Baked inside-

• According to Trump, China was not performing in the recent trade negotiations and hence Beijing wanted to continue the trade negotiation into a possible second term that is after 2020 Presidential elections. In case of a democratic would win the White House China might get a better deal.
• Donald Trump on Saturday warned China to act now on trade or else if he wins in the second term the deal will become for worse for China.
• Raising the rate from 10 to 25% Donald Trump has doubled tariff on $200 billion of Chinese goods. Another $300 billion of Chinese goods is yet to be imposed tariff which is upto 25%, by the administration          
• Although Donald Trump is known to go back on his words, China has stated that it will respond to the tariff imposed by the U.S.
• Macroeconomic data of CPI and WPI has been released and an increase from 2.86% to 2.97% in inflation rate year on year has been observed
• WPI and CPI will be a major factor rolling this week.
• Election results are a fortnight away and will be a major reason for the fluctuation in the market.
• Quarter 4 earnings result for major stocks can be expected this week.
• Indian market fail for last 8 sessions, a 4% decline

Current Scenario

 After Donald Trump’s warning to China and a raise from 10% to 25% in tariff rates on $200 Billions of Chinese goods, there is a atmosphere of tension in the Indian Market. According to Donald Trump, China was beaten up badly in the recent trade negotiations and hence they choose to wait for the 2020 Presidential elections in a hope to get lucky and get a democratic win. Trump warned China to act now on trade or else if he continues the 2^nd term, the situation can become far worse than it is right now.

China and U.S. held a trade talk on Friday whereas the tariff remains still in place. Trump stated that the Friday talks were constructive and negotiations will continue. Chinese Media reported that the next trade meeting can happen in Beijing whereas the Treasury Secretary Steve Mnunchin while talking to a reporter stated no plans for further trade talks as of now.

Trump has complained about the U.S and China trade deficit gap which is increasing since 1995. The trade deficit has increased from 2% to 24.2% in the last 23 years. He blamed the weak negotiations by previous U.S. administration for this. Although Donald Trump is known to go back on his words, there is a strong possibility of action from China on the tariff imposed by the U.S. on Chinese goods.

Tariff, if we talk in layman language is nothing but the tax imposed on goods which are brought into the country from foreign traders. They are particularly charged in percentages of the transaction price paid by the buyer of the goods. Increasing tariff on Chinese goods will make them costly and decrease their demand in the U.S. market. Tariffs are usually imposed to increase government revenue or protect domestic industries in due course of time. As we can connect the dots that the U.S. exports have never matched the Chinese import in the last 23 years which boils down to a major reason for the increase in the trade deficit. The increase in tariffs can be seen as a bold move before 2020 Presidential elections from Donald Trump.

In India, Macroeconomic data has been realized which stated that inflation is on a rise. An increase from 2.86% to 2.97% is seen in the month of April on a YOY basis. Having a close look at the Retail (CPI) and wholesale (WPI) inflation number, market is yet to show some volatility in the coming week. Election season is at its full swing and the results are expected in a fortnight which will be a major driving factor for the upcoming Indian market. Adding to the hustle, major stocks can publish their Q4 earnings this week which will slightly add to the market trend in the coming weeks.

With U.S-China trade war in limelight and other macroeconomic events in the picture of the Indian market, the market fell for a continuous 8^th session last week. With Q4 earnings and the macroeconomic data disclosure this week, combined with China’s counter to tariff will drive the Indian market in the upcoming sessions. Although experts suggest that the market will bounce back this week, but investors are still looking forward to Indian election results before commenting on the market trend.