Asian shares and U.S. stock futures rose on Thursday as growing optimism about a global economic recovery from the coronavirus pandemic trumped immediate concerns about a standoff between the United States and China over Hong Kong. Australian shares rose 2.22% to the firmest in more than two months, while Japan’s Nikkei stock index .N225 rose 2.01% to the highest since late February as investors cheered the re-opening of economic activity in both countries.
U.S. stock futures, S&P 500 e-minis, rose 0.36% on Thursday in Asia following another positive session on Wall Street overnight, highlighting the optimistic mood.However, the biggest risk to equities is the Sino-U.S. relationship, which is likely to worsen after U.S. Secretary of State Mike Pompeo said Hong Kong no longer warranted special treatment under U.S. law.
The decline in Hong Kong stocks underscores some investors’ concerns about the strength of the recent rally in global equities. Pompeo said overnight that China had undermined Hong Kong’s autonomy so fundamentally that the territory no longer warranted special treatment, a potentially big blow to the city’s status as a financial hub. Some investors worry a punitive U.S. response to China on the issue of Hong Kong could result in a tit-for-tat reaction from Beijing, further straining ties between the world’s two biggest economies and further hobbling global growth.
Sources have said the U.S. government may suspend Hong Kong’s preferential tariff rates for exports to the United States, a far less severe response than formally revoking Hong Kong’s special status under U.S. law. President Donald Trump said he will announce a response to China’s policies towards Hong Kong later this week.
Source: Reuters
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