Asian markets take a beating as Trump signals further escalation in his trade war with China

All major indices in the regions, including Japan, China and Australia all lost more than 1% as a result.
Analyst Eleanor Creagh of Saxo Capital Markets believes the most recent escalation "increases the risk of a recession on top of what is now a synchronised global slowdown."
Visit Business Insider's homepage for more stories.

Asian markets are reeling from an escalation in the US-China trade war over the weekend, with all major indices in the region closing down on Monday.

President Donald Trump indicated on Twitter on Friday that he would again retaliate by raising tariffs on Chinese goods, causing markets around the world to catch the fallout in the new week.

The Australia's ASX 200 was the first major index to be hit, falling 1.27%. It followed Japan's Nikkei 225 down 2.17%, and the Korean KOSPI down 1.49% as of 5:30 p.m. Sydney time.

Heading into the final hour of session, China's Shanghai Composite finished 1.17% lower, while Hong Kong rattled by its own huge protests at home had fallen by 2.21%.

With Trump's tweets indicating the trade war will get a lot worse before it gets better, investors appear to have sold down their exposure to it, according to Saxo Capital Markets Australian market strategist Eleanor Creagh.

"Against this fragile backdrop it is easy to see why risk assets are being pummelled, with Asian indices down across the board, and safe havens bid with gold climbing to a fresh 6 year high," Creagh said in a note issued to Business Insider.

Read more: Trump retaliates against China, says the US will hike tariffs on imports

She said investors were accordingly looking to safer assets like gold and treasuries as the likelihood of a global recession increased.

"The most recent trade escalation increases the risk of recession on top of what is now a synchronised global slowdown. Growth is deteriorating and growth momentum is slowing, with monetary policy already at, below or approaching the zero bound there is very little central bankers can do to pivot the cycle," Creagh said.

That's certainly the message that central bankers appeared to be relaying at the annual economic symposium in Jackson Hole, Wyoming, over the weekend.

Federal Reserve Chairman Jay Powell indicated the central bank wasn't prepared to cut interest rates as much as the White House has demanded.

At the same meeting Powell's Australian counterpart, Philip Lowe, acknowledged that cutting interest rates wasn't enough to offset global political turbulence.

"We trade with one another. Not with Mars this means that monetary policy responding to global political shocks isn't going to get the normal exchange rate effect. And I think monetary easing has its limitations as a result," Lowe said.

However, Creagh was quick to note that the trade war was simply exacerbating a long-coming global downturn.

"As tempting as it is to blame our woes on President Trump's trade war, we can't escape the cycle. At present the manufacturing and industrial sector are already in recession and firms across the US, Europe and Asia Pacific have slowed business investment," she said.

None of those factors look like abating as long as the escalating trade war persists.

NOW WATCH: Octopuses are officially the weirdest animals on Earth