LONDON, May 22 — Wall Street opened lower after heavy losses for Hong Kong where China pushed for a national security law that has fanned geopolitical tensions and somewhat overshadowed optimism about easing coronavirus lockdowns in Europe and the United States.
After months of concentrating on the economic impact of the coronavirus, traders’ attention is once again also on China-US tensions, already exacerbated by US President Donald Trump’s constant criticism of Beijing’s handling of the pandemic.
On the first day of its rubber-stamp parliament, China unveiled proposals to strengthen “enforcement mechanisms” in Hong Kong, after the city was last year rocked by seven months of massive — and sometimes violent — pro-democracy protests.
There was criticism from Washington regarding the latest move, with the State Department saying it would be “highly destabilising, and would be met with strong condemnation from the United States and the international community”.
Hong Kong’s main stocks index closed down more than five per cent, with financials and property firms battered as investors fretted about the city’s economic future.
“Riots in the street and plummeting real estate markets might be the least of Hong Kong’s building wall of worry as this authoritarian national security plan will most certainly bring into question (the city’s) status as a global banking centre,” said Stephen Innes of AxiCorp.
US lawmakers have already passed legislation that would strip the city’s preferential trading status in the United States if it no longer enjoys autonomy from the mainland.
“The very real threat now is the return of mass protests to the streets of Hong Kong, a downgrade in trade status with the US and potentially an exit of large companies,” said Oanda analyst Jeffrey Halley.
After Chinese officials refrained from offering a 2020 growth target in light of the coronavirus, Wall Street sagged with the Dow Jones Industrial Average off 0.4 per cent five minutes into the session.
The broad-based S&P 500 and the tech-heavy Nasdaq shed 0.3 per cent.
London suffered modest losses mid-session while Frankfurt and Paris were just in positive territory two hours from the close.
The pound held up following official data, which as expected, showed a record drop in UK retail sales and unprecedented surge in government borrowing to £62 billion (RM329.3 billion) during April, the country’s only full-month of total lockdown.
Britain’s fiscal watchdog, the Office for Budget Responsibility, warned that was just an “initial taste” of the pandemic damage.
HSBC Global Research highlighted the “massive fiscal cost from Covid-19” while noting that the latest fiscal numbers are “eye-watering.”
Concerns about China-US tensions have taken away from news that more countries were edging out of virus lockdowns after new deaths and infections eased and observers said the worst of the pain for the global economy may have passed.
Still, the US reported another 2.43 million workers applied for unemployment benefits last week, bringing the total of newly jobless since the shutdowns began in mid-March to 38.6 million.
The fresh uncertainty also weighed on oil prices but WTI and Brent crude pared down initial losses of around 5 per cent and main contracts remained above US$30 (RM130) per barrel thanks to a huge cut in output by key producers and on hopes for increased demand as lockdowns are lifted.
Key figures around 1400 GMT
New York — Dow: DOWN 0.4 per cent at 24,375.39
London — FTSE 100: DOWN 0.8 per cent at 5,971.98 points
Frankfurt — DAX 30: UP 0.1 per cent at 11,080.02
Paris — CAC 40: UP 0.2 per cent at 4,454.90
EURO STOXX 50: DOWN 0.1 per cent at 2,903.96
Tokyo — Nikkei 225: DOWN 0.8 per cent at 20,388.16 (close)
Hong Kong — Hang Seng: DOWN 5.6 per cent at 22,930.14 (close)
Shanghai — Composite: DOWN 1.9 per cent at 2,813.77 (close)
West Texas Intermediate: DOWN 0.2 per cent at US$32.71 per barrel
Brent North Sea crude: DOWN 0.2 per cent at US$33.61 per barrel
Euro/dollar: DOWN at US$1.0896 from US$1.0949 at 2100 GMT
Dollar/yen: DOWN at 107.58 yen from 107.60 yen
Pound/dollar: DOWN at US$1.2176 from US$1.2223
Euro/pound: DOWN at 89.45 pence from 89.57 pence — AFP
