Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Flare-up of Sino-U.S. tensions over Hong Kong knocks world shares off 22-month high

Stock MarketsNov 20, 2019 04:06AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

By Sujata Rao

LONDON (Reuters) - World stocks were knocked off 22-month highs on Wednesday as a renewed flare-up in Sino-U.S. tensions and the creeping return of U.S. recession fears fueled a bid for bonds and other "safe" assets such as gold.

European equities tumbled half a percent at the open, edging further off recent four-year highs hit when it had appeared Washington and Beijing were about to agree the first phase of a trade deal. Wall Street futures were marked lower while oil prices suffered their biggest daily loss in seven weeks.

The mood in markets soured after the U.S. Senate angered China by passing a bill requiring annual certification of Hong Kong's autonomy and warning Beijing against violently suppressing protesters. China demanded the United States stop interfering in its internal affairs and said it would retaliate.

U.S. President Donald Trump also threatened to up tariffs on Chinese goods if a trade deal is not reached soon.

"Markets have taken a bit of a wobble due to the talk about Hong Kong, but they had rallied a lot in recent weeks on expectations of a (trade) deal," said Salman Ahmed, chief investment strategist at Lombard Odier.

Ahmed said both sides needed a deal to be signed -- Trump cannot afford a recession because of his re-election bid next year, while China's economy is slowing markedly.

"I think we are looking at a short-term setback rather than a major issue that would derail the process. The bill still has to be signed into law by Trump so there's a high probability he will use it as leverage against China."

MSCI's index of Asia-Pacific shares ex-Japan (MIAPJ0000PUS) tumbled 0.7%, Japan's Nikkei (N225) fell 0.8% and Shanghai blue chips (CSI300) lost 1%. MSCI's global index (MIWD00000PUS) slipped 0.3%, ending a three-day winning streak.

Wall Street was tipped for a weaker start with futures (ESc1) down 0.2%.

U.S. shares closed just below record highs on Tuesday, however, and world stocks remain just 0.5% off all-time peaks hit last year.

"It was noticeable that fixed income markets rallied despite equity markets being stable, suggestive of a market that remains cautious about the growth outlook," ANZ told clients.

U.S. 10-year Treasury yields, which have fallen in six out of the past seven sessions, slipped 5 basis points to 1.735%, a 2-1/2 -week low (US10YT=RR).

German bonds fell for the third straight day to touch a 2-1/2 week low (DE10YT=RR), shrugging off European Central Bank Chief Economist Philip Lane's comment that the euro zone economy would not fall into a recession.

"It's all about sentiment on trade ... We have this classical risk-off trade taking place again," Rainer Guntermann, a rates strategist at Commerzbank (DE:CBKG), said.

THE R WORD

Moves on commodity prices and bond markets imply fears of economic recession may be creeping back.

Japan's October exports fanned those fears further, tumbling at their quickest rate in three years, with shipments to China and the United States suffering big falls.

U.S. crude stocks rose far more than expected, the American Petroleum Institute said, driving Brent crude (LCOc1) into a 2.6% slide. Brent fell another half percent, inching towards the $60 mark last breached three weeks ago.

A marked flattening of the curve -- the gap between two-year and 10-year yields is at its narrowest in more than two weeks -- also hints at a return of recession fears. The curve inverted earlier this year, returning to normal only after three U.S. interest rate cuts.

But Federal Reserve officials have hinted there will be no further easing for now, a message the U.S. central bank may reiterate later in the day when it releases minutes from its last meeting. Markets are now pricing in just a 0.8% chance of a December rate cut .

Dour forecasts from retailers Home Depot (NYSE:HD) and Kohl's also fueled worries about U.S. consumer spending, which has so far been extremely robust, in contrast to manufacturing.

"We've had a bit of topping out of the U.S. consumer in the past couple of months, possibly we are seeing some catch up between consumer and manufacturing sectors," Lombard Odier's Ahmed said.

On currencies, the dollar nudged lower versus the yen to 108.4 but firmed 0.13% versus a basket of currencies (DXY). Gold rose 0.4% .

Flare-up of Sino-U.S. tensions over Hong Kong knocks world shares off 22-month high
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Hank Williams
Hank Williams Nov 20, 2019 8:40AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
This is another way the Koch group is trying to push the trade deal through.
Strela Fxxx
Strela Fxxx Nov 19, 2019 8:05PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
FOMC will raise the dollar index .........
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email