The COVID19 pandemic could potentially change the entire dynamic of global trade in the long run. Companies will revert to less stretched and interdependent global channels and turn closer to local-based supply chains. As always, in our GLOBAL MARKETS podcast, we hosted Gaurav Kashyap in Dubai and Mark Lee in London.
Gaurav notes that in the previous trading week US markets continued their stellar run, DOW Jones hit an 11-week high to above 25500 levels gaining 4%. He believes the turnaround in the US markets is anchored on optimism about potential vaccine release, effects of the stimulus announced by the Federal reserve, and scheduled reopening after prolonged lockdown. The percentage of fund managers deeming US stocks as attractive has risen to a five year high. However, Gaurav remains skeptical of the recent rally saying that the buffet indicator suggests the US stocks are overvalued and there is no further clarity on the effects of the pandemic which will be clear with the release of Q2 data.
A major theme still in the markets is the US-CHINA tensions. Mark says that tension between the US and CHINA has boiled to the surface. There are reports that Chinese authorities have frozen purchase of US farming products which includes soybeans and pork which may have economic ramifications for the US. Post pandemic, Mark opines that in the short term China may be ahead due to faster economic recovery compared to the global economy and may strengthen their position in the trade war. However, in the long run, firms may turn to domestic sources to operate supply chains as companies sacrifice short term profit maximization for long term risk minimization.
Key Releases in the week
- Tuesday – Reserve Bank of Australia, Zoom earnings, UK Members of Parliament return to House of Commons
- Wednesday – US ADP employment report
- Thursday- ECB rate announcement,
- Friday – US Non-farm payrolls report