China Market sinks on fears US-China trade deal unravelling

Headline indices of the Mainland China equity market closed down on Wednesday, 08 May 2019, tracking losses on global markets as fears about a breakdown in US-China trade negotiations continued to pull down cyclical stocks. Market losses were, however, capped after Beijing confirmed its top negotiator would go to Washington as planned for the next round of trade talks. At closing bell, the benchmark Shanghai Composite Index sank 1.12%, or 32.63 points, to 2,893.76. The Shenzhen Composite Index, which tracks stocks on China's second exchange, dropped by 0.65%, or 10 points, to 1,530.31. The blue-chip CSI300 index fell 1.43%, or 53.21 points, to 3,667.46.

US President Donald Trump's threat to increase tariffs on Chinese imports continues to send shock waves across global financial markets, sinking stocks in the US and Europe overnight. US stocks dropped by the most since March and equities in Europe closed at their lowest in five weeks. In the US, the Dow, S&P 500, and Nasdaq all finished the day solidly in the red, adding to their losses from Monday. The Dow fell about 473 points, marking the second-worst trading day of the year. The S&P 500 was down 1.7% and the Nasdaq fell 2%. European stocks fared poorly too. The FTSE 100, DAX, and CAC 40 all closed 1.6% lower. The pan-European Stoxx 600 fell 1.4%.

 

Mainland China stocks broadly succumbed to selling, as investors were disheartened by growing concern about U.S.-China trade talks in Washington between China and the United States, which have been clouded by the Trump administration's renewed threat to increase tariffs on Chinese goods.

Global stocks were ailing after President Donald Trump Sunday threatened further tariffs on Chinese imports that could come into effect on Friday, throwing global markets into disarray. His administration doubled down on that threat Monday evening. Investors previously expected Beijing and Washington to be close to sorting out a trade deal after months of negotiations. A lack of an agreement between the world's two largest economies could stymie global growth.

Speaking to reporters on Monday, US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin said China reneged on previous agreements over the weekend, undermining progress towards a detailed trade agreement between the world's two largest economies. Lighthizer, the top US trade negotiator, said the administration would increase penalties on $200 billion of Chinese goods to 25% from 10% on Friday. Trump renewed his threat to raise tariffs on Sunday.

China isn't the only place with which Trump wants to change trade relations. The United States has other trade-related issues on its plate: The European auto industry is also on his list and could get hit with tariffs. The US-driven replacement for NAFTA, called USMCA, took more than a year to negotiate but is not yet ratified. In short, uncertainty is back.

Technology and industrial companies have been hit the hardest by the selloff, because their businesses inherently rely on the global trade of materials and finished goods.

CURRENCY NEWS: China's yuan edged up against the U.S. dollar on Wednesday, as China's central bank set stronger official yuan midpoint. Prior to market open, the People's Bank of China (PBOC) set the midpoint rate at 6.7596 per dollar, 18 bps or 0.03 percent firmer than the previous fix of 6.7614. In the spot market, onshore yuan opened at 6.7750 per dollar and was changing hands at 6.7715 at midday, 65 bps firmer than the previous late session close but 0.18 percent softer than the midpoint.

Powered by Capital Market - Live News