World Stocks Ease Back On Trade Tensions

Analysts expect Hong Kong's economy to have fallen into recession in the third quarter as the city's key tourism and retail sectors are hammered by months of protests AFP / PHILIPPE LOPEZ

Global stock markets mostly dropped Thursday as China-US trade tensions resurfaced, with gloomy sentiment exacerbated by news of a recession in Hong Kong.

Analysts pointed to a Bloomberg article that Chinese officials are skeptical of a long-term trade deal with the United States as a drag on sentiment.

The Bloomberg report "has certainly taken some of the buzz out of the markets," Oanda analyst Craig Erlam told AFP.

A manufacturing indicator for the Chicago region also tumbled to its lowest in four years.

The Paris market was dogged by heavy losses for French auto maker PSA, whose stock tanked as investors remained unconvinced by a proposed mega-merger with the US-Italian Fiat Chrysler. Fiat's share price rose in Milan.

Corporate earnings disappointment hurt London stocks with sizeable falls for energy major Royal Dutch Shell, as well as lenders Lloyds Banking Group and Standard Chartered.

US stocks also declined, with the S&P 500 retreating from a record due in part to unease over the Federal Reserve's announcement the day before.

The US central bank cut interest rates but signaled it would hold off on further interest rate cuts.

"The market now is concerned we are still seeing some slowness," said Stephanie Lewicky, a senior manager of futures and forex at TD Ameritrade.

"And with Fed Chair Powell saying that we're probably going to pause for December, there's a little bit of concern."

Recession in Hong Kong

Investors dumped risky equities for safer assets after Beijing slammed US Secretary of State Mike Pompeo for a speech it said had "viciously attacked" China.

In the latest hawkish take on China by the Trump administration, Pompeo had Wednesday called Beijing "truly hostile" to the United States and vowed to ramp up pressure on China on multiple fronts.

"This deliberate distortion of the facts and slandering of China's domestic and foreign policies fully exposes the deep political bias and anti-communist mindset of a small number of US politicians," Foreign Ministry spokesman Geng Shuang said at a news briefing.

Hong Kong's stock market rallied by 0.9 percent but after the close came gloomy news of an official recession.

Official figures showed Hong Kong's gross domestic product in the third quarter shrank 3.2 percent from the previous quarter, which had already seen a drop of 0.4 percent.

The technical definition of a recession is two successive quarters of economic contraction.

The semi-autonomous Chinese city has been upended by nearly five months of huge, often violent, pro-democracy demonstrations with little end in sight as Beijing and city leaders adopt a hardline approach.

Clashes between protesters hurling bricks and petrol bombs at police wielding tear gas and rubber bullets have become a weekly occurrence.