Coronavirus: Markets fall on Hong Kong tensions and slow COVID-19 recovery fears

·Finance and policy reporter
·2-min read
President Donald Trump speaks as he tours Ford's Rawsonville Components Plant that has been converted to making personal protection and medical equipment, Thursday, May 21, 2020, in Ypsilanti, Mich. (AP Photo/Alex Brandon)
US president Donald Trump at a Ford plant as he ratcheted up tensions with the Chinese government. Photo: AP/Alex Brandon

European markets fell for a second day in early trading on Friday, with US-China tensions over Hong Kong and fears of slow economic recovery from the coronavirus denting stocks.

Britain’s FTSE 100 index (^FTSE) was trading 2.1% lower at around 8.15am in London, while France’s CAC 40 (^FCHI) and Germany’s DAX (^GDAXI) were both 1.4% lower shortly after the open.

US stocks also looked set to fall again after closing lower on Thursday. Futures tied to the S&P 500 (ES=F) and the Dow (YM=F) were down 0.8%, and Nasdaq futures (NQ=F) were trading 0.9% lower.

It comes after the Chinese government announced it would impose new national security legislation likely to curtail freedoms in Hong Kong, which could trigger a fresh wave of protests.

US president Donald Trump ratcheted up already-escalating tensions with China over the coronavirus in recent weeks by warning his administration would react “very strongly” to the move.

READ MORE: Fears of second wave of coronavirus and bleak PMI data hit European stocks

The financial centre’s Hang Seng index (^HSI) dropped 5.4% overnight to a seven-week low. China’s Shanghai Composite (000001.SS) fell 1.9%, and Japan’s Nikkei index (^N225) shed 0.8%.

The heightened diplomatic row adds to gloom triggered by weak economic data in Europe on Thursday, which brought a recent rally to an end.

A closely watched purchasing managers’ index (PMI) for the eurozone showed only a gradual easing in the pace of decline in activity among services and manufacturing firms. The headline figure on the index came in at a dire 30.5, on a scale where figures below 50 show decline, and above 50 show growth.

"Markets have essentially been range bound for more than a month now waiting for a new driver to emerge," said Mohamed El-Erian, chief economic advisor at Allianz.

He added that positive news on reopenings and vaccines were insufficient to compensate for the string of negative data and concerns about the sharpness of the recovery, Reuters reports.

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