Asian Markets Diverge Despite Trump-Xi Trade Truce as China PMI Weighs on Sentiment

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Summary:

Asian stock markets saw mixed performance as optimism over the Trump-Xi trade truce was dampened by fresh signs of economic weakness in China and disappointing earnings from Big Tech in the U.S....

Mixed Regional Gains Reflect Uneven Confidence After Trade Talks

Asian equities failed to rally uniformly despite a symbolic trade détente between U.S. President Donald Trump and Chinese President Xi Jinping. While Trump rated the meeting a “12 out of 10” and pledged to cut tariffs, the market response across Asia was cautious. Japan's Nikkei 225 jumped 1.7% to a record 52,201.05, fueled by stronger-than-expected industrial output, while China’s major stock indexes fell, and broader Asia showed fragmented momentum.

South Korea’s Kospi added 0.4%, Taiwan’s Taiex rose 0.5%, and Australia’s ASX 200 inched up 0.2%. In contrast, Hong Kong’s Hang Seng dropped 0.9% and the Shanghai Composite slipped 0.6%, as fresh data reinforced the structural slowdown in China’s manufacturing sector.

China PMI Slump Offsets Positive Diplomatic Optics

The key driver of China’s market underperformance was the release of October’s official manufacturing PMI, which fell to 49.0 marking the seventh consecutive month in contraction territory. The reading signaled that Chinese factory activity remains subdued, echoing concerns about persistent weak demand and geopolitical uncertainty. Despite the high-profile trade meeting, investors remained wary of China’s economic fundamentals, especially as global supply chains continue to shift and Beijing faces structural headwinds from property and industrial overcapacity.

The weak PMI data contrasted with the modest boost in non-manufacturing activity and reinforced a divergence between diplomatic signaling and economic reality. The decline in Chinese equities suggests markets are demanding more than symbolic gestures they are looking for concrete stimulus and structural reforms.

Big Tech Disappointment Drags Down Wall Street and Dampens Sentiment Globally

Wall Street’s pullback added further pressure on global investor sentiment. The S&P 500 fell 1% to 6,822.34, the Nasdaq Composite dropped 1.6% to 23,581.14, and the Dow Jones slipped 0.2% to 47,522.12. Despite record highs earlier in the week, earnings from major tech firms revealed vulnerability beneath the surface.

Meta Platforms tumbled 11.3%, driven by concerns over its aggressive spending outlook for 2026. Analysts flagged growing investor anxiety that heavy AI investments may not translate into short-term returns. Microsoft also declined 2.9% despite beating profit estimates, as its Azure growth missed elevated expectations and its capital expenditure guidance triggered caution.

Alphabet was a notable outlier, gaining 2.5% after surpassing both revenue and earnings forecasts. Given that Alphabet, Meta, and Microsoft collectively represent 14.5% of the S&P 500's total market capitalization, these moves significantly influence global sentiment and can overshadow broader market dynamics.

Commodity and Currency Movements Reflect Defensive Positioning

Oil prices retreated modestly, with U.S. crude down 42 cents to $60.15 per barrel and Brent falling to $63.95, reflecting tepid demand expectations. In currency markets, the U.S. dollar weakened slightly against the yen, trading at 153.95, while the euro edged higher to $1.1573.

These moves indicate cautious investor positioning in light of mixed macroeconomic signals. While the Trump-Xi truce may alleviate immediate tariff risks, the market appears focused on earnings fundamentals, real economic data, and the durability of diplomatic resolutions.

The divergence in Asian markets underscores that symbolic political agreements alone are insufficient to sustain risk appetite, particularly when macroeconomic indicators signal deeper fragility. China’s contracting manufacturing sector remains a drag on regional confidence, and with U.S. tech giants facing margin scrutiny, the global rally is encountering resistance. Investors are likely to remain selective, favoring markets with clearer data support and policy stability over headline-driven rallies.

Source: AP

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