Cooling sentiment on the Warsaw Stock Exchange in the shadow of tensions between China and the US

Friday's session on the Warsaw Stock Exchange saw minor changes to the main indices, but investor sentiment cooled significantly. The WIG20 ended the day with a symbolic 0,04% drop, falling to 2,873 points. The broad market index fell 0,06%, with relatively solid turnover reaching PLN 1,75 billion..

While index changes may suggest relative stability, clear movements at the individual company level indicate profit-taking and increasing investor caution.

Tensions between China and the US

Tensions between China and the United States have been rising recently, which is having an increasingly significant impact on global financial markets.Beijing has made a significant decision to impose strict export restrictions on rare earth elements, which are seen as key raw materials used in modern electronics, semiconductor production, and military equipment, effective December 1st. Under the new regulations, exporting these products will require special permits if they contain even trace amounts of these minerals or are produced using Chinese extraction and processing technologies.

China, which controls a significant portion of the global market for these raw materials, is using this advantage as a means of leverage in the ongoing technological dispute with the US. These restrictions could seriously disrupt production in sectors such as consumer electronics, automotive, and defense, where access to rare earths is essential.In an era of global competition for technological dominance, Beijing emerges as a player ready to use economic tools of pressure.

The threat of further tariffs

The Trump administration responded strongly to this. The US president threatened to significantly raise tariffs on Chinese goods imported to the United States, while expressing criticism of Chinese actions that he called "hostile"He added that because of these moves, he sees no point in his scheduled meeting with President Xi Jinping during the upcoming APEC summit in South Korea, indicating a further deterioration in relations between the two countries.

Additionally, Trump noted that China is sending out information to various countries about its plans to expand export controls to almost all rare earth products, even if they are not produced directly in China. This raises concerns about disruptions in global supply chains and difficulties in accessing key technological components.

Immediate market reaction

This escalation caused an immediate reaction from the markets, with US stock indices opening the session in the red, with the Nasdaq losing more than 2% and the S&P 500 losing around 1,5%. Similar sentiments prevailed on European markets, where indices also ended the day with declines.Investors are concerned about the possible consequences of these events, which could result in production slowdowns, increased component costs, and supply disruptions.

In the short term, the market will closely monitor further developments and the reactions of China and the United States. In the longer term, it is possible that the diversification of raw material sources will accelerate and that companies most dependent on rare earth elements and advanced technologies will change their strategies.

Source: Mikołaj Sobierajski, XTB