Asian equities advanced on expectations of a rate cut; US tariffs worry China

Following Wall Street's gains, the majority of Asian equities saw gains on Friday as more indications of the U.S. labour market softening fueled hopes of rate reduction later this year.

However, Chinese equities underperformed relative to their peers, narrowly missing a technical bull market as a result of a number of stories indicating that the Biden administration planned to impose fresh trade duties on the nation—specifically targeting the electric car industry.

With the exception of China, Wall Street led regional markets higher after a greater-than-expected rise in weekly jobless claims contributed to expectations of Federal Reserve interest rate decreases.

The Shanghai Composite and Shanghai Shenzhen CSI 300 indices in China dropped by around 0.5% apiece on Friday, retreating from recent highs and remaining just below bull market territory following many reports indicating that the United States was planning to slap further trade duties on China, specifically targeting the EV industry.

Increased duties, which may be announced as early as next week, are also anticipated to affect China's substantial battery and solar energy sectors.

The action suggests that the Chinese economy is under increasing strain and has the potential to worsen ties between the largest economies in the world, upsetting China's already precarious recovery.

Despite this, Chinese equities have made spectacular gains over the previous three months thanks to Beijing's continued stimulus programme and some encouraging economic data.

Among its Asian counterparts, Hong Kong's Hang Seng index outperformed, climbing 1.1% in spite of declines in heavyweight mainland and EV stocks.

The key factor driving gains was news that China was thinking of excluding mainland investors' profits from taxes when they invested in Hong Kong equities.

The possible action would coincide with Beijing and Hong Kong's ongoing efforts to boost the local equities markets, which have suffered greatly over the last three years.

Overnight Friday also saw gains in other Asian markets as confidence in a September rate decrease by the Fed increased. However, overall increases were modest owing to anticipation of important U.S. inflation data, which is anticipated next week.

(Sources: investing.com, reuters.com)