Market Update

After a relatively calm period, global trade tensions took center stage once again this week. Despite the back-and-forth between the US and China, most other equity markets managed to post positive returns.
In an attempt to pressure China amid faltering trade negotiations, the US escalated tariffs from 10% to 25% on $200 billion worth of Chinese imports last Friday (10/05/2019). China swiftly retaliated, announcing tariffs on $60 billion of US goods effective from 1st June. The US countered by unveiling a list of an additional $300 billion of Chinese goods, essentially all items not already subjected to tariffs, that they are willing to target.
Although tensions appeared to escalate, President Trump somewhat eased concerns by confirming his meeting with Chinese President Xi at the upcoming G20 summit in June. This provided relief, as their meeting in December had previously deferred planned tariffs and resumed negotiations.
With pressure mounting due to the upcoming presidential elections, Trump is increasing his efforts. However, he seems aware that tariffs will eventually burden consumers and businesses. Later in the week, he postponed automobile tariffs, which were set to be imposed on 18th May 2019, and removed tariffs on Canadian and Mexican aluminum and steel.
In China, economic data disappointed this week as industrial output, retail sales, and investment all slowed more than expected. While the impact of US tariffs won't be immediately reflected in economic data, given the softening trends, China is likely to respond by implementing further monetary and fiscal easing measures.
In the UK, cross-party Brexit talks hit a deadlock as the government announced another vote on the withdrawal bill in early June. After the vote, Theresa May agreed to outline her departure timetable as Prime Minister, leading to several MPs declaring their candidacy for the Conservative Party leadership. With Labour unwilling to support the withdrawal agreement without significant changes and a leadership contest underway, the vote's success seems unlikely. The future of Brexit is likely to rest with May's successor, with negotiations taking a back seat during the campaigning period.
Looking ahead to next week, the Indian elections will finally conclude, European parliament elections will take place across Europe, and the Fed will release minutes from its latest meeting. The ECB will publish its account of the April monetary policy decision, and Mark Carney, Governor of the Bank of England, will testify to Parliament on the May inflation report. Data releases will include UK inflation figures and Japanese GDP and trade data.