Asian stocks sink as trade tensions escalate; yen firms

Asian markets slumped on Friday, tracking sharp falls in U.S. and European stocks, which took a hit on fears of a potential trade war.

In Tokyo, the Nikkei 225 fell 3.59 percent in the morning after earlier dropping to its lowest levels in around five months. Major exporters were downbeat, with Toyota falling 2.57 percent and Sony losing 3.02 percent.

The broader Topix lost 2.88 percent, with its 33 sectors trading lower across the board. The materials and financials sectors were among the biggest losers.

Meanwhile, Seoul's benchmark Kospi index lost 2.25 percent, as shares fell broadly. Technology names fell sharply, with heavyweight Samsung Electronics sinking 3.01 percent.

Greater China markets plunged in early trade, with Hong Kong's Hang Seng Index sinking 3.09 percent. On the mainland, the Shanghai composite dropped 2.98 percent and the Shenzhen composite lost 3.3 percent as stocks came under pressure from mounting trade tensions.

In Sydney, the S&P/ASX 200 slid 1.9 percent as all sectors traded in the red. Declines were led by the materials subindex, which lost 3.24 percent. Oil producers were also weaker after oil prices slid overnight as markets stateside took a tumble.

Meanwhile, most steel and aluminum plays in the region took a beating.

In China, Baoshan Iron & Steel led losses among its peers, falling 5.75 percent, and Aluminum Corp of China (Chalco) fell 4.48 percent.

South Korean steel stocks, however, were mixed, with Posco falling 2.79 percent. Dongbu Steel, a smaller player, jumped 6.96 percent. South Korea is one of the countries temporarily exempt from recent U.S. steel tariffs.

The moves in Asia came on the back of U.S. and European stocks falling overnight after President Donald Trump signed a memorandum that would implement tariffs on up to $60 billion in imports from China.

The tariffs largely focus on technology sector goods and were intended to penalize China for, according to the Trump administration, stealing intellectual property.

Trump had signed off on tariffs on steel and aluminum imports earlier this month, although several countries were exempt. Markets are worried that subsequent retaliatory actions from U.S. trading partners could result in a trade war.

In response, China on Friday proposed a list of 128 U.S. products as potential retaliation targets, according to a government statement.

"[T]he real risk is that this escalates into tit-for-tat trade wars," Vishnu Varathan, head of economics and strategy at Mizuho Bank, said in a note.

The dollar extended losses against the safe-haven yen on the back of trade-related fears, with the greenback trading at 104.86 at 9:33 a.m. HK/SIN. The yen touched its highest levels in 16-months earlier.

The dollar index, which tracks the dollar against a basket of six currencies, traded at 89.652.

Of note, the Bank of England held rates steady on Thursday, although two policymakers dissented and voted for an immediate rate hike.