Asian stocks are vulnerable as trading tensions escalate

TOKYO (Reuters) – Asian equities came under pressure on Tuesday after Wall Street peer group weakened amid renewed concerns over the US-China trade war, with their largest October decline since the 2008 financial crisis.

FILE PHOTO – A pedestrian is standing on an electronic board displaying the stock indices of various countries outside a brokerage firm in Tokyo, Japan, February 26, 2016. REUTERS / Yuya Shino

MSCI's broadest index for Asia-Pacific equities outside Japan. The index fell 0.1 percent, due to US equities. The index fell more than 12 percent this month.

Japan's Nikkei average .N225 rose 0.9 percent and the Australian benchmark lost 0.2 percent in early morning trade.

The major US indices fell sharply in volatile trading following a Bloomberg report announcing that the US would announce tariffs on all remaining Chinese imports by early December, should President Donald Trump and Xi Jinping talk next month falter.

The CBOE Global Markets volatility index .VIX, known as the Wall Street "Deterrent", rose to 27.86 points, the highest since October 11, and the second highest since the volatility shock in early February.

"The likelihood of global equities becoming a bear market is increasing," said Masanari Takada, cross-asset strategist at Nomura Securities.

"While some investors looking at fundamentals are buying stocks on dips, there are other players who continue to sell automatically in response to increased volatility, and buyers will be overwhelmed when we have negative headlines over prices in times like these."

China's key stock indexes fell sharply on Monday as earnings reports from industrial and consumer companies raised concern over the slowdown in economic growth and the impact of past policy support.

The Shanghai Composite Index .SSEC lost 2.2 percent to 2,542, well below the 2,600 points, while the CSI300 index .CSI300 fell 3.0 percent.

The Chinese yuan closed down 0.16 percent Monday, down 6.6060 CNY = CFXS on Monday, reversing speculation that the central bank will tolerate a fall above the key level of $ 7 per dollar ,

Before opening the cash market, the CNH = D4 offshore Yuan barely changed at 6.9730 after falling to $ 6.9760 on Friday, the weakest since January 2017.

The Dollar Index .DXY rose higher, just below its 10-week high on Friday. The index rose after German Chancellor Angela Merkel had not requested a new election as head of her CDU party.

Merkel said she would not stand for election as party leader and announce the end of a 13-year era in which she dominated European politics.

Oil prices fell overnight as Russia signaled that production will remain high and concerns about the global economy fueled concerns about crude oil demand.

Crude oil futures CLc1 and West Texas Intermediate's LCOc1 crude oil futures were last traded at $ 66.81 and $ 76.77, respectively. [O/R]

Reporting by Tomo Uetake; Arrangement of Sam Holmes

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