Stocks in Asia Pacific fell as tensions between the U.S. and China come under further strain. China is poised to impose a new national security law on Hong Kong after months of anti-government protests in the Chinese-ruled city. The move has sparked concerns that Beijing is tightening its grip on Hong Kong, and there are worries it could trigger another wave of pro-democracy protests. Hang Seng index led losses among the region’s major markets as it plummeted 5.5%, as of its final hour of trading. Shares in Australia also declined, with the S&P/ASX 200 closing 0.96% lower. The Hong Kong dollar was little changed near the top end of its narrow 7.75-7.85 band against the greenback.
European stocks traded lower as ties between the U.S. and China, potentially threatening the “Phase One” trade deal signed earlier this year. The pan-European Stoxx 50 dropped 1.6% in early trade, with banks plunging 3.1% to lead losses as all sectors and major bourses slid into the red. German and French indices opened much lower than yesterday’s close and the dollar rose 0.24% to $1.0901 per euro today, following a 0.3% increase in the previous session.
The dollar gained against major peers as rising diplomatic tensions supported safe-haven demand for the greenback. The dollar bought 0.9716 Swiss franc after posting its biggest gain in more than two weeks. Sterling fell to $1.2171 after data showed a plunge in British retail sales. The Australian dollar fell 0.5% to $0.6517. Across the Tasman Sea, the New Zealand dollar eased to $0.61. The fresh geopolitical strains also boosted the safe-haven yen up to 107.44 per against the greenback. Japan's currency also rose 0.6% against the Aussie and gained 0.4% against the kiwi due to safe-haven inflows.
Britain’s government borrowed more than it has done in any month on record in April, pushing up a measure of public debt to close to 100% of economic output, while retail sales fell by a record 18% as the coronavirus crisis hammered the economy. Britain’s economy could be facing a slower recovery from its deep coronavirus slump than the Bank of England suggested this month and all stimulus options, including sub-zero interest rates, should be considered, said the BoE deputy governor Ramsden. UK stock markets fell more than 1% today as a coronavirus-induced lockdown hammered retail sales in April, while Asia-focussed banks tumbled after China said it would impose new national-security laws on Hong Kong. The blue-chip FTSE 100 was down 1.8% to 5906.