GLOBAL MARKETS-Equities snap 4-day rally on U.S-China frictions; dollar firm

* Graphic: 2020 asset performance http://tmsnrt.rs/2yaDPgn
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

By Saikat Chatterjee
LONDON, Aug 7 (Reuters) - World stocks ended four days of
gains on Friday after U.S. President Donald Trump cranked up
antagonism with Beijing by banning U.S. transactions with two
popular Chinese apps: Tencent (HK:0700)'s WeChat and ByteDance's TikTok.
With second quarter GDP data showing double digit percentage
declines for major economies that may be the worst hits from the
coronavirus lockdowns, investors were looking forward to other
factors like the U.S. presidential vote and China-U.S. trade.
"Historical data show equities perform less well when the
incumbent party loses and the president is not re-elected and
the odds of this happening have increased significantly in
recent months," said Jeroen Blokland, portfolio manager at
Robeco, of the upcoming U.S. election.
"What is more, Trump might revert to more drastic policies
or statements to try to gain in the polls. Today's banning of
Tencent's WeChat, in addition to TikTok, might be an example of
this."
Chinese stocks led losers in Asia and its currency slumped
after Trump issued executive orders to purge "untrusted" Chinese
apps from U.S. digital networks. MSCI's broadest index of world stocks .MIWD00000PUS
deepened losses, down more than 1% after four days of gains.
Still, it was around 3% away from a late February peak.
"The U.S. pressure on China's tech sector appears likely to
continue in the presidential elections, injecting volatility in
the sector and opening the door to escalatory retaliation," UBS
strategists said.
European stocks also suffered with major indexes down
between 0.2% to 0.4% .STOXX .FTSE .
Latest Bank of America fund flow statistics also confirmed
the undercurrent of caution in global markets with investors
flocking to cash, gold and investment-grade bonds and switching
out of equities. Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 1%,
with mainland Chinese indexes down more than 1% each, even
though Chinese trade data for July showed exports beat
expectations. STRONG
Risk appetite was subdued on Friday with hopes fading for a
quick deal by U.S. policymakers on stimulus worth at least $1
trillion to support the fragile economy. The White House and
Democrats remained far apart on the size of the stimulus package
and what to include. The risk-off mood pushed U.S. Treasury yields lower and
offered a brief respite to the struggling dollar, which has been
under pressure in recent weeks. The 10-year U.S. Treasury yield
US10YT=RR dipped 1.1 basis points to 0.5198%, near Thursday's
five-month low of 0.504%.
In currency markets, the dollar =USD rebounded smartly
from more than two-year lows hit in the previous session against
its rivals with riskier currencies like the euro and the Aussie
dollar falling more than half a percent each.
Closely watched U.S. non-farm payrolls data, due at 1230
GMT, is expected to show an increase of 1.58 million in July,
compared with 4.8 million in June.
Gold XAU= hit a record high of $2,075.2 per ounce XAU=
before succumbing to profit-taking to slip to $2,063.
Silver dropped 1.7% to $28.452 per ounce XAG= following
its rise to a seven-year high of $29.838.
Oil prices were little changed, with Brent futures LCOc1
down 0.1% at $45.04 per barrel.
For Reuters Live Markets blog on European and UK stock
markets, please click on: LIVE/

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