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European stocks rise despite mounting US-China tensions

Edmund Heaphy
·Finance and news reporter
·2-min read
Hong Kong students and Taiwanese supporters hold slogans reading: "Evil law under the pressure of the border, Work hand in hand " and ''The asylum mechanism is clearly in place'' during a protest against Beijing's national security legislation in Taipei, Taiwan, Thursday, May 28, 2020. (AP Photo/Chiang Ying-ying)
Hong Kong students and Taiwanese protest against Beijing's national security legislation in Taipei, Taiwan. (AP Photo/Chiang Ying-ying)

Stocks in Europe rose on Thursday despite growing tensions between the US and China and the approval of a controversial Hong Kong national security law.

The ascent came in the wake of the announcement on Wednesday of the European Commission’s €750bn (£657bn) recovery plan, which will see countries in the bloc jointly issue debt on financial markets for the first time.

The pan-European STOXX 600 index (^STOXX) rose by around 0.8%. London’s FTSE 100 (^FTSE) climbed by around 0.7%.

Germany’s DAX (^GDAXI) was up by around 0.6%, while France’s CAC 40 (^FCHI) was 0.7% in the green.

READ MORE: EU unveils €750bn recovery plan to tackle 'immense challenge'

“While markets have reacted as if this is a significant moment for Europe, the sums involved are tiny in the overall scheme of things, given the scale of the economic shock, particularly since none of the money will be available immediately,” said Michael Hewson, chief market analyst at CMC Markets UK.

“There is also the prospect that the stated sums will probably get watered down, and even if it is delivered will probably be so small as to be completely insignificant.”

The gains in Europe followed a mixed trading session in Asia. China’s legislature on Thursday approved the introduction of a sweeping national security law on Hong Kong, bringing the semi-autonomous territory further under Beijing’s control.

The move came after US secretary of state Mike Pompeo on Wednesday said that Hong Kong was no longer autonomous from China, meaning that the US will rescind Hong Kong’s special trade status, which currently sees it receive more favourable tariffs than China.

China’s SSE Composite Index (^SSEC) rose by more than 0.3% on Thursday, while the Hang Seng (^HSI) was down by 0.9% in Hong Kong at market close.

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Japan’s Nikkei (^N225) closed 2.3% in the green, while the KOSPI Composite Index (^KOSPI) in South Korea was down by around 0.1%. Australia’s ASX 200 (^AXJO) climbed by around 1.3%.

Rising tensions between the US and China could “let some of the air out” of the current optimism, Hewson said.

Futures were pointing to a mixed open for US stocks on Thursday. Investors have been weighing signs of a stabilising US economy, along with hopes of a vaccine or treatment and the Chinese tensions.

S&P 500 futures (ES=F) rose by 0.3% after the index on Wednesday saw its highest close since early March.

Dow Jones Industrial Average futures (YM=F) climbed by more than 0.6%. Nasdaq futures (NQ=F), meanwhile, were down by more than 0.1%.