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Looming trade war knocks sentiment

March 2018

China’s relationship with the US deteriorated during March following President Donald Trump’s decision to impose a series of new tariffs intended to safeguard US interests. Widely criticised levies on steel and aluminium imports early in the month were followed by a range of tariffs specifically imposed on Chinese imports.

  • Brazil’s key Selic interest rate was cut to 6.5%
  • FTSE Russell promoted Saudi Arabia to “Secondary Emerging” status
  • India’s rate of inflation eased in February

To view the series of market updates through March, click here


China’s relationship with the US deteriorated during March following President Donald Trump’s decision to impose a series of new tariffs intended to safeguard US interests. Widely criticised levies on steel and aluminium imports early in the month – later suspended for certain countries until 1 May – were followed by a range of tariffs specifically imposed on Chinese imports in a bid to remedy China’s allegedly “unfair” business practices and reduce the US’s trade deficit with China “immediately” by US$100 billion. 

“China subsequently imposed levies on a range of US exports worth almost US$3 billion”

China’s US embassy initially responded by warning that China “would fight to the end to defend its legitimate interests with all necessary measures”. China subsequently imposed levies on a range of US exports worth almost US$3 billion. The measures comprised a 15% tariff on 120 products worth US$977 million, and a tariff of 25% on eight products worth almost US$2 billion. The Shanghai Composite Index fell by 2.8% in March. 

Brazil’s rate of inflation – as measured by the IPCA-15 – rose at an annualised rate of 2.84% during February, falling below the Banco Central do Brasil’s (BCB’s) target of 4.5% plus or minus 1.5 percentage points. Policymakers at Brazil’s central bank predict the rate of inflation to reach 3.8% in 2018 and 4.1% next year. The BCB cut its key Selic interest rate by 0.25 percentage points to 6.5%. Another cut is widely expected in May. The benchmark Bovespa Index was broadly flat over March as a whole.

Having fallen to 5.07% in January, India’s annualised rate of inflation declined to 4.44% in February. The Reserve Bank of India (RBI)  expects inflation to be around 5.1-5.6% in the first half of the next fiscal year, before slackening to 4.5-4.6% in the second half. Central bank policymakers have an inflation target of 4% within a range of 2-6%. Looking ahead, inflationary pressures are forecast to increase as vegetable prices experience a seasonal rise; the RBI predicts the country’s economy to grow by 7.2% during the next fiscal year, compared with growth of 6.6% in the current year. During March, the CNX Nifty Index fell by 3.6%.

Index provider FTSE Russell announced that Saudi Arabia will be classified as a “Secondary Emerging” market within its FTSE Global Equity Index Series from March 2019. Fellow index provider MSCI is expected to announce its own decision over the possible reclassification of Saudi Arabia in June. 


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