European markets fell for a second day in early trading on Friday, with US-China tensions over Hong Kong and fears of slow economic recovery from the coronavirus denting stocks.
It comes after the Chinese government announced it would impose new national security legislation likely to curtail freedoms in Hong Kong, which could trigger a fresh wave of protests.
US president Donald Trump ratcheted up already-escalating tensions with China over the coronavirus in recent weeks by warning his administration would react “very strongly” to the move.
The heightened diplomatic row adds to gloom triggered by weak economic data in Europe on Thursday, which brought a recent rally to an end.
A closely watched purchasing managers’ index (PMI) for the eurozone showed only a gradual easing in the pace of decline in activity among services and manufacturing firms. The headline figure on the index came in at a dire 30.5, on a scale where figures below 50 show decline, and above 50 show growth.
"Markets have essentially been range bound for more than a month now waiting for a new driver to emerge," said Mohamed El-Erian, chief economic advisor at Allianz.
He added that positive news on reopenings and vaccines were insufficient to compensate for the string of negative data and concerns about the sharpness of the recovery, Reuters reports.
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