Stocks edge lower as U.S.-China relations sour

Stocks edge lower as U.S.-China relations sour

The increasing rhetoric between Washington and Beijing has knocked Wall Street off multi-month highs, although the three main indexes still all rose around 3% for the week, fueled by optimism about an eventual coronavirus vaccine and the easing of virus-related curbs.

Enthusiasm over a coronavirus vaccine and the economy reopening was kept in check Friday, however, as tensions between China and the US rose.

Trading was subdued ahead of the Memorial Day holiday in the U.S. The pan-continental Stoxx Europe 600 retreated 0.4%.

Energy was the big loser on the day, falling 1.5 per cent on a lower crude oil price as Frontera Energy Corp. decreased 5.2 per cent. The gains came as investor optimism over a USA economic reopening counterbalanced renewed China concerns, capping off a volatile week of trading.

Beijing's decision to omit a formal target comes amid the sharpest contraction in four decades precipitated by a sudden halt in manufacturing activity because of the coronavirus pandemic.

Fears of a renewed trade war have cut short Wall Street's April rally and indices are now moving in a tight range, with fresh tariff actions likely to hamper a recovery from the economic shock of Covid-19.

Tensions between the United States and China flared again after Beijing said it would impose new national-security legislation for Hong Kong.

"The market had gotten kind-of used to dealing with the coronavirus and bad economic indicators, but potential disruption from a trade war is proving to be too much for sentiment", said David Madden, a market analyst at brokerage CMC Markets.

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The dollar strengthened as investors moved into haven assets, with the ICE US Dollar Index rising over 0.3%.

Prices for the 10-Year Treasury gained ground, lowering yields to 0.66% from Thursday's 0.68%.

Oil prices retreated, with USA benchmark West Texas Intermediate down about three per cent to trade at US$32.85 per barrel after threatening to breach the US$35 level earlier in the week. "But at the same time, demand is ticking up and supply is ticking down", as Asian countries reopen, he said.

Hewlett Packard Enterprise (HP) fell 8.4% after missing second-quarter revenue and profit estimates, hit by global lockdowns since February.

Amazon finished lower on Thursday after touching a record intraday high earlier in the day.

The Shanghai Composite Index closed at 2,813.77 points, down 54.15 points, or 1.89 percent. That could help stoke broader geopolitical tension, he said. "If we have a second freezing of the economy, then this market is grossly overvalued and the only people that are right now are the bears".

The resurgent U.S. -China standoff weighed on oil prices. The proceeds will be channeled to local governments to help boost employment, consumption and investment. However, the measures have disappointed some Chinese investors, since it meant less capital would flow into shares and property, he said.

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