* EM stocks on biggest slide since December 2015
* Trump to impose 10% tariffs on rest of U.S. imports from China
* Kospi falls after Japan takes Seoul off easy-trade list
By Agamoni Ghosh
Aug 2 (Reuters) – Emerging market assets were battered on Friday by resurgent U.S.-China trade tensions, with investors veering away from riskier assets and taking refuge in safe-haven bonds.
U.S. President Donald Trump hit China with a 10% tariff on the remaining $300 billion of Chinese imports on Thursday, a day after negotiators from both countries concluded a meeting in Shanghai without significant signs of progress.
Emerging market assets already reeling from the U.S. Federal Reserve’s hawkish rate-cut outlook earlier this week fell to near two-month lows, with developing world stocks on track for their worst run since December 2015.
The yuan was at its lowest levels since last November, while Chinese shares plummeted and Hong Kong’s Hang Seng slumped 2.2%.
“With Trump getting impatient with Powell and a rather impossible to meet deadline for a deal before the fresh tariffs kick in, PBoC may consider cutting 7-day repo rates, in order to ease monetary conditions,” said Maybank analysts in a note.
South Korean shares shed nearly 1% as Japan’s decision to remove Seoul from its “white list” of favoured trading partners put even more strain on the trade-dependent economy which is already reeling from Trump’s latest trade outburst.
Indices outside Asia also fell, with stocks in Johannesburg falling more than 2%, while those in Moscow and Istanbul shedding between 0.8% and 1.3%.
Developing world currencies were mixed with Asian currencies under pressure, but those more sensitive to U.S. interest rates as Turkey’s lira and South Africa’s rand jumped.
Trump’s decision has thrown the Fed another curve ball that may force it to again cut interest rates to protect the U.S. economy from trade-policy risks, with October Fed funds rate futures jumping to now fully price in a rate cut in September.
Investors will also be watching out for S&P’s review of recession-hit Turkey’s credit rating later in the day which comes after the central bank slashed interest rates last week.
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For RUSSIAN market report, see (Reporting by Agamoni Ghosh in Bengaluru; Editing by Hugh Lawson)