Stock markets mostly lower as traders hope for US stimulus

LONDON: Stock markets mostly declined Thursday, with nervous investors keeping an eye on stimulus talks in Washington, while China-US tensions continued to weigh on confidence.

London's benchmark FTSE 100 index, top-heavy with multinationals earning in dollars, was additionally weighed down by the pound rallying after the Bank of England said Britain's coronavirus-fuelled economic downturn would be less severe than first thought.

"The FTSE 100 gave up a good portion of its recent gains as investors weighed the latest decision on interest rates from the Bank of England," said AJ Bell investment director Russ Mould.

The FTSE was down almost 2.0 percent around midday in London, also after the BoE kept its main interest rate at a record-low 0.1 percent.

US stimulus hopes

While there have been hopes over the development of a coronavirus vaccine, the rapid spread of the contagion around the world and fresh flare-ups that have caused renewed lockdowns are keeping a lid on equities buying and sending haven gold soaring to record highs above $2,000 an ounce.

All three main indices on Wall Street ended with gains Wednesday -- the Nasdaq at another record -- on bets US lawmakers will eventually reach a deal on another much-needed stimulus for the world's top economy.

The two parties remain far apart on their proposals, with Democrats' $3.5 trillion plan more than three times bigger than the Republicans' offer and a key sticking point being supplementary jobless benefits that ran out last week.

Still, there is agreement that they will eventually have to compromise at some point and Republican Senate Majority Leader Mitch McConnell said next week's recess could be put off so a deal can be reached.

"For now our sense is that no politician in the US wants to be blamed for a failure to deliver a new round of stimulus ahead of the elections in November," said National Australia Bank's Rodrigo Catril.

"US Treasury Secretary (Steve) Mnuchin remarked that while differences remain, at least there was an agreement to set a timeline. So the story continues to be about when the deal will be agreed, rather than if."

The need for an agreement was laid bare with data showing the US added a below-forecast 167,000 private-sector jobs in July, while a broadly positive report on business activity was clouded by a weak employment component.

The China-US stand-off continues to jar nerves, with Beijing on Wednesday warning that a planned visit by US health secretary Alex Azar to Taiwan was a threat to "peace and stability".

The trip to the island, which China claims as its own territory, would further sour relations between the powers, which have already clashed over several issues including Hong Kong, the virus and Huawei.

And there are worries the rows could lead to a renewal of their economically painful trade war.

"China will likely interpret the trip as a provocative move ahead of planned US-China trade talks on August 15," said Stephen Innes at AxiCorp, adding that the US move was seen as part of Trump's anti-China drive leading into the election.

"Even if trade-war risk fades, President Trump will be rushing the podium with his latest technology beef in hand, and the non-stop barrage of China browbeating will likely extend into the November election."