LONDON (Reuters) - World stock markets stalled overnight as U.S.-China tensions over Hong Kong re-emerged on the eve of Thursday’s Thanksgiving holiday stateside.
Even though Wall St indices roared into the break setting another round of record highs after an upwardly-revised third quarter U.S. GDP reading, Asia markets were knocked back overnight after U.S. President Donald Trump’s signed into law congressional bills backing protesters in Hong Kong and threatening China with possible sanctions on human rights – moves which prompted an angry response from Beijing and warnings of “firm counter measures”.
How much the issue will affect broader trade talks between the world’s two biggest economies is the chief concern in markets, given that both sides had been signalling a “Phase One” agreement was imminent – or at least before the next round of U.S. tariffs kick in on Dec 15.
The bill signed overnight threatens to remove Hong Kong’s special economic status that has so far exempted it from wider tariff war between Washington and Beijing.
Adding to the trepidation overnight was news of a surprisingly large plunge in retail sales in Japan last month after the government introduced a sales tax. The larger-than-forecast 7.1% plunge in sales in the year through October was the biggest drop in 4-1/2 years. Dollar/yen rose to its highest level since May.
The net effect of the trade and economic news on stocks was to send Asia shares into the red, albeit modestly in the absence of U.S. markets on Thursday.
Shanghai and Seoul stocks underperformed with losses of about 0.4% each, Japan’s Nikkei and Hong Kong’s Hang Seng were off by less than that and Australia and New Zealand stocks touched new records in Wall St’s slipstream.
MSCI’s all-country world stock index stopped within a hair’s breadth of its all-time high, less than 0.2% from the record peak of January 2018.
In Europe, attention remained on the British election campaign. Sterling rallied overnight after the release of an opinion poll model from pollsters YouGov, which accurately predicted the 2017 election outcome, showed Prime Minister Boris Johnson is on course to win a sizeable majority of 68 in parliament in the Dec. 12 vote.
The pound jumped more than a cent from Wednesday’s lows to trade $1.2947 first thing as the election projection offset signs in other incoming polls of a narrowing lead for the Conservatives.
Data also showed that UK house prices rose by the most in seven months in November, according to Nationwide.
Elsewhere, European stocks fell 0.3% at the open in sympathy with the pullback in Asia. In emerging markets, Turkey’s lira regained some of its recent lost ground with data out showing that economic confidence improved to 91.3 points this month, its second straight month of gains.
On the European corporate news front, Remy Cointreau missed already lowered first-half profit expectations and that's seen pushing the French spirits group's shares 4% lower, according to traders.
Shares in the UK's Virgin Money jumped more than 10% at the open despite it suspending its dividend and reporting below-consensus profits. Traders said the confusing reaction was due to improved elements in the company's outlook.
Among UK small caps, Vitec, which supplies camera and lighting equipment, opened down after the company said unusually severe de-stocking is likely to hit 2019 results. Marine services provider James Fisher was called 3% to 5% down after a weak profit outlook.
Dealers expect shares of Italian infrastructure group Atlantia to take another hit today on chatter that Italy’s PD is may back the a proposal by the leader of the ruling 5-Star Movement, Luigi Di Maio, to revoke motorway concessions given to the firm. Shares are called down 2% to 3%.
— A look at the day ahead from EMEA Markets Editor Mike Dolan. The views expressed are his own —