Asian shares wobble as US-China trade war escalates

Global stocks see-sawed in volatile trade on Friday while the US dollar sank after a brutal week marked by an all-out trade war and a dramatic loss of confidence in US assets as anchors of market stability.

The US dollar slid to its lowest in 10 years against the Swiss franc and a six-month low against the yen as investors sought other safe haven assets. The euro surged 1.7 per cent to $US1.13855, a level last seen in February 2022 and gold, seen as a safe asset during times of crisis, hit another record high.

Investors are grappling with worries over the escalating Sino-US trade war after US President Donald Trump ratcheted up tariffs on Chinese imports, raising them effectively to 145 per cent.

On Friday, China hit back, hiking its tariffs on US goods to 125 per cent, from 84 per cent, helping unleash another wave of money into other markets, such as Europe, where the euro roared to more multi-year highs against the dollar and the Chinese yuan.

An overnight selloff in US Treasuries abated but left the 10-year note yield at 4.4 per cent, still up about 45 basis points in the week, its biggest increase since 2001, LSEG data showed. Bond yields go up when prices go down.

"US and China tariffs are now so high on one another, it's easy to argue trade in most goods will come to a complete stall apart from essential items and those with high margins. US-China commercial flows will be in freefall casting doubt on the long-term and short-term role of the dollar," Mizuho head of fixed income, currencies and commodities strategy Jordan Rochester said.

In Asia, Japan's Nikkei tumbled 4.3 per cent, while stocks in South Korea fell nearly one per cent.

Hong Kong and China stocks reversed earlier declines on Friday and narrowed the week's losses, as a chip share rally and potential state buying shielded against more losses.

The Hang Seng Index jumped 1.1 per cent at the close, reversing an earlier fall of as much as 1.2 per cent in morning trades. The tech subindex climbed 1.8 per cent.

European stocks pared earlier losses to trade up around 0.1 per cent on the day, having fallen by as much as one per cent previously. The STOXX 600 is still down around 1.7 per cent this week, one of its most volatile weeks on record.

James Athey, fixed income manager at Marlborough, said the outlook remains clouded in more uncertainty than it did a month ago: "There are still so many unanswered and unanswerable questions."

US futures for the S&P 500 and Nasdaq were up almost one per cent, but trading was highly erratic, with both having traded down as much as two per cent earlier before rallying as much as 1.6 per cent.

The anxiety about tariffs has sparked a renewed rush into safe havens, after a brief but massive relief rally following Trump's move on Wednesday to temporarily postpone tariffs on many countries.

"The short-term outlook for global risk assets remains uncertain given growth and inflation concerns, fluid sentiments and fast-changing developments on the trade and tariff fronts," said Vasu Menon, managing director of investment strategy at OCBC Bank in Singapore.

A violent US Treasury selloff this week, evoking the COVID-era "dash for cash", has reignited fears of fragility in the world's biggest bond market.

Thirty-year bond yields rose to 4.90 per cent, on course for their biggest weekly jump since at least 1982, LSEG data showed.

"What we are seeing in US bond markets is not currently about inflation concerns," said Michael Krautzberger, Global CIO Fixed Income at Allianz Global Investors.

Krautzberger said the price action in Treasuries could be reflecting investor fears that a sharp growth slowdown, or recession, "makes an already unsustainable US fiscal outlook even worse."

"On the other hand, we could just be witnessing a rebalancing among institutional investors or a deleveraging from levered funds."

In commodities, gold hit another record high, rising 1.2 per cent to $US3,212 an ounce.

Oil prices rose on Friday, but still headed for a second straight week in the red on concerns about a prolonged trade war between the United States and China. Brent crude futures were last up 0.35 per cent at $US63.54 a barrel.

with AP