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Global Stocks Dip as Trade Hopes Falter

Global stocks skidded on Friday, ending a recent rally after comments from Chinese officials suggested an uncertain course ahead for trade talks with the U.S.

In Europe, the pan-continental Stoxx Europe 600 fell 0.6% in midday trading, putting it on course to cap a three-session run of gains.

London’s FTSE 100 fell 0.4%, less than its counterparts in Frankfurt and Paris, as stocks were supported by a weaker British pound, which has fallen against the dollar all week amid growing Brexit uncertainty. The British currency and the country’s blue-chip index often move in opposite directions.

Shares in food-delivery businesses slipped after Amazon.com said it would invest in the unlisted U.K. startup Deliveroo. British rival Just Eat saw shares fall 7%, while Takeaway.com and Delivery Hero shares fell around 4%.

Chinese indexes led Asian markets lower, with the Shanghai Composite falling 2.5% and Hong Kong’s Hang Seng falling 1.1%. Japan’s Nikkei bucked the trend with a rise of 0.9%.

Trade tensions also prompted a slide in the Chinese yuan, which fell 0.4% against the dollar.

On Wall Street, futures pointed to opening drops for both the S&P 500 and the Dow Jones Industrial Average of 0.4%. The S&P 500 rose 0.9% Thursday, while the Dow climbed 0.8% as robust earnings helped offset economic growth concerns.

Investors continued to focus on comments from Washington and Beijing on the state of trade talks after new U.S. tariffs marked a re-escalation of tensions and upended hopes the dispute was nearing a conclusion.

On Thursday, China’s Commerce Ministry contradicted comments from Treasury Secretary Steven Mnuchin that U.S. negotiators will hold further talks in Beijing at “some point in the near future.”

A Chinese spokesman said China “doesn’t have a grasp on the U.S. side’s plans to come to China for negotiations.” He then said the U.S.’s escalation of tariffs had “severely hampered” talks.

“The resurgent trade war is shaking markets,” said David Folkerts-Landau, Group Chief Economist at Deutsche Bank, adding that further tariffs would prompt a large market correction. “There is also the possibility of further escalation by the U.S. or a more combustible retaliation from China, either of which would further inflame tensions and elevate risks.”

Investors also worried that Beijing could target U.S. tech companies in China after President Trump signed an executive order banning Chinese telecommunications firms.

“President Trump’s latest executive order is more important than the current trade tussle in the medium to longer term” because of its potential impact on Chinese growth, said Geoffrey Yu, head of the U.K. Investment Office at UBS Wealth Management.

The rising likelihood of national elections in the U.K. was also concerning European investors after Prime Minister Theresa May on Thursday set out plans for her resignation and bipartisan Brexit talks collapsed Friday. Investors suspect Mrs. May’s replacement would be more in favor of a disruptive exit from the European Union, something most economists warn would harm trade and the nation’s economy.

The British pound has fallen against the dollar for five-straight sessions this week as questions over Mrs. May’s succession have grown. It was last down 0.3% at $1.2766.

U.S. government bonds were little changed, with the yield on the benchmark 10-year Treasury note at 2.385%. The WSJ Dollar Index, which tracks the dollar against a basket of currencies, was also flat.

In commodities markets, Brent crude oil rose 0.7% to $73.10 a barrel, while gold fell 0.1% at $1,285 an ounce.
Source: Dow Jones

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