HONG KONG, Nov 28 — Asian markets mostly fell today as optimism over the China-US trade talks took a jolt after Donald Trump signed into law a bill supporting Hong Kong’s pro-democracy protests, prompting an angry response from Beijing.
Global equities have been surging in recent weeks — with Wall Street hitting multiple records — on expectations the much-vaunted negotiations would result in a partial pact soon.
Trump yesterday put his name to the Hong Kong Human Rights and Democracy Act, which requires the president to annually review the city’s favourable trade status and threatens to revoke it if the territory’s freedoms are quashed.
He also agreed to legislation banning sales of tear gas, rubber bullets and other equipment used by Hong Kong security forces in putting down protests that have wracked the city since June and have battered its economy.
The president spoke of “respect” for his Chinese counterpart Xi Jinping and said he hoped all sides could “amicably settle their differences”.
Trump had seemed reluctant to sign the bill with the trade talks still ongoing, but with almost unanimous US congressional support for the measure, he had little political room to manoeuvre.
China hit out at the decision, calling it “extremely abominable”, and threatened “firm countermeasures”, though it did not specify what they would be. Hong Kong’s government expressed “extreme regret” at the move.
China’s foreign ministry summoned the US ambassador and lodged a protest. It called on the US to “refrain from putting the bill into practice, and immediately stop interfering in Hong Kong affairs and China’s internal affairs, so as to avoid further damage to China-US relations and bilateral cooperation in important areas”.
The signing, while not entirely surprising, spooked investors, who had been in an upbeat mood following a string of positive comments from both sides indicating the first part of a wider agreement was close.
“At such a delicate moment for trade talks this could tip the balance against agreement,” said Neil Wilson, chief market analyst at Markets.com.
‘The big question’
Hong Kong fell 0.2 per cent and Shanghai ended down 0.5 per cent, while China’s yuan was also slightly lower. Tokyo finished 0.1 per cent lower.
Singapore slipped 0.4 per cent and Seoul dropped 0.5 per cent while Taipei, Jakarta and Manila also retreated.
However, Sydney and Mumbai rose 0.2 per cent and Wellington added 0.8 per cent after data showed a pick-up in New Zealand business confidence.
AxiTrader’s Stephen Innes, added: “Now the big question is, does China decide to compartmentalise the Hong Kong issues away from the phase one deal. So that’s where the risk lies now.”
Wall Street had provided another record lead following figures showing US growth was faster than originally reported in the July-September period, easing concerns about the world’s top economy.
However, China remains under pressure, and a top government adviser yesterday warned the economy could expand less than six per cent this year. The government had fixed a growth target of between six and 6.5 per cent for 2019.
Worries about the trade talks also weighed on oil prices, with traders concerned that the prolonging of the China-US trade war would hit long-term demand.
On currency markets, the pound rallied after a much-anticipated opinion poll suggested Prime Minister Boris Johnson was on course to win a healthy majority in next month’s general election.
The huge YouGov poll, which predicted the surprise result of the 2017 election correctly, sparked buying in the pound on hopes a big Conservative party win would allow Johnson to push through his Brexit deal and avoid a no-deal EU divorce.
In early trade London fell 0.6 per cent, while Paris and Frankfurt each shed 0.4 per cent.
Key figures around 0820 GMT
Tokyo – Nikkei 225: DOWN 0.1 per cent at 23,409.14 (close)
Hong Kong – Hang Seng: DOWN 0.2 per cent at 26,893.73 (close)
Shanghai – Composite: DOWN 0.5 per cent at 2,889.69 (close)
London – FTSE 100: DOWN 0.6 per cent at 7,388.80
Euro/dollar: UP at US$1.1009 from US$1.0999 at 2150 GMT
Dollar/pound: UP at US$1.2945 from US$1.2899
Euro/pound: DOWN at 85.04 pence from 85.26 pence
Dollar/yen: DOWN at 109.45 yen from 109.55 yen
West Texas Intermediate: DOWN 27 cents at US$57.84 per barrel
Brent North Sea crude: DOWN 17 cents at US$63.89 per barrel
New York – Dow: UP 0.2 per cent at 28,164.00 (close)