Asian markets down as Trump sparks China anger with HK law

by AFP / pic by AFP

HONG KONG – Asian markets mostly fell Thursday as optimism over the China-US trade talks took a jolt after Donald Trump signed into law a bill supporting Hong Kong’s pro-democracy protests, prompting an angry response from Beijing.

Global equities have been surging in recent weeks — with Wall Street hitting multiple records — on expectations the much-vaunted negotiations would result in a partial pact soon.

Trump on Wednesday put his name to the Hong Kong Human Rights and Democracy Act, which requires the president to annually review the city’s favourable trade status and threatens to revoke it if the territory’s freedoms are quashed.

He also agreed to legislation banning sales of tear gas, rubber bullets and other equipment used by Hong Kong security forces in putting down protests that have wracked the city since June and have battered its economy.

The president spoke of “respect” for his Chinese counterpart Xi Jinping and said he hoped all sides could “amicably settle their differences”.

Trump had seemed reluctant to sign the bill with the trade talks still ongoing, but with almost unanimous US congressional support for the measure, he had little political room to manoeuvre.

China hit out at the decision, calling it “extremely abominable”, and threatened “firm countermeasures”, though it did not specify what they would be. Hong Kong’s government expressed “extreme regret” at the move.

China’s foreign ministry summoned the US ambassador and lodged a protest. It called on the US to “refrain from putting the bill into practice, and immediately stop interfering in Hong Kong affairs and China’s internal affairs, so as to avoid further damage to China-US relations and bilateral cooperation in important areas”.

The signing, while not entirely surprising, spooked investors, who had been in an upbeat mood following a string of positive comments from both sides indicating the first part of a wider agreement was close.

“At such a delicate moment for trade talks this could tip the balance against agreement,” said Neil Wilson, chief market analyst at Markets.com.

‘The big question’
Hong Kong fell 0.2 % and Shanghai ended down 0.5 %, while China’s yuan was also slightly lower. Tokyo finished 0.1 % lower.

Singapore slipped 0.4 % and Seoul dropped 0.5 % while Taipei, Jakarta and Manila also retreated.

However, Sydney and Mumbai rose 0.2 % and Wellington added 0.8 % after data showed a pick-up in New Zealand business confidence.

AxiTrader’s Stephen Innes, added: “Now the big question is, does China decide to compartmentalise the Hong Kong issues away from the phase one deal. So that’s where the risk lies now.”

Wall Street had provided another record lead following figures showing US growth was faster than originally reported in the July-September period, easing concerns about the world’s top economy.

However, China remains under pressure, and a top government adviser on Wednesday warned the economy could expand less than 6 % this year. The government had fixed a growth target of between 6 % and 6.5% for 2019.

Worries about the trade talks also weighed on oil prices, with traders concerned that the prolonging of the China-US trade war would hit long-term demand.

On currency markets, the pound rallied after a much-anticipated opinion poll suggested Prime Minister Boris Johnson was on course to win a healthy majority in next month’s general election.

The huge YouGov poll, which predicted the surprise result of the 2017 election correctly, sparked buying in the pound on hopes a big Conservative party win would allow Johnson to push through his Brexit deal and avoid a no-deal EU divorce.

In early trade London fell 0.6 %, while Paris and Frankfurt each shed 0.4 percent.

Key figures around 0820 GMT
Tokyo – Nikkei 225: DOWN 0.1 % at 23,409.14 (close)

Hong Kong – Hang Seng: DOWN 0.2% at 26,893.73 (close)

Shanghai – Composite: DOWN 0.5 % at 2,889.69 (close)

London – FTSE 100: DOWN 0.6 % at 7,388.80

Euro/dollar: UP at $1.1009 from $1.0999 at 2150 GMT

Dollar/pound: UP at $1.2945 from $1.2899

Euro/pound: DOWN at 85.04 pence from 85.26 pence

Dollar/yen: DOWN at 109.45 yen from 109.55 yen

West Texas Intermediate: DOWN 27 cents at $57.84 per barrel

Brent North Sea crude: DOWN 17 cents at $63.89 per barrel

New York – Dow: UP 0.2 % at 28,164.00 (close)