Friday’s Stock Market Open: US Equities Fall On Mounting U.S.-Chinese Tensions

Friday’s Stock Market Open: US Equities Fall On Mounting U.S.-Chinese Tensions

KEY POINTS

  • China abandoned its policy of setting annual GDP targets
  • India’s Monetary Policy Committee unexpectedly cut interest rates to 4%.
  • Trump said U.S. will not close down if a second virus wave hits

U.S. stocks fell on Friday as worries about U.S. ties with China mounted on a number of fronts.

The Dow Jones Industrial Average fell 74.93 points to 24,399.19, while the S&P 500 slipped 7.99 points to 2,940.52 and the Nasdaq Composite Index dropped 19.68 points to 9,265.20.

China's Communist Party is preparing to introduce a controversial national security law for Hong Kong that will prohibit "treason, secession, sedition and subversion." Pro-democracy activists fear the new laws will erode Hong Kong's freedoms and autonomy.

Earlier this week, the U.S. Senate passed a bill that could lead to the delisting of Chinese stocks from U.S. exchanges.


Ed Mills, Washington policy analyst at Raymond James, said of the bill: “We believe there will be a significant push for the legislation to be taken up in the coming weeks, and we believe it is only a matter of time before this bill (or something similar) is signed into law.”

Trade relations between U.S. and China are also under scrutiny as President Donald Trump appears to be taking a more hardline stance against Beijing ahead of his re-election bid in November.

“Although both sides [U.S. and China] highlighted overnight progress on trade deal implementation and the intention to keep it going, the overall relationship is deteriorating fast,” wrote Sebastien Barbe, the head of emerging-market research and strategy at Credit Agricole CIB. “The issue may well become a major drag on sentiment until U.S. presidential elections in November.”

China’s National People’s Congress also abandoned its policy of establishing an annual target for economic growth due to uncertainties surrounding the coronavirus pandemic.

In the U.S. Trump said “we are not closing our country” if a second wave of coronavirus infections strikes the U.S. “We can put out the fires. Whether it is an ember or a flame, we are going to put it out. But we are not closing our country,” he declared.

“The future remains uncertain, and thus, we are not confident in saying a second wave cannot happen -- but the good news, there has yet to be a second wave in re-opened economies,” said Tom Lee, founder and head of research at Fundstrat Global Advisors. “We remain in the half-full camp and believe stocks offer pretty good risk/reward, even here.”

Overnight in Asia, markets finished lower. The Shanghai Composite dropped 1.89%; Hong Kong’s Hang Seng plunged 5.56%; while Japan’s Nikkei-225 slipped 0.8%.

In Europe markets finished in the red, as Britain’s FTSE-100 dropped 0.51%, while France’s CAC-40 rose 0.4% and Germany’s DAX gained 0.34%.

Crude oil futures fell 2.74% at $32.99 per barrel, Brent crude dropped 2.86% at $35.03. Gold futures gained 0.54%.

The euro fell 0.47% at $1.0899 while the pound sterling slipped 0.32% at $1.2181.