FTI TechnipFMC Limited

By David Hodari 

U.S. stocks opened lower at the end of a holiday-shortened week, after China shares fell amid fresh trade fears with the U.S.

The Dow Jones Industrial Average shed 170 points, or 0.7%, to 24294 shortly after the opening bell. The S&P 500 fell 0.5% and the Nasdaq Composite lost 0.5%.

Trading volumes were expected to be thin during an abridged postholiday trading session, with volumes in Asia-Pacific markets also thin due to the Japanese public holiday.

Oil-exposed stocks led indexes lower, with TechnipFMC and Marathon Oil Corp. down 3.9% and 3.7%, respectively, in premarket trade.

That came as a fall in oil prices accelerated, with Brent crude oil plumbing depths not seen since 2017, dropping 2.5% to $61 a barrel as light trading volumes amplified concerns about rising supply. West Texas Intermediate futures were down 4.4% at $52.51 a barrel, their lowest price since late October 2017.

The pan-European Stoxx Europe 600 index gained 0.2% in afternoon trade. Investors were looking to a scheduled meeting between U.K. and EU lawmakers over the weekend after both announced Thursday they had made progress in outlining their future relationship. Still, the deal faces fierce opposition in both the U.K. and Europe. The British pound fell 0.4% against the U.S. dollar.

Chinese stocks tumbled, with the Shanghai Composite Index down 2.5% and the tech-heavy Shenzhen A-Share dropping 3.7%, after The Wall Street Journal reported that the U.S. government had attempted to persuade foreign allies to avoid telecommunications equipment from China's Huawei Technologies Co. due to what they see as cybersecurity risks.

That marked the latest attempt by the Trump administration to tighten restrictions on Chinese telecom firms. The White House banned U.S. suppliers from selling components to ZTE, a sector-peer of Huawei, earlier this year. ZTE shares fell 2% Friday.

" Trump asking allies to stop buying equipment from certain Chinese technology stocks" could have been behind the decline in Chinese stocks, said Jeroen Blokland, a portfolio manager at Dutch asset manager Robeco. Slower news flow and lighter volumes may have also played a role in the size of the move, he said.

The news of Washington's campaign against Huawei followed the release of a report by U.S. Trade Representative Robert Lighthizer earlier in the week in which he accused Beijing of failing to change economic policies that threaten U.S. industry, such as cybertheft and espionage.

China's commerce ministry responded on Friday, calling Washington's accusations groundless, according to media reports.

However, investors have displayed growing optimism of warming relations between the world's two largest economies, viewing this week's developments as a part of the U.S.'s negotiating strategy. President Trump and China's President Xi Jinping are due to meet at the Group of 20 summit in Buenos Aires later this month.

"There's clearly a good-cop-bad-cop dynamic here with the new USTR report aimed at keeping pressure on China," said Isabelle Mateos y Lago, chief multiasset strategist for BlackRock Inc. "Markets are already pricing in some kind of good outcome from the meeting and the baseline not yet fully priced in is that further escalations in U.S. tariffs are put on hold."

The Chinese yuan was down 0.2% against the dollar Friday, while the country's banking sector was among those weighing on major bourses.

Global equities have been volatile in recent weeks, but swings in Chinese benchmarks have been particularly large, with the country's assets bruised by Beijing's icy trading relations with Washington and acting as a bellwether for fears over the health of global economic growth.

U.S. economic figures have also given investors pause this week. Falling mortgage applications and rising jobless claims "cast more doubt on how aggressive the Fed can be in raising rates and how good the growth outlook is for the U.S. given high rates, a strong dollar, and fading support from fiscal stimulus at a time of trade protectionism and weaker global growth," according to James Knightley, the chief international economist at ING.

In commodities, the price of gold was down 0.4% at $1,223.20 a troy ounce.

Steven Russolillo

contributed to this article.

Write to David Hodari at David.Hodari@dowjones.com

(END) Dow Jones Newswires

November 23, 2018 09:49 ET (14:49 GMT)

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