LONDON: Global stocks slid further on Thursday as the standoff between the world’s two largest economies extended beyond trade, reducing the odds of a “phase-one” deal this year and forcing investors to seek shelter in safe-haven assets.
The US House of Representatives on Wednesday passed two bills intended to support protesters in Hong Kong and send a warning to China about human rights.
With US President Donald Trump seen likely to sign the bill, Deutsche Bank strategist Jim Reid said this “could risk progress towards a phase one trade deal”.
European shares extended their losses from Wednesday with the pan-European STOXX 600 and the trade-sensitive Germany’s DAX 30 both sliding 0.7 per cent to fresh two-week lows.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.1 per cent to a near three-week lows, with Hong Kong’s Hang Seng tumbling 1.6 per cent while Japan’s Nikkei dropped 0.5 per cent. Chinese mainland shares dropped 0.3 per cent.
US S&P500 futures were down 0.2 per cent, having dropped as much as 0.6 per cent in Asian trade, a day after all three major indexes fell, with the S&P 500 losing 0.4 per cent.
“The cracks in equity market sentiment widened a little further yesterday, although this setback remains modest in the context of the index gains enjoyed so far in Q4,” Ian Williams, economics & strategy research analyst at Peel Hunt, said.
The S&P 500 had hit a record high as recently as Tuesday on trade deal hopes, but Washington’s move on Hong Kong derailed the rally.
Trade experts and people close to the White House said completion of a “phase one” US-China trade deal could slide into next year, as Beijing presses for more extensive tariff rollbacks, and the Trump administration counters with demands of its own.
Chinese Vice Premier Liu He, also the chief trade negotiator, said he was “cautiously optimistic” on a phase one deal, according to a report by Bloomberg.
CAUTIOUS As the chances of a deal in the near-term faded, investors sought the safety of government bonds, the yen and gold.
Spot gold climbed 0.2 per cent to $1,473.56 per ounce as of 0852 GMT.
German government bond yields -- which move inversely to price -- steadied a day after hitting more than two week lows. The 10-year US Treasuries yield dipped to 1.733 per cent, near its lowest levels in three weeks.
On the other hand, the Chinese yuan hit three-week lows, trading as low as 7.0450 to the dollar in onshore trade.
The dollar was soft against the yen at 108.59, compared to this week’s high of 109.07 touched on Monday.
Japan’s currency has rallied almost 1 per cent from more than five-month lows hit against the greenback earlier this month.
“Our short-term strategy remains fairly cautious, as markets are very narrowly driven every positive piece of news in trade negotiations sends markets higher, while any disappointment sinks,” Marija Veitmane, Senior Strategist at State Street Global Markets said.
“This makes it very hard for investors to build positions in risk trades.” The euro gained slightly and was last trading at $1.1077 ahead of the release of the latest European Central Bank’s policy meeting minutes.
Meanwhile, oil prices dipped, paring some of their 2 per cent gains made on Wednesday after a better-than-expected US crude inventories report and as Russia said it would continue its cooperation with Opec to keep the market balanced.
Global benchmark Brent futures dropped 0.5 per cent to $62.08. US West Texas Intermediate (WTI) crude futures were down 0.5 per cent at $56.73 per barrel in early Thursday trade.