China’s blue-chip CSI300 Index and the Shanghai Composite Index fell over 1% as a risk-off mood set in global markets. Both indexes swung between gains and losses through the morning session but remained close to recent peaks.
Hong Kong’s benchmark Hang Seng fell roughly 2%, tracking global markets as investors’ euphoria over tech stocks gave way to inflation fears amid rising wagers of US rate hikes this year.
Trump and Xi concluded on Friday their two-day summit that included talks on trade, Iran and Taiwan.
“I think we were optimistically looking at the meeting and maybe half expecting some huge trade agreement to be proposed or announced, and from that view, it has disappointed,” said Nick Twidale, chief market analyst at ATFX Global.
It was undecided whether the October trade truce will be extended after it expires later this year, US Trade Representative Jamieson Greer told Bloomberg TV on Friday, but added that deals had been firmed up on Chinese purchases of farm goods and beef.
Investor attention will be on whether detailed agreements are announced now that the summit is over.
“This (summit) was not a meeting aimed at a full reset of US-China relations,” said Cliff Zhao, chief economist at CCB International.
It was more about promoting high-level communication, reducing near-term uncertainty, and setting clearer boundaries for competition, Zhao said.
Thorny geopolitics
Investors are focusing on geopolitical issues such as Iran and Taiwan, but it’s hard to make substantive progress, said Lynn Song, chief economist for Greater China at ING.
“Actions will speak louder than words, and if we see progress on Iran negotiations or shifts in stance on US arms sales to Taiwan, it may suggest that progress was made at this summit,” said Song.
Trump told Fox News Channel that China has agreed to buy 200 Boeing jets, a number that was far fewer than analysts had expected. That sent shares of Boeing lower and China’s aviation stocks fell more than 2%.
Chip stocks, meanwhile, jumped 4% after China’s SMIC said foreign clients were shifting orders back to China. Shares in chip equipment maker Advanced Micro-Fabrication Equipment (AMEC) rose 10% on its strong order expectation.
Data showed new Chinese yuan loans contracted in April for the first time in nine months, sharply undershooting forecasts as seasonal factors and weak household credit demand dragged on lending in the world’s second-largest economy.
In currencies, the yuan remained close to a three-year high against the dollar it hit on Thursday.
The yuan retreated slightly after the People’s Bank of China set the midpoint rate CNY=PBOC at 6.8415 per dollar, 439 pips weaker than a Reuters estimate.
The yuan “isn’t likely to be impacted too much by the summit, nor is it likely to be a topic of conversation given the CNY has been on an appreciation trajectory,” said ING’s Song.