By Musa Sunusi Ahmad
Global markets slid on Friday amid mounting geopolitical tensions between the US and China, after Beijing ordered the closure of a US consulate in the city of Chengdu.
China’s benchmark Shanghai index fell 3.8% and Hong Kong’s Hang Seng dropped 2.3%. Futures tied to the S&P 500 fell 0.7% in European trade Friday.
Stocks fell as China ordered the winding down of the US consulate in its southwestern city Chengdu and on news that it might refuse to obey a request to shut down its consulate in Houston, Texas.
Of the move, China’s foreign ministry spokesperson said in a tweet: “This is a legitimate & necessary response to the unilateral provocative move by the US to demand the closure of China’s Consulate General in Houston.”
Both unemployment figures and slow progress on the next US fiscal stimulus package are likely to have contributed to the fall in US stocks.
The latest US jobless claims, totalling 1.42 million, marked the first increase in 15 weeks. The number was above Bloomberg consensus estimates of 1.3 million.
China’s ordering of the closure of the Chengdu consulate followed an inflammatory speech from US Secretary of State Mike Pompeo on Thursday, in which he called on “free nations” to triumph over China’s “new tyranny.”
“Today China is increasingly authoritarian at home, and more aggressive in its hostility to freedom everywhere else,” he said.
In response to his speech, China’s spokesperson said: “What he is doing is as futile as an ant trying to shake a tree.”
Pompeo also reportedly said in a private meeting with UK politicians that the head of the World Health Organisation, Tedros Adhanom Ghebreyesus, was “bought by the Chinese government.”
“Markets can now contemplate a serious escalation in US-China tensions that runs far beyond the risk of mere tariffs; and of a looming lurch lower in the US economy, which might necessitate even more focus on foreign policy as a distraction,” Rabobank analysts said in a note.