Asian stocks report modest declines on trade tensions

• Asian stocks retreat on trade uncertainties.
• The US moved against India and Mexico late last week.
• China implemented retaliatory measures on Friday.

Asian stocks are trading in the red on the first trading day of the week amid escalating US-Chin trade tensions.

As of writing,  Japan's Nikkei is down more than 200 points or 1.3% and Australia's S&P/ASX 200 is shedding 0.81%. The South Korean stocks are also flashing losses along with a 0.32% drop in Hong Kong's Hang Seng. The Shanghai Composite, however, is trading largely unchanged on the day with the futures on the S&P 500 reporting a 0.5% drop.

The yield on the 10-year US treasury note is losing altitude, currently at 2.12% and its Australian counterpart is trading at 1.51%, having hit a record low of 1.448% earlier today.

The risk-off tone could be associated with the uncertainty triggered by the US moves against India and Mexico and China's tit-for-tat measures.

On Friday, the Trump administration eliminated India's ability to export products to the US duty-free. Further, President Trump threatened to impose tariffs on Mexico over immigration.

Meanwhile, China implemented tariff hikes Saturday and launched an investigation into FedEx after it diverted two parcels destined for Huawei addresses in Asia to the United States.

With the US and China set for a long drawn out trade war, the markets have begun pricing the possibility the Federal Reserve will cut its target rate by a half-percentage point by year-end. Goldman Sachs also sees a higher chance of rate cut but believes it is a close call as the economic outlook has not changed much.