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Geopolitics re-enter market stage

Just as markets were trying to prove that they have regained some rational balance when they shrugged off central banks’ rejection of further monetary support, geopolitical tensions returned with vengeance. Perhaps it was naïve of the international investment community to assume (and price into their market valuation metrics) that the US and China would imminently reach a trade agreement, simply because it is widely accepted wisdom that trade wars have no winners.

 

More battles to come in US-China trade war

US-China trade relations took an unexpected twist last weekend. At the time of writing the last weekly, we were told that trade negotiations were going well. But on Sunday, Trump resumed trade war hostilities by threatening an imminent raising of tariffs to 25% on $200bn worth of imports from China. In typical Trumpian fashion, the President touted this over Twitter on Sunday, followed by a threat to extend tariffs to an additional $325bn of Chinese goods. According to Trump and the US negotiators, the tariffs would be a response to China’s backtracking on parts of a trade deal that had already been agreed. At a Florida rally later in the week, Trump told supporters that China “broke the deal”, and promised not to back down unless the Chinese government “stops cheating our workers”.

 

Earnings recession averted

While concerns persist around potentially imminent trade wars, investors can take comfort from positive and better than expected Q1/2019 corporate earnings results. Globally, earnings delivery looks stronger than the gloomy consensus of analysts’ forecasts, which was for an outright decline.

 

Iranian tensions could rekindle speculative oil interest

Tensions in the Middle-East took a sharp turn for the worse this week. The US announced it was sending an aircraft carrier and bomber task force to the region, in what appears to be a clear threat to Iran. In itself, that is not particularly out of the ordinary; the world’s preeminent superpower regularly shifts its military might to regions of strategic interest. What makes this move significant are the accompanying remarks from the White House. On Sunday, National Security Adviser John Bolton boasted that the deployment sends “a clear message to the Iranian regime” that any attacks on US interests would be met with “unrelenting force”. This was followed a few days later by comments from Secretary of State Mike Pompeo warning that “we will hold the Iranians accountable for attacks on American interests.”

 

Tech IPOs – 1999 déjà vu?

IPOs (Initial Public Offerings) of company shares appear to be back in fashion. Especially in the US, where the IPO market is currently booming despite a general rise in market volatility and arguably rising economic uncertainty.

 

Read the full commentary here

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