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LONDON MARKET EARLY CALL: Lower Call As US-China Tensions Simmer

Fri, 7th Aug 2020 07:00

(Alliance News) - Stock prices in London are seen opening slightly lower on Friday, tracking falls in Asian equity markets, amid US-China tensions and as US lawmakers struggle to find agreement on an economic stimulus package.

IG futures indicate the FTSE 100 index is to open 12.84 points lower at 6,014.10. The blue-chip index closed down 77.78 points, or 1.3%, at 6,026.94 Thursday.

The Japanese Nikkei 225 index is down 0.7%. In China, the Shanghai Composite is down 1.9%, while the Hang Seng index in Hong Kong is down 2.0%.

"Global equity markets are bid into the Asia morning session, with fears of an extended gridlock in US fiscal negotiations that seemingly faded after the White House indicated immediate executive orders on extending unemployment benefits and imposing a payroll tax holiday. It is not clear if the US president can do this, but the pressure is now on the Democrats to agree to something. Clearing the fiscal malaise could drive a bear steepening in the US yield curve and might trigger a short-term correction in the US dollar and gold," said AxiCorp's Stephen Innes.

Republicans and Democrats have been holding talks for more than a week on the new package but with the Democrats' USD3.5 trillion proposal more than three times the size of the Republicans' offer, a deal appears a distant hope, despite a deadline being set for Friday.

"There are a lot of issues we are close to a compromise position on," Treasury Secretary Steven Mnuchin said after holding talks with House Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer.

However, he added they were "very, very far apart on some significant issues", while White House Chief of Staff Mark Meadows said: "The differences are still significant."

US President Donald Trump on Thursday also ordered that a ban on interacting with popular social media platform TikTok or its Chinese parent company take effect in 45 days. "The US must take aggressive action against the owners of TikTok to protect our national security," Trump said in an executive order.

After taking effect, the order will bar "any transaction by any person, or with respect to any property, subject to the jurisdiction of the US, with ByteDance Ltd" or any company in which it has an interest.

Trump's order contended the step is needed to "deal with the national emergency with respect to the information and communications technology and services supply chain".

The move, which comes into force in 45 days, is the latest salvo in a tech stand-off between superpowers the US and China and adds to a laundry list of issues they have butted heads over in recent months, including Hong Kong, Huawei and the coronavirus.

Elsewhere, Chinese Defense Minister Wei Fenghe warned his US counterpart in a phone call Thursday to avoid firing up bilateral tensions, a day after Washington angered Beijing by announcing it would send a senior official to visit Taiwan.

Wei told US Defense Secretary Mark Esper in a 90-minute phone call to "stop erroneous words and deeds" and "avoid taking dangerous moves that may escalate the situation," referring directly to Taiwan and the South China Sea, the Xinhua News Agency reported.

But Esper told Wei that China was undertaking destabilizing activity, according to the Pentagon, showing no sign of backing down as the US rejects China's claims of sovereignty in both areas

In the US on Thursday, Wall Street ended higher, with the Dow Jones Industrial Average up 0.7%, S&P 500 up 0.5% and Nasdaq Composite up 1.0%.

The pound was quoted at USD1.3120 early Friday, lower from USD1.3137 at the London equities close Thursday.

The euro was priced at USD1.1838, soft from USD1.1845. Against the yen, the dollar was trading at JPY105.57, flat from JPY105.51 in London.

Brent oil was quoted at USD44.88 a barrel Friday morning, down from USD45.37 at the London equities close Thursday. Gold was priced at USD2,058.24 an ounce, up from USD2,052.10 late Thursday.

In the UK corporate calendar on Friday there are half-year results from asset manager Standard Life Aberdeen, property portal Rightmove and drugmaker Hikma Pharmaceuticals, with annual results from stockbroker Hargreaves Lansdown.

Friday's economic calendar has German industrial production at 0700 BST. The main event is US nonfarm payrolls, due at 1330 BST alongside the unemployment rate and average hourly earnings.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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