(Corrects FTSE decline in fourth paragraph to 1%.)
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
* MSCI All Country World Index down 0.16%
* Japanese yen in demand, up 0.5% vs. dollar
* Trump press conference on Hong Kong in focus
By Ritvik Carvalho
LONDON, May 29 (Reuters) - Global stock markets fell and
safe havens such as bonds and the Japanese yen gained on Friday,
as investors awaited Washington's response to China tightening
control over the city of Hong Kong.
China's parliament on Thursday pressed ahead with national
security legislation for the city, raising fears over the future
of its freedoms and its function as a finance hub.
U.S. President Donald Trump said he would hold a news
conference on China later on Friday. Trepidation about a further
deterioration in Sino-U.S. relations put investors on
edge. European stocks opened lower, with the pan-European STOXX
600 index .STOXX down 0.86%. Germany's DAX .GDAXI fell 1.2%,
Britain's FTSE 100 by 1% .FTSE and France's CAC 40 by 1%.
.EU Futures for the S&P 500 ESc1 slipped 0.4%. .N
Earlier in Asia, MSCI's broadest index of Asia-Pacific
shares outside Japan .MIAPJ0000PUS fell 0.2%. Japan's Nikkei
.N225 retreated from a three-month high and the yen rose to a
two-week high of 107.06 against the dollar. Bonds rose.
"The question is how far Trump will go at today's press
conference, as removing Hong Kong's favoured status would
probably spark negative market developments, hitting global risk
sentiment, which could backfire on the U.S. economy as it would
further deteriorate the relationship with China," said
strategists at Danske Bank in a note to clients.
Trump offered a muted response to Hong Kong's mass democracy
protests last year while pursuing a trade deal with China. But
ties with Beijing have since soured considerably through the
COVID-19 pandemic.
Hong Kong's government warned on Friday that withdrawing its
special U.S. status, which has underpinned it as a finance hub,
could be a "double-edged sword" and urged the United States to
stop interfering in its internal affairs. The Chinese yuan CNY= weakened in offshore trade. CNY/
Hong Kong's Hang Seng index .HSI was 0.8% lower and has
lost about 3% in the two weeks since news of China's security
legislation broke. .HK
In bond markets, yields on benchmark 10-year U.S. Treasuries
US10YT=RR fell to 0.6656%, more than 100 basis points below
where they began 2020.
MAY MARCHES ON
Despite the gathering tension and the near-daily release of
grim economic data, enormous global stimulus seems to have
propped up stocks. The S&P 500 .SPX is up 4% for the month and
on track for its best May since 2009.
A rally in the risk-sensitive Aussie dollar AUD=D3 is
slowing, but the currency has gained nearly 2% for the month and
sits 20% above March lows.
MSCI's All Country World Index .MIWD00000PUS , which tracks
stocks across 49 countries, is on track for a 3.5% gain this
week - its best weekly performance since April.
The optimism stems from signs of progress in the world
economy. The number of Americans seeking jobless benefits fell
for an eighth straight week last week and New York has outlined
plans for re-opening. "As we have said about the re-opening and ensuing recovery,
this is a process," said RBC Capital Markets' chief U.S.
economist, Tom Porcelli. "And right now the process is moving
along in the right direction."
The euro EUR= was headed for its best month since December
as the European Union's 750 billion-euro coronavirus recovery
fund fuelled optimism about the EU's political future. FRX/
It hit a two-month high of $1.1114 and last traded at $1.1106.
The dollar sank against a basket of currencies, down 0.2%.
=USD
Gold was up 0.1% at $1,720.27 an ounce. GOL/
Brent crude LCOc1 slipped 1.5% to $34.76 a barrel. U.S.
crude Clc1 fell 2.2% to $32.99 a barrel. O/R
Both contracts are headed for their biggest monthly gains in
years as production cuts and optimism about demand recovery led
by China supported prices.
London aluminium prices, which stayed flat on Friday, were
set for their strongest monthly gain since January 2019,
underpinned by a solid recovery in demand from top consumer
China. MET/L
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Recovery on course? https://tmsnrt.rs/2TQdG3s
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