Stock markets fell yesterday on revived concerns about a China-US trade deal after US lawmakers passed legislation to support Hong Kong civil rights, sparking anger in Beijing.
In addition, US President Donald Trump threatened higher tariffs should a mini trade pact with China fall through.
The dollar was higher against other major currencies, while the pound was little changed after British Prime Minister Boris Johnson and Labour opposition leader Jeremy Corbyn sparred in a TV debate ahead of December’s general election.
Oil prices rebounded after a hammering Tuesday caused by worries over the trade talks and signs of a further build up in US energy inventories.
As trading got underway in New York yesterday, the Dow index was off by 0.2 per cent, while European markets had trimmed morning losses a bit.
On the corporate front, Chinese online retail titan Alibaba said it could raise almost $13 billion in Hong Kong’s biggest IPO for nearly a decade after announcing the pricing of shares for the mega sale.
In Washington, the US Senate adopted legislation Tuesday that supported “human rights and democracy” in Hong Kong and threatened to revoke its special economic status.
In reaction, China summoned a US diplomat and threatened counter-measures.
“The global trading wind changed direction yesterday with benchmarks across the world drifting lower,” noted ActivTrades analyst Pierre Veyret.
“This shift in investors’ trading stance was caused by the US Senate passing legislation supporting protesters in Hong Kong.... Most investors now fear it could significantly impair negotiations and the signing of a ‘phase-one’ deal with Beijing,” he added.
Meanwhile, Trump raised the spectre of stiffer levies on Chinese goods, warning: “If we don’t make a deal with China, I’ll just raise the tariffs even higher.”
While observers expect both sides to eventually reach some sort of agreement as part of a wider pact, there have been several bumps in the road so far, undermining investor sentiment.
“The announcement from the US president has hit stock markets” again, David Madden, analyst at CMC Markets UK, said yesterday.
“Recently we have seen the DAX (index in Frankfurt) at 22 month highs, and the (Paris) CAC 40 at a level last seen in 2007, so the threat from Trump has encouraged traders to exit the equity markets.”