World shares slip as China orders US consulate closed

MITO, Japan (AP) — Worsening China-United States (US) friction, worries over aid to Americans and US businesses and a stumble on Wall Street combined to push world shares lower yesterday.

Germany’s DAX fell 2.2 per cent to 12,814.51, while the CAC 40 in Paris skidded 2.1 per cent to 4,928.63. Britain’s FTSE 100 shed 1.5 per cent to 6,118.53. US markets looked set for a downbeat opening, with the future for the S&P 500 trading 0.5 per cent lower. The future for the Dow industrials also was down 0.5 per cent.

Trump administration officials escalated their public condemnations of China in the last several weeks, with speeches by FBI Director Chris Wray, Attorney General William Barr and Secretary of State Mike Pompeo.

Earlier this week, the US ordered the Chinese consulate in Houston, Texas closed. Yesterday, as expected, China’s Foreign Ministry ordered the closure of the US consulate in the western city of Chengdu.

Shanghai led regional declines, with its Composite index giving up 3.9 per cent to 3,196.77. The Hang Seng in Hong Kong lost 2.2 per cent to 24,705.33.

The latest dust up between the two biggest economies comes amid allegations of theft of US intellectual property — including by Chinese researchers with military and government connections — for Beijing’s benefit.

Screen show the Korean Securities Dealers Automated Quotations (KOSDAQ) and the foreign exchange rate at the foreign exchange dealing room in Seoul, South Korea. PHOTO: AP

“Alongside the eviction of the Houston Chinese Consulate, the risk of the US-China conflict escalating into a ‘Cold War’ is worrying,” said Hayaki Narita of Mizuho Bank.

A speech on Thursday by US Secretary of State Mike Pompeo’s saying that “securing our freedom from the Chinese Communist Party is the mission of our time” adds to the rhetoric certain to incense Beijing, making it still more difficult for either side to back down, he said.

“And so, while the inevitability of deteriorating US-China relations as a structural feature of our geo-political landscape was never in doubt, the shifts appear to be hastened,” Narita said.

In other Asian trading, the S&P/ASX 200 in Australia gave up 1.2 per cent to 6,024.10. South Korea’s Kospi shed 0.7 per cent to 2,200.44.

Analysts said investors also are wary over the unclear prognosis for further stimulus for the US economy, just as the end of a previous package of extra support for those made jobless by the pandemic looms.

Republicans in the Senate were set to unveil their proposals for a USD1 trillion COVID-19 rescue package on Thursday morning, but that got delayed. Finding a compromise with the Democratic-controlled House of Representatives could prove more difficult than it was in March, when Congress produced a USD2 trillion rescue package.

A report on Thursday that the tally of American workers applying or unemployment benefits rose last week by 109,000 to a little more than 1.4 million broke a stretch of 15 straight weeks of improvements. That shook investor optimism that the recession might be shorter lived than expected.

The rise in unemployment comes as coronavirus counts continue to rise across much of the Sun Belt, leading to more business closures and the total number of confirmed cases surpassed four million in the US.

The S&P 500′s 1.2 per cent drop, to 3,235.66, was its first loss in five days and its worst in nearly four weeks.

The yield on the 10-year Treasury was steady at 0.58 per cent yesterday, down from 0.59 per cent on Wednesday. It tends to move with investors’ expectations for the economy and inflation.

Gold for delivery in August rebounded, gaining USD2.90 to USD1,892.90 per ounce. It rose USD24.90 overnight to settle at USD1,890.00 per ounce.

Benchmark US crude fell back, giving up 29 cents to USD40.78 in electronic trading on the New York Mercantile Exchange. It lost 83 cents to USD41.07 per barrel on Thursday. Brent crude oil for September delivery fell 21 cents to USD43.10. It fell 98 cents to USD43.31 a barrel overnight.

In currency dealings, the dollar bought JPY106.24, weakening from JPY106.86. The euro rose to USD1.1611 from USD1.1596.