This week, investors continued looking at the ongoing trade war between United States and China. In an interview, Donald Trump said that the country will add tariffs on all imported goods from China if the two leaders don’t meet at the G20 summit in Japan. China responded by saying that the tariffs and trade restrictions put in place by the US will empower it to be self-reliant. In recent years, the Chinese government has increased its investments in high-tech products like chips that the US has long dominated.
Yesterday, tensions in the Middle East continued after attacks on two oil tankers that were transporting crude oil to other countries. This led to a sharp increase in the price of crude oil as investors started to think about the disruption in supplies. Two thirds of all the world’s sea-borne oil passes in those waters. In response, the US announced that the ships were attacked by Iran without providing any evidence. Iran denied the allegations and blamed the US for starting to initiate instability in the Middle East region. This week, data from the American Petroleum Institute (API) and Energy Information Administration (EIA) showed that oil inventories were rising faster than expected.
On interest rates, Turkey and Switzerland were the main central banks that delivered their rates decision this week. In Turkey, the central bank left the one-week repo rate unchanged at 24%. The late liquidity window rate was left unchanged at 24%. The same was true with the overnight lending and borrowing rates, which was left unchanged at 22.50%. Yesterday, the Swiss National Bank left rates unchanged at the current -0.75%. This was expected. The bank also raised the growth forecast for the year. The rates decision came shortly after a government report raised the growth estimate of the year.
On Wednesday, the US released inflation numbers. The numbers showed that the headline CPI rose by 1.8% in May, which was lower than the expected 1.9%. In April, the CPI had risen by 2.0%. The core CPI< which strips the volatile food and energy products rose by an annualized rate of 2.0%, which was below the expected 2.1%. On a MoM basis, the core CPI rose by 0.1%, lower than the expected 0.2%. Later today, the US will release the retail sales data for May.
This week, the United States Department of Agriculture (USDA) released the World Agriculture Supply and Demand Estimates (WASDE). This is an important report that is released every month to provide guidance to policymakers, farmers, and investors on the expected demand and supply dynamics of agricultural products. On corn, the report showed that the US will see lower corn produces as most of the farmers have not yet planted because of the extreme weather.
Another main thing that happened was in the corporate scene. On Sunday, United Technologies confirmed an earlier report that it was merging with Raytheon Technologies. Bill Ackman, a major investor in United Technologies rejected the deal. As the consolidation wave continued, Salesforce announced that it was acquiring data visualization company, Tableau.