Insights on The U.S. and China Trade Tensions and Federal Reserve Concerns

The blue-chip CSI 300 Index (Shanghai Shenzhen) and the SSE Composite Index (Shanghai Composite) have fallen. The declines for each index were 0.9% and 0.4%, respectively. SS:600353 (Chengdu Xuguang Electronics Co Ltd) and SS:688019 (Anji Microelectronics Tech Co Ltd) are chipmaking stocks that have declined. Both stocks saw drops of up to 20%. After the White House introduced export limits, this occurred. 

The Introduction of Export Limits by the U.S

The restrictions prevented some semiconductor chips produced using American machinery from reaching Chinese enterprises. The action directly caused the Hong Kong Hang Seng index to lose more than three per cent of its value. It suggests that investors were apprehensive. 

Share prices of these companies all fell between 2% and 4%. These companies include Tencent Holdings Ltd., Alibaba Group Holding Ltd., and Baidu (NASDAQ: BIDU) Inc. (HK:0700). The United States’ choice may aggravate already complicated economic ties between the two largest economies on earth. If China strikes back, the effects on the world economy might be even more severe.

Some observations have emerged from the published data over the weekend. It demonstrates that the nation’s services industry unexpectedly shrank in September. The decline aided in the deterioration of attitudes against China due to COVID’s persistent disturbances. There have been questions regarding the need for more lockdowns. The recent increase in infection rates is the reason behind this.

The Chinese Communist Party’s 20th Congress is underway this week. It is expected to include a summary of the government’s five-year intentions.

The value of the larger Asian stock markets fell precipitously. This occurred even though trading volumes on Monday were low. The decline is due to holidays in Japan and South Korea.

More Declines in Stocks 

In Australia, the S&P/ASX 200 index fell by 1.4%. The downturn is brought on by mining businesses suffering significant losses. The Losses are the result of the potential fall in Chinese demand. 

The Philippines’ PSEi Composite index has Southeast Asia’s worst performance of any index. With a loss of 1.1%, the benchmark Nifty 50 index had a 1.3% decline.

Regional stocks had a terrible lead-in on Wall Street. Just after stronger-than-expected U.S. employment figures, Wall Street fell on Friday. The statistics did not convince the Federal Reserve to soften its hawkish stance. 

The US CPI inflation data for September will be released on Thursday. The report will also influence the Federal Reserve’s perspective on interest rates. It is predicted that the information will show that inflation remained strong over the previous month.

It seems likely that the central bank will raise interest rates in November by 75 basis points. The chance is more than 80%, according to the financial markets. 

This year, increasing interest rates in the U.S. have been the biggest obstacle for Asian markets. Due to rising interest rates, market declines are anticipated to continue for the foreseeable future.

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