Global stocks slipped Friday, following a steep drop in Hong Kong shares, as tensions between Washington and Beijing swelled and the outlook for China’s economy deteriorated.
The Dow Jones Industrial Average edged down about 100 points, or 0.4%, shortly after the opening bell. The S&P 500 fell 0.3%. The Nasdaq Composite lost 0.2%. All three major indexes are still on track for weekly gains of at least 2.5%.
Shares of energy companies were among the worst performers Friday as oil prices fell, dragging down the broader market.
The Hang Seng Index closed down 5.6% in its worst day since July 2015 after China moved to impose new national-security laws on the city.
Earlier in the day, China scrapped its economic growth target for 2020 in a stark acknowledgment of the challenges facing the world’s second-largest economy, sending crude oil and metal prices sharply lower.
“Anything that knocks China’s growth rate, whether it’s a slower recovery from the coronavirus or a rise in tensions with the U.S., will weigh on global growth expectations,’’ said Seema Shah, chief strategist at Principal Global Investors.
Friday’s market moves may also be outsized due to lower liquidity, as many traders in Europe took the day off to extend a long weekend, she said.
Markets are closed Monday for Memorial Day in the U.S.
Beijing’s decision to omit a formal target comes amid the sharpest contraction in four decades precipitated by a sudden halt in manufacturing activity because of the coronavirus pandemic. The nation’s policy makers are signaling that they won’t rush to introduce additional stimulus measures, which suggests more economic pain for countries that have become increasingly reliant on China as an engine of growth.
China’s proposed national security law would challenge the financial hub’s autonomy and threatens to increase tensions with the U.S. Congress condemned the move, with senators promising an urgent push on legislation that would impose sanctions on Chinese officials and institutions involved in undermining Hong Kong’s Western-style rule of law.
“The market had gotten kind-of used to dealing with the coronavirus and terrible economic indicators, but potential disruption from a trade war is proving to be too much for sentiment,’’ said David Madden, a market analyst at brokerage CMC Markets.
The dollar strengthened, with the ICE US Dollar Index recently rising 0.4%. Investors also turned to traditionally safer assets. The yield on the 10-year U.S. Treasury bond fell to 0.661%, from 0.677% Thursday as bond prices rose. Gold prices gained 0.9%.
Brent crude, the global oil benchmark, fell 3.9% to $34.65 a barrel. Copper, a closely watched metal for its use in industrial activity, slipped more than 2%.
“China is today the biggest importer of crude oil, so Chinese growth is hugely important for oil demand,’’ said Bjarne Schieldrop, chief commodities analyst at Nordic bank SEB. “But at the same time, demand is ticking up and supply is ticking down,’’ as Asian countries reopen, he said.
In Asia, most major stock benchmarks ended the day lower. China’s Shanghai Composite Index fell 1.9% while South Korea’s Kospi Index retreated 1.4%.
The Chinese flag flies above the Hong Kong Special Administrative Region’s flag in the city.
Photo: Paul Yeung/Bloomberg NewsCorrections & Amplifications
Chinese Premier Li Keqiang detailed bond programs totaling 4.75 trillion yuan to help fund China’s coronavirus recovery. An earlier version of this article incorrectly said the programs totaled ¥4.75 trillion. (Corrected on May 22, 2020)
Elsewhere, the pan-continental Stoxx Europe 600 lost 0.2%.
—Gunjan Banerji contributed to this article.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Chong Koh Ping at chong.kohping@wsj.com
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