Asia markets set to come under pressure as U.S.-China ties worsen

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NEW YORK (Reuters) – Asian stocks were likely to come under pressure on Thursday as fresh diplomatic tensions between Washington and Beijing heightened investor jitters and overshadowed the boost to Wall Street from U.S. stimulus hopes.

In early Asian trade, {{178|Japan’s NiNikkei 225 futures lost 0.02% while Hong Kong’s Hang Seng index futures fell 0.05%.

Australian S&P/ASX 200 futures rose 0.12% and E-mini futures for the S&P 500 were up 0.13%.

In the latest deterioration in Sino-U.S. ties, the United States ordered China to close its consulate in Houston, saying it was “to protect American intellectual property and Americans’ private information.”

China strongly condemned the move, and a source said Beijing was considering shutting the U.S. consulate in Wuhan in retaliation.

Despite those geopolitical concerns, Wall Street still found some cheer on hopes for another round of U.S. stimulus even as Republicans and Democrats remain far apart on how much to spend to combat the economic fallout from the coronavirus.

“Sentiment was mixed, with recent optimism dented by news of U.S.-China consulate closures,” Imre Speizer and Tim Riddell wrote for Westpac Banking (NYSE:WBK) Corporation.

U.S. coronavirus cases continued to surge, with California officially becoming the worst-hit state, exceeding New York, with more than 414,000 cases of COVID-19.

Regardless, U.S. equities settled higher on strength in corporate earnings and the stimulus hopes. The Dow Jones Industrial Average rose 0.62%, the S&P 500 gained 0.57% and the Nasdaq Composite added 0.24%.

In contrast, the pan-European STOXX 600 closed down 0.9%, its sharpest one-day drop in a month, as U.S.-China relations soured.

Gold surged to a nine-year peak, with prices up 22% on the year. Investors have flocked to the safe-haven metal as they seek shelter from a potential reversal in U.S. equities.

Spot gold hit its highest since September 2011 at $1,870.01. Spot gold jumped 1.3% to $1,865.61 per ounce, while U.S. gold futures closed 1.2% higher at $1,865.1 per ounce.

The Australian dollar rose 0.07% versus the greenback at $0.714. The U.S. dollar index is down 8% from its March highs and stands near its lowest level since 2018.

Brent crude futures slid 3 cents to settle at $44.29 a barrel. U.S. crude futures settled down 2 cents at $41.90 a barrel.

The 10-year U.S. Treasury note fell 0.1 basis point to 0.597%, marking another day below 0.6%.