Asia stocks to drop on China data, trade tension

SYDNEY: Stocks in Asia looked set for losses after a weak US session Friday, signs China’s economy remains under pressure and a potential escalation of tensions between Washington and Beijing. The yuan weakened with the Australian dollar.

Futures on equity indexes in Japan, China and Australia declined after the S&P 500 Index fell over 2% Friday.

Benchmark Treasury yields were at 2.85%, the lowest in four months.

Dampening the mood at the start of this week was a slowing in China’s factory inflation amid weakening demand and news the country’s vice foreign minister has summoned the US ambassador in protest over the arrest of Huawei Technologies Co Chief Financial Officer Meng Wanzhou.

Signs that demand remains sluggish in the world’s second largest economy came hot off the heels of data showing the US labor market moderated in November.

That’s emboldening those who are betting on a slower pace of Federal Reserve interest-rate increases next year. The Fed is now in a blackout period with no scheduled public speeches ahead of its Dec 18-19 policy meeting.

Sentiment in financial markets has been fragile in recent weeks as traders gauge whether the Fed will soon pause hiking as trade war fears linger.

It’s unclear how much the summons of the US ambassador, China’s most public display of anger over the arrest, will mark a heightening of tensions over the arrest and Huawei more generally.

Also in investors minds is Tuesday’s crucial House of Commons vote on Brexit. UK Prime Minister Theresa May faces stiff odds, but Brexit Minister Kwasi Kwarteng told Sky News the prime minister could still get her deal through.

And there’s been another change of personnel in the White House, as Chief of Staff John Kelly steps down, removing a key force for West Wing discipline from President Donald Trump’s inner circle.