BANGKOK (AP) – Shares slipped in Europe and Asia yesterday, led by a nearly six per cent decline in Hong Kong after communist leaders in Beijing proposed legislation that could limit opposition activity in the former British colony.
For now, flaring tensions between the United States (US) and China over Hong Kong and other issues appear to have eclipsed optimism over moves to reopen many economies stalled by the coronavirus pandemic.
Germany’s DAX shed 1.4 per cent to 10,909.67 in early trading yesterday while the CAC 40 in Paris also lost 1.4 per cent, to 4,382.26. Britain’s FTSE 100 skidded 1.8 per cent to 5,906.69.
The future for the S&P 500 lost one per cent and the future for the Dow industrials also was down one per cent, auguring a weak open on Wall Street.
China’s National People’s Congress opened its annual session in Beijing and Premier Li Keqiang delivered a work report that promised CNY2 trillion (USD280 billion) in support for local governments to help them fight the pandemic and create jobs as the country struggles to revive growth.
Li told the gathering that Beijing would set no economic growth target in order to focus on fighting the disease. He warned that the battle against the pandemic isn’t over and urged the country to “redouble our efforts” to revive the economy.
Beijing’s move to take over long-stalled efforts to enact national security legislation in semi-autonomous Hong Kong spooked investors who have endured months of pro-democracy demonstrations last year that at times descended into violence between police and protesters.
The proposed bill is aimed at forbidding secessionist and subversive activity, as well as foreign interference and terrorism. Such proposals are certain to be approved by the largely ceremonial parliament.
“Traders around the world are playing the waiting game to see details of the new Hong Kong law to gauge how severe the terms are,” Stephen Innes of AxiCorp said in a commentary.
More specifically, he said, attention is on the US response to the possible impact on Hong Kong’s special economic status. Under the terms of Britain’s handover of control of the territory to Beijing, the city kept its own trade regime and finances and a legal system based on western-style civil liberties not enjoyed elsewhere in China.
The proposal, one of the most controversial items on the Chinese legislative agenda in years, has drawn strong rebukes from the US government and rights groups. On Thursday, the White House issued a report attacking Beijing’s economic policies and human rights violations, expanding on get-tough rhetoric President Donald Trump expects to resonate with voters ahead of the election in November.
Hong Kong’s Hang Seng index sank 5.6 per cent to 22,930.14 and the Shanghai Composite index dropped 1.9 per cent to 2,813.77.
Elsewhere in Asia, Japan’s Nikkei 225 index fell 0.8 per cent to 20,388.16 despite a pledge from the Bank of Japan (BoJ) to devote USD280 billion to banks for financing small and medium-size businesses battling economic hardships brought on by the coronavrius pandemic. The central bank said it will start providing the zero-interest, unsecured loans in June, expanding earlier stimulus measures.
In South Korea, the Kospi lost 1.4 per cent to 1,970.13, while Australia’s S&P/ASX 200 declined one per cent to 5,497.00.
India’s Sensex declined 1.2 per cent after the central bank cut the benchmark interest rate to four per cent, the lowest level in a decade, as its governor forecast the economy would fall into a contraction this year.
Shares also fell in Taiwan.
Overnight, there was further gloomy news on job losses, with the US Labor Department saying the number of people thrown out of work since the virus struck has climbed to nearly 39 million.
Despite a week of uneven finishes, Wall Street looks set to recoup its losses from last week after a strong rally on Monday that reversed all of the market’s losses for the month. The index is still down about 13 per cent from its high in February.
Oil prices fell back yesterday, with benchmark US crude losing USD2.40, or 6.5 per cent, to USD31.52 per barrel in electronic trading on the New York Mercantile Exchange. It closed higher on Thursday, the sixth day in a row, gaining 43 cents, or 1.3 per cent, to USD33.92 a barrel.
Brent crude oil, the international standard, declined USD2.06 to USD34.00 per barrel.
Crude oil started the year at about USD60 a barrel, but plummeted earlier this year as demand sank due to widespread travel and business shutdowns related to the coronavirus.