Investing.com – U.S. stocks are set to head lower Friday, as China threatened to crack down on Hong Kong’s autonomy, a move that could have significant consequences for relations between China and the West.
At 07:20 AM ET (1120 GMT), S&P 500 Futures traded 7 points, or 0.3%, lower, Nasdaq Futures down 34 points, or 0.4%. The Dow Futures contract fell 57 points, or 0.2%. These cash indices are up around 3% so far this week, and are on course for their highest weekly closes since early March.
Overnight, China announced plans to impose new national security legislation on Hong Kong to tighten its grip on the semi-autonomous city, potentially threatening its favorable U.S. trading terms.
The Hang Seng, Hong Kong’s major equity index, closed 5.6% lower, its biggest drop in five years.
The decision drew a warning from President Donald Trump that Washington would react “very strongly” against the attempt to impose more control over the former British colony. The U.S. Senate piled in and introduced a bill with bipartisan support that would sanction Chinese officials – and any banks serving them – if they implement the law.
The move adds to the rapidly deteriorating relationship between the world’s two largest economies, and a serious confrontation begins to look more likely as both administrations seek to win over domestic audiences looking for someone to blame for a deterioration in living standards.
That said, losses on Wall Street aren’t seen as being too substantial Friday, kept within bounds by Senate Majority Leader Mitch McConnell’s signal on Thursday that another coronavirus relief bill may not be too far away.
“I think there’s a high likelihood that we’ll do another rescue package. … We’re not quite ready to intelligently lay down the next step, but it’s not too far off,” McConnell said during an interview with Fox News.
The retail sector continues its earnings season Friday, with Chinese e-commerce giant Alibaba (NYSE:BABA) set to report earnings before the bell.
Harley-Davidson (NYSE:HOG) gained 3.7% premarket after announcing it was resuming production at its U.S. manufacturing plants after suspending output for about two months.
Elsewhere, oil futures slumped, weighed by China’s decision to drop its target for gross domestic product growth for the first time in three decades, casting doubt on its demand for oil.
Baker Hughes will release its U.S. oil rig count at 1:00 PM ET. Last week the rig count dropped to 258 from 292 the week before.