Stock markets retreat on trade concerns

THE numbers are on a downswing -- temporarily investors hope.

Stock markets slid lower Wednesday on revived concerns for a China-US trade deal after US lawmakers passed legislation to support Hong Kong civil rights, sparking anger in Beijing. On top of that, US President Donald Trump threatened higher tariffs on Chinese goods should a mini trade pact with Beijing fall through.

Oil prices were sharply higher meanwhile following two days of hefty losses, and the dollar gained ground against other major currencies on foreign exchange markets. Crude oil prices surged after a rise in US energy stocks turned out to be weaker than expected.

In New York, the Dow index was off by 0.3 percent in midday trading, while European markets had trimmed morning losses a bit by the close. On the corporate front, Chinese online retail titan Alibaba said it could raise almost $13 billion in Hong Kong’s biggest IPO for nearly a decade after announcing the pricing of shares for the mega sale.

In Washington, the US Senate adopted legislation Tuesday that supported “human rights and democracy” in Hong Kong and threatened to revoke its special economic status. China subsequently summoned a US diplomat and threatened counter-measures.

“The global trading wind changed direction on Wednesday with benchmarks across the world drifting lower,” noted ActivTrades analyst Pierre Veyret.

“This shift in investors’ trading stance was caused by the US Senate passing legislation supporting protesters in Hong Kong…. Most investors now fear it could significantly impair negotiations and the signing of a ‘phase-one’ deal with Beijing,” he added.

In addition, Trump raised the spectre of stiffer levies on Chinese goods, warning: “If we don’t make a deal with China, I’ll just raise the tariffs even higher.”

While observers expect both sides to eventually reach some sort of agreement as part of a wider pact, there have been several bumps in the road so far, undermining investor sentiment. “The announcement from the US president has hit stock markets” again, David Madden, analyst at CMC Markets UK, said on Wednesday.

“Recently we have seen the DAX (index in Frankfurt) at 22 month highs, and the (Paris) CAC 40 at a level last seen in 2007, so the threat from Trump has encouraged traders to exit the equity markets.”

London – FTSE 100: DOWN 0.8 percent at 7,262.49 points (close)

Frankfurt – DAX 30: DOWN 0.5 percent at 13,158.14 (close)

Paris – CAC 40: DOWN 0.3 percent at 5,894.03 (close)

EURO STOXX 50: DOWN 0.3 percent at 3,683.88

New York – Dow: DOWN 0.3 percent at 27,844.44

Tokyo – Nikkei 225: DOWN 0.6 percent at 23,148.57 (close)

Hong Kong – Hang Seng: DOWN 0.8 percent at 26,889.61 (close)