(Sharecast News) - Asia-Pacific equities declined on Monday as renewed trade tensions between China and the United States rattled investor sentiment, while Japanese markets were closed for a public holiday.
The sell-off followed a fresh escalation in rhetoric between Washington and Beijing after US president Donald Trump threatened to impose 100% tariffs on Chinese imports in response to China's new export controls on rare earth minerals.
"President Trump's stern warning of a 'massive increase' in tariffs on Chinese goods added fuel to an already volatile week, which had been overshadowed by growing fears of a potential bubble in artificial intelligence stocks," said TickMill market strategy partner Patrick Munnelly.
A spokesperson for China's Ministry of Commerce accused the US of a "textbook double standard," prompting Trump to later downplay his remarks, telling investors "don't worry about China, it will all be fine."
According to Munnelly, "US equity index futures rose after Trump indicated an openness to a deal with China, boosting morale after markets were unnerved by a rapid escalation in trade tensions.
"S&P 500 futures climbed by 1.4%, while the Nasdaq 100 saw an even bigger boost, jumping 1.85%."
He added that the rebound came "after the US government softened its tone following President Trump's threat of imposing 100% tariffs on China in retaliation for restrictions on Chinese exports," though Asian markets "painted a less optimistic picture" when they reopened on Monday.
Markets start the week red across the Asia-Pacific region
In China, the Shanghai Composite slipped 0.19% to close at 3,889.50, while the Shenzhen Component fell 0.93% to 13,231.47.
Losses were led by Wingtech Technology, down 10%, Beijing Capital Development, off 9.97%, and Hebei Yangyuan ZhiHui Beverage, which dropped 9.21%.
Hong Kong's Hang Seng Index slid 1.52% to 25,889.48, weighed by heavy declines in WuXi AppTec, Xiaomi and Sands China, which fell 5.87%, 5.71% and 5.51%, respectively.
Munnelly observed that "with markets in the region closed during Trump's Friday remarks, investors reacted negatively when they reopened.
"Mainland Chinese stocks dropped by 1.8%, and Hong Kong suffered its sharpest intraday decline since early April."
South Korea's Kospi 100 shed 1.05% to 3,798.00, with industrial and defence names among the weakest performers.
Korea Aerospace tumbled 5.23%, Hanwha Techwin lost 4.7%, and Hyundai-Rotem declined 4.55%.
In Australia, the S&P/ASX 200 retreated 0.84% to 8,882.80, led lower by Treasury Wine Estates, which plunged 15.04%.
Pinnacle Investment Management Group and Hub24 also slipped 5.81% and 5.64%, respectively.
New Zealand's S&P/NZX 50 fell 0.86% to 13,351.92, dragged by property and consumer stocks.
Synlait Milk dropped 5.06%, Goodman Property slid 3.49% and Argosy Property eased 3.03%.
In currency markets, the dollar was last 0.65% stronger on the yen to trade at JPY 152.18, while it weakened 0.74% against the Aussie to AUD 1.5332 and retreated 0.17% from the Kiwi to NZD 1.7443.
On the commodities front, oil prices extended gains, with Brent crude futures last up 1.86% on ICE at $63.86 per barrel, and the NYMEX quote for West Texas Intermediate rising 2% to $60.08.
Munnelly said that "oil prices rose by 1.4% while silver flirted with record highs as a dramatic short squeeze in London and ongoing trade tensions shook the market.
"Gold also reached an all-time peak, while cryptocurrencies steadied, and European stock futures hinted at a positive opening."
China imports and exports rise sharply despite US trade tensions
In economic news, China's exports and imports rose sharply in September, underscoring resilient external demand despite renewed tensions with the United States.
Official customs data released on Monday showed exports climbing 8.3% in dollar terms from a year earlier, the fastest pace in six months and above economists' forecasts for a 7.1% rise.
Imports jumped 7.4% year on year, far exceeding expectations for a 1.5% gain and marking their strongest growth since April 2024.
Munnelly highlighted that "in a surprising twist, Chinese exports surged at their fastest pace in six months, outperforming expectations.
"This resilience could give Beijing an upper hand in its latest trade standoff with Washington."
The surge was driven by robust trade with Asia, Europe and Africa, even as shipments to the US continued to tumble.
Exports to the Association of Southeast Asian Nations (ASEAN) increased 15.6%, while those to the European Union and Africa rose 10.4% and 56.4%, respectively.
By contrast, exports to the US dropped 27% in September, with imports from the US down 16%, extending a string of double-digit declines since April.
China's trade surplus with the US narrowed to $208.6bn in the first nine months of the year, compared with $258.8bn a year earlier, reflecting the sustained weakness in bilateral trade.
Reporting by Josh White for Sharecast.com.
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