Chinese stocks ended trading on Thursday with the largest daily loss in a month, while the yuan fell against the dollar, with investors remaining cautious about the ability of the summit between US President Donald Trump and his Chinese counterpart Xi Jinping in Washington to achieve a broader breakthrough in trade and technology issues. At the close, the CSI 300 index of leading stocks fell 1.7 percent, while the Shanghai Composite Index lost 1.2 percent, both recording the largest daily decline in a month.
In Hong Kong, the losses were less severe, as the Hang Seng Index closed down 0.3 percent. Equity pressures coincided with the weakness of the Chinese currency. The yuan fell in spot trading during the session to about 6.7171 against the dollar, a decrease of 0.09 percent, while the yuan circulating outside the mainland recorded a level close to 6.7182 to the dollar.
This came with the dollar index rising to 101.15 points, after the US currency rose to its highest level in about two months, supported by increasing expectations of the Federal Reserve raising interest rates in the near term.
Inflation fears also pushed 10-year US Treasury yields to their highest levels since 2007, increasing pressure on Asian currencies. Before the market opened, the People's Bank of China set the reference rate for the yuan at 6.7489 against the dollar, 305 points weaker than Reuters estimates.
The yuan recently rose to its highest level in three and a half years, supported by improved expectations regarding the stability of Chinese-American relations. Kaiwan Securities said that the markets have already absorbed part of the expected improvement in relations, and that attention is now turning to whether the Washington talks will result in additional developments in the files of customs duties and technology.
Trump received Xi on Wednesday on a three-day visit to the United States. US Treasury Secretary Scott Besent said that the two countries agreed to extend the trade truce until January 10, that is, for about two additional months. But the extension period was shorter than market expectations, which were betting on a one-year extension. Analysts at UBS said that the agreement, despite its short duration compared to expectations, helps maintain stability in bilateral relations.
Also weighing on morale was the absence of a delegation of senior Chinese businessmen from Xi's visit, after Beijing was seeking to accompany a delegation to hold meetings with Trump, according to sources who spoke to Reuters. Losses included most sectors on the mainland, with gold, non-ferrous metals and artificial intelligence equipment companies leading the declines. The weak performance was in line with Wall Street's losses in the previous session, as rising oil prices and Treasury bond yields pressured global risk appetite.
In Hong Kong, the better performance of energy, banking and shipping stocks helped reduce market losses, which explains the decline of the Hang Seng at a slower pace than the main Chinese indices.
The technology sector remained a major focus in investors' accounts. Sanjeev Rana, head of semiconductor research for North Asia at CLSA, said that despite expectations about the possibility of Washington and Beijing cooperating in developing artificial intelligence and enhancing its safety, he does not expect the United States to ease restrictions on exporting chips to China.
In the background, the People's Bank of China is preparing to pump up to one trillion yuan, about $149 billion, daily through short-term liquidity tools around the end of the month, with the Golden Week holiday approaching.
Thursday's closes reflect the increased level of caution towards Chinese assets after recent gains. Extending the trade truce removed some immediate risks, but it was not enough to prompt investors to increase their exposure to stocks or the yuan, while markets remain awaiting clearer results from the Trump-Xi talks, especially regarding tariffs, chips, and technology.
The Japanese “SoftBank” group is raising $11.1 billion in bonds denominated in dollars and euros, in an issuance that is expected to become the world’s largest ever for high-yield corporate bonds, at a time when the group is intensifying its borrowing to finance a huge investment in “Open AI” and other bets on artificial intelligence.
The issuance comes after the issuance of bonds worth one trillion yen, about $6.3 billion, to individual investors during September, which sheds more light on the amount of financing that the group is mobilizing under the leadership of its founder, Masayoshi Son.
SoftBank has pledged to invest $64.6 billion in OpenAI, and is expected to own about 13 percent of the company by next week. It also agreed to buy ABB's robotics business for $5.4 billion, and to acquire Digital Bridge for $3.1 billion.
The new issuance includes three tranches of premium dollar bonds, worth $1 billion for a period of three and a half years with a return of 8.625 percent, $4.5 billion for a period of five and a half years with a return of 9.25 percent, and $4.5 billion for a period of seven and a half years with a return of 9.75 percent.
The group also issued two euro tranches worth 500 million euros each, the first for four years with a return of 7.125 percent, and the second for six years with a return of 8 percent.
These returns reveal a clear increase in the cost of financing the group. In a previous issuance worth $7.3 billion in June 2021, the returns on SoftBank’s dollar and European bonds ranged between 2.125 and 5.25 percent.
However, investors showed strong appetite towards the issue. Satoru Aoyama, senior director at Fitch, said he was positively surprised by the size of the demand, noting that the wave of borrowing related to artificial intelligence, which was initially led by major American technology companies with high credit ratings, has now widely reached the high-yield bond market.
If the deal is completed at the announced size, it will exceed the issuance of French telecommunications company Numericable Group, which amounted to $10.9 billion in 2014, to become the largest issuance of high-yield corporate bonds in the world, according to LSEG data.
SoftBank has already issued high-yield bonds worth $14.6 billion during 2026, representing 63.4 percent of the market for these bonds in Asia Pacific and Japan.
The group did not rely on bonds alone; It sold assets and obtained loans secured by its shares in the chip design company ARM and OpenAI to provide the necessary funds for its investment obligations.
But the postponement of the public offering plans for both “OpenAI” and the “SP Energy” data center development unit, after the two offerings could have started this month, reduced expectations of new liquidity flowing into the group in the near term.
Mark Chapman, head of communications and media at Credit Sites, believes that SoftBank's credit risks have become significant and have increased with increased concentration of assets and pressure on cash flows. According to his estimates, the group’s shares in “Arm” and “OpenAI” represent about three-quarters of the value of its assets.
This was reflected in the cost of insuring against SoftBank's debt default, as the margin for five-year CDS contracts exceeded 400 basis points this week, compared to about 280 basis points in June.
On the other hand, Standard & Poor's Global Ratings believes that the strong performance of ARM's stock supports the creditworthiness of the group, such that postponing the offering of "Open AI" does not have an immediate negative impact.
Between the strong demand for bonds and the high cost of debt insurance, the issuance reflects the new “Soft Bank” equation; It is financing its largest bet on artificial intelligence through record borrowing, with its financial position increasingly linked to the performance of “OpenAI” and “ARM.” The group's shares rose 1.5 percent on Thursday, after the Tokyo market returned from a three-day holiday.
John Williams, head of the Federal Reserve Bank of New York, said on Thursday that it is reasonable to believe that the US central bank may need to raise interest rates again before the end of the year, to help reduce the risks of inflation.
Williams pointed out that market participants’ expectations reflect investors’ belief that “another interest rate hike is likely to be appropriate by the end of the year.” “It seems to me that this is a logical way to think about it.”
He added, at a conference organized by the National Institute for Economic and Social Research in London: “But we have to wait and see.” “We will collect data and do what we did between last July and this September” when evaluating the information, according to Reuters.
Williams stressed the high levels of uncertainty surrounding the economic outlook.
Last week, the US Central Bank, under the leadership of its new president, Kevin Warsh, raised the key interest rate to a range between 3.75 and 4 percent, and 16 out of 18 policymakers indicated that the Federal Reserve would likely need to raise interest rates at least once before the end of 2026.
Williams, who also serves as Vice Chairman of the Federal Open Market Committee, which is responsible for setting interest rates, said that the American economy and other economies around the world have proven resilient in the face of the shock of rising energy prices resulting from the war in Iran.
But he said inflation represented the "biggest challenge" for policymakers seeking to balance growth with the risks of rising prices.
“Not only do we want to see inflation return to the 2 percent level, which is absolutely necessary, but we also want it to happen ... at the appropriate time,” Williams said.
The Federal Reserve raised interest rates last week to address inflation pressures that have exceeded its two percent target for years, pressures that are intensifying due to the trade tariffs agenda of US President Donald Trump and the war in the Middle East. Federal Reserve officials now expect that inflation will not return to the target level before 2029.
Futures markets indicate a high probability of another increase in borrowing costs during the Federal Reserve’s “monetary policy” meeting next October, followed by another increase in December.
In response to a question about the possible timing of the next interest rate hike, Williams indicated that the September decision came as a result of accumulating pressures, and not because of a sudden change in data.
