By Julia Horowitz • Friday, May 22

Good morning. In today's newsletter: The world's growth engine has stalled, and tensions between the United States and China are rising. Plus, coronavirus could change Silicon Valley forever, and how Brexit could deepen the United Kingdom's economic pain.

US stock futures are lower after the Dow and S&P 500 slid on Thursday. Markets in Europe dropped in early trading, following stocks in Asia.

▸ Forwarded this newsletter? Want global markets news and analysis from Cnn Business reporters every morning? You can sign up here.

What's happening now in markets:
▼ Dow futures 24,283 (-0.4%)
▼ S&P futures 2,926 (-0.4%)
▼ Nasdaq futures 9,309 (-0.5%)
▼ STOXX Europe 338 (-0.6%)
▲ Gold $1,734.50 (+0.5%)
▼ US oil $31.68 (-6.7%)
MARKET DATA AS OF 6:45 AM ET

ADVERTISEMENT

MARKET FLASH

The world's growth engine has stalled

Since the Great Recession following the 2008 financial crisis, China and India have powered much of the world's economic growth. Now, activity in both countries has plunged, raising the risk of a prolonged global slump.

What's happening: China said Friday that it could not set a target for economic growth this year — a sign of how much uncertainty the coronavirus pandemic has caused the world's second largest economy. 

China has set such targets for decades. Last year, Beijing targeted growth in the range of 6% to 6.5%. GDP grew 6.1%, its slowest pace in nearly 30 years.

Meanwhile, Shaktikanta Das, the governor of the Reserve Bank of India, said Friday that the country's economy wouldn't grow at all in the current fiscal year, which ends in March 2021. The country's nationwide lockdown was just extended through the end of the month.

These announcements cast further doubt on the ability of the global economy to recover from its deepest downturn since the Great Depression.

Bank of America continues to slash its economic forecasts, it told clients Friday. The bank now predicts that the global economy will shrink by 4.2% this year, down from a 2.7% contraction it forecast six weeks ago. The IMF predicted in April that global output would contract by 3% in 2020. 

The deteriorating relationship between the United States and China is giving investors even more reason to worry.

Eye on Hong Kong: Global stocks tumbled Friday after news broke that Beijing would pass a controversial national security law, the biggest blow to the city's autonomy since its handover to China in 1997. Hong Kong's Hang Seng Index notched its worst performance since July 2015.

The US State Department has condemned the move, warning that "any effort to impose national security legislation that does not reflect the will of the people of Hong Kong" would be met with an international response.

Tensions had already been running high, with Beijing and Washington trading criticism over the handling of the coronavirus pandemic.

Watch this space: Chinese stocks have become a flashpoint. On Wednesday, the US Senate unanimously passed a bill that would prevent companies that refuse to open their books from listing on Wall Street. The bill's bipartisan cosponsors said the goal is to "kick deceitful Chinese companies off US exchanges."

VOICES

Market mood turns anxious as tensions rise

"Geopolitical risks are threatening to gatecrash an already-tense 'risk party' among global investors."

HAN TAN, FXTM MARKET ANALYST 

Read more from CNN Business.

IN THE VALLEY

Coronavirus could end Silicon Valley as we know it

The Silicon Valley of the past decade may be on its way out as remote work becomes the new normal.

First came Twitter's pronouncement earlier this month that some employees would be able to continue working from home "forever."

The company said the experience of working from home during the pandemic has shown that it can be adopted at scale.

"If our employees are in a role and situation that enables them to work from home and they want to continue to do so forever, we will make that happen," Twitter's vice president of people, Jennifer Christie, in a statement to CNN Business. "If not, our offices will be their warm and welcoming selves, with some additional precautions, when we feel it's safe to return."

Facebook CEO Mark Zuckerberg said Thursday that as many as 50% of employees could be working remotely within the next five to 10 years.

Zuckerberg pitched the idea as both a matter of keeping employees happy and creating "more broad-based economic prosperity."

"When you limit hiring to people who live in a small number of big cities, or who are willing to move there, that cuts out a lot of people who live in different communities, have different backgrounds, have different perspectives," Zuckerberg said on a livestream.

What it means: US tech companies have fared far better than most firms during the pandemic. Demand for cloud services has shot up, and employees were already used to working from home. Now tech leaders may reconsider all the money they spend maintaining their high-end campuses, which had been a key perk for employees — and a symbol of Silicon Valley's prosperity.