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Markets

Asian stocks end lower after volatile day

Markets pare losses after Trump says Chinese want to return to negotiations

This signboard shows Tokyo stocks down more than 512 points soon after the market opened on Aug. 26 as traders reacted to the big tumble on New York exchanges on Aug. 23. (Photo by Kei Higuchi)

TOKYO -- Stocks in Asia sank on Monday in response to escalating U.S.-China trade tensions, as investors scrambled to safety in the Japanese currency and government bonds.

The markets gyrated as U.S. President Donald Trump tweeted and spoke about his interactions with the Chinese leadership. He told reporters on Monday morning that Beijing is seeking to return to the negotiating table, renewing hopes for an easing of the trade tensions between the two countries. "They want to make a deal," he was quoted as saying by U.S. media. "That’s a great thing."

Earlier in the day, the Chinese yuan slid 0.6% to 7.15 per dollar in offshore trading -- the currency's weakestlevel since February 2008 -- before trimming losses later Monday. 

The Chinese central bank fixed the midpoint of the yuan's trading band at 7.0570 against the dollar on Monday, compared with 7.0572 on Friday, marking the first rise in three sessions and signaling a commitment to prevent further depreciation.

Shares in Shanghai closed down 1.2% and those in Hong Kong finished off 1.9%, as China's yuan slid 0.6% to 7.15 per dollar in early offshore trading -- the currency's weakest level since February 2008.

In Tokyo, the Nikkei Stock Average fell more than 537 points, or 2.6%, to 20,173 soon after the market opened, before slightly trimming the losses. The index managed to hold the 20,000 level and finished the day down 2.2% at 20,261.04.

ln South Korea, the benchmark Kospi ended down 1.6%, while Taiwan's Taiex index closed off 1.7%, as investors responded to a 623-point fall, or 2.4% decline, in New York's blue chip stocks on Friday.

The safe-haven yen was bid up, briefly hitting the 104 range against the dollar for the first time since Jan. 3. On the bond market, the yield on 10-year Japanese government bonds sank to minus 0.285%, off 0.045 of a point from late Friday and the lowest level since July 2016, reflecting growing risk aversion. Bond yields move in an opposite direction from bond prices.

Expectations that central banks around the world will become more accommodative to support the economy have further fueled bond buying.

The growing market pessimism was sparked by U.S. President Donald Trump's tweet on Friday afternoon that he will raise the tariff rate on both existing and planned levies on Chinese goods.

After the U.S. stock market closed, Trump said the existing 25% tariff on $250 billion worth of goods will be hiked to 30% on Oct. 1. Also, a planned 10% tariff on the remaining $300 billion in goods will instead be 15%, he added.

The announcement came hours after China's State Council said it will impose additional tariffs of 5% or 10% on $75 billion worth of American products.

In a rare positive development on the trade front, investors learned that the U.S. and Japan reached a broad agreement on Sunday. But Monday's market action suggests the bilateral accord did little to ease concerns about the global trade outlook.

The Group of Seven global powers voiced concern about the worsening trade friction at a weekend summit in Biarittz, France, but were unable to come up with any concrete steps to break the cycle of tit-for-tat tariffs by Washington and Beijing.

"Optimism that the trade war will ease over time is receding," said Daisuke Uno, an analyst at Sumitomo Mitsui Banking Corp.

"The financial market was caught off guard by the latest flare-up of trade tensions," said Akira Kato, executive director at Morgan Stanley MUFG Securities. "Market players thought that the trade talks had been making progress following positive remarks a week ago from White House economic adviser Larry Kudlow."

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