Market Update

Global equity markets experienced mixed trends this week, with positive developments in US-Mexico trade relations being counteracted by uncertainties surrounding US-China trade negotiations.
Early in the week, markets were lifted by the news that the US and Mexico had reached an agreement to address immigration issues, leading President Trump to indefinitely postpone tariffs on Mexican imports that were set to take effect on Monday (June 10). However, this positive sentiment was short-lived as Trump announced his personal stance against finalizing a US-China trade deal unless China agreed to previously negotiated terms. He also reiterated his threat of imposing additional tariffs if no agreement was reached at the upcoming G20 meeting later this month.
China's industrial production data released this week indicated that tariffs were taking a toll on the Chinese economy, with a growth rate of 5.0%, the lowest since 2002 and below analyst expectations of 5.4%. In response, China has introduced various measures to support its economy, including encouraging local governments to increase borrowing for infrastructure spending. Despite the disappointing industrial data, Chinese retail sales surpassed expectations, potentially reflecting the positive impact of recent personal tax reductions.
On the US front, soft inflation data, with US Core CPI rising by 2.0% compared to the estimated 2.1% from the previous year, strengthened the case for the Federal Reserve to support the economy. The Federal Reserve is set to announce its monetary policy next Wednesday. While expectations of 2-3 US interest rate cuts this year have been fueled by weakening economic data, it wouldn't be surprising if the Fed decided to maintain rates next week, awaiting further clarity on US-China trade relations after the G20 meeting.
Meanwhile, the race for the next UK Conservative Party leader commenced this week, narrowing down ten candidates to six. Boris Johnson emerged as a clear favorite, and by the end of the next week, the final two contenders, who will face a vote by the 120,000 Conservative Party Members in late July, will be known.
Additionally, next week will see updates on monetary policy from both the Bank of England and the Bank of Japan.