Markets

European markets close mixed as U.S.-China tensions dent sentiment

Key Points
  • The pan-European Stoxx 600 provisionally closed a touch above the flatline Friday, with food and beverages falling 0.6% to lead losses while travel and leisure stocks jumped 0.8%.
  • Tensions between the world's two largest economies have flared on multiple fronts in recent days.

European stocks closed mixed on Friday as ties between the U.S. and China came under further strain, potentially threatening the "Phase One" trade deal signed earlier this year.

The pan-European Stoxx 600 provisionally closed a touch above the flatline Friday, with food and beverages falling 0.6% to lead losses while travel and leisure stocks jumped 0.8%.

Tensions between the world's two largest economies have flared on multiple fronts in recent days. China is poised to impose a new national security law in Hong Kong following months of anti-government protests, raising further questions about Beijing's control over the city and likely evoking the ire of the U.S. and other Western powers which supported pro-democracy protesters.

Already engaged in a blame game over the coronavirus pandemic, discord between Washington and Beijing has spilled over into financial markets this week after the U.S. Senate passed legislation on Wednesday that could restrict Chinese companies from listing on American exchanges unless they abide by U.S. regulatory and audit standards.

A Chinese government official said Thursday that Beijing will not flinch in the face of any escalation of tensions with the U.S., but stressed that economic recovery and cooperation should be the priority, according to Reuters.

On Wall Street, stocks slipped as the news of escalating U.S.-China tensions offset increasing optimism over a potential coronavirus vaccine.

The U.S. has paid AstraZeneca up to $1.2 billion to secure almost a third of the first 1 billion doses planned for its experimental vaccine, while Britain announced Thursday that it would acquire over 10 million coronavirus antibody tests from Roche and Abbott.

In corporate news, British lender Lloyds faced a shareholder rebellion over its planned bonuses for top executives on Thursday, while Lufthansa announced that it is closing in on a $10 billion rescue deal with the German government.

On the data front, U.K. borrowing soared to a record high of £62.1 billion ($75.8 billion) in April, according to figures published Friday, while retail sales fell by a record 18% as the coronavirus pandemic decimated the economy.

Biggest movers

Concerns over the new Hong Kong security laws hit shares of banks and financial services companies with a significant Asian presence on Friday. HSBC saw its stock fall almost 5%, while Standard Chartered fell 2% and Prudential slid almost 9% to the bottom of the Stoxx 600.

At the top of the European benchmark, Swedish real estate firm SBB jump 9%. The company announced Wednesday that its CEO, Ilija Batljan, was dismissed from a criminal investigation into insider dealing and that the probe has been withdrawn.