Trade War Escalates as Trump Confirms Hong Kong Bill into Law
On Wednesday evening in the United States, U.S. President Donald Trump signed the Hong Kon Human Rights and Democracy Act of 2019 into law, despite vehement protests from Beijing and promises for retaliation if the bill was passed into law. Trump also passed another bill which prohibits the sale of munitions to Hong Kong’s police force.
Beijing has told Washington to expected “firm counter measures” if the bills were passed, but Trump argued that the bills were passed “out of respect for President Xi, China, and the people of Hong Kong,” a vision that President Xi does not share. Trump added that he hopes that the people of China and Hong Kong will be able to settle their differences for the long term in a way that will create “prosperity for all.”
Asian markets were broadly lower on Thursday, despite record closes on Wall Street and rallies for many Asian indexes throughout the week. China’s Shanghai Composite saw the steepest declines, down 0.58 percent as of 2:32 p.m. HK/SIN. South Korea’s Kospi was down 0.41 percent. Japan’s Nikkei 225 was down 0.12 percent, and Hong Kong’s Hang Seng index was 0.12 percent lower. Wall Street indexes will be closed for the rest of the week in observance of the Thanksgiving holiday.
On Wednesday, the Japanese yen struck a six-month low against the U.S. dollar, but it rebounded on Thursday, trading up 0.08 percent. The dollar was trading at 109.47 in the mid-afternoon in Asia, as traders flocked to the safe haven yen on concerns that Trump’s passing of the bills would complicate the trade negotiations. Still, progress was limited thanks to positive data out of the U.S. which kept the yen from surging further.
Gold prices were also higher as traders flocked to the safe-haven asset, with gold futures up 0.13 percent to $1,462.70 per ounce. On the flip side, oil prices were lower, with traders concerned that demand would be weakened if the trade war intensifies. U.S. WTI futures were down 0.55 percent to $57.79 per barrel, and Brent crude futures were down 0.44 percent to $63.78 per barrel.
The Chinese offshore yuan fell 0.16 percent against the dollar in early trade, while the onshore yuan was fairly stable.