The Friday Market Minute
- Global stocks slump as China moves to tighten its grip on Hong Kong in the latest incident of rising tensions between Washington and Beijing.
- China will bring new security legislation to the National People's Congress this week, while Hong Kong's leaders have said they'll support the move to give more control to the Chinese Communist Party.
- Oil prices tumble as China drops its annual GDP target for the first time since 1990 as the world's second-largest economy staggers from the affects of the coronavirus pandemic.
- The U.S. dollar posts solid flight-to-safety gains in overnight trading, while benchmark 10-year Treasury note yields fall to 0.641%.
- U.S. equity futures suggest a flat open on Wall Street ahead of before-the-bell earnings from Deere & Co, Foot Locker and Campbell Soup.
U.S. equity futures slumped lower Friday, while global stocks traded sharply in the red and oil prices plunged, as China moved to tighten its grip on Hong Kong in what could be the latest escalation of dangerous tensions between Washington and Beijing.
Stocks were given some support, however, by comments from Dr. Anthony Fauci, who told NRP's Morning Edition program that data from Moderna Inc.'s (MRNA) - Get Report phase 1 coronavirus vaccine study was 'really quite promising'.
Chinese officials have said they're ready to bring new legislation to the National People's Congress, which starts this week, that would give Beijing more control over security in the semi-autonomous region of Hong Kong.
President Donald Trump said the U.S. would "address that issue very strongly", raising yet another area of concern for relations between the world's two largest economies following intense criticism of Beijing's handling of the coronavirus outbreak earlier this year.
Investors were further unsettled by China's decision to drop its economic growth targets for the year, for the fist time since they were established in 1990, following a first quarter GDP contraction of 6.8% and the ongoing trade and investment uncertainty linked to the global pandemic.
Hong Kong shares plunged more than 5% on the session, pulling regional markets deeply in the red and setting up weaker opens in Europe and on Wall Street.
Futures contracts tied to the Dow Jones Industrial Average suggest little change for the 30-stock average at the start of trading, while those linked to the S&P 500 are primed for modest gain to close out the week.
The U.S. dollar index, which tracks the greenback against a basket of six global currency peers, was marked 0.37% higher in safe-haven trading overnight at 99.744. while benchmark 10-year Treasury note yields fell to 0.641% as investors pulled money from risk markets around the world.
Oil prices also tumbled alongside the political drama, with traders also citing China's decision to abandon GDP targets -- which could correspondingly sap demand from the world's biggest energy importer -- for the sharp Friday pullbacks.
Brent crude contracts for July delivery, the global benchmark, were seen $2.15 lower at $33.91 per barrel while WTI contracts for the same month -- the new U.S. benchmark -- slumped $2.31 lower to $31.61 per barrel.
European stocks were also firmly on the back foot, lead to the downside by U.K. banks such as HSBC and Standard Chartered, both of which have significant exposure to both Hong Kong and the broader Asia region, as well as Germany's trade-sensitive DAX performance index.
Britain's FTSE 100 was marked 1.8% lower in early London trading, while the region-wide Stoxx 600 fell 1.35% and the DAX was last seen 1.2% lower in Frankfurt.
Asia stocks were also nursing heavy losses over the Friday session, with Hong Kong's Heng Seng index tumbling 5.56% to a seven-week low and China's benchmark Shanghai Composite falling 2.3% by the close of trading.
Japan's Nikkei 225 was marked 0.8% lower on the session at 20,388.16 points while the region-wide MSCI ex-Japan benchmark was last seen 2.8% lower heading into the final hours of trading.