Stocks rebound on relief at Trump’s response to China over Hong Kong

A gauge of global equities rebounded and crude oil rose on Friday after U.S. President Donald Trump ordered an end to Washington’s special treatment of Hong Kong, a move investors welcomed as unlikely to jeopardize a trade accord with China.

Trump said China broke its word over Hong Kong’s autonomy but did not mention any action that would undermine the Phase 1 trade deal that Washington and Beijing signed this year. China’s parliament on Thursday passed new national security legislation for the city, casting doubt on its freedoms and its future as a finance hub.

US stocks pared losses after Trump’s remarks and oil gained on hopes the dispute will not curb the economy’s nascent recovery from the coronavirus pandemic. Investors were worried about a further deterioration in Sino-U.S. relations, which have soured considerably through the COVID-19 pandemic.

MSCI’s gauge of stocks across the globe gained 0.05%. In Europe, the pan-regional STOXX 600 index lost 1.44%. Overnight in Asia, MSCI's broadest index of

Asia-Pacific shares outside Japan fell 0.2%. Japan's Nikkei retreated from a three-month high and the yen rose to a two-week high of 107.06 against the dollar, while bonds rose.

Data on Friday showed a record drop in US consumer spending for the second straight month and the highest-ever saving rate, reflecting high levels of economic uncertainty. Investors have been buying stocks as lockdowns have been lifted or eased, betting on a speedy recovery.

The S&P 500 gained around 4% for the month, making it the best May since 2009. MSCI’s All Country World Index, which tracks stocks across 49 countries, was up around 3.5% this week - its best weekly performance since April.

US crude oil prices jumped more than 5%, while Brent, the international benchmark, edged higher. U.S. crude futures rose $1.78 to settle at $35.49 a barrel, while Brent settled up 4 cents at $35.33 a barrel. Both contracts had their biggest monthly gains in years, supported by production cuts and optimism about demand recovery led by China.

This article was compiled by BOV Asset Management Limited, a member of the BOV Group. BOV Asset Management,TG Complex, Suite 2, Level 3, Brewery Str., Mriehel BKR 3000. Email: infoassetmanagement@bov.com Internet address: www.bovassetmanagement.com. BOV Asset Management is licensed by the MFSA.