Finance Update – China Adding Fuel To HK Fire

Asia

Chinese equities are marginally down this morning led by the Hang Seng’s -0.96% while the Nikkei is up a percent and a half and Australia’s S&P +1.79%.

Last week’s rallies ended after China proposed imposing national securityA documented and tradeable asset -mainly stocks and bonds, but also documented derivatives. legislation in Hong Kong, adding to investor concerns on top of the growing rift between China and the US.

The US, responding to the HK crackdown, added another 33 Chinese companies to its human rights violation blacklist.

HK Financial Secretary Paul Chan tried to calm investors, saying that the new laws would not affect the economic climate.

Meanwhile, across the sea, Japan is lifting the Tokyo lockdown and planning a $1 tn stimulus package, which is doing nothing to dampen public distrust in PM Shinzo Abe whose popularity rating is now under 30%.

Europe

European benchmarks closed mixed last week, the UK FTSE losing 0.37% and the Italian FTSE adding 1.34%.

German GDP figures for Q1 came in in-line with expectations with a 1.9% contraction (YoY) – 2.2% QoQ, landing the nation into a recession.

PMIs on Thursday came in better than expected, the UK’s manufacturing marker up from 32.6 in April to 40.6 in May.

Friday wasn’t as good for the kingdom, retail sales contracting by 22.6% (YoY) – 4 times worse than in March.

Americas

US indices also closed mixed last week, the DOW losing a fraction of a percent, the Nasdaq adding under a half.

The USD remained relatively unperturbed by Friday’s horrendous jobless claims figures – the continuing number soaring to 25 million and initial claims adding 2.44 mn.

Other US data on Thursday was not as bad, PMIs exceeding expectations at 39.8 (manufacturing) and 36.9 (services).

Home sales also added 4.33 mn in April.

Commodities

Hertz shares are down 7.3% after the company filed for bankruptcy protection on Friday following unsuccessful negotiations with creditors.

Corporate

US oil rigs continue to close, despite the recovery in oil prices, Baker Hughes registering 21 rigs less for the week. The culprit seems to be escalating US-Sino tensions which seem to be headed towards a renewed trade-war.

Gold is also down on tensions, losing a half percent during the Asian session, marking a $50 loss over the week since peaking last Sunday at 1778.