December 3, 2019 / 3:52 AM / 5 days ago

GLOBAL MARKETS-Stocks drop as Trump's Brazil, Argentina tariffs revive trade angst

* MSCI Asia ex-Japan -0.58%, Nikkei down 0.86%

* Australian shares -2%, on track for worst day in 2 months

* U.S. tariffs on Brazil and Argentina 'effective immediately'

* Asian stock markets: tmsnrt.rs/2zpUAr4

By Andrew Galbraith

SHANGHAI, Dec 3 (Reuters) - Asian shares tumbled on Tuesday after U.S. President Donald Trump stunned markets with tariffs against imports from Brazil and Argentina, recharging fears about global trade tensions, while weak U.S. factory data added to the investor gloom.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.37%, with Australian shares dropping more than 2%, on track for their worst day in two months.

China's blue-chip CSI300 index fell as much as 0.62% before clawing back to end the morning session flat. Japan's Nikkei shed 0.61%.

In tweets on Monday, Trump said he would impose tariffs on steel and aluminium imports from Brazil and Argentina, attacking what he saw as both countries' "massive devaluation of their currencies."

Contrary to his remarks, both Brazil and Argentina have been trying to strengthen their respective currencies against the dollar.

Steven Daghlian, market analyst at CommSec in Sydney, said while the South American tariffs dominated market worries on Tuesday, China's response to U.S. supporting for anti-government protesters in Hong Kong has also chilled sentiment.

"Markets are extremely sensitive to any good or bad news on the U.S.-China dispute front, but also the U.S. relationship with other nations as well," he said.

China said on Monday U.S. military ships and aircraft won't be allowed to visit Hong Kong, and also announced sanctions against several U.S. non-government organisations for encouraging protesters to "engage in extremist, violent and criminal acts."

Worsening the mood, data from the Institute for Supply Management (ISM) showed the U.S. manufacturing sector contracted for a fourth straight month in November as new orders slid.

That erased the market cheer from upbeat Chinese factory surveys released over the past few days.

While trade war headlines have been a key driver of markets in recent weeks, sentiment has broadly held up. The U.S. S&P 500 index, the Dow Jones Industrial Average, the Nasdaq Composite and Australia's S&P/ASX 200 index all touched record highs last week.

On Monday, the Dow Jones index fell 0.68% to 27,861.52, the S&P 500 lost 0.59% to 3,122.45 and the Nasdaq dropped 0.94% to 8,584.20.

"I think some kind of breathing or consolidation probably is needed," said Joanne Goh, Asia equity strategist at DBS in Singapore, noting that some data releases, such as China's factor surveys, are suggesting bottoming out.

"I think investors should pick quality stocks not really affected by the trade war," she said.

FALLING YIELDS

Bearish sentiment on Tuesday pushed bond prices higher. The yield on benchmark 10-year Treasury notes fell to 1.8258% from a U.S. close of 1.836% on Monday, and the policy-sensitive two-year yield, dipped to 1.608% from its U.S. close of 1.614%.

In currency markets, the dollar rose 0.15% against the yen to 109.15 and the euro was off 0.05%, buying $1.1072.

The dollar index, which tracks the greenback against a basket of six major rivals, was up 0.08% at 97.934 amid the risk-off mood.

Oil prices continued to rise on expectations that the Organization of the Petroleum Exporting Countries (OPEC) and its allies may agree to deepen output cuts at a meeting this week.

Global benchmark Brent crude added 0.33% to $61.12 per barrel, and U.S. West Texas Intermediate crude was up 0.39% to $56.18 a barrel.

Gold was a touch lower on the spot market, shedding 0.02% to trade at $1,462.07 per ounce.

Reporting by Andrew Galbraith; Editing by Sam Holmes

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