Summary:
- US Senate passes a bill supporting protesters in Hong Kong
- China warns it will retaliate once the bill becomes law
- Equities slide, yields drop, safe haven currencies gain
After long weeks the US Senate on Tuesday ultimately passed a bill aimed at supporting protesters in Hong Kong, a move which could make any trade agreement between the US and China yet more challenging. Let us notice that Beijing reiterated on Wednesday that it would retaliate (it has yet to specify what measures could be deployed) if the bill became law and it also urged Washington to stop meddling in Hong Kong affairs. On top of that, the government in Beijing expressed “extreme regret” over the bill, suggesting that it would negatively impact relations between Hong Kong and the US. Although the case concerns directly Hong Kong and the US, needless to say it will negatively affect relations between the US and China as well, at a time when both countries are striving to reach a phase-one trade agreement in order to avoid imposing fresh tariffs/rising the current duties. Moreover, Mike Pence said on Tuesday that it would be tough for the US to sign a deal with China if the demonstrations in Hong Kong are met with violence. This comment suggests fading odds to get a deal done in the nearest future.
A response to these events from financial markets was unambiguous - equities slid, US bond yields dropped and risk-related currencies moved down. Looking forward, the SP500 futures are pointing to a negative open later today. This thread will be closely followed by market observers as it may decide not only on further performance of various asset classes but on a state of the global economy next year too.
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The US500 has stopped climbing after approaching the upper limit of the bullish channel. Source: xStation5
