Friday 24 July 2020 7:28 am

Asian shares retreat as US-China tensions sour

Asian shares sunk overnight from six-month highs as tensions between the US and China worsened, following the closure of the US consulate in Chengdu.

China announced the closure of the US consulate in Chengdu, just days after Washington told Beijing to close its Houston consulate. Beijing said it notified the US embassy in Beijing and said it was a “legitimate and necessary response to the unreasonable actions of the United States.”

Read more: US gives China 72 hours to shutter Houston embassy as spy charges rise

“The US move seriously breached international law, the basic norms of international relations, and the terms of the China-US Consular Convention. It gravely harmed China-US relations,” China’s foreign ministry said in a statement.

China’s benchmark CSI 300 index fell three per cent on the news, while other indices sank further into the red. The Hang Seng is down 2.35 per cent, while the Shanghai Composite slipped 3.59 per cent. The Shenzhen Component sunk nearly five per cent.

The futures market tipped the FTSE 100 to open down around one per cent amid renewed tensions.

MSCI’s index of Asia-Pacific shares outside Japan lost 1.7 per cent. While Tokyo is closed for a holiday, Nikkei futures were trading 350 points below the last cash close.

President Trump’s statement overnight that the trade deal with China “means less to me now than when I made it” is also appearing to weigh on sentiment.

Read more: US jobless claims rise for first time in four months as coronavirus spreads

The optimism on economic recovery from the pandemic appeared to hit a wall on Thursday, as data showing the number of Americans filing for unemployment benefits unexpectedly rose last week for the first time in nearly four months.

It came as US lawmakers struggled to agree on a fresh round of fiscal measures to help stimulate the economy. It saw the Dow Jones close down 1.31 per cent, while the benchmark S&P 500 lose 1.23 per cnet and the Nasdaq drop 2.29 per cent.

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