Market Close Aug 07

US bans for China apps, jobs data jitters hurt markets

Gold remains elevated after hitting new peak; Tencent tumbles after US bans WeChat; Investors brace for gloomy US jobs data

US bans for China apps, jobs data jitters hurt markets
An aerial view shows the massive damage done to grain silos at Beirut's port and the area round it on August 5, 2020, a day after a mega-blast tore through the harbour in the Lebanese capital with the force of an earthquake, killing 137 people and injuring about 5,000. The EU will hold a donor conference on Sunday to help the people of Beirut recover. Photo: AFP.

(ATF) Hong Kong: Financial markets are risk-off after a broadside by the United States against China Inc sparked concerns this could renew hostilities between the world’s two largest economies.

US President Donald Trump issued an executive order taking action against “the spread in the United States of mobile applications developed and owned by companies in the People’s Republic of China (China) continues to threaten the national security, foreign policy, and economy of the United States.”

Earlier, a government body recommended closer scrutiny of Chinese companies that are seeking listings on US stock markets. The US President’s Working Group on Financial Markets sought to “address risks to investors in US financial markets posed by the Chinese government’s failure to allow audit firms that are registered with the Public Company Accounting Oversight Board (PCAOB) to comply with US securities laws and investor protection requirements.”

It urged the SEC to accept the five recommendations regarding disclosures, due diligence and audit standards related to Chinese companies seeking a US listing.

Attention will now turn towards US non-farm payroll data, said Fiona Cincotta, a market analyst at data provider City Index, who warned that labour data released earlier in the week were harbingers of disappointment.

“Expectations are for 1.5 million new jobs to have been created in the US in July. This is down significantly from last month’s 4.8 million,” Cincotta said.

“Lead indicators this week from the ADP Payroll report and the employment subcomponent of the ISM non-manufacturing report have been disappointing and point to the recovery in the labour market stalling, hampered by a resurgence in coronavirus cases since mid-June.”

Japan’s Nikkei index eased 0.39%, Hong Kong’s Hang Seng benchmark slipped 1.6% and mainland China’s CSI 300 index slid 1.15%. Australia’s S&P ASX 200 benchmark retreated 0.62%.

Safe havens are in demand - gold stayed above $2,050 per ounce after hitting a new peak of $2,072 and US Treasuries advanced with the 10-year yield dipping a basis point to 0.52%.

The US dollar rebounded after falling to below 93 against a basket of currencies.

“The current sell-off in the USD also resonates with the one during the global reflation trade between January 2017 and February 2018, during which there was an intermittent upward correction to 95 from 91.4 in September-October 2017. With US data starting to surprise on the upside recently, it is prudent to be watchful of a possible correction ahead,” DBS Bank strategists said in a note.

Asian credit markets are steady with the Asia IG index flat at 67/68. Although no new mandates have been announced, companies with existing bonds are reopening outstanding debtBeijing Properties and E-House China are tapping their existing bonds.

ATF China Bond 50 Index: Flagship index retreats on Huawei sales hit

Also on Asia Times Financial

PBoC has plenty to say about 2020 

China exports rise as stimuli lifts global demand 

Trump imposes US ban on WeChat, TikTok

Motor industry struggles to shake off coronavirus impact 

Chinese chipmaker SMIC posts record Q2 revenue

Foreign Exchange:

Asia Stocks

# Japan’s Nikkei 225 eased 0.39%

# Australia’s S&P ASX 200 retreated 0.62% 

# Hong Kong’s Hang Seng index slipped 1.6%

# China’s CSI300 slid 1.15%

# The MSCI Asia Pacific index fell 0.47%.

Stock of the day

Chinese tech giant Tencent fell as much as 10.2% after US President Donald Trump announced a ban on US transactions with the company starting in 45 days. The executive order comes as the Trump administration said this week it was stepping up efforts to purge "untrusted" Chinese apps from US digital networks and called the Chinese-owned short-video app TikTok and messenger app WeChat "significant threats."