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Investors seek safety on threat of wider US-China spat

Sterling hits lowest since January amid Brexit chaos

By Reuters - May 22,2019 - Last updated at May 22,2019

A Hikvision logo is seen at an exhibition during the World Intelligence Congress in Tianjin, China, on May 16, 2019 (Reuters file photo)

NEW YORK — Global equity markets slid on Wednesday as investors sought safety in bonds, the Japanese yen and Swiss franc amid renewed worries over the US-China trade standoff after reports the United States has another Chinese tech firm in its sights.

Relief over Washington’s temporary relaxation of curbs against China’s Huawei Technologies Co. Ltd. evaporated after reports that the White House is considering further sanctions on Chinese video surveillance firm Hikvision.

Fears of another blacklisting reinforced worries that US President Donald Trump is looking beyond sealing a trade deal with China to a potentially bigger battle aimed at curbing Beijing’s technology ambitions.

The yen and Swiss franc gained against the dollar and the price of the 10-year US Treasury note rose, but the decline in US and European equity markets was subdued.

“The market is still expecting a resolution or at least a modification of some of the worrying aspects out there about the trade relationship,” said John Vail, chief global strategist at Nikko Asset Management in New York.

Major central banks around the world still have accommodative monetary policies, which favours equities, he said.

“Clearly the situation is more fraught than it has been in the past,” Vail said. “But for the time being we’re still positive on equity markets globally.”

Asia-Pacific shares outside Japan closed 0.03 per cent higher, while Japan’s Nikkei rose 0.05 per cent.

The Chinese markets, which have endured a volatile few months, were on the backfoot. The Shanghai Composite Index closed down 0.5 per cent.

MSCI’s gauge of stock performance in 47 countries across the globe shed 0.20 per cent and the FTSEurofirst 300 index of leading Europeans shares fell 0.13 per cent.

On Wall Street, the Dow Jones Industrial Average fell 70.84 points, or 0.27 per cent, to 25,806.49. The S&P 500 lost 6.85 points, or 0.24 per cent, to 2,857.51 and the Nasdaq Composite dropped 20.32 points, or 0.26 per cent, to 7,765.40.

London’s FTSE 100 blue chips bucked the trend, rising 0.07 per cent as sterling slumped to lows last seen in early January amid renewed worries about the country’s messy exit from the European Union.

The pound fell 0.43 per cent to $1.2650, its lowest since early January, after Prime Minister Theresa May’s final gambit to get a divorce deal approved failed dramatically.

The dollar held near a one-month high ahead of the release of Federal Reserve meeting minutes, which may provide more clues on why the US central bank stood pat on interest rates earlier this month.

Investors sought havens in the Swiss franc, Japanese yen and German government bonds. 

The yen strengthened away from two-week lows against the dollar, rising 0.17 per cent to 110.30 yen, while the Swiss franc was higher against the euro and the dollar. The euro fell 0.04 per cent against the dollar to $1.1154.

In commodities, US West Texas Intermediate crude futures were down $1.25 at $61.88 per barrel after American Petroleum Institute data showed that US crude stockpiles rose unexpectedly last week.

Oil was also pressured by Saudi Arabia reiterating that it would aim to keep the market balanced and try to reduce tensions in the Middle East.

Brent crude futures lost $1.01 to $71.17 per barrel.

Benchmark 10-year notes last rose 10/32 in price to yield 2.3909 per cent. 

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