The Mainland China equity market closed higher on Friday, 12 July 2019, buoyed by short-term traders switching their investments back into selective financial stocks, after US Fed Chairman Jerome Powell provided more hints this week on interest rate cut slated for the Fed meeting end of this month. Market gains were, however, limited on worries over Sino-U.S. trade tensions and caution ahead of a June trade and lending data later today. At closing bell, the benchmark Shanghai Composite Index rose 0.44%, or 12.79 points, to 2,930.55. The Shenzhen Composite Index, which tracks stocks on China's second exchange, added 0.51%, or 7.84 points, to 1,556.77. The blue-chip CSI300 index rose 0.62%, or 23.51 points, to 3,808.78

Federal Reserve Chairman Jerome Powell, in his first day of testimony before Congress on Wednesday, confirmed the U.S. economy was still under threat from disappointing factory activity, tame inflation and a simmering trade war and said the Fed stood ready to “act as appropriate.” Powell testified before the Senate Banking Committee on Thursday. Speaking during a second day of congressional testimony, Mr. Powell reiterated the Fed's intention to “act as appropriate to sustain the expansion.”

Although investors continue to disagree on how much the Fed will cut rates—opinions vary on whether the central bank will slash by a quarter of a percentage point or half of one—several said Mr. Powell's comments all but guarantee at least one rate cut as soon as this month.

Elsewhere, minutes from the European Central Bank's June policy meeting showed that officials are likely to consider injecting fresh stimulus into the eurozone in light of weak inflation data. The minutes suggest policy makers will weigh cutting the bank's key interest rate or restarting its 2.6 trillion euro ($2.92 trillion) bond-buying program.

China is due to release June trade and lending data on Friday, while second-quarter GDP figures are scheduled for Monday. China's economy is expected to have slowed to its weakest pace in at least 27 years amid a bruising trade war with the United States, raising hopes for more stimulus ahead.

Meanwhile, worries over Sino-U.S. trade tensions resurfaced after U.S. President Donald Trump tweeted on Thursday that China was not living up to promises it made on buying agricultural products from American farmers.

CURRENCY NEWS: China yuan was higher against greenback on Friday, as expectations for US rate cuts weighed on the greenback. However, gains were capped by caution ahead of the release of China's June trade and lending data later in the day, and second-quarter GDP and June activity readings next week. Prior to the market opening, the People's Bank of China (PBoC) set the midpoint rate at 6.8662 per dollar, 15 pips firmer than the previous fix of 6.8677. In spot market trade, the yuan opened at 6.8725 per dollar and was changing hands at 6.8713 late afternoon, 27 bps firmer than the previous late session close.


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