LONDON / SYDNEY (Reuters) – Global stocks slid further from the five-month spikes on Friday, as a pickup in European trading activity did little to ease concerns surrounding Sino-US tensions, while gold it approached a record high.
FILE PHOTO: The London Stock Exchange Group offices are seen in the City of London, Great Britain, on December 29, 2017. REUTERS / Toby Melville
The mood darkened after Beijing ordered the United States to close its consulate in Chengdu, in retaliation for having been ordered to close its consulate in Houston earlier this week.
“An escalation in tensions between the US and China is worrying that could have enormously negative consequences for the leadership of the stock market, particularly for the US technology giants,” said the analysis of international markets and ideas from Stephen Innes, chief global market strategist at AxiCorp.
“Furthermore, if President Trump takes the free pass to China, and things could get pretty ugly over the weekend as traders will have no choice but to reduce risk.”
Unsurprisingly, the Chinese blue chips led the falls, retreating 4.4%, eliminating a week of gains.
European stocks were on their way to their worst day in a month, with the Euro Stoxx 50 pan-euro region falling 1.9%.
Tech stocks made losses, following their US peers overnight, while the China-sensitive basic materials sector lost 2.4%.
MSCI’s broader index of Asia Pacific stocks outside Japan lost 1.9%. Tokyo was closed for the holidays, but Nikkei futures were trading 1% less.
E-Mini futures for the S&P 500 fell 0.8%.
(GRAPHIC: tensions between the United States and China, here)
Investors were little consoled by data from the Purchasing Managers Index (PMI) which showed that eurozone business activity rebounded in July as more parts of the economy that were blocked from slowing down the spread of the coronavirus reopened.
British companies experienced the fastest rebound in five years during July and data from the United States follows later in the day.
The market’s stubborn optimism about the economic recovery had been questioned Thursday by data showing that the number of Americans applying for unemployment benefits unexpectedly increased last week for the first time in nearly four months.
The euro was at $ 1,16020, near its highest level since October 2018, after enjoying a winning streak throughout July, as the European Union’s approval of a € 750 billion recovery fund restored the trust.
The yen rose 0.6% to 106.25, its highest level since June 23.
The Chinese yuan, a barometer of Sino-US tensions, appears poised for its worst week in three months. It fell 0.2% to 7.0276 per dollar in the offshore market.
The yield on Italian 10-year bonds held steady at around 1.05%, holding close to Thursday’s 4½-month low at 1.04%. The yield on the German Bund was slightly lower on Friday at -0.49%.
The combination of super loose money and negative real bond yields has polished the appeal of gold, which pays no return but is limited by supply.
The precious metal last lasted at $ 1,894.23 an ounce for its biggest weekly gain in more than three months as it held steady near a nine-year high.
Analysts at RBC Capital Markets noted that holdings of gold-backed exchange-traded products had already reached record highs.
“COVID-19’s level of uncertainty, low and negative real and nominal rates, politics and geopolitics have driven gold prices considerably higher, and have driven allocations among investors more and more,” they said in a note.
Oil prices were ending the week on a flat note as they failed to hold a five-month high as concerns about global demand offset a weaker US dollar.
Brent crude fell 1 cent to $ 43.30 a barrel, while US West Texas Intermediate (WTI) crude rose 1 cent to $ 41.08.
Graphic by Vidya Ranganathan; Editing by Toby Chopra
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