Stocks declined alongside US equity futures on Thursday as deteriorating Sino-American ties cast a cloud over the recent rally in risk assets. Treasuries advanced with the dollar.
The Stoxx Europe 600 Index erased Wednesday’s gain, with all 19 sector groups in the red. Contracts on the three main American equities gauges signalled a drop at the Wall Street open, a day after the US Senate overwhelmingly passed a bill that could bar some Chinese companies from listing on American exchanges.
President Donald Trump stoked tensions by tweeting criticism of Xi Jinping’s leadership, two days before the biggest Chinese political gathering of the year. Asian shares dipped and the Australian dollar sank, though the offshore yuan held steady.
Worries about resurgent US-China tensions and global coronavirus cases reaching 5 million are duelling for investor attention with optimism over reopening economies and progress on vaccines. AstraZeneca Plc received more than $1 billion in US funding to develop a Covid-19 vaccine. Meanwhile, the US legislation could lead to Chinese mega-companies such as Alibaba Group Holding Ltd. and Baidu Inc. being barred from listing on US stock exchanges. Both fell in American premarket trading.
“Markets may be pricing in far too much complacency as the US-China ‘phase one’ trade deal could be at risk,” said Stephen Innes, chief global market strategist at AxiCorp. “The pandemic and resulting acute economic downturn have made China’s trade commitment to the US much more challenging to fulfill.”
Elsewhere, crude oil climbed for a sixth day after a drop in US stockpiles.
The Stoxx Europe 600 Index fell 1% as of 9:25 am London time and France’s CAC 40 Index fell 1.4%. While Futures on the S&P 500 Index decreased 0.8%, Nasdaq 100 Index futures decreased 0.7% and the MSCI Asia Pacific Index declined 0.3%.
While the Bloomberg Dollar Spot Index jumped 0.3% to 1,244, the euro dipped 0.1% to $1.0966.
While the British pound dipped 0.4% to $1.22, the Japanese yen weakened 0.2% to 107.72 per dollar.
While the yield on 10-year Treasuries declined one basis point to 0.67%, Britain’s 10-year yield dipped three basis points to 0.203% and the spread of Italy’s 10-year bonds over Germany’s advanced two basis points to 2.126 percentage points.
While West Texas Intermediate crude climbed 1.2% to $33.88 a barrel, gold weakened to as much as 0.7% to $1,735.93 an ounce and LME nickel climbed 1.3% to $12,830 per metric ton.