Hong Kong unrest buffets global markets
Escalating violence in the city has stoked demand for the safe-haven yen and gold
London — Shares across the globe fell on Monday, buffeted by escalating violence in Hong Kong that pushed Asian stocks to their worst day since August and stoked demand for the safe-haven yen and gold.
In the 24th consecutive week of pro-democracy unrest, Hong Kong police shot and wounded a protester as the Chinese-ruled territory saw rare working-hours violence.
The MSCI world equity index, which tracks shares in 47 countries, slipped 0.2%, with Hong Kong’s Hang Seng index falling 2.7% and leading losses across Asia.
There, MSCI’s widest index of Asia-Pacific shares outside Japan fell 1.2% from six-month highs to set a course for its worst day since late August. Chinese blue chips dropped 1.8%.
The nerves spread to Europe, too.
The broad Euro Stoxx 600 fell 0.2%, with London shares slipping 0.6% ahead of British GDP data. Wall Street futures gauges were also set to suffer, suggesting losses of about 0.4%.
Some investors said markets risked being hit by any further escalation of the violence in Hong Kong, where protesters are angry about what they see as police brutality and meddling by Beijing in the freedoms guaranteed to the former British colony.
“At some stage, I think it will be likely that there will be a more fully fledged crackdown,” said Stéphane Barbier de la Serre, a strategist at Makor Capital Markets.
“And if you see a crackdown, you could see markets collapsing. For these reasons markets are complacent.”
The violence in Hong Kong sent investors running for assets perceived as safe havens and away from riskier currencies.
Gold rose 0.4%, rebounding from a three-month low touched on Friday to reach $1,463.49/oz.
The Japanese yen, which often strengthens in times of global political or economic turmoil, strengthened 0.3% against the dollar. China’s yuan, in contrast, weakened 0.3% to seven per dollar in offshore trade.
Investors were also focused on the US-China trade talks. After a bout of optimism last week over prospects for Washington and Beijing to reach an initial deal that would quell the worst of the 18-month old dispute, doubts over prospects for a resolution gnawed again.
On Saturday, US President Donald Trump said talks with China had moved more slowly than he would have liked. Trump said reports that the US was willing to lift tariffs were incorrect, adding that Beijing wanted a deal more than he did.
Still, some market players said Trump’s comments fitted an established pattern of optimistic rhetoric from the US president being followed by a more sceptical tone.
A deal was still likely, they said.
“It’s the usual two steps forward and one step backwards,” said Adam Cole, head of forex strategy at RBC Capital Markets.
“We are probably still moving in the direction [of a deal], and that’s the way the market is priced on balance ... the direction is still a positive one.”
The uncertainty over trade weighed on commodities markets commodities.
Oil lost nearly 1% on Monday, with concerns over trade looming and the worry on oversupply weighed on the market. Brent crude was down 54c, or 0.9%, at $61.97 by 7.45am GMT.
In Europe, Spanish government bond yields held their ground after a weekend election delivered a deeply riven parliament and set the stage for difficult talks to form a new ruling coalition.
The far-right surged in the poll, the fourth in as many years. Spain’s 10-year bond yield was flat at 0.40%.
Most other major bond yields across the eurozone were little changed on Monday, holding below highs reached on Friday as investors showed scant appetite for risk in the wake of the Hong Kong violence.
US bond markets were closed on Monday for the Veteran’s Day holiday.