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US - China trade talks optimism starts to fade

US – China trade talks optimism starts to fade

The optimism that briefly turned Chinese assets into world’s best performers faded amid skepticism that there’s been any breakthrough with the U.S. on trade.

The Hang Seng China Enterprises Index fell 1.4 percent at the close, tracking losses in U.S markets overnight after President Donald Trump called himself “Tariff Man” and questioned whether a deal with China was possible. China’s Ministry of Commerce issued a short statement Wednesday sayingthe weekend meeting between the two leaders in Buenos Aires was “very successful,” without adding new details.

Chinese government bonds climbed, with the 10-year yield falling 2 basis points to 3.32 percent, the lowest since April 2017. The yuan weakened 0.44 percent at 6.8674 per dollar as of 4:21 p.m. in Shanghai.

Investors are losing their appetite for risk only days after an apparent trade truce between the world’s largest economies triggered the biggest two-day surge in the yuan in at least a decade. A relief rally in stocks had sent the Shanghai Composite Index above a key technical level that it’s failed to hold three times this year. Even government bonds found buyers amid speculation that a stronger currency gives the central bank room to increase stimulus.

The statement on the Ministry of Commerce’s website said China is “confident” of implementing the results agreed upon at the talks, but didn’t provide any further details on the outcome. Trump continued to ratchet up pressure on China, saying there will be a “REAL DEAL with China, or no deal at all.”

The Shanghai Composite Index retreated as much as 1.5 percent before paring the drop to 0.6 percent. The Hang Seng Index lost 1.6 percent, as tech stocks led the decline. Sunny Optical Technology Group Co. slumped 7.3 percent, while Tencent Holdings Ltd. retreated 2.3 percent.

BAIC Motor Corp. slumped 11 percent. Daimler AG has raised the prospect of boosting its stake in Chinese partner BAIC, according to people familiar with the discussions, a move that threatens to dry up a key source of profit for domestic automakers. Guangzhou Automobile Group Co. and Dongfeng Motor Group Co. fell more than 4.1 percent as the worst performers on the Hang Seng China measure.

Bloomberg

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