Global stocks lower amid China tension with US, Australia

AP – Global stock markets declined yesterday after Japanese exports plunged and Chinese trade tensions with Washington and Australia worsened.

Investors were looking ahead to today’s meeting of China’s legislature for details of possible new steps by Beijing to stimulate its virus-battered economy.

London and Frankfurt opened lower. Tokyo, Shanghai and Australia declined after spending the day swinging between gains and losses.

Japan reported its exports fell 22 per cent in April from a year earlier in their biggest decline since the 2008 crisis. Forecasters said they expect more export weakness due to slumping United States (US) and European demand.

Investors are optimistic about the global outlook despite mounting infection numbers in the US, Brazil and other countries. But China’s conflicts with Washington and Australia over the coronavirus, trade and Beijing’s technology ambitions are adding to uncertainty.

China blocked beef imports from four Australian suppliers in possible retaliation for Australia’s support for an investigation into the origin of the coronavirus pandemic. Meanwhile, the Trump administration has stepped up a feud over Beijing’s industrial ambitions by tightening controls on use of US technology by tech giant Huawei.

A man wearing a face mask walks past a bank’s electronic board showing the Hong Kong share index at the Hong Kong Stock Exchange. PHOTO: AP

Investors are “trying to make heads or tails of the recent China trade spats with the US and Australia,” Stephen Innes of AxiCorp said.

In early trading, the FTSE 100 in London lost 0.9 per cent to 6,012.38 and Frankfurt’s DAX sank 1.5 per cent to 11,053.55. The CAC 40 in France declined 1.5 per cent to 4,430.18.

On Wall Street, the future for the benchmark S&P 500 index was down 0.8 per cent and that for the Dow Jones Industrial Average lost 0.7 per cent.

In Asia, the Shanghai Composite Index lost 0.6 per cent to 2,867.92 and the Nikkei 225 in Tokyo declined 0.2 per cent to 20,552.31. The Hang Seng in Hong Kong lost 0.5 per cent to 24,280.03.

The Kospi in Seoul gained 0.4 per cent to 1,998.31 and Australia’s S&P-ASX 200 lost 0.4 per cent to 5,550.40. India’s Sensex rose 0.7 per cent to 31,036.60. New Zealand was off 0.5 per cent and Singapore lost 0.1 per cent.

US stocks have been spurred higher by hopes for a potential vaccine and optimism the economy will recover in the second half as businesses reopen and stay-at-home orders are relaxed.

Investors are looking to Premier Li Keqiang’s speech to China’s ceremonial legislature today for details of Beijing’s spending plans to speed up economic recovery.

China was the first economy to begin reopening in March but has yet to join the US, Japan and other major governments in announcing stimulus spending plans. Chinese manufacturing has rebounded but consumer spending, the main growth driver, is weak.

Forecasters expect Beijing to channel extra money into job-creation efforts to head off a surge in unemployment and put money in consumers’ pockets.

“Renewed trade tensions between the US and China could weigh on markets in the coming months,” Esty Dwek of Natixis IM said in a report. “Higher volatility is likely, especially as ‘tough on China’ will clearly be a large part of Trump’s re-election campaign.”

Also yesterday, Korea reported trade fell 20.3 per cent in the first 20 days of May from the same period a year earlier, compared with April’s 26.9 per cent decline.

In energy markets, benchmark US crude rose 53 cents to USD34.02 per barrel in electronic trading on the New York Mercantile Exchange. The contract gained USD1.53 on Wednesday to USD33.49.

Brent crude added 41 cents to USD36.16 per barrel in London. It rose USD1.10 the previous session to USD35.75. The price of oil has made a comeback this month as producing nations cut output and the gradual reopening of economies drove up demand. Crude started the year at about USD60 a barrel but plummeted as demand sank due to travel and business shutdowns.

The dollar gained to JPY107.75 from Wednesday’s JPY107.71. The euro advanced to USD1.0973 from USD1.0960.