US futures decline on China tensions; bonds advance

Bloomberg

American equity-index futures declined along with stocks in Europe and Asia after the US Senate passed legislation supporting Hong Kong protesters, drawing a rebuke from China and potentially complicating trade talks. Bonds gained.
Contracts on all three major US indexes declined, signalling a weak open in New York. The 10-year Treasury yield fell to a three-week low and the offshore yuan slipped after China’s threat of unspecified retaliation following the Senate vote. The dollar edged higher.
Miners and oil companies led the retreat in the Stoxx Europe 600 index, with all major regional benchmarks in the
red. Swedbank AB dropped after a report that American authorities are investigating possible breaches of sanctions against Russia by the Swedish lender.
Hong Kong shares fell along with Japanese and South Korean benchmarks. Australian equities saw the biggest declines, after allegations of financial crimes at Westpac Banking Corp. hit financial stocks. Oil steadied after plunging more than 3% on Tuesday.
The Senate vote marks a challenge to the government in Beijing just as the US and China seek to close a phase-one agreement to end their trade war. With no signing date set yet,
the standoff could complicate discussions.
Vice President Mike Pence said it would be tough for the US to seal a deal if the demonstrations in Hong Kong are met with violence.
Meanwhile, disappointing reports from US retailers reminded investors that the economy is not out of the woods. Japanese data on Wednesday showing a tumble in exports also underlined the global hit from the trade dispute. The release later of minutes from the last FOMC meeting may provide fresh insight into the Federal Reserve’s view.
“It’s a time for the thoughtful investor to be more cautious,” George Ball, chairman of Houston investment firm Sanders Morris Harris Group Inc, said on Bloomberg TV. “Even the best economy that you can think of is going to pull back, it has to happen. And I think it’s going to happen, in the US markets at least, fairly soon.”
US economic indicators due for release include initial jobless claims on Thursday. Federal
Reserve speakers this week
include district bank presidents Loretta Mester and Neel Kashkari.
European central bankers speaking this week include European Central Bank President Christine Lagarde, Bundesbank chief Jens Weidmann, along with Yves Mersch, Luis de Guindos, Pablo Hernandez de Cos and Philip Lane.
The Stoxx Europe 600 Index sank 0.9% in New York. Futures on the S&P 500 Index dipped 0.4%. The UK’s FTSE 100 Index fell 1.4%. The MSCI World Index of developed countries dropped 0.3%. The MSCI Emerging Market Index declined 0.4%.
The Bloomberg Dollar Spot Index gained 0.1%. The euro declined 0.1% to $1.1062. The British pound declined 0.2% to $1.2904. The Japanese yen strengthened 0.1% to 108.43 per dollar.
The yield on 10-year Treasuries declined four basis points to 1.74%. The yield on two-year Treasuries fell two basis points to 1.58%. Germany’s 10-year yield dipped four basis points to -0.38%. Britain’s 10-year yield sank four basis points to 0.689%. Japan’s 10-year yield decreased three basis points
to -0.106%.
West Texas Intermediate crude rose 0.3% to $55.35 a barrel. Gold strengthened 0.3% to $1,476.98 an ounce, the highest in two weeks.