Asia markets to fall on China vow to retaliate against U.S.

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NEW YORK (Reuters) – Asian markets are set to open mostly lower on Friday as China vowed to retaliate against a U.S. order to close one of its consulates, and the American equity markets fell on gloomy data about its labor market.

Australian S&P/ASX 200 futures lost 0.86% in early trading.

Japan’s Nikkei 225 futures added 0.11%, while the Nikkei 225 index closed the overnight session down 0.58%. Hong Kong’s Hang Seng index futures lost 1.13%.

E-mini futures for the S&P 500 rose 0.12%.

China said the U.S. move to close its Houston consulate this week had “severely harmed” relations and warned it “must” retaliate, after Washington ordered the office closed yesterday in a dramatic escalation of tension between the world’s two biggest economies.

The number of Americans filing for unemployment benefits unexpectedly rose to 1.416 million last week for the first time in nearly four months, suggesting the United States’ economic recovery is stalling amid a resurgence in COVID-19 cases.

The worsening pandemic, signs of weakening recovery and mixed corporate earnings all caused U.S. equities to drop sharply, with investors fleeing market-leading tech shares.

Wall Street’s sell-off steepened after a tech watchdog group reported that Apple Inc faces investigations in multiple states for potentially deceiving consumers. Apple shares (NASDAQ:AAPL) settled down 4.6% and pulled the Dow, Nasdaq and S&P 500 lower.

“Markets had a bumpy ride overnight … as just about every U.S. data release disappointed, and as nervousness on the geopolitical front grew,” wrote Kishti Sen of ANZ Research.

The Dow Jones Industrial Average fell 1.31%, the S&P 500 lost 1.23% and the tech-rich Nasdaq Composite dropped 2.29%.

Apple, Microsoft (NASDAQ:MSFT), (NASDAQ:AMZN), Facebook (NASDAQ:FB) and Google’s parent Alphabet (NASDAQ:GOOGL), all of which tumbled on Thursday, account for roughly 23% of market cap of the entire S&P 500 index, according to Goldman Sachs (NYSE:GS).

The dollar slipped to an almost two-year low against a basket of peer currencies and gold rose for a fifth straight session to almost $1,900 an ounce, as U.S.-China tensions increased bullion’s safe-haven appeal.

Investors are selling the greenback on expectations the U.S. economy will likely underperform its peers in the developed world as the surge in new coronavirus infections pushed the overall number of cases in the United States to over 4 million.

U.S. gold futures settled 1.3% higher at $1,890 an ounce.

The Australian dollar rose 0.01% versus the greenback at $0.710 with the U.S. dollar index down 0.22% at $94.7970.

Oil prices fell 2% as the surge in coronavirus cases triggered fears of a hit to demand and the latest U.S.-China spat outweighed the benefit of a weaker dollar.

Brent crude futures settled 98 cents lower at $43.3l a barrel, and U.S. crude futures fell 83 cents to settle at $41.07 a barrel.

The 10-year Treasury note fell 1.4 basis points to 0.5807%.