European stocks, futures fall on rising US-China tensions

Bloomberg

Futures on the S&P 500 Index dropped with European stocks after China said the US ordered the closure of its consulate in Houston, further stoking tensions between the two countries. Treasuries edged higher and the dollar erased a loss.
The yuan weakened after a Chinese Foreign Ministry spokesman said the move was unilaterally initiated by the US and China would “react with firm countermeasures” if Washington didn’t “revoke this erroneous decision.” It wasn’t immediately clear what spurred the action from the Washington. Hong Kong shares deepened their decline. Gold held near $1,850 an ounce, while silver retreated from its highest level in about seven years.
Fresh tensions between the two superpowers adds to potential risks weighing on investors with global equities sitting near a five-month high. After the success of a European rescue package this week, Senate Republicans and the Trump administration are struggling to reach consensus on another stimulus plan. The president warned the coronavirus crisis will probably worsen before improving.
“I’m more concerned going into the August, September period: what’s going to then be the next catalyst to take the broader market higher,” Andrew Sheets, a cross-asset strategist at Morgan Stanley, said on Bloomberg TV. It’s going to be “a tougher period for stocks,” he said.
Elsewhere, oil in New York eased from a four-month high on signs of a surprise gain in US crude stockpiles.
While futures on the S&P 500 Index decreased 0.3% as of 9:17 am London time, the Stoxx Europe 600 Index fell 0.7%. The MSCI Asia Pacific Index fell 0.9% and the MSCI Emerging Market Index dipped 0.6%.
While the Bloomberg Dollar Spot Index was little changed, the euro was little changed at $1.1525. The British pound fell 0.5% to $1.2666 and the onshore yuan weakened 0.3% to 7.002 per dollar. The Japanese yen also weakened 0.2% to 106.99 per dollar.
While the yield on 10-year Treasuries sank one basis point to 0.59%, the yield on two-year Treasuries decreased less than one basis point to 0.14%. Germany’s 10-year yield declined one basis point to -0.47%.
While Britain’s 10-year yield fell one basis point to 0.127%, Japan’s 10-year yield dipped one basis point to 0.019%.
While West Texas Intermediate crude declined 0.9% to $41.53 a barrel, Brent crude dipped 0.7% to $44.01 a barrel and gold strengthened 0.5% to $1,851.17 an ounce.