US-China San Francisco Summit: Markets react as Joe Biden, Xi Jinping meet yields few results

Image credit: The White House/X

US President Joe Biden and Chinese leader Xi Jinping met in San Francisco for over four hours to de-escalate tensions that had worsened relations between the two countries over the past 12 months.

The two agreed to resume military-to-military communications and cooperate on anti-drug policies, a sign ties were improving, but some investors were disappointed at the lack of any major breakthroughs in the talks.

Happening Now: President Biden holds a press conference following the U.S.-PRC Summit. https://t.co/XUxgS6sAYa

— The White House (@WhiteHouse) November 16, 2023

Global markets react to Xi Jinping, Joe Biden meet

Asian stocks

In China, stocks fell on Thursday partially because investors were disappointed by the top level Sino-US meeting between Joe Biden and Xi Jinping, with Shanghai’s blue-chip CSI300 index down 0.72 per cent and Hong Kong’s Hang Seng index dropping 1 per cent.

Asian stocks fell on Thursday pausing the heavy gains made this week, as fresh Chinese data showed prolonged weakness in the property sector and dented some of the recent optimism about a recovery in the world’s second-largest economy.

While data released this week showed China’s industrial and retail sectors making a comeback, a sharp drop in property investment and weak home prices suggest persistent problems in the sector that could drag on the country’s overall recovery.

Meanwhile, Japanese exports grew for a second straight month in October but at a sharply slower pace due to slumping China-bound shipments of chips and steel.

“The weak economic data from both countries indicate the fact that the global economy is slowing down, highlighting ongoing macro headwinds that businesses face,” said Tina Teng, market analyst at CMC Markets.

“China’s housing crisis remained a major issue for the economy and weakened global consumer demands will likely continue to press on sentiment.”

The MSCI Asia ex-Japan index, MSCI Emerging Market index and Nikkei all posted their biggest gains in a year, of 2.5 per cent or more, on Wednesday.

European markets

European markets were set for a lower open, with pan-region Euro Stoxx 50 futures down 0.21 per cent, German DAX futures falling 0.11 per cent and FTSE futures dropping 0.11 per cent.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.4 per cent in afternoon trade although the index is up 7.1 per cent so far this month.

Australian shares were down 0.67 per cent as strong wages data indicated that inflationary pressures were still running high. Japan’s Nikkei stock index slid 0.18 per cent as investors sold stocks to lock in profits from the previous session’s sharp gains.

US markets

On Wednesday, US stocks closed slightly higher, as inflation data reinforced investor hopes the Fed is done raising interest rates, while retail stocks were boosted by an upbeat forecast from Target.

The Dow Jones Industrial Average rose 0.47 per cent, the S&P 500 gained 0.16 per cent and the Nasdaq Composite narrowed earlier gains to end flat.

Money market traders have fully priced in the odds that the US central bank will keep rates steady in December, as per CME Group’s Fedwatch tool. They also see the first rate cut of the cycle to kick off in May 2024.

Investors are increasingly pricing in more rate cuts next year with bond yields and the dollar coming under downward pressure. Some of that reversed on Wednesday, with Treasury yields and the dollar rebounding slightly from the previous session’s fall.

The yield on benchmark 10-year Treasury notes was at 4.5039 per cent compared with its US close of 4.537 per cent on Wednesday. The two-year yield, which rises with traders’ expectations of higher Fed fund rates, touched 4.8989 per cent compared with a US close of 4.916 per cent.

In currencies, the European single currency was up 0.1 per cent on the day at $1.0837, having gained 2.47 per cent in a month, while the dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was up at 104.48.

US crude dipped 0.9 per cent to $75.97 a barrel. Brent crude fell to $80.44 per barrel.

Gold was slightly higher. Spot gold was traded at $1963.29 per ounce.