Rifts ahead of US-China talks on AI safety

Asian stock markets saw an upward trend on Monday morning, driven by the growing demand for artificial intelligence technology and positive indications from recent trade discussions between Chinese and US officials. The US stock market had started the week mixed due to central banks' efforts to control inflation, with the Federal Reserve raising interest rates on Wednesday.

US and Chinese economic officials held talks on Sunday regarding trade and AI, setting the stage for a potential summit in Washington on Thursday with US President Donald Trump and Chinese President Xi Jinping. US Treasury Secretary Scott Bessent announced that the two nations had discussed establishing a channel to communicate about AI matters called the US-China AI dialogue.

Chinese state media described the talks as candid, in-depth, and constructive. Hong Kong's main index rose by half a percent shortly after the market opened on Monday, while South Korea's tech-heavy benchmark surged by 1.5 percent, and shares in Shanghai gained 0.5 percent. Tokyo was closed for a public holiday, and Sydney's main index experienced a slight decline.

Stephen Innes from Quintex Intel noted that while this is not a market anticipating a significant breakthrough, it is eagerly awaiting to see if both sides can prevent any further trade disputes. Recent months have seen mounting pressure on global monetary authorities, as oil prices remain high due to the ongoing conflict between the United States and Iran, with no immediate resolution in sight.

The Bank of Japan increased interest rates on Friday to a three-decade high, but the yen weakened against the dollar due to concerns about the pace of rate hikes being lower than anticipated. This followed earlier hikes by the European Central Bank and the US Federal Reserve. Oil prices dropped on Monday morning, following Friday's declines as hopes grew that Saudi Arabia might restore around half of its crude shipments within days following the disruption of its East-West pipeline to the Red Sea.

However, both major crude contracts were still around $100 a barrel, significantly higher than pre-war levels. The West Texas Intermediate fell by 2.1 percent to $98.19 per barrel, and Brent North Sea Crude declined by 2.0 percent to $101.77 per barrel. Hong Kong's Hang Seng Index rose by 0.5 percent to 24,875.93, Shanghai's Composite Index increased by 0.5 percent to 3,932.64, while the Dollar/yen strengthened to 156.83 yen from 156.73 yen on Friday, and the Euro/pound rose to 85.78 pence from 85.76 pence.