China Market gains on temporary trade truce ahead of G20

The Mainland China equity market advanced on Thursday, 27 June 2019, as investors propped up by better than expected China Industrial Profits data for May 2019. Meanwhile, buying momentum supported by report of tentative trade truce between the United States and China ahead of a meeting between leaders of the two nations at the G20 summit this weekend. At closing bell, the benchmark Shanghai Composite Index advanced 0.7%, or 20.51 points, to 2,996.79. The Shenzhen Composite Index, which tracks stocks on China's second exchange, was up 1.1%, or 17.05 points, to 1,577.56. The blue-chip CSI300 index jumped 1.07%, or 40.49 points, to 3,834.82.

China's industrial profits recovered in May, data from the National Bureau of Statistics revealed Thursday, bolstered by improving sales and better margins. Industrial profits increased 1.1% year-on-year to 565.6 billion yuan in May, reversing a 3.7% drop in April. During January to May, industrial profits fell 2.3% compared to the same period last year. Profits had decreased 3.4% in January to April period.

As per media reports, he two governments have agreed to a tentative pause in their dispute ahead of this weekend's G20 summit in Osaka, Japan, where U.S. President Donald Trump will hold talks with Chinese President Xi Jinping.

Investors looked toward developments on the U.S.-China trade front, with Presidents Donald Trump and Xi Jinping set to meet at the June 28-29 G20 summit in Osaka. The two leaders are expected to discuss the protracted trade fight between their two countries. Investors are focusing on whether the two leaders can pave the way to resolve a trade dispute between the world's two biggest economies.

The potential implications of the Trump-Xi meeting for US monetary policy are huge. If the two sides agree not to impose more tariffs, the Fed would no longer need to cut rates. On the contrary, if the talks point to the imposition of more tariffs, that could nudge hesitant policymakers towards rate cuts.

U.S. President Donald Trump said on Wednesday that a trade deal with Chinese President Xi Jinping was possible this weekend and also raised a possibility that he might impose a lower tariff on a $300 billion list of Chinese imports.

CURRENCY NEWS: China yuan eased against greenback on Thursday. Prior to market opening, the People's Bank of China (PBOC) set the yuan's midpoint rate at 6.8778 per dollar, 0.11% weaker than the previous fix of 6.8701. In the spot market, onshore spot yuan was changing hands at 6.791 per dollar, weaker by 0.02% than the previous day quote of 6.8802 per dollar.

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