China Stocks fall on trade concerns

Headline shares of the Mainland China equity market closed down on Wednesday, 05 December 2018, as risk aversion selloff triggered on tracking losses in U.S markets overnight amid skepticism whether China and the United States will be able to settle their trade dispute before the 90-day deadline expires, and as new data showed a worsening business outlook. At the close, the benchmark Shanghai Composite Index declined 0.6%, or 16.15 points, to 2,649.81, meanwhile the Shenzhen Composite Index, which tracks stocks on China's second exchange, fell 0.48%, or 6.71 points, to 1,380.78. The blue-chip CSI300 index was down 0.48%, or 15.71 points, to 3,252. So far this year, the Shanghai stock index was down 19.9%, the CSI300 index had fallen 19.3%.

China has issued an upbeat but vague promise to carry out a tariff cease-fire with Washington but gave no details that might help dispel confusion about what Presidents Xi Jinping and Donald Trump agreed to in Argentina. China has yet to confirm Trump's claim Beijing promised to cut auto tariffs and immediately buy more American farm goods. That has fueled doubts the weekend deal will lead to a lasting settlement of a fight over technology that threatens to chill global economic growth.

China's commerce ministry said on Wednesday that Beijing and Washington will push forward with trade negotiations in the next 90 days and that it is confident that an agreement can be reached, amid growing scepticism that the two sides will be able to reach a substantive deal on a host of highly divisive issues before the deadline. US President Donald Trump on Tuesday held out the possibility of an extension of the 90-day trade truce with China but warned he would revert to tariffs if the two sides could not resolve their differences.

China's services sector grew at its quickest pace in five months in November due to an uptick in new orders, a private survey released showed, although the outlook for businesses over the next year worsened for the third month. The Caixin/Markit services purchasing managers' index (PMI) rose to 53.8 in November from 50.8 in October, well above the 50.0 mark separating growth from contraction. The bounce off the 13-month low in October suggests pockets of strength in domestic demand in a sector that accounts for more than half of China's gross domestic product and urban jobs. The subindex for new business in China's services sector rose to 52.5 in November, also a five-month high, from 50.1 in October, although the rate of growth was modest and within recent ranges. Caixin's composite manufacturing and services PMI, also released on Wednesday, rose to 51.9 in November from 50.5 in October, although the growth rate was relatively marginal compared with previous months.

Amid increasing economic headwinds, China's state council, the cabinet, on Wednesday said that the government will offer financial help to struggling companies that keep staff on payrolls.

CURRENCY NEWS: China yuan weakened against greenback on Wednesday, despite central bank set stronger mid-point rate, as investors calmed down after cheering a temporary truce in the Sino-U.S. trade war. Prior to market opening, the People Bank of China set central parity rate at 6.8476 per US dollar, the strongest level since Sept.25, and stronger by 463 basis points from previous day mid-point rate of 6.8939. In China's spot foreign exchange market, the yuan is allowed to rise or fall by 2% from the central parity rate each trading day. In the spot market, the onshore yuan opened at 6.8500 per dollar and was changing hands at 6.8671 at midday, 296 pips weaker than the previous late session close and 0.28 percent softer than the midpoint. Offshore, the yuan was trading at 6.87 per dollar as of midday.

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