Market Close Dec 07

US-China friction weighs, pound bashed

China stocks, yuan fall despite strong exports and rise in forex reserves; Australia outperforms as iron ore rally boosts miners; British pound hammered on fears of a no-deal Brexit

US China friction weighs, pound bashed
China's senior diplomat Wang Yi said on Monday he believed that US policy on China could eventually "return to objectivity and rationality". China's relations with the United States hit rock bottom during the Trump administration, which is set to be replaced when President-elect Joe Biden takes office in January. Speaking to business leaders from US firms, Wang, who is China's foreign minister, said both countries should respect each other's history, core interests and "the systems and paths chosen by our people" when managing differences and conflicts. "China and the US can totally cooperate on areas such as managing the pandemic, economy recovery and climate change." File photo by AFP.

(ATF) Hong Kong: Asian markets were jittery after tensions between the world’s two biggest economies rose following a report the Trump administration is seeking to impose sanctions on Chinese officials over their alleged role in Beijing's disqualification of elected opposition legislators in Hong Kong.

Earlier, the Trump administration restricted travel to the United States by members of China’s ruling Communist Party and their families and China warned the US about 'abuses' in the name of national security, after the Trump administration added China’s SMIC and CNOOC to a defense blacklist.

At the weekend, index provider FTSE Russell said it would drop eight Chinese companies from its indexes after a US order issued last month restricted purchase of their shares.

Today, Japan’s Nikkei 225 index dropped 0.76%, Hong Kong’s Hang Seng index slumped 1.23%, China’s CSI300 slid 0.86%, but Australia’s S&P ASX 200 added 0.62% after miners rallied on strong iron ore prices. Iron ore prices rose 6% as demand from China rose on the back of the economic recovery.

Regionally, the MSCI Asia Pacific index retreated 0.68%.

The yuan slumped on the US-China tensions, despite China’s forex reserves climbing to a 4-month high boosted by a more than expected rise. The currency dipped 0.2% to 6.54 per dollar even though the global dollar index fell to 90.715 on Monday from the previous close of 90.83.

China’s forex reserves climbed to $3.178 trillion in November, compared with $3.150 trillion forecast by a Reuters poll of analysts and $3.128 trillion in October. The Chinese currency has gained 6.4% so far this year on the back of the country's post-Covid economic recovery.

The world’s second largest economy extended its rebound as data released on Monday showed China’s exports in November leapt by the largest margin in nearly 3 years.

“The main factor behind strong exports is the resilience of China's manufacturing base during the pandemic allowing China's exports to take a larger share of global exports, despite weak global demand,” analysts at Everbright Sun Hung Kai said in a note.

The rebound was supported by robust exports to the US. 

“China is still behind on its phase-one deal commitments with the President-elect Biden stating in an interview that he will not abandon the deal, suggesting that the punitive tariffs will not be lowered. However, with fewer avowed hawks in his transition team, there could be a message of more reconciliation than attacking China for failing to make its import targets as outlined in the deal,” the brokerage said.

The risk aversion gave a boost to US Treasuries with the 10-year yield falling 3 basis points to 093%.

The British pound fell 1.1% to $1.3266 amid jitters ahead of the EU and UK trade talks. The increasing likelihood of a no-deal Brexit scenario is hurting the currency.

ATF China Bond 50 Index: Bond calculus framed by deflation forecast

Also on Asia Times Financial:

Global economy set to warm up faster than US-China relations

US blacklist could bring CNOOC to its knees

China's old 'dragon' Baidu well ahead of the pack in AI technologies

China buying Taiwanese phone, PC displays in latest shift away from US

Foreign Exchange: Rising currencies park fear of post-Covid currency war

Asia Stocks

· Japan’s Nikkei 225 index dropped 0.76%

· Australia’s S&P ASX 200 added 0.62% 

· Hong Kong’s Hang Seng index slumped 1.23%

· China’s CSI300 slid 0.86%

· The MSCI Asia Pacific index retreated 0.68%.

Stock of the day

GCL Poly Energy and GCL New Energy rose by 24% and 41% after they said they had disposed of a jointly-owned subsidiary for 211 million yuan.

Asian markets US-China Australia iron ore Brexit pound slumps pandemic superpower tensions China exports