earlier in the session.

The CME was actually forced to halt trading at one point due to disorderly price movements sparked by the Huawei headlines.

"CME experienced multiple Velocity Logic events from the open in Equity futures today," said a note from an institutional clearing desk in Sydney seen by Business Insider.

"It caused several 10 second pauses where limit orders were accepted but market/IOC orders were rejected causing multiple algo slices to get rejected. The pauses allow participants to enter the market preventing even harder moves."

There's nothing like an unscheduled trading halt to get markets jumpy, even at the best of times.

Like stocks, currency markets have not reacted well to the Huawei headlines with the US dollar gaining ground against all bar the safe-haven Japanese yen.

The losses have been particularly acute in the Australian dollar, widely regarded as being a risk proxy for trade war risks.

AUD/USD 0.7224 , -0.61%
NZD/USD 0.6868 , -0.41%
USD/JPY 112.65 , -0.48%
USD/CNY 6.8766 , 0.32%
USD/CNH 6.8861 , 0.41%
USD/HKD 7.8123 , -0.01%
USD/KRW 1119 , 0.55%
USD/SGD 1.3703 , 0.26%
USD/TWD 30.85 , 0.19%
USD/PHP 52.80 , 0.25%
USD/MYR 4.164 , 0.28%
USD/IDR 14555 , 1.15%
USD/THB 32.82 , 0.27%
USD/INR 71.05 , 0.70%
US Dollar Index 97.02 , -0.06%

Ahead of OPEC's meeting later in the session, and despite the prospect of a production cut being announced, Brent crude is also trading higher while safe-haven gold has also caught a bid.

Brent Crude $61.11 , -0.73%
Gold $1,240.05 , 0.21%
Silver $14.48 , -0.19%

Sovereign bond yields in the US, Japan and Australia are also trading sharply lower, indicative of a rush to safety.

United States 2.879% , -0.044%
Japan 0.043% , -0.031%
Australia 2.459% , -0.041%