Global Stocks Slide as U.S.-China Tensions Simmer
By Avantika Chilkoti and Chong Koh Ping
Global stocks ebbed Friday as investors braced for President
Trump's response to China's push for tighter security controls on
Hong Kong, which could reignite tensions between the world's two
Futures tied to the Dow Jones Industrial Average slipped 0.7%,
suggesting that the blue-chips index will open lower. A sharp rally
in the gauge this week came to a stuttering halt on Thursday after
Mr. Trump said he would hold a press conference on China on
The pan-continental Stoxx Europe 600 dropped 0.7%. Most major
Asia-Pacific equity benchmarks closed lower, while the Hong Kong
gauge lost 0.7%.
China and the U.S. have been on a collision course in recent
days following Beijing's moves to clamp down on antigovernment
protesters in Hong Kong by imposing national-security laws on the
city. Fresh U.S. measures targeting trade and Chinese companies
could weigh on both economies at a time when they are already
struggling with the coronavirus pandemic, analysts said.
Mr. Trump could review Hong Kong's special status and leave the
city facing the same tariffs as mainland China, according to James
Athey, a portfolio manager at Aberdeen Standard Investments.
Washington has signaled this week that it may declare that it no
longer considers Hong Kong autonomous from Beijing.
"It would essentially change the business environment for U.S.
companies operating in Hong Kong, so that would be a significant
step and not one that we could discount," said Mr. Athey.
Mr. Trump could also take broader punitive measures against
China, he said. "He can saber rattle and increase tensions with
China directly, rescinding the phase-one deal and going back into
the playbook of 2019."
Any U.S. measures on trade or against Chinese companies, and any
Chinese retaliation, could have a greater impact than previous
actions taken before the new coronavirus battered both economies,
according to Colin Low, senior macro analyst at FSMOne.com in
Bond markets reflected the erosion in investors' risk appetite.
The yield on the benchmark 10-year U.S. Treasury note edged down to
0.661%, from 0.703% Thursday. Yields fall as bond prices rise.
Ahead of the opening bell in New York, Dell Technologies rallied
7.3%. The computer maker on Thursday said the pandemic has boosted
its business in certain sectors. Software maker VMware, which is
majority owned by Dell, climbed over 8% after its earnings topped
Wall Street's expectations.
Salesforce.com dropped 3.2% in offhours trading after the
business-software maker cut its full-year earnings outlook.
Fresh data Friday showed that U.S. consumer spending fell by a
record 13.6% in April during coronavirus lockdowns. But there are
signs that purchasing is starting to pick up as states start to
reopen businesses and Americans return to work.
The University of Michigan's closely watched consumer-sentiment
survey for this month will be reported at 10 a.m. Investors are
also likely to be watching closely for Federal Reserve Chairman
Jerome Powell's comments at 11 a.m.
Market sentiment could be shifting on a realization that
government support won't be enough to prevent job cuts, and that
reinfection rates could rise as people get back to work, according
to Mike Bell, global market strategist at J.P. Morgan Asset
"If you do see infection rates reaccelerate, then that could
call into question the existing market narrative that we're now on
the path of sustainable reopening," said Mr. Bell.
In commodities, Brent crude, the global gauge of crude-oil
prices, fell 1.8%. The main gauge for U.S. crude prices dropped
In the Asia-Pacific region, Japan's Nikkei 225 closed 0.2%
lower, while Australia's S&P/ASX 200 retreated 1.6%.
Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com and
Chong Koh Ping at email@example.com
(END) Dow Jones Newswires
May 29, 2020 08:57 ET (12:57 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.