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Asia markets plunge on trade fears after US passes HK rights bill

WT24 Desk

HONG KONG – Hong Kong led losses as Asian markets tanked on Thursday after US lawmakers passed a bill supporting the city’s civil rights, sparking fears it could derail delicate China-US trade talks, AFP reports.

Investors already nervous about the progress of negotiations were sent
running for the hills after both houses of Congress overwhelmingly agreed to the bill and sent it to be signed off by Donald Trump.

The Hong Kong Human Rights and Democracy Act requires the president to
annually review the city’s favourable trade status and threatens to revoke it
if its freedoms are quashed.

They also passed legislation banning sales of tear gas, rubber bullets and
other equipment used by Hong Kong security forces in putting down the
protests, which are now in their sixth month.

Beijing had already summoned a top US diplomat Wednesday over the Senate’s passing of the bill and warned of “strong” countermeasures against the United States should it be signed into law.

The White House has not threatened to veto the measure and Trump is
expected to sign it, according to a source familiar with the matter.

The move comes just as US and Chinese negotiators try to put the finishing
touches to a much-vaunted mini trade deal that is seen as the first part of a
wider agreement. Markets had been rallying in recent weeks on optimism it
will be signed off soon.

“China’s strong response to the Hong Kong bill news is something to be
taken seriously in terms of how it impacts on the trade discussions,” said
National Australia Bank’s Ray Attrill.

“Who knows where we land here? All we’d say for now is that we have a good idea where markets will reprice if and when a phase-one deal gets done and depending on whether it includes some tariff rollbacks.

“But what happens between now and then is frankly anyone’s guess.”

– Relations ‘permanently injured’ –

Hong Kong shares tanked two percent and Tokyo ended the morning session 1.2 percent lower, though Shanghai fell just 0.5 percent.

Sydney, Singapore, Seoul, Taipei and Manila also fell more than one
percent.

“It is clear that this pushes the Chinese negotiation and makes it
difficult. I think that’s one thing we can depend on,” David Kotok at
Cumberland Advisors told Bloomberg TV.

“I don’t see a trade deal coming. I think anything we get is minor, small,
and a long-term relationship between the US and China has been permanently injured.”

Adding to the downbeat mood was a Reuters report saying the partial trade
deal may not be completed before the end of the year.

And Trump said that while talks were ongoing, he felt no pressure to
strike a bargain, saying: “I don’t think they’ve stepped up.”

That came a day after he warned he could raise tariffs further on China if
the deal is not finalised.

The uncertainty caused a flight to safe-haven investments, with the yen —
a go-to unit in times of turmoil — rallying against the dollar, while the
greenback jumped across the board versus high-yielding currencies such as the South Korean won and Mexican peso.

Oil prices dipped on the trade worries, a day after surging on data
showing a smaller-than-forecast rise in US stockpiles. WTI piled on 3.4
percent and Brent climbed 2.4 percent Wednesday.

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: DOWN 1.2 percent at 22,872.03 (break)

Hong Kong – Hang Seng: DOWN 2.0 percent at 26,349.25

Shanghai – Composite: DOWN 0.5 percent at 2,896.72

Euro/dollar: UP at $1.1077 from $1.1072 at 2200 GMT

Pound/dollar: UP at $1.2927 from $1.2922

Euro/pound: UP at 85.69 pence from 85.67 pence

Dollar/yen: DOWN at 108.37 yen from 108.62 yen

West Texas Intermediate: DOWN 17 cents at $56.84 per barrel

Brent North Sea crude: DOWN 25 cents at $62.15 per barrel

New York – Dow: DOWN 0.4 percent at 27,821.09 (close)

London – FTSE 100: DOWN 0.8 percent at 7,262.49 (close)

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