Global stock markets dropped yesterday after US President Donald Trump left investors hanging over prospects for progress in trade talks with China.
Asian trading suffered also from violent Hong Kong protests that showed no sign of letting up.
In a speech on Tuesday, Trump hailed a strong US economy and said a trade deal was close, but also warned that he could ramp up tariffs if things did not go his way.
Global equities have been gaining strength on optimism that the economic superpowers will unveil a “phase one” deal as the first part of a wider agreement that could support economies worldwide.
But with a planned signing ceremony between Trump and Xi Jinping seemingly pushed back to December and scant news of fresh developments, traders are becoming nervous.
“We’re close. A significant phase one trade deal with China could happen, it could happen soon,” Trump said at the Economic Club of New York.
But he then warned: “If we don’t make a deal, we’re going to substantially raise those tariffs”.
Trump added: “That’s going to be true for other countries that mistreat us too.”
The remarks threw a wet blanket on markets that had hoped he would provide positive updates on the trade talks.
“The US President merely suggested that a phase one deal ‘could’ happen soon and that China wanted it so badly,” remarked Fawad Razaqzada, a market analyst at Forex.com.
Traders had already been jolted by Trump’s denial of a Chinese claim that the two had a plan to remove some tariffs as negotiations progress.
In afternoon trading, the London stock market index dropped by 0.4 per cent, Paris fell by 0.3 per cent and Frankfurt was off by 0.5 per cent.
As trading cranked up in New York, the Dow index showed a loss of 0.3 per cent.
US dealers awaited comments by US Federal Reserve chairman Jerome Powell before US lawmakers to see if they provide insight to future interest rate moves by the central bank.
Underscoring global gloom meanwhile was concern about unrest in Hong Kong, which suffered a night of rage as months of protests enter a more violent phase.
Police warned the rule of law there was on “the brink of total collapse”.
Hong Kong’s Hang Seng Index plunged by 1.8 per cent, having shed a similar amount on Monday before staging a small rebound on Tuesday.
Asian investors worry that the increasingly violent demonstrations could lead China to step in.
Elsewhere, the New Zealand dollar rallied more than one per cent after the country’s central bank held its main interest rates steady, confounding expectations for a cut.