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- Global stocks plummeted on Friday as investors weighed in on tensions between the United States and China that worsened at an exponential rate.
- On Friday, China ordered the closure of a US consulate in its Chengdu city in retaliation for a request to close its own consulate in Houston.
- “This is a legitimate and necessary response to the unilateral provocative movement by the United States to demand the closure of the Chinese Consulate General in Houston,” the spokesman for the Chinese Foreign Ministry said in a tweet.
- Investors are seeing a serious escalation in tensions between the United States and China that go far beyond the risk of “simple tariffs” and an impending downturn in the US economy, analysts at Rabobank said.
- Shares in mainland China fell nearly 4%, while shares in Europe were 1% lower during the morning trade.
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World markets fell on Friday amid mounting geopolitical tensions between the United States and China, after Beijing ordered the closure of a US consulate in Chengdu city.
China’s Shanghai Benchmark Index fell 3.8% and Hong Kong’s Hang Seng fell 2.3%. S&P 500-linked futures fell 0.5% in European trade on Friday.
Stocks fell when China ordered the closure of the US consulate in its southwestern city of Chengdu and at the news that it could refuse to obey a request to close its consulate in Houston, Texas.
On the move, a Chinese Foreign Ministry spokesman said in a tweet: “This is a legitimate and necessary response to the United States’ provocative unilateral move to demand the closure of the Chinese Consulate General in Houston.”
Both unemployment numbers and slow progress in the upcoming US fiscal stimulus package are likely to have contributed to the fall in US stocks.
The latest unemployment claims in the United States, totaling 1.42 million, marked the first increase in 15 weeks. The number was above the estimated Bloomberg consensus of 1.3 million
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China’s order to close the Chengdu consulate followed an incendiary speech by US Secretary of State Mike Pompeo on Thursday, calling on “free nations” to triumph over China’s “new tyranny”.
“Today China is increasingly authoritarian in its country and more aggressive in its hostility to freedom anywhere else,” he said.
In response to his speech, the Chinese spokesman said: “What it is doing is as futile as an ant trying to shake a tree.”
Pompeo also reportedly said in a private meeting with UK politicians that the head of the World Health Organization, Tedros Adhanom Ghebreyesus, was “bought by the Chinese government.”
“Markets can now see a serious escalation in tensions between the US and China that goes far beyond the risk of mere tariffs; and an impending downturn in the US economy,” he said in a note.
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Here is the overview of the market as of 12.55pm in London (7.55am ET):
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