Global equities snap four-day rally on U.S.-China frictions; dollar firm

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’s WeChat and ByteDance’s TikTok.

Reuters says 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% .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.