Markets in Details: 02 July 2019

2 July, 2019

Trade Truce Announced

After an 80-minute discussion behind closed doors on Saturday, China released a statement saying that a truce has been reached which would prevent new tariffs from being placed on Chinese imports. U.S. President Trump, in his press conference, stated that U.S. companies could continue to sell to Huawei as long as the products involved pose no threat to national security.

Market observers welcome the pause in tariff increases but are otherwise cautious about a long-term solution to the trade war as uncertainty remains present and has not been completely removed.

Risk appetite for equities were boosted with news of the U.S./China truce, whilst gold slid 1.1 percent and yield on the 10-year U.S. Treasuries rose by 1.2 basis points as funds flowed out of debt.

Crude strengthens

Russia and Saudi Arabia have agreed to take away 1.2m barrels a day from the market, with President Putin suggesting the cuts could last up to 9 months. Brent rose 2% to 65.90

China manufacturing contracts

The latest Caixin manufacturing PMI showed China’s factory activity contracted in June after the index fell to 49.4, consistent with official figures released on Sunday by the National Bureau of Statistics. Trade tensions, U.S. tariffs and cooling global demand are noted by some economists as factors renewing the manufacturing slowdown in China.

Japan/South Korea rift

After South Korea allowed its courts to seize assets of Japanese companies, Japan’s Ministry of Economy, Trade, and Industry imposed restrictions on exports of important chemicals used by the semiconductor industry.

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