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Global Stocks Waver as Tension Mounts on U.S.-China Technology Ties

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01/15/2020 | 06:45am EST

By Avantika Chilkoti

Global stocks drifted lower Wednesday as investors grew concerned that an initial U.S.-China trade pact, set to be sealed later in the day, won't assuage ongoing trade and technology tensions between the two superpowers.

Futures tied to the Dow Jones Industrial Average were mostly unchanged. The Shanghai Composite closed 0.5% lower, and the pan-continental Stoxx Europe 600 index swung between gains and losses.

While the signing of the accord is widely expected to call a halt to the two-year trade war between the U.S. and China, a continuing battle over technology may keep relations on edge as the Trump administration focuses on tightening restrictions on Huawei Technologies Co.

The White House and Congress both view the giant Chinese telecommunications company as a national-security threat, and the Commerce Department is seeking to largely eliminate a loophole that allowed U.S. companies to sell to Huawei from their overseas facilities, people familiar with the matter said.

The phase-one deal itself is a disappointment as it reflects a compromise measure, some analysts said.

President Trump "wants the U.S. economy to be humming along going into the presidential election," said Lyn Graham-Taylor, fixed-income strategist at Rabobank. "But on the flip side, he doesn't want to be seen as weak on China, so he is doing a balancing act."

Investor optimism on further progress in the trade negotiations between Beijing and Washington also waned after Bloomberg News reported that the U.S. won't review existing tariffs on Chinese imports for at least 10 months. That suggests a delay in the timetable for any phase-two deal.

Over in Europe, the yield on government bonds dipped ahead of fresh bond sales planned by major eurozone governments. Germany is offering EUR1.5 billion of bonds maturing in August 2050, while Italy is set to issue new debt maturing September 2050. The yield on 10-year German bonds dipped to minus 0.200%, from minus 0.168% on Tuesday. The yield on the equivalent Italian debt dipped to 1.369% from 1.389%.

Ahead of the opening bell in New York, shares in Nektar Therapeutics dropped more than 16% after a U.S. Food and Drug Administration panel voted against recommending approval for a painkiller from the biotech company.

Investors trying to gauge the impact of the continuing trade dispute on the global economy will be monitoring public comments due from Federal Reserve and German central bank officials later in the day.

Financial firms are likely to dominate the earnings calendar in the U.S. for another day, with firms including Goldman Sachs Group set to report their latest results.

Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
CHINA-SHANGHAI COMP -2.75% 2976.53 End-of-day quote.-2.93%
DJ INDUSTRIAL -1.57% 28535.8 Delayed Quote.-0.01%
GOLDMAN SACHS GROUP INC. -1.56% 238.14 Delayed Quote.5.21%
NASDAQ 100 -2.07% 8952.178363 Delayed Quote.5.54%
NASDAQ COMP. -1.89% 9139.30952 Delayed Quote.4.58%
NEKTAR THERAPEUTICS -6.44% 19.77 Delayed Quote.-2.11%
S&P 500 -1.57% 3243.63 Delayed Quote.0.40%
S&P/CITIC 300 INDEX -3.13% 3485.68 Delayed Quote.-1.86%
S&P/CITIC 50 INDEX -2.99% 3600.44 Delayed Quote.-3.65%
STOXX EUROPE 600 -2.26% 414.07 Delayed Quote.1.01%
STOXX EUROPE 600 NR -2.26% 894.14 Delayed Quote.1.06%
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