European stocks opened lower, with the pan-European STOXX 600 index down 0.86%. Germany's DAX fell 1.2%, Britain's FTSE 100 by 7% and France's CAC 40 by 1%. Futures for the S&P 500 slipped 0.4%.
Earlier in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.2%. Japan's Nikkei retreated from a three-month high and the yen rose to a two-week high of 107.06 against the dollar. Bonds rose.
"The question is how far Trump will go at today's press conference, as removing Hong Kong's favoured status would probably spark negative market developments, hitting global risk sentiment, which could backfire on the U.S. economy as it would further deteriorate the relationship with China," said strategists at Danske Bank in a note to clients.
Trump offered a muted response to Hong Kong's mass democracy protests last year while pursuing a trade deal with China. But ties with Beijing have since soured considerably through the COVID-19 pandemic.
Hong Kong's government warned on Friday that withdrawing its special U.S. status, which has underpinned it as a finance hub, could be a "double-edged sword" and urged the United States to stop interfering in its internal affairs.
The Chinese yuan weakened in offshore trade.
Hong Kong's Hang Seng index was 0.8% lower and has lost about 3% in the two weeks since news of China's security legislation broke.
In bond markets, yields on benchmark 10-year U.S. Treasuries fell to 0.6656%, more than 100 basis points below where they began 2020.
MAY MARCHES ON
Despite the gathering tension and the near-daily release of grim economic data, enormous global stimulus seems to have propped up stocks. The S&P 500 is up 4% for the month and on track for its best May since 2009.
A rally in the risk-sensitive Aussie dollar is slowing, but the currency has gained nearly 2% for the month and sits 20% above March lows.
MSCI's All Country World Index, which tracks stocks across 49 countries, is on track for a 3.5% gain this week - its best weekly performance since April.
The optimism stems from signs of progress in the world economy. The number of Americans seeking jobless benefits fell for an eighth straight week last week and New York has outlined plans for re-opening.
"As we have said about the re-opening and ensuing recovery, this is a process," said RBC Capital Markets' chief U.S. economist, Tom Porcelli. "And right now the process is moving along in the right direction."
The euro EUR= was headed for its best month since December as the European Union's 750 billion-euro coronavirus recovery fund fuelled optimism about the EU's political future. It hit a two-month high of $1.1114 and last traded at $1.1106.
The dollar sank against a basket of currencies, down 0.2%.
Gold was up 0.1% at $1,720.27 an ounce.
Brent crude slipped 1.5% to $34.76 a barrel. U.S. crude fell 2.2% to $32.99 a barrel.
Both contracts are headed for their biggest monthly gains in years as production cuts and optimism about demand recovery led by China supported prices.
London aluminium prices, which stayed flat on Friday, were set for their strongest monthly gain since January 2019, underpinned by a solid recovery in demand from top consumer China.
(Reporting by Ritvik Carvalho, additional reporting by Tom Westbrook in Singapore; editing by Larry King) ((Ritvik.Carvalho@thomsonreuters.com; +44 2075429406; Reuters Messaging: email@example.com))