Stocks dropped Friday, led by Chinese technology firms, after a U.S. move to prohibit transactions related to WeChat stoked tensions. Treasuries and the dollar rose.
China and Hong Kong shares saw the bulk of losses, with WeChat operator Tencent Holdings Ltd. slumping more than 7%. The offshore yuan also retreated along with S&P 500 futures. President Donald Trump signed executive orders prohibiting U.S. residents from doing any business with WeChat, TikTok or the apps’ Chinese owners beginning 45 days from now, citing national security risks.
U.S. stocks had earlier closed higher after lawmakers pledged to keep working toward a coronavirus relief package, with Trump saying he could act unilaterally on some measures. The dollar edged higher but is still on course for a sixth week of losses.
Fresh U.S.-China turmoil threatens to derail this week’s rally in global shares. Better-than-forecast earnings and optimism on a coronavirus vaccine had helped lift a gauge of world equities to little changed for the year.
“The executive orders leveled on TikTok, and the scrutiny over WeChat has opened up a most unwelcome can of worms,” said Stephen Innes, chief global markets strategist at AxiCorp. This could “be more of a signal than anything else, especially front running the China trade talks” expected later this month, he said.
Concerns remain that negotiators won’t be able to resolve differences over a new U.S. relief package. The White House and congressional Democrats are up against a self-imposed Friday deadline to strike a deal as investors await more data on the state of the U.S. labor market.
Meanwhile, a high-powered U.S. panel recommended tightening the disclosure requirements for Chinese companies listed on American exchanges. On the virus front, data signaled that infections are picking up again in Europe, while modeling by the University of Washington saw the U.S. death toll almost doubling by December if the pandemic’s pace doesn’t change.
Howard Marks, co-founder and co-chairman at Oaktree Capital, the largest investor in distressed securities worldwide, warns the Federal Reserve and U.S. Treasury can’t keep stimulating the economy forever.
Source: Bloomberg
Here are some key events coming up:
- Germany’s June industrial production figures are scheduled for Friday.
- July U.S. jobs reports expected Friday.
These are some of the main moves in markets:
Stocks
- Futures on the S&P 500 Index dipped 0.4% as of 12:31 p.m. in Tokyo. The gauge rose 0.6% Thursday.
- Japan’s Topix index lost 0.5%.
- Hong Kong’s Hang Seng slid 2.3%.
- Shanghai Composite lost 1.5%.
- Australia’s S&P/ASX 200 Index declined 0.7%.
- Euro Stoxx 50 futures dropped 0.2%.
Currencies
- The Bloomberg Dollar Spot Index added 0.3%.
- The yen was at 105.55 per dollar.
- The offshore yuan slipped 0.3% to 6.9673 per dollar.
Bonds
- The yield on 10-year Treasuries fell two basis points to 0.52%.
- Australia’s 10-year yield dipped two basis points to 0.83%.
Commodities
- West Texas Intermediate crude was at $41.93 a barrel.
- Gold was at $2,065.01 an ounce, up 0.1%.
Source: Bloomberg