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Stock markets retreat as Trump triggers Chinese anger

AFP  |  London 

Stock markets mostly fell on Thursday as China-US trade talks took a jolt from a US law backing Hong Kong protests that has angered Beijing.

US President Donald Trump signed into law a bi-partisan bill that voiced support for the pro-democracy protests, prompting a sharp response from Chinese officials.

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

"European stock markets are in the red today as US-China trade tensions have ticked up a little on the back of President Trump signing the Hong Kong bill," said David Madden, analyst at CMC Markets UK.

"This is a new dimension to the US-China relationship, and it has the potential to derail the trade talks. Traders are fearful that China will lash-out at the US, which is why stocks are lower," he added.

The dollar dropped versus main rivals and oil prices were lower as well.

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.

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.

Wall Street had provided another record lead Wednesday 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 six per cent this year.

The government had fixed a growth target of between six and 6.5 per cent for 2019.

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

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, November 28 2019. 17:40 IST
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