Trump & China
Trump & China
Major news of the past week was the emerging market sell-off sparked by the US’s announcement concerning Chinese imports.
Major news of the past week was the emerging market sell-off sparked by the US’s announcement concerning Chinese imports. The Trump administration threatened to impose an additional $200 billion in tariffs on Chinese imports if China retaliates because of the $250 billion in tariffs already proposed by the US. This announcement led to as sale of bonds and equity across emerging markets, and South Africa was not spared. Most emerging market currencies weakened against the dollar as capital moved out of these markets back into the US.
Equity markets globally lost value in response to the US’s threats. The Shanghai composite lost a massive 4.37% for the week, followed by the Nikkei with a loss of 1.47%.
British Prime Minister Theresa May won a narrow victory to pass the EU Withdrawal Bill, giving members of the House of Commons a meaningful vote on the terms of any agreement between the United Kingdom and the EU over the UK’s departure. The European equity markets reacted negatively to this news. The Dax in Germany lost 3.06% and the CAC 40 closed 2.08% lower. On the flipside, the FTSE 100 in the UK closed 0.63% up.
The local market did not escape the flight of capital, with the equity and bond markets closing lower in response to the announcement from the US. The JSE all-share index lost 1.30% in value to close on 56 856.66 points. Some positive news concerning inflation is that the rate eased to 4.4% for May compared to 4.5% in April, despite the implementation of a VAT hike in April. Contributors to the May inflation rate include food and non-alcoholic beverages, which increased by 3.4% year-on-year.
The price of Brent crude oil was at around $75 per barrel. The Organization of the Petroleum Exporting Countries (OPEC) agreed to boost production by 600 000 barrels a day to make up for production shortfalls in Venezuela and Iran. This should support a lower oil price.
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