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Stock markets in Asia extended a selloff on Wall Street as investors were rattled after President Donald Trump announced the United States would impose hefty tariffs on steel and aluminium imports, raising the spectre of a global trade war.
On Wall Street, the S&P 500 lost 36.16 points, or 1.33 per cent, to 2,677.67 on Thursday, coming a day after the investors sold off heavily on worries the Federal Reserve might increase rates more than expected this year.
Trump said the duties of 25 per cent on steel and 10 per cent on aluminium would be formally announced next week, although White House officials later said some details still needed to be ironed out.
Investors fear Trump's decision could spark retaliatory moves from major trade partners like China, Europe and neighbouring Canada in a blow to the global economy.
The anxiety was underscored by Canada's quick response, with officials in Ottawa saying they will retaliate against any US tariffs on steel and aluminium products.
The concerns of a harmful trade war eclipsed the upbeat US economic data published on Thursday, including a rise in the manufacturing index to 14-year highs and another showing the number of Americans filing for unemployment benefits hitting a 48-year low.
US inflation picked up as the PCE price index, a gauge of underlying inflation, advanced 0.3 percent in January - the largest gain since January 2017. On the year, it posted an increase of 1.5 per cent, same as the previous two months.
"Even if you manufacture goods, if someone doesn't buy them, you have to scale back your production, leading to slowdown in global economic activities," said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.
"I would expect markets entered another period of correction," he added.
The 10-year US Treasuries yield
In the currency market, the dollar's rebound following the bullish comments on the US economy from new Federal Reserve Chair Jerome Powell on Tuesday lost steam.
The dollar slipped to 106.12 yen
Oil prices were also under pressure, having fallen more than one percent the previous day as Trump's trade move raised worried about the global economy.
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