Global Stocks Slip on U.S.-China Tensions
August 07 2020 - 5:35AM
Dow Jones News
By Anna Isaac
Global stocks fell Friday amid building tensions between
Washington and Beijing after President Trump moved to impose new
limits on two Chinese social-media apps.
Futures tied to the S&P 500 ticked down 0.3%, suggesting the
benchmark could drop after the opening bell in New York. The gauge
is still on course to close the week up about 2%.
Overseas, the pan-continental Stoxx Europe 600 drifted down less
than 0.2%. In Asia, major markets fell. The Shanghai Composite
dropped almost 1%, while Hong Kong's Hang Seng Index fell nearly 2%
and Japan's Nikkei 225 index dropped 0.4%.
Mr. Trump signed executive orders Thursday night that would bar
people in the U.S. or subject to U.S. jurisdiction from
transactions with the China-based owners of WeChat and TikTok,
effective 45 days from Thursday. It also essentially imposes a
45-day deadline for an American company to purchase TikTok's U.S.
operations. The orders are likely to be viewed in China as an
attempt to stifle the nation's technology sector.
The orders come as relations deteriorate between the two
countries, prompting speculation that trade among the world's two
largest economies could take a hit.
"China is just about the only bipartisan issue in Washington at
the moment," said James Athey, senior investment manager at
Aberdeen Standard Investments. "The framework of a Cold War,
decoupling and a bi-polar world is the right one to think about. It
won't be possible to straddle both China's and the U.S.'s
agenda."
Shares of Tencent Holdings plunged as much as 10% on Friday in
Hong Kong, hours after Mr. Trump signed the order targeting its
WeChat app. Analysts who follow Tencent were scrambling Friday to
figure out how much of the company's business could be
affected.
In another sign of the deepening rift, Chinese companies with
shares traded on U.S. stock exchanges would be forced to give up
their listings unless they comply with U.S. audit requirements
under a plan recommended Thursday by the Trump administration.
Concerns over delays to the next tranche of fiscal stimulus in
the U.S. are also weighing on markets, investors said. Talks
between White House officials and Democratic leaders on a new
coronavirus-aid package ended late Thursday without a breakthrough
as both sides edged closer to the Trump administration's Friday
deadline for reaching a deal or leaving the bargaining table.
The ICE Dollar Index, which tracks the greenback against a
basket of other major currencies, climbed 0.3%.
"Risk sentiment has worsened generally this week, supporting the
dollar, " said Lee Hardman, currency analyst at MUFG Bank. "The
deadlock over a fiscal deal, the rising tension with Beijing:
people think a fiscal deal will be done but that's taking longer
than hoped."
Jobs data, due at 8:30 a.m. ET., will offer fresh cues on the
recovery in the American labor market. Employers are expected to
have added jobs for the third straight month in July. But the
recent payroll gains won't be nearly enough to recoup losses in
March and April, and the pace of job creation -- though elevated by
historical standards -- is likely to have slowed as the recovery
loses some steam.
Overseas, the Turkish lira fell 1% against the dollar after
hitting its weakest ever closing level Thursday. Officials from the
central bank and the Turkish banking watchdog held an hourslong
meeting with top executives from the country's main banks late
Thursday evening to discuss recent market developments.
"The situation in Turkey is getting worse and may feed negative
spillovers," Mr. Hardman said. "There's potential there that could
push the dollar higher against the euro. The euro's more exposed to
a negative shock in Turkey, as we saw in 2018."
In commodities, Brent crude, the international oil benchmark,
slid 0.4% to $44.91 a barrel.
The yield on the benchmark 10-year U.S. Treasury ticked down to
0.521%, from 0.535% Thursday.
Write to Anna Isaac at anna.isaac@wsj.com
(END) Dow Jones Newswires
August 07, 2020 05:20 ET (09:20 GMT)
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