Stock markets mixed as China-US tensions return to fore

Equities were mixed Wednesday as profit-taking and worries about deteriorating China-US relations were weighed against optimism over the gradual reopening of economies around the world.

Hong Kong extended losses as police fired pepper-ball rounds as anti-China protesters took to the city's streets, with investors fearing the demonstrations could erupt into the worst unrest since last summer.

The broad trend across global markets has been upward for weeks as virus deaths and infections ease in most countries and governments begin to reopen their battered economies, fanning hopes for a recovery in the second half of the year.

Confidence has also come from mind-boggling amounts of stimulus and central bank pledges of support, with the latest coming from the eurozone, where European Commission President Ursula von der Leyen is due to unveil a trillion-euro revival plan for the bloc.

However, there was little fresh desire for risk assets with eyes on the simmering row between the world's top two economies, fuelled by Donald Trump's barracking of China over its role in the pandemic, and made worse this week by Beijing looking to tighten its grip on Hong Kong.

The financial hub was thrown back into the spotlight Friday when Chinese officials proposed a controversial security law that many fear could ring the death knell for the city.

And Trump appeared to agree, with his press secretary Kayleigh McEnany telling a briefing he had said it is "hard to see how Hong Kong can remain a financial hub if China takes over".

Washington has already said it could terminate its preferential trading status over the issue.

Markets are also fretting over reports that the US has warned it will impose sanctions on Chinese entities and officials if it goes ahead with the law.

While China and Hong Kong leader Carrie Lam have sought to ease worries about the extent of the law plans, Jeffrey Halley at OANDA warned that no matter how they try to dress it up "the passage of the security legislation from Beijing will have consequences for the beleaguered (city) and will further darken relations between the US and China."

Concerns about the growing crisis have weighed on the yuan, losing almost three percent this year, with observers suggesting it could hit a record low.

- Hong Kong protest worries -

Meanwhile, there are concerns about another flare-up in the city as lawmakers prepare to discuss a law that bans insulting China's national anthem.

Seven months of sometimes violent demonstrations last year hammered the local economy and raised questions about its future.

Hong Kong fell 0.4 percent, Shanghai lost 0.3 percent and Sydney fell 0.1 percent, while Kuala Lumpur dropped more than one percent as Malaysia struggled to contain its virus. There were also losses in Jakarta, Bangkok and Singapore.

But Tokyo, Mumbai, Manila, Seoul, Taipei and Wellington saw gains.

In early trade, London, Paris and Frankfurt were all higher. The gains in Paris as dealers brushed off a warning from officials that France's economy could contract 20 percent in the second quarter.

Still, National Australia Bank's Tapas Strickland, said in a note: "Risk sentiment continues to surge as activity lifts following the gradual easing of containment restrictions around the world, while vaccine hopes remain high with 10 different vaccines currently at the human trial stage."

He also cited comments from Federal Reserve official James Bullard that the third quarter "very likely, right behind the worst quarter, will be the best quarter of all time on the growth perspective".

Wall Street, where the New York Stock Exchange trading floor reopened after two months of closure, finished higher, with the Dow gaining 2.2 percent.

Oil markets slipped on China-US tensions, and after reports said Russia could begin easing up on its supply cuts in July.

Massive reductions by Moscow and other major producers including Saudi Arabia have helped fuel a surge in prices over the past month, with WTI doubling since the end of April.

But analysts said the commodity will likely continue to win support from the easing of lockdowns, which is expected to boost demand as people get back on the road.

- Key figures at around 0810 GMT -

Tokyo - Nikkei 225: UP 0.7 at 21,419.23 (close)

Hong Kong - Hang Seng: DOWN 0.4 percent at 23,301.36 (close)

Shanghai - Composite: DOWN 0.3 percent at 2,836.80 (close)

London - FTSE 100: UP 0.7 percent at 6,112.97

Euro/dollar: DOWN at $1.0954 from $1.0984 at 2040 GMT Friday

Dollar/yen: UP at 107.51 yen from 107.54 yen

Pound/dollar: DOWN at $1.2292 from $1.2335

Euro/pound: DOWN at 89.11 pence from 89.04 pence

West Texas Intermediate: DOWN 2.3 percent at $33.55 per barrel

Brent North Sea crude: DOWN 2.2 percent at $35.37 per barrel

New York - Dow: UP 2.2 percent at 24,995.11 (close)

Agence France-Presse

Global stocks slide on looming Brexit risk

NEW YORK, United States — World stock markets extended losses Monday as fears heightened that Britain could vote to leave the European Union in next week’s referendum.

Tokyo’s main stocks index dived 3.5 percent to a two-month low point by Monday’s close, as worries over Britain’s EU membership vote on June 23 sparked a rally in the safe-haven yen currency, which in turn hammered shares in Japanese exporters.

Craig Erlam, senior market analyst at Oanda trading group, said “risk aversion” continued to drive markets ahead of “a number of key risk events”.

“The UK referendum next week is right at the top of this list given the destabilization effects that a vote to leave the EU could have on global markets,” he said in a note to investors.

US stocks joined the global retreat, falling for a third straight day and pushing the S&P down 0.8 percent. But shares in professional networking company LinkedIn shot up 46.6 percent on news of its $26.2 billion takeover by Microsoft.

Shares of US travel-oriented equities were especially weak, with American Airlines, Delta Air Lines and United Continental all losing at least 3.5 percent in the aftermath of Sunday’s deadly attack by a lone gunman at a gay nightclub in Orlando, Florida.

London’s FTSE 100 index lost 1.2 percent. In the eurozone, Frankfurt’s DAX 30 index and the CAC 40 in Paris were both about 1.8 percent lower. Banking stocks weighed in Milan, where the main index slid 2.9 percent to its lowest level since February.

In foreign exchange, the British pound hit two-month lows against both the euro and dollar.

The pound’s latest tumble against the dollar “could be the tip of the iceberg” if Britons opt to quit the EU, said Alex Holmes, of Capital Economics.

The European single currency meanwhile sank as low as 119 yen, the lowest level since February 2013.

Central banks on tap

Markets also are on edge as the US, Japanese and British central banks meet this week.

Few expect any move on interest rates from the US Federal Reserve and Bank of England, but observers are divided over whether the Bank of Japan will announce more stimulus.

“Chances of the Fed raising interest rates this month are nil at this point, with a July raise looking less and less likely,” Mark Vickery, of Zacks Investment Research, said in a note to clients.

For Oanda’s Erlam, the Brexit risk is also playing a role in the Fed’s timing.

“The Fed will meet this week and while the (May) jobs report may have given them a reason to put off raising interest rates again, the closing of the gap ahead of the UK referendum is likely the real reason behind the delay,” he said.

Hong Kong’s main stocks index tumbled 2.5 percent and Shanghai dived 3.2 percent, while Seoul sank 1.9 percent and Singapore 1.6 percent.

source: business.inquirer.net