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Stocks slip as markets await Trump's Hong Kong response

EconomyMay 29, 2020 02:22AM ET
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© Reuters. A man wearing protective face mask, following an outbreak of the coronavirus, is reflected on a screen displaying stock prices outside a brokerage in Tokyo

By Tom Westbrook

SINGAPORE (Reuters) - Stock markets dipped and safe-havens such as bonds and Japan's yen firmed on Friday, as investors awaited Washington's response to China tightening control over the city of Hong Kong.

China's parliament on Thursday pressed ahead with national security legislation for the city, raising fears over the future of its freedoms and function as a finance hub.

U.S. President Donald Trump, who has vowed a tough response, said he will hold a news conference on China later on Friday. Trepidation about a further deterioration in Sino-U.S. relations sent stocks lower and put investors on edge.

European futures were in the red, with FTSE futures down 0.7% and EuroSTOXX 50 futures (STXEc1) 1% lower. Futures for the S&P 500 slipped 0.2%.

MSCI (NYSE:MSCI)'s broadest index of Asia-Pacific shares outside Japan slipped 0.1%. The Nikkei (N225) retreated slightly from a three-month high and, though moves were small, the safe-haven yen rose to a two-week high and bonds rose.

"It is seen as a major threat to the rally we've had and the recovery," said Shane Oliver, chief economist at Australian wealth manager AMP (OTC:AMLTF) Capital.

The possible U.S. response could range from a tearing up of the Phase 1 trade deal and fresh tariffs on China, to milder travel or financial sanctions on Chinese officials, he said.

"If it's at the relatively mild end, then I don't think it would derail the recovery bull market, but if it's at the more extreme end with tariffs and harsh treatment of Hong Kong, then I think it gets more problematic," Oliver said.

Trump offered a muted response to Hong Kong's mass democracy protests last year while prioritising a trade deal with Chinese President Xi Jinping. But ties with Beijing have since soured considerably through the COVID-19 pandemic.

Hong Kong's government warned on Friday that withdrawing its special U.S. status, which has underpinned it as a finance hub, could be a "double-edged sword" and urged the United States to stop interfering in internal affairs.

The Chinese yuan weakened slightly in onshore trade.

Hong Kong's Hang Seng index (HSI) was 0.5% lower in early trade and has lost about 3% in the two weeks since news of China's security legislation broke.

In bond markets, yields on benchmark 10-year U.S. Treasuries fell 3 basis points to 0.6705%, more than 100 basis points below where they began 2020.

MAY MARCHES ON

Despite the gathering tension and the near-daily release of diabolical economic data, enormous global stimulus seems to have dispelled the old adage to "sell in May".

The S&P 500 (SPX) is up 4% for the month and on track for its best May since 2009. The rally in the risk-sensitive Aussie dollar is slowing, but the currency has gained nearly 2% for the month and sits 20% above March lows.

The optimism stems from signs of progress away from the presently parlous state of the world economy.

The number of Americans seeking jobless benefits fell for an eighth straight week last week and New York has outlined plans for reopening.

"As we have said about the reopening and ensuing recovery, this is a process," said RBC Capital Markets' chief U.S. economist, Tom Porcelli. "And right now the process is moving along in the right direction."

The euro (EUR=) was headed for its best month since December as the European Union's 750-billion-euro coronavirus recovery fund fuelled optimism about the bloc and its political future.

It hit a fresh two-month high of $1.1100 briefly and last sat at $1.0935.

Gold was firm at $1,720.87 an ounce.

Demand jitters kept oil under pressure and Brent crude slipped 33 cents or 0.9% to $34.96 a barrel, while U.S. crude was down 1.6% at $33.17 a barrel.

Stocks slip as markets await Trump's Hong Kong response
 

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Comments (22)
Citcat Catcit
Citcat Catcit May 29, 2020 3:58AM ET
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ttip8929
About Face
About Face May 29, 2020 2:18AM ET
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Markets are supposed to be more savvy, informed, smarter than Trump. Looks like I am wrong, reading the headlines.
Rotolo Domenico
Rotolo Domenico May 29, 2020 1:57AM ET
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Waiting...and yesterday or two days ago?
Proble Matic
Proble Matic May 29, 2020 1:41AM ET
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lol awaiting Trumps response. Nice headline.
Muhamed Jaffir
Muhamed Jaffir May 29, 2020 12:37AM ET
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I think the paid CCP bug shills should go back to their noodle stalls. I'm hoping for sanctions against Hong Kong.
About Face
About Face May 29, 2020 12:37AM ET
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I hope your hope comes true.....then you know where it hurts. The noodle stalls will be having brisk business cause there are 1.4 billion customers that does not buy Made in America.
Citcat Catcit
Citcat Catcit May 29, 2020 12:37AM ET
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where are you
John Hat
John Hat May 29, 2020 12:35AM ET
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Hong Kong's government stabbed its people in the back by making deals with the corrupt Chi-Coms.
David David
David9 May 29, 2020 12:35AM ET
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You don't understand...Hong Kong did not make the deal. It comes down from the central government in China. China passed the bill with over 2200 votes.
David David
David9 May 29, 2020 12:32AM ET
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I think now that China has approved the law for Hong Kong, we.should see Hong Kong will.start to stabilized in the coming months. After that, Hong Kong should return to growth just like in China. Once all those Rioters are locked up and no more outside forces can interrupt their internal affairs, then we will see huge investments start to flow into Hong Kong. Even right now, investments from mainland China is flowing in at unprecedented rate.
Orion Orion
Orion Orion May 29, 2020 12:32AM ET
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i see you have no insight on the matter
Tha You
Tha You May 29, 2020 12:23AM ET
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Waiting for ahort pull back ingues at least 40-75pios
Kaveh Sun
Kaveh Sun May 29, 2020 12:13AM ET
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I am not buying at this level. The market needs a pull back for me to get in.
du ich
du ich May 29, 2020 12:12AM ET
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Did UK care about the political right or freedom of Hongkong native people ? The answer is clearly No and the evidence in history not in current media.
krishnan GK
krishnan GK May 29, 2020 12:09AM ET
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China needs a gangban. from the world FK him
du ich
du ich May 29, 2020 12:08AM ET
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the second reason is that the US strength of international intervention in not only China but aslo other east Asian countries will be weaken.
David David
David9 May 29, 2020 12:08AM ET
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How weaken? Explain yourself...
du ich
du ich May 29, 2020 12:05AM ET
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the first reason why US & UK worry about Hongkong is that they will lose their largest agency operation center in Hongkong.
Chris Mallory
Chris Mallory May 28, 2020 11:59PM ET
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China needs Joe Biden. They need to go back to Obama, Bush days.
Klaus Renault
Klaus Renault May 28, 2020 11:31PM ET
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Hhhaah.. i was thinking on this. The communist country wish control the world. The reason formwar. Hong kong ..china many population They are like locusts and want come for food. And in 2021 we will live other 1929 crisis. Dark times are coming
Klaus Renault
Klaus Renault May 28, 2020 11:28PM ET
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Hahahha,. Ok.. i was thinking on this. Cause will be hong kong indeed. The communist country want control everything . They are locusts going for food. And 2021 we will live new 1929 crisis
David David
David9 May 28, 2020 11:24PM ET
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I tell you guys... China does not like confrontation. Over the last 50 years, China is only the country that has not fire a single bullet outside their borders. This is because China understand Sun Tze, the Art of War. Do you really think a Real Estate Trumo thinks he knows how to deal with China? China is already thinking 10 years out, while Trumo thinks in terms of months out for his election. That's it.
Brady Murray
Brady Murray May 28, 2020 11:24PM ET
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he's already dealt with them in a big way and the commies are feeling. just wait until we pull our manufacturing base out over the next 10 years. China is great at the Art of Lies and deception.
David David
David9 May 28, 2020 11:24PM ET
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Have you read Ray Dalio's the Changing World Order? The next few hundred years all belong to China. For the past 1800 years, China has always been the top. It was just in the last 150 years where China was weak. But now, the time is for China to return to the top.
Erski Gumby
SB20 May 28, 2020 11:24PM ET
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David David Just like in the movies?
Orion Orion
Orion Orion May 28, 2020 11:24PM ET
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china was never top, never controlled anything outside its borders, but it is trying.since ccp took over, and chinese people are paying the price of their ambition. ccp must fall
Brandon Son
Brandon Son May 28, 2020 11:12PM ET
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USA and China will engage in war come 2022 mark my words. It has been many years in the making
David David
David9 May 28, 2020 11:12PM ET
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How do you know? Explain yourself...
David David
David9 May 28, 2020 11:08PM ET
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Trumo have to be careful...if he disturbed the China Lion, she will Roar. When she Roars, all markets collapse.
Brady Murray
Brady Murray May 28, 2020 11:08PM ET
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She roars and spews Lies and deception. oh and then hacks up a hairball called Covid 19. China needs to be reckoned.
Robert DZ the patterns
Robert DZ the patterns May 28, 2020 11:02PM ET
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I need 14% correction
Ryan Reed
Ryan Reed May 28, 2020 11:02PM ET
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I need a lot more than that before I will consider gambling.
Jeff Bauman
Jeff Bauman May 28, 2020 10:34PM ET
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Chinese liars and theives
Show previous replies (1)
Bulls MakeMore
Bulls MakeMore May 28, 2020 10:34PM ET
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*the current Chinese leaders I should say
Jeff Bauman
Jeff Bauman May 28, 2020 10:34PM ET
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Bulls MakeMore agreed 100%
Kathie ILL
Kass1212 May 28, 2020 10:34PM ET
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David David  Such simplistic and ignorant thinking on your part.
Kaveh Sun
Kaveh Sun May 28, 2020 10:34PM ET
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Kathie ILL he is a paid poster.
Muhamed Jaffir
Muhamed Jaffir May 28, 2020 10:34PM ET
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it's like good cop bad cop and they think they're clever.
Bulls MakeMore
Bulls MakeMore May 28, 2020 10:15PM ET
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Do the people in China really, honestly, to themselves, favor communism? ... remember, from history, the crowds of people cheering when President Reagan heroically helped them tear down the Berlin wall. Freedom seems to be a universal desire of the human race.
Joanna Yin
Joanna Yin May 28, 2020 10:15PM ET
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US is very disappointed example to Chinese on its double standards and bully activities. Chinese are comfortable on its current own system ~ if you want truth.
Bulls MakeMore
Bulls MakeMore May 28, 2020 10:15PM ET
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Are you free to say that publicly without fear of retaliation? In the U.S. today, Trump is fighting censorship and discrimination by his political opponents, widespread and poweful in the media. He is fighting to restore free speech in the U.S....I'm sad to have to say this about the country that I love!
Bulls MakeMore
Bulls MakeMore May 28, 2020 10:15PM ET
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...at least I'm still free to say that here on this site, without censorship.
Yixiao Chen
Yixiao Chen May 28, 2020 10:15PM ET
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I think ultimately it depends on the economic condition of the country. For the past 25 years or so, people in general are getting better lifes day by day, benefiting from the historical GDP growth. Unless their life gets significantly worsen by communism in the next few years, jobless rate skyrockets etc., no one really cares about it. People may not necessarily "favor" communism, it's that they don't see a strong benefit to get rid of it right now (which takes a huge effort to do), so they are reluctant to change.
 
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