There’s been no reprieve for equity investors today, with Wall Street extending global declines at the open:

• S&P 500 is down -0.33%
• Dow is down -0.54%
• Nasdaq is down -0.1%

The focus on renewed trade tensions between the US and China feels strangely familiar, but it’s important to remember how the pandemic has put this in a completely different context.

Neil MacKinnon, Global Macro Strategist at VTB Capital explains:

From the perspective of the financial markets, these uncertainties manifest themselves at an awkward time, when the global economy is struggling to recover from the COVID-19 pandemic and the global recession is the worst this side of WW2.

China’s key role in the global economy is widely-documented, and during the last financial crisis it played an important role through its mega-fiscal policy stimulus back then in preventing a much deeper downturn in the global economy.

As a reflection of increasing US-China tensions, CNY has depreciated, with the USD moving closer to the 7.20 level. Normally, for equity market investors a lower CNY=lower equity markets.

Slippage in the CNY is seen as hurting the competitiveness of China’s Asian trading partners at a time when world trade is still in contraction. A depreciation in CNY also exports disinflation to the global economy at a time when a slump in global demand heightens disinflationary forces.

Equity market investors are alert to the negative effects on corporate pricing power and earnings at a time when US corporate profits have slumped.

Time to check in with stock markets.

With just over an hour until the US open, we’re still looking at a sea of red across European indices, with the FTSE 100 currently the worst performer.

While pharma firms and supermarkets like Ocado and Morrisons make the top slots on London’s blue chip index, it is still being dragged down by travel and leisure. Cruise ship owner Carnival currently the worst performer after falling nearly 8%.

British Airways is proposing to outsource work being done by at least 450 employees it is making redundant, my colleague Jasper Jolly writes.

The Labour party said the proposals were “disturbing news” and called for the government to scrutinise the plans, revealed by the Guardian.

The airline, owned by International Airlines Group (IAG), is also considering closing its operation at Heathrow’s Terminal 3 completely and shrinking its footprint at Terminal 5, the Guardian understands.

BA, which has received state aid worth hundreds of millions of pounds, proposed cutting as many as 12,000 jobs last month in response to the coronavirus pandemic.

Among the thousands of job cuts, the proposals include plans to make at least 450 workers at Heathrow redundant before outsourcing the work they did, according to a person with knowledge of the proposals.

BA has said job cuts are necessary because passenger numbers are expected to be significantly lower for as long as four years, meaning demand will be lower.

Twitter shares are down 0.9% in pre-market trading amid a growing rift between the social media platform and the White House.

Donald Trump signed signed an executive order overnight that aims to remove Twitter’s protections against civil claims in cases where it acts as an “editor” rather than a publisher. (That came after the company applied a fact-checking label to the president’s tweets for the first time.)

Since then, Twitter has hidden one of Donald Trump’s tweets behind a warning that it “glorifies violence”, further escalating the row with the US president.

That tweet, posted on Thursday night Washington time, warned people in Minneapolis protesting against the killing of a black man, George Floyd, by a white police officer that he would send the military to intervene if there was “any difficulty”.

Now, it has emerged that Twitter chief executive Jack Dorsey was informed by staff in advance of the decision to tag the tweet as glorifying violence.

A Twitter spokeswoman told Reuters:

The decision was made jointly by teams within Twitter, and our CEO Jack Dorsey was informed of the plan before the Tweet was labelled.

All that glitters is...silver?

The drop across global stock markets has pushed up safe havens assets including gold which is now trading higher by 0.4% at $1,725 per ounce

But silver prices have also come into focus, as the lesser precious metal looks set for its largest monthly gain since June 2016 after rising nearly 0.3% to $17.47 per ounce.

Stephen Innes, chief global markets strategist at AxiCorp, says:

With gold struggling to make new highs, the market prefers silver, which has lagged gold considerably in this year’s rally, and positioning does not seem to be a factor. Even the typical fast money momentum traders are avoiding selling silver these days.

Naeem Aslam, chief market analyst at AvaTrade, says tensions between the US and China over Hong Kong are driving the drop in US futures. But aside from geopolitical tensions, carmakers and tech stocks will also take centre stage on Wall Street today.

Renault’s stock, a French car maker, is going to be the primary focus among investors. The company has announced to lay off 14,600 jobs worldwide, nearly 4,600 job losses in France, and reduce its production capacity by nearly a fifth. The strategy is designed to stop the cash bleed under the current circumstances. There is no denying that the automobile industry has been hit hard, and the bigger question is whether we will see a similar reaction from other carmakers such as BMW and Mercedes-Benz.

He warns that Twitter shares are likely to suffer “another dismal price action” during the Friday trading session.

The stock plunged over four percent yesterday after Twitter decided to fact check Trump’s tweets. Under the current law, social platform companies such as Twitter and Facebook are protected for their user’s posts.

However, Trump signed an executive order and called for a new law. Trump calls it freedom of speech, and this threatens the liability shield that companies like Twitter currently enjoy.

The new law is likely to be challenged in court, and the outcome of that will determine the future of freedom of speech and also for Twitter. But one thing is for certain, the stock is likely to remain highly volatile because it jumped over one percent in the U.S. after-market session yesterday.

Futures are pointing to a drop across major US indices at the start of trading today:

• S&P 500 futures are down 0.5%
• Dow Jones futures are down 0.6%
• Nasdaq futures are down 0.5%

UK lenders have granted around 1.5 million payment holidays on credit cards and personal loans for customers impacted by the Covid-19 outbreak and lockdown.

That’s according to fresh figures released by banking lobby group UK Finance, which shows there has been a near 30% increase in payment delays being granted across both products since the start of May.

Currently:

• 877,800 credit card customers have been granted a freeze, representing around 1.7% of the total 51 million accounts run by its members

• 608,000 personal loan customers have been put on a payment holiday, which is around 6.8% of the 9 million accounts run by UK Finance members

It’s worth noting that interest is usually being charged during the payment holidays, even if principle payments are frozen.

Discount retailer B&M has fared relatively well during lockdown.

The company has reported exceptionally strong demand for DIY and gardening tools that helped push underlying UK sales up 22.7% over the last eight weeks.

Overall, UK like-for-like sales growth accelerated from 6.6% in the final quarter of its 2019-20 year, which benefited from a strong grocery performance in March, Reuters reports.

The company said customers were visiting its stores less frequently during the lockdown but their average spend had been much higher than usual.

The FTSE 100 has extended its losses and is now down over 1.1% at around 6,146 points.

Newsflash: China’s foreign ministry has said it reserves the right to take countermeasures against the UK if it offers permanent residency to Hong Kong residents, according to Reuters.

It’s not exactly clear what those countermeasures would entail, but it is unlikely to be good news for future trade relations and industry.

It comes after the UK foreign secretary Dominic Raab said Britain would extend visa rights for as many as 300,000 Hong Kong British national (overseas) passport holders if China continues down the path of imposing repressive security laws on the former British colony.

The move is a response to growing Conservative backbench pressure on the Foreign Office to do more to help Hong Kong citizens fearful that China is about to extinguish their independence and political freedoms, my colleagues Patrick Wintour and Verna Yu explain.

You can read that story here:

In a sign that some semblance of normality is expected in the UK in the months ahead, CityAM has announced that it will be restarting the printing presses by September:

Nationwide Building Society has seen its annual profits almost halve, in part due to the impact of hundreds of thousands of customers taking payment holidays due to the coronavirus, my colleague Mark Sweney writes.

The mortgage lender said that pre-tax profits plunged by 44% from £833m to £466m in the year to 4 April. Joe Garner, chief executive, said that 280,00 customers have so far opted to take a payment holiday which has cost the company £101m:

In the last month of our financial year all our lives have been overshadowed by the coronavirus. We are helping members in financial difficulty with payment holidays on mortgages and loans and interest-free overdraft periods.

In total Nationwide booked £209m in charges as the business was also impacted by investment in technology and higher PPI provisions as customers raced to make last-minute claims ahead of the Financial Conduct Authority’s deadline last August.

Garner said that Nationwide has already moved to continue to support struggling homeowners guaranteeing that there will be no compulsory repossessions in the current financial year for those financially affected by the coronavirus pandemic. The lender has also guaranteed that it will not make any staff redundant this year.

He added that the hit to profits would be short-term and that it had been expected before the health emergency hit the UK.

Europe’s Stoxx 600 has been dragged lower by autos, banks, and travel & leisure stocks, and the FTSE 100 is not much different.

The worst performers including Rolls Royce and cruise company Carnival, as well as easyJet. HSBC is not too far behind either, having been hit by fears that Hong Kong’s robust financial sector could be hurt if it is included in sanctions aimed at China.

There are only about 20 stocks trading in positive territory on London’s blue chip index this morning.

They include pharma giant AstraZeneca which has been boosted by news that its drug Tagrisso has been shown to hold back certain types of lung cancer.

French carmaker Renault plans to cut 14,600 jobs as it aims to save €2bn in one of the deepest restructuring programmes prompted by the coronavirus pandemic across the global car industry, my colleague Jasper Jolly writes.

Renault will cut 4,600 jobs in its French operations, which will undergo a major reorganisation, and another 10,000 around the world.

The cost cutting is on a similar scale to Nissan, Renault’s alliance partner, which on Thursday announced the closure of its Barcelona car plant amid a restructuring. The two companies have rejected proposals to merge their operations fully, but have committed to letting one of the carmakers “lead” in each global region.

Renault said it will cut its global production capacity from 4m vehicles in 2019 to 3.3m by 2024. Closures could include a foundry in Brittany, a factory in northern France.

The carmaker will also abandon selling combustion engine cars in China, with Dongfeng buying out its joint-venture partner.

The job cuts are likely to have been agreed with the French government, which has been in discussions about providing an emergency €5bn loan guarantee for Renault. The French state owns 15% of the carmaker.

Clotilde Delbos, Renault’s interim chief executive, said:

In a context of uncertainty and complexity, this project is vital to guarantee a solid and sustainable performance, with customer satisfaction as a priority.

By capitalizing on our many assets such as the electric vehicle, by capitalizing on the resources and technologies of Groupe Renault and the Alliance, and by reducing the complexity of development and production of our vehicles, we want to generate economies of scale to restore our overall profitability and ensure our development in France and internationally.

Commenting on the negative turn in global stocks, Michael Hewson, chief market analyst at CMC Markets UK says:

Having spent most of this week ignoring the prospect of an escalation of US, China tension over Hong Kong, despite various smoke signals throughout the week suggesting a confrontation was brewing, US markets turned tail sharply late last night on reports that President Trump was going to be holding a press conference later today on China.

On top of revoking special trade status for Hong Kong, the US house as also passed further sanctions on China that threaten to increase tensions between Washington and Beijing. Hewson adds:

The US house also passed a bill, earlier this week authorising sanctions against senior Chinese officials for human rights abuses, against Muslim minorities, so today’s press conference could well up the ante further, if President Trump signs off on that bill as well as implementing further measures that might hint that the US is keen to send the Chinese a message.

This sharp reversal in the last hour of US trading, merely goes to show that markets not only see what they want to see and hear what they want to hear, but that they also choose when they want to as well.

The announcement of today’s press conference is probably as a result of yesterday’s vote in the China’s National People’s Congress that approved the controversial new security law for Hong Kong.