The trade relationship between China and the US continued to dominate investor sentiment during June. Nevertheless, towards the end of the month, President Trump and China’s President Xi Jinping met at the G20 summit in Japan, and agreed to restart trade negotiations.
- China’s exports posted an unexpected increase
- The Reserve Bank of India cut its key rate to 5.75%
- The rate of inflation declined in Brazil
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The trade relationship between China and the US continued to dominate investor sentiment during June, following President Donald Trump’s decision in May to increase tariffs on over US$200 billion-worth of imports from China from 10% to 25%. Nevertheless, towards the end of June, President Trump and China’s President Xi Jinping met at the G20 summit in Japan, and agreed to restart trade negotiations. In the meantime, the US postponed additional tariff increases on a further US$325-worth of Chinese imports.
“The UK and China launched the London-Shanghai Stock Connect”
Despite the ongoing trade war between China and the US, China’s exports posted a surprise increase during May, rising at an annualised rate of 1.1% following April’s decline of 2.7%. In contrast, imports fell by 8.5%. Elsewhere, industrial production continued to weaken: output fell from an annualised rate of 5.4% in April to 5% in May. The Shanghai Composite Index rose by 2.8% during June.
The UK and China launched the London-Shanghai Stock Connect during the month. The new link will enable companies to trade shares through dual listings on the Shanghai and London Stock Exchanges using depositary receipts. This is the first time that foreign companies have been able to list in mainland China. According to the UK Treasury, over 260 of the 1,500 companies listed in Shanghai are potentially eligible to list in London through Stock Connect.
The Reserve Bank of India (RBI) cut its key interest rate from 6% to 5.75% in June, and modified its monetary policy stance from “neutral” to “accommodative”. RBI policymakers also cut the central bank’s forecast for economic growth for the fiscal year 2019-20 from 7.2% to 7%, and raised its inflationary forecast to 3-3.1% in the first half of the fiscal year and 3.4-3.7% in the second half. The RBI has already cut rates twice in 2019, reflecting intensifying concerns over the outlook for India’s economic growth. Over June, the CNX Nifty Index fell by 1.1%.
Brazil’s monthly rate of inflation fell from 0.57% in April to 0.13% in May, driven down by deflation of 0.56% in the price of food and beverages to reach its lowest May rate since 2006. On an annualised basis, the rate of inflation moderated to 4.66% in May, compared with April’s rate of 4.9%. Brazil’s central bank maintained its key interest rate at 6.5% during June. The benchmark Bovespa Index rose by 4.1% over the month.
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