China Services Activity Stumbles; Tariff Fears Undermine Jobs Boosting Stimulus

“Consumer spending will largely depend on job market stability, with Goldman Sachs estimating that 16 million workers, over 2% of the labor force, may be exposed to exports bound for the US.”

Rising Tensions: Trade Talks and Tariff Threats

April’s Caixin PMI surveys raise two critical concerns. First, China may lack leverage in US-China trade negotiations if no progress is made. Second, President Trump could escalate tariffs to win concessions from Beijing. Nonetheless, signs suggest China is unlikely to yield easily, pointing to rising tensions between the two powers.

On Monday, May 5, President Trump proposed a 100% tariff on foreign films. However, there were signs of optimism. Trump reportedly said China wants a deal, while Treasury Secretary Scott Bessent expressed confidence in upcoming negotiations.

Hong Kong and Mainland Markets Rise in Post-Holiday Trading

Mainland China’s equity markets resumed trading on Tuesday, May 6, to a mixed backdrop of economic data and trade developments. The CSI 300 rose 0.85%, while the Shanghai Composite Index gained 0.84% in morning trading.

Gaming shares rallied as Chinese tourists traveling to Macau, Asia’s Las Vegas, reportedly surged 40.8% year-on-year during the May Day Holiday. The data suggests consumers hope Beijing could mitigate tariff risks with fresh stimulus.

Hong Kong’s Hang Seng Index also opened higher, rising 0.81% in the morning session. In contrast, the Nasdaq Composite Index fell 0.74% overnight, bringing year-to-date losses to 7.59%, significantly steeper than the CSI 300’s 3.36% drop.