(Bloomberg) — Asian stocks fell Friday, with the bulk of losses coming in Hong Kong, as China announced plans to impose a national security law on the city, which threatened to further escalate tension between Washington and Beijing. Treasuries climbed with the dollar.
Hong Kong’s Hang Seng fell over 4%. Losses were more modest in Tokyo and Sydney, while equity futures in Europe and the U.S. retreated. The yuan was steady as China’s National People’s Congress began with pledges to sell bonds and omit a GDP target for this year due to uncertainties stemming from the pandemic. Indian bonds rallied after the country’s central bank cut its policy rate in an unscheduled move.
Earlier, the S&P 500 closed lower, with signs mounting that President Donald Trump Trump will make his tough-on-China stance a key element of his re-election bid. China responded to accusations from Trump, warning that it will safeguard its sovereignty, security and interests, and threatened countermeasures.
Investors are parsing through initial details to come out of the NPC, China’s biggest political event of the year. Beijing is also preparing to impose national security legislation in Hong Kong, a show of legal force that could exacerbate tensions and threatened to reignite violent protests.
“The geopolitical risks are meaningful,” David Riley, chief investment strategist at BlueBay Asset Management LLP said on Bloomberg TV. “It’s a concern for the market, is a potential source of weakness and a correction.”
Meanwhile, the Bank of Japan kept its main policy rate while saying it will start a new lending program next month. India’s central bank chief is due to speak later Friday.
Elsewhere, crude oil fell about 5% in New York, while gold was steady. The Australian dollar dipped as Fitch Ratings Ltd. cut the country’s AAA credit rating outlook to negative.
These are some of the main moves in markets:
Stocks
S&P 500 futures fell 0.6% as of 1:46 p.m. in Tokyo. The S&P 500 fell 0.8% on Thursday.Japan’s Topix index fell 0.8%.Hong Kong’s Hang Seng dropped 4.6%.South Korea‘s Kospi fell 1.5%.Australia’s S&P/ASX 200 Index lost 0.7%.Euro Stoxx 50 futures were 0.7% lower.
Currencies
The yen rose 0.2% to 107.45 per dollar.The offshore yuan was little changed at 7.1408 per dollar.The euro bought $1.0930, down 0.2%.
Bonds
The yield on 10-year Treasuries slipped two basis points to 0.65%.Australia’s 10-year yield fell two basis points to 0.90%.
Commodities
West Texas Intermediate crude was at $32.08 a barrel, down 5.4%.Gold dipped less than 0.1% to $1,726 an ounce.
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