Hong Kong tensions build

Fragile relations between China and the US over China’s handling of Hong Kong are causing investors to tread with caution Friday ahead of Washington’s response to the situation, which is expected later today.

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Fragile relations between China and the US over China’s handling of Hong Kong are causing investors to tread with caution Friday ahead of Washington’s response to the situation, which is expected later today.

Add this into an economy that has already been eroded by coronavirus, Britain trying to resume Brexit talks but increasingly looking as if it will hit a deadlock next week, and domestic frictions in the US, and the result are sliding markets in Europe and lower US stock futures.

Investors are also taking profits off the table from FTSE-listed travel companies, airlines and related industries which have all powered higher this week when airlines announced their first flights in June. 

Worst hit was engine maker Rolls Royce, recently downgraded to junk status by S&P despite plans to cut 9,000 jobs. The British aircraft engine maker is not alone in the struggle to stay afloat but is symptomatic of the post-corona state of the European manufacturing industry as signalled by Renault’s sweeping cost-cutting plan that will include nearly 15,000 job cuts.

However, pharma stocks are gaining ground with GlaxoSmithKline planning to produce 1 billion doses of a vaccine booster by next year and AstraZeneca signing a deal with the University of Oxford for a developing vaccine.

Trade discussions back again

As the lockdown eases across Europe, US attention is moving back to some old issues which are being magnified by the fact that both regions are trying to dig themselves out of the economic damage created by the coronavirus. The European Commission plans to bring in over $20bn in trade tariffs on US imports of tractors, fruit, frozen fish and wine in retaliation to subsidies given to aircraft maker Boeing.

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