HSBC Slumps as US Weighs Moves to Punish Hong Kong Banks

Marco Green
July 11, 2020

The mood lifted Australia's S&P/ASX 200 1%, though New Zealand's benchmark fell almost 2% after a Rio Tinto plan to close an aluminium smelter hit energy stocks.

HSBC Holdings Plc, which draws more than two-thirds of its pretax income from Hong Kong, slumped in early trading after a report that the mulling a move to punish banks in the city and destabilize the currency peg to the dollar.

China's blue-chip index rose for an eighth straight session in early trade on Thursday, gaining 0.6% to touch a five-year high. MSCI's EM currency index was at a one-month high.

Both have added about 15% this month, and the rally continued in spite of a more circumspect take in Chinese media, which carried a commentary reminding investors about the 2015 crash and suggesting a rational approach to risk-taking. The index fell 0.6% on Thursday.Futures on Japan's Nikkei 225 declined 0.5%.Hang Seng futures slipped 0.8%.Futures on Australia's S&P/ASX 200 Index dropped 0.4%. Treasuries and the dollar rose.

"Rightly or wrongly, that market is liking the idea that the yuan can strengthen on the back of equity inflows".

They jumped by 9% on the month after diving by 24% in April, but economists had been hoping for a near 14% bounce and the numbers remained nearly 27% lower than their pre-crisis level in February, the Federal Statistics office said.

"The yuan has a flawless combination for a currency - relatively tight monetary policy; yield spreads moving in favour of the currency and equity prices also rising more than most", said Deutsche Bank's chief global strategist, Alan Ruskin.

Rising coronavirus cases and slower improvement in the U.S. jobs market amounted to a one-two punch for investors.

Standard Chartered fell 1.7% as of 10:54 a.m. and BOC Hong Kong lost 1.2%. The Australian dollar rose 0.2% to $0.6995, but - perhaps indicating a cap on exuberance - it was unable to break past resistance at $0.70.

Pompeo's remarks also come amid increasing U.S. Still, the tech-heavy Nasdaq advanced to a fresh record high.

The Japanese yen was little changed at 107.22 per dollar.

The yield on 10-year Treasuries fell three basis points to 0.59%.The yield on two-year Treasuries decreased one basis point to 0.14%.Germany's 10-year yield fell two basis points to -0.48%.Britain's 10-year yield declined two basis points to 0.141%.Japan's 10-year yield dipped one basis point to 0.025%.

Stocks fell on Friday as a buying frenzy in China cooled and concern resurfaced that a rising number of coronavirus cases will hurt the global economic recovery.

"Earnings season is upon us, and we really want to see what it looks like", said Jun Bei Liu, a portfolio manager at Australia's Tribeca Investment Partners. data due at 1230 GMT will offer the next checkup on the recovery's progress, followed by results next Tuesday from J.P. Morgan, Citigroup and Wells Fargo, then Microsoft and Netflix on Thursday.

Other reports by Click Lancashire

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