Wall St dips on US-China tensions, economic woes

Marco Green
May 23, 2020

India's Monetary Policy Committee unexpectedly cut interest rates to 4%.

USA stocks ended Friday mixed, but the Dow Joens industrial average still turned in its best week since early April.

As of 1225 BST, Dow Jones futures were down 0.30%, while S&P 500 and Nasdaq-100 futures had the indices opening 0.27% and 0.38% weaker, respectively.

The U.S. senate is moving to delist Chinese companies from U.S. stock market indexes in retaliation to the start of the coronavirus in China.

In New York, the Dow Jones industrial average was down 8.96 points at 24,465.16.

Tensions between the USA and China flared again after Beijing said it would impose new national-security legislation for Hong Kong.

While market watchers expect US President Donald Trump to continue to attack China as his re-election campaign heats up, investors are skeptical he will take action that threatens the trade detente with Beijing.

That proposal was unveiled after the Senate passed a bill earlier in the week that would potentially delist Chinese stocks from US exchanges.

Adding tariffs on Chinese goods would hit USA consumers and "the market is skeptical Trump will risk that before November", said Gregori Volokhine of Meeschaert Financial Services.

USA and China trade tensions flared as the Trump administration raised concerns about China's plan to impose a new security law in Hong Kong that threatens the autonomy of the city.

"Although both sides [U.S. and China] highlighted overnight progress on trade deal implementation and the intention to keep it going, the overall relationship is deteriorating fast", wrote Sebastien Barbe, the head of emerging-market research and strategy at Credit Agricole CIB. "The issue may well become a major drag on sentiment until US presidential elections in November".

Tensions between the world's two largest economies have risen in recent weeks, with Washington ramping up criticism of China over the origins of the coronavirus pandemic, raising fears the rhetoric could crimp economic growth. "We can put out the fires".

"After the shock of the Covid-19 lockdown, we have to go through a regular recession with high unemployment, low capex (capital expenditure), low demand and that's not what's priced in at the moment". "But we are not closing our country", he declared.

Dr. Fauci also said that now is the time to reopen the United States economy, albeit with significant social-distancing precautions. The Shanghai Composite dropped 1.89%; Hong Kong's Hang Seng plunged 5.56%; while Japan's Nikkei-225 slipped 0.8%.

Oil prices retreated, with USA benchmark West Texas Intermediate down about three per cent to trade at US$32.85 per barrel after threatening to breach the US$35 level earlier in the week.

Materials rose on higher gold prices.

The dollar index =USD rose 0.331%, with the euro down 0.42% to $1.0903.

Other reports by Click Lancashire

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