Global stocks fall as investors brace for Trump to hit China with a 'bazooka'

• Global stocks turned lower on Friday as investors prepare for fresh US-China intensification ahead of President Donald Trump's press conference on the new Hong Kong security law.
• Analysts said "Trump won't look good if he has the whole world watching him, and he produces a small water pistol and not a bazooka."
• Futures for the S&P 500 dropped 0.5%, while Hong Kong's Hang Seng index fell 0.7%.
• Oil prices also fell ahead of Trump's announcement. US oil benchmark WTI fell 3.5% to $32.51 a barrel, and Brent crude dropped 2.8% to $35.12.
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Global stocks fell on Friday ahead of expected developments in US-China strains as President Trump promised "interesting" action on the world's second-largest economy. 

Investor optimism faded as China rubber-stamped its new draconian security law on Hong Kong, which sent armed police flooding the streets to tackle pro-democracy protests in the administrative region. Trump is expected to respond harshly later on Friday.  

Analysts say the market is filled with both an optimist camp and a realist camp. While one side believes Trump would not want to rattle business and needs the Chinese market, the other side feels Trump should send a clear message to Beijing over the "red lines it has crossed."

"Trump won't look good if he has the whole world watching him, and he produces a small water pistol and not a bazooka," Rabobank analysts said in a note.

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Oil prices dropped on news of the impending press conference. US benchmark West Texas Intermediate fell 3.3% to $32.62, and Brent Crude was down 2.8% to $35.12 a barrel.

Overnight on Thursday, S&P 500 futures erased gains of 1% and went lower by 0.2%, closing a 3-day winning streak for the Wall Street index. 

On Wednesday, the House passed an overwhelming legislation that would punish top Chinese officials for detaining more than a million Uighur Muslims in internment camps.

For that reason, Trump's Friday announcement will be seen by investors as "a step towards escalation," according to Connor Campbell, a financial analyst at SpreadEx.

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Here's the market roundup as of 10.35 a.m. in London (5.35 a.m. ET):

• Asian indexes were mixed with China's Shanghai Composite up 0.2%, Hong Kong's Hang Seng down 0.7%, and Japan's Nikkei down 0.2%.
• European equities fell, with Germany's DAX down 1.6%, Britain's FTSE 100 down 1%, and the Euro Stoxx 50 down 1.1%.
• US stocks are set to open lower. Futures underlying the Dow Jones Industrial Average, the S&P 500, and the Nasdaq fell between 0.5% and 0.8%.
• Oil prices fell, with West Texas Intermediate down 3.3% at $32.62, and Brent crude down 2.8% at $35.12.
• The benchmark 10-year Treasury yield fell to 0.04%.
• Gold rose 0.7% to $1,725 per ounce.

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