Stocks stumble when the HK bill impedes US-China trade

LONDON (Reuters) – Global equities slipped further on Thursday as the gap between the world's two largest economies went beyond trade, reducing the odds of a "phase-one" deal this year, forcing investors to seek shelter in safe harbor assets.

FILE PHOTO: German stock price index DAX graph is depicted on the Frankfurt Stock Exchange, Germany, November 14, 2019. REUTERS / Staff

The US House of Representatives on Wednesday passed two bills to support protesters in Hong Kong and send a warning to China on human rights.

With US President Donald Trump likely to sign the bill, Deutsche Bank strategist Jim Reid said this "could risk progressing toward a phase of a trade deal".

European stocks extended their losses from Wednesday with the pan-European STOXX 600 and trading-sensitive Germany's DAX 30 GDAXI, both slipping 0.7% to a fresh two-week low.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 1.1% to a near three-week low, with Hong Kong's Hang Seng .HSI falling 1.6% while Japan's Nikkei. N225 drops 0.5%. Chinese mainland shares fell 0.3% .SSEC.

US S & P500 futures ESc1 was down 0.2%, falling as much as 0.6% in Asian trading, a day after all three major indices fell, and the S&P 500. SPP lost 0.4% .

"The cracks in sentiment on the stock market widened slightly yesterday, although this downturn remains modest in the context of index gains enjoyed so far in Q4," said Ian Williams, an economics and strategy analyst at Peel Hunt.

S&P 500. SPPX had reached a record high as late as Tuesday in hopes of trading, but Washington's move to Hong Kong derailed the rally.

Trade experts and people near the White House said completion of a "phase one" US-China trade agreement could come next year as Beijing pushes for more comprehensive tolls, and the Trump administration counts with their own requirements.

Chinese Deputy Prime Minister Liu He, also the top trade negotiator, said he was "cautiously optimistic" at one stage of a deal, according to a Bloomberg report.


As the chances of a short-term deal faded, investors sought the security of government bonds, yen and gold.

Spot gold XAU = climbed 0.2% to $ 1,473.56 per ounce at 0852 GMT.

German government bonds give DE10YT = RR – which is reversed to price – stable for a day after hitting more than two weeks of lows. The 10-year US government bond dipped to 1.733% US10YT = RR, near the lowest level in three weeks.

On the other hand, the Chinese yuan hit a three-week low price, trading as low as $ 7.0450 to the dollar CNY = CFXS in land trading.

The dollar was soft against the yen at JPY 108.59, compared to this week's high of 109.07 touched on Monday. Japan's currency has risen almost 1% from more than five months' low hit against the greenback earlier this month.

"Our short-term strategy remains fairly cautious as markets are very narrowly driven – every positive news in trade negotiations sends markets higher, while all disappointment declines," said Marija Veitmane, Senior Strategist at State Street Global Markets.

"This makes it very difficult for investors to build positions in risk trading."

The euro won a bit and was last traded at $ 1.1077 EUR = before the release of the latest European Central Bank policy meeting minutes.

Meanwhile, oil prices dipped and pared some of their 2% gains made on Wednesday after a better-than-expected US commodity stock, which Russia said would continue its cooperation with OPEC to keep the market balanced.

Global benchmark Brent futures LCOc1 fell 0.5% to $ 62.08. The US West Texas Intermediate (WTI) crude futures CLc1 was down 0.5% to $ 56.73 a barrel early Thursday.

Additional Reporting by Hideyuki Sano, Editing by William Maclean

Our Standards: The Thomson Reuters Trust Principles.

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