TOKYO/NEW YORK (May 27): Asian shares slipped today as investor concerns about rising tensions between the US and China tempered optimism about a reopening of the world economy.
US President Donald Trump said last night he was preparing to take action against China this week over its effort to impose national security laws on Hong Kong, but gave no further details. Hong Kong shares led declines among major regional indices, with Hang Seng falling 0.46%, though it kept a bit of distance from a two-month low touched on Monday. MSCI's ex-Japan Asia-Pacific Index lost 0.12%, with mainland Chinese shares down a similar amount.
Japan's Nikkei was almost flat.
Worsening relations between the world's two biggest economies could further hobble global business activity already under intense pressure due to the Covid-19 pandemic.
E-Mini futures for the S&P 500 rose 0.4%, reclaiming the 3,000 chart level. The index cleared 3,000 points in Wall Street overnight before pulling back as some traders returned to the New York Stock Exchange (NYSE) floor for the first time in two months.
"The S&P 500 looked to be set to close above 3,000 until the late headline that the US was considering a range of sanctions on Chinese officials and businesses should China go ahead with its legislation regarding Hong Kong," analysts at the National Australia Bank (NAB) said in a note.
"The extent of those possible sanctions is uncertain," the analysts said.
China's plans to impose national security laws in Hong Kong have triggered the first big street unrest in the Asian financial hub since last year.
Overnight, hundreds of riot police took up posts around Hong Kong's legislature in anticipation of protests today.
Still, the index of world's 49 stock markets stood near two-and-a-half-month highs, having gained 2.6% so far this month on hopes of economic recovery in the developed world as countries ease social restrictions.
Economic data published yesterday showed US consumer confidence nudged up in May and new home sales beat expectations.
"We have seen a clear sign of rising expectations in economic recovery. Now we are beginning to see evidence of various stimulus supporting the economy," said Toshifumi Umezawa, a strategist of Pictet.
US Treasury yields retreated from lows, with 10-year yields at 0.692%, having risen about four basis points (bps) yesterday.
Gold prices rebounded from losses as some investors played it safe, with spot gold unchanged at US$1,710.90 (RM7,456.27) per ounce.
The retreat from risk led oil prices to give up earlier gains. US West Texas Intermediate (WTI) crude futures were down 1.2% at US$33.95 per barrel.