Stock markets extended recent losses Thursday after US lawmakers passed a bill supporting civil rights in embattled Hong Kong, jeopardising delicate Chinese-American trade talks as Beijing threatened to fight back.
Investors, already nervous about slow progress of the talks, were sent running for the hills after both houses of Congress overwhelmingly agreed to the bill and sent it to be signed by US President Donald Trump.
"A third day in the red for equity markets as the US-China trade deal, or lack of, continues to dictate market sentiment," said Craig Erlam, senior market analyst at Oanda trading group.
China on Thursday accused the United States of seeking to "destroy" Hong Kong and threatened retaliation after Congress passed legislation supporting the pro-democracy movement that has thrown the city into nearly six months of turmoil.
Foreign Minister Wang Yi said the passage of the Hong Kong Human Rights and Democracy Act "indulges violent criminals" that China blames for the worsening unrest and aims to "muddle or even destroy Hong Kong".
The city's main stocks index led the losses Thursday, closing down 1.6 percent.
"Recent moves in stock markets seem to be almost solely driven by the latest developments in US-Sino talks," said XTB chief market analyst David Cheetham.
"It's quite remarkable that stock markets in not only New York and Shanghai, but also London and Frankfurt have such a heightened level of sensitivity in the near term to any news on this front."
The OECD grouping of the world's wealthiest nations on Thursday said it had trimmed its 2020 global economic growth forecast and said it did not see a strong rebound in 2021 owing to risks stemming from trade tensions.
The Paris-based Organisation for Economic Co-operation and Development now estimates that business activity around the world will expand by 2.9 percent next year, a decline of 0.1 percentage points from a forecast in September and the lowest growth rate since the financial crisis.
Amid the latest fallout, the dollar fell against its main rivals, while investors sought haven investments such as the yen.
Oil prices dipped also on the trade worries, a day after surging on data showing a smaller-than-forecast rise in US energy stockpiles.
On the corporate front Thursday, investors cheered the market debut of shares in France's state-owned lottery monopoly, with eager buyers pushing the stock up more than 15 percent in the opening minutes of trading.
Stock markets have generally rallied in recent weeks on optimism that US and Chinese negotiators would deliver a much-vaunted mini trade deal that is seen as the first part of a wider agreement by the world's biggest economies.
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