SHANGHAI / NEW YORK (Reuters) – Asian stocks fell on Thursday as investor concerns over mounting tensions between Washington and Beijing outweighed hopes of further stimulus, after the United States ordered the closure of the Chinese consulate. in Houston amid allegations of espionage.
FILE PHOTO: A security guard wearing a face mask stands near the Bund Financial Bull statue and a screen showing an image of a medical worker following the new outbreak of coronavirus disease (COVID-19), in The Bund in Shanghai, China on March 18. 2020. REUTERS / Aly Song / File Photo
China said the order was an “unprecedented escalation” by Washington, and a source said Beijing was considering closing the US consulate in Wuhan in retaliation.
United States President Donald Trump said other consulate closings were “always possible.”
After rising earlier in the morning session, the broader MSCI index of Asian stocks, excluding Japan, was down 0.3%, slowed by the fall in Chinese stocks. The Shanghai benchmark index fell 1.67% after four days of gains.
Australian stocks held flat and Hong Kong’s Hang Seng Index reversed past gains to lose 0.08%.
Nikkei futures lost 0.13% to 22,755, with Japanese markets closed for the holidays.
S&P mini futures were down 0.08%.
A further escalation of Sino-US tensions was increasingly likely, said Kay Van-Petersen, global macro strategist at Saxo Capital Markets in Singapore.
“The biggest short-term risk for me … is that Trump goes further and breaks the Phase One deal,” he said.
But he said unprecedented stimulus measures to boost pandemic-affected economies would continue to provide structural support for riskier assets.
“The liquidity forces are unmatched … we are seeing what happened after the GFC, but we are seeing it on steroids,” he said.
“It is rare that you see monetary and fiscal policy activated, and when they are activated they only activate a little bit.”
Hopes for yet another round of US stimulus and solid corporate earnings propelled Wall Street overnight, even as Republicans and Democrats remain separate as to how much to spend on the next round of coronavirus relief.
The Dow Jones Industrial Average increased 0.62%, the S&P 500 gained 0.57%, and the Nasdaq Composite added 0.24%.
In the commodity markets, spot gold fell 0.3% to $ 1,865.84 per ounce, but remained close to a nine-year peak on Thursday, with prices rising nearly 23% on the year. Investors have flocked to safe haven as they seek refuge from a possible reversal in US equities.
Gold has been helped by a weak dollar, which remained in the depression near the lows of more than four months on Thursday, falling 0.05% to 94,965. The dollar remained flat against the yen at 107.14 and against the euro at $ 1.1568.
Oil was also little changed, with stable US crude at $ 41.90 a barrel and world benchmark crude Brent up a penny to $ 44.30 a barrel.
Reports by Andrew Galbraith and Elizabeth Dilts Marshall; Editing by Kim Coghill
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