Vittorio Emanuele Parsi & Valerio Alfonso Brun | On January 25, addressing a virtual World Economic Forum, China’s President Xi Jinping not only strongly advocated for a multilateral approach to the COVID-19 pandemic but insisted on the virtues and systemic benefits of free trade and globalization. Jeopardizing those elements may introduce conflict into the international system, Xi warned, clearly referring to, although not mentioning, the US. Can China credibly profess the virtues of globalization to achieve harmony and balance in an international system if it doesn’t adhere to international law?
Olivia Álvarez (Monex Europe) | Joe Biden’s proposed $1,9 Tr stimulus bill will run its race in Senate next week, as House Democrats passed the legislation on Friday. The package includes $1400 direct payments to most Americans, a $400 weekly jobless benefit and an extension of unemployment insurance programs to a larger share of eligible candidates. The bill also includes $20bn for Covid-19 vaccinations, $50bn for testing and $350bn into state and local aids. The plan also aims to hike the federal minimum wage to $15/hour by 2025, although this particular amendment hangs on a thin balance.
Eva Cairns (Aberdeen Standard Investments) | December 2020 marked the fifth anniversary of the Paris Climate Agreement. For all the promises made during the talks, countries have already fallen woefully behind on their commitments to limit global warming. But could the narrative be shifting? Client demand for Paris-aligned investment solutions is growing rapidly. For example, the UN Net Zero Asset Owner Alliance consists of investors with combined assets of more than US$5 trillion (and growing).
David Rees (Schroders) | Financial markets in the emerging world suffered a wobble last month. It followed the belated “blue wave” in the US election which appeared to clear the way for a large fiscal stimulus, and sparked a sell-off in the Treasury market. The bout of volatility harked back to the Taper Tantrum that rocked EM markets in 2013. Fears of a repeat, as the US economy recovers this year, have become a major concern among investors.
Intermoney | Last week, the Chinese authorities intentionally leaked their consultations to limit rare earth exports in order to see the effects on the armaments sector of rivals such as the US. In particular, China focused on the F-35 fighter-bomber, which requires 417 kilograms of rare earths for its prodcution. Thus, China will manage rare earths as a new weapon, but will be cautious to ensure that restrictions on their access or prices do not generate a crisis like the one caused by oil in the last century seventies.
Commodity prices ended 2020 with significant growth, whilst the major global economies (except China) suffered sharp declines in their GDP.The combination of demand and supply factors and elements of the financial situation have led to a mismatch between commodity prices and activity in the real economy.
Hans-Georg Betz | At the end of last year, Elon Musk announced that he was going to leave Silicon Valley to find greener pastures in Texas. To be more precise, Austin, Texas. Austin is not only the capital of the Lone Star State. It also happens to be an oasis of liberalism in a predominantly red state. Recently, there has been a lot of talk about the “tech exodus” from Silicon Valley. Michael Lind, the influential social analyst and pundit who also happens to teach at UT, has preferred to speak of a “Texodus,” as local patriotism obligates.
Akira Horiguchi (Capital Group) | 2020 was a rather eventful year for Japan following a series of headline-grabbing events, including COVID-19, a delay of the Tokyo Summer Olympics and a surprise change in leadership in September. Yoshihide Suga’s succession of his ally Shinzo Abe as prime minister, in particular, has provided investors plenty to think about in terms of what Suga’s leadership could mean for Japanese stocks heading into the new year.
Theo Smid (Atradius) | With the economic outlook improving, there are opportunities to be found. We identify markets that have relatively strong prospects. Promising markets are identified based on three criteria: (1) the pace of GDP recovery in the wake of the Covid-19 crisis, (2) a relatively low number of Covid-19 cases (per 100,000 inhabitants), and (3) stable political and institutional conditions. We do acknowledge that for some countries there may be an underreporting of Covid-19 cases, as testing capabilities differ per country. Therefore, we attach a higher weight to the other two factors in the selection of countries. Based on these broad criteria alongside our market experience, we have identified Chile, Egypt, Senegal, Malaysia and Vietnam as the most promising markets.
Bankinter | The price of oil rebounded strongly yesterday (Brent $63.3, +1.4%; West Texas $59.5, +2.1%), due to the cold weather in Texas, the main US oil state, which is causing supply problems. Therefore, the rise is one-off. In our view, a strong and sustained rise in crude oil prices poses a risk for the stock markets due to the impact this would have on economic growth.