Mito (Japan): Worsening China-US friction, worries over aid to Americans and US businesses and a stumble on Wall Street combined to push shares in Asia lower on Friday.
Shanghai led regional declines, with its Composite index giving up 3.1 per cent to 3,220.65. The Hang Seng in Hong Kong lost 2.4 per cent to 24,663.68.
Trump administration officials have escalated their public condemnations of China in the last several weeks, with speeches by FBI Director Chris Wray, Attorney General William Barr and Secretary of State Mike Pompeo.
As expected, China announced the closure of the U.S. consulate in the western city of Chengdu. The move was in retaliation for the US order earlier this week to close the Chinese consulate in Houston, Texas.
The latest dust up between the two biggest economies comes amid allegations of theft of US intellectual property – including by Chinese researchers with military and government connections – for Beijing’s benefit.
Alongside the eviction of the Houston Chinese Consulate, the risk of the US-China conflict escalating into a Cold War is worrying, said Hayaki Narita of Mizuho Bank.
A speech by US Secretary of State Mike Pompeo’s saying that securing our freedom from the Chinese Communist Party is the mission of our time adds to the rhetoric certain to incense Beijing, making it still more difficult for either side to back down, he said.
And so, while the inevitability of deteriorating US-China relations as a structural feature of our geo-political landscape was never in doubt, the shifts appear to be hastened, Narita said.
In other Asian trading, the S&P/ASX 200 in Australia gave up 1.2 per cent to 6,021.40. South Korea’s Kospi shed 0.5 per cent to 2,202.81.
Analysts said investors also are wary over the unclear prognosis for further stimulus for the U.S. economy, just as the end of a previous package of extra support for those made jobless by the pandemic looms.
Republicans in the Senate were set to unveil their proposals for a USD1 trillion COVID-19 rescue package Thursday morning, but that got delayed. Finding a compromise with the Democratic-controlled House of Representatives could prove more difficult than it was in March, when Congress produced a USD2 trillion rescue package.
A report Thursday that the tally of American workers applying or unemployment benefits rose last week by 109,000 to a little more than 1.4 million broke a stretch of 15 straight weeks of improvements. That shook investor optimism that the recession might be shorter lived than expected.
The rise in unemployment comes as coronavirus counts continue to rise across much of the Sun Belt, leading to more business closures and the total number of confirmed cases has surpassed 4 million in the U.S.
The S&P 500’s 1.2 per cent drop, to 3,235.66, was its first loss in five days and its worst in nearly four weeks.
Technology stocks had the sharpest declines after a better-than-expected profit report from Microsoft failed to satisfy investors who were expecting even more. Because Microsoft is one of the largest U.S. stocks by market value, its movements have an outsized effect on indexes like the S&P 500.
The Dow Jones Industrial Average lost 1.3 per cent to 26,652.33. The Nasdaq composite fell 2.3per cent, to 10,461. Smaller stocks held up better, and the Russell 2000 index of small-cap stocks was virtually unchanged, adding 0.06 points to 1,490.20.
The yield on the 10-year Treasury was steady at 0.58 per cent, down from 0.59 per cent late Wednesday. It tends to move with investors’ expectations for the economy and inflation.
Gold for delivery in August lost USD 7.40 to USD 1,882.60 per ounce. It rose USD 24.90 overnight to settle at USD1,890.00 per ounce.
Benchmark U.S. crude advanced, gaining 4 cents to USD41.11 in electronic trading on the New York Mercantile Exchange. It gave up 83 cents to USD 41.07 per barrel on Thursday.
Brent crude oil for September delivery added 12 cents to USD 43.43. It fell 98 cents to USD 43.31 a barrel overnight.
In currency dealings, the dollar bought 106.39 Japanese yen, weakening from 106.86 yen. The euro rose to USD 1.1600 from USD 1.1596. (AP)