Tue, January 31, 2023

Asian Shares Weaken, Gold Advances on Trump-Xi Conflict

Man watching stock market index.

On Friday, Asian shares slipped. Meanwhile, markets became more uncertain whether the highly anticipated meeting between US President Donald Trump and Chinese President Xi Jinping could result to better trade relations.

Signs of rising risks to global growth came out with uncertainty over whether the talks will result into progress in ending the year-long trade war between the world’s two largest economies.

Chinese and U.S. officials agree that a continuation of talks was the most likely outcome of the weekend meeting.

A strategist at McKenna Macro stated, “I’m not sure the Americans can deliver what the Chinese want, and the Chinese don’t want to deliver what the Americans want,” adding that he sees an “extend and pretend” outcome.

McKenna said, “we will not be in a holding pattern on Monday morning.” Regardless of the outcome.

Meanwhile, Japan’s Nikkei stock index was 0.55% lower, with weakness in Chinese equities weighing on the broader region. MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.3%.

The meeting, which is set to take place on Saturday at the G20 summit in Japan, had no preconditions to which Trump has agreed on. The President is threatens to impose new tariffs on Chinese goods, as stated by a White House economic adviser on Thursday.

As part of a trade deal, Lawrence Alan Kudlow, an American financial analyst, dismissed a report that China was insisting on lifting sanctions on Chinese telecom equipment giant Huawei Technologies Co Ltd.

The Trump administration had reportedly agreed to delay new tariffs on Chinese goods.

For a second consecutive month in June, ahead of the release of data that is expected to show China’s factory activity shrank, China’s central bank pledged to support a slowing economy as global risks rise on
Thursday.

Updates on Indexes

United states of America flag and China flag.

On Friday, Chinese blue chips plunged 0.49% while Hong Kong’s Hang Seng dropped 0.59%. Australian shares were down at 0.3%.

Overnight, the losses followed the gains in global equity markets. On Friday, early gains were trimmed and traded flat with S&P 500 e-mini stock futures uncertain.

In a morning note, an analyst stated, “Central expectations for the G20 meeting between Trump and Xi are that negotiations will resume, additional U.S. tariffs will be delayed, China will buy more U.S. goods and talks over tech-trade will gain renewed focus.”

In addition, he also said, “However, as the difficulty of resolving economic aspirations between the two countries is herculean, markets remain cautious.”

Even if signs of progress emerge on trade, investors would quickly move on to U.S. interest rate policy, a global investment strategist at Principal Global Investors said.

In a note the strategist also stated, “As the equity market is now fully pricing in a 50-basis point cut, market disappointment could be significant … And if the Fed follows through with a cut despite a brighter trade outlook? Beyond the knee-jerk euphoria, expect minimal market reaction – this last scenario is exactly what the market is already expecting.”

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