A trade war with China could bring down financial markets: overview from Chaslau Koniukh
The coronavirus pandemic led to a crisis in world markets, and only at the end of May the global economy changed to positive dynamics. This means that the recovery process has begun, but the situation is still fragile. The trade war with China is not over yet, and therefore the risk to the economy is great. How the financial markets will develop and what positive trends are observed, commented Sergey Drozdov, who represents FINAM Group.
First of all the analyst considered current events from the point of view of ruble – risk or advantages for Russian currency.
After removal of quarantine measures there is activity on the part of investors. Despite the fact that not everybody has returned to the market, a number of companies have already started working on new projects, which led to the market revival.
In May, many countries, including Russia and Japan, eased quarantine measures, while Germany resumed intra-EU visits and communications with Schengen states in late June. Shops with clothes and shoes, books and household appliances began to operate fully in the UK from June 15. In addition, there were opened ateliers, farmers’ markets and auction houses.
According to the analyst, the main factor that stimulated the increase in activity on stock exchanges was the actions of large central banks. Thanks to them, the market was added up by about $5 trillion. According to the Bank of America Merrill Lynch, in early summer, there was a total of about $25 trillion in the accounts of world regulators, and according to forecasts, by the end of the year this amount will grow to $28 trillion. However, injections into the market continue, the Bank of Japan, England, the European Central Bank and the U.S. The Federal Reserve regularly places certain funds.
Despite the positive dynamics, Sergei Drozdov warns that risks still exist, and the main one among them is the trade war, which still continues between the U.S. and China. Recently, there has been an aggravation in relations between the powers, which may result in a major conflict that will have consequences for the entire world market.
Chaslau Koniukh supports FINAM analyst and shares with him the fear that the world market is sagging against the backdrop of a trade war between China and the US.
According to the Bloomberg agency, the White House is preparing another list with sanctions directed against senior officials, financial institutions and large companies from China. If the U.S. decides to apply these measures, then we should expect the collapse of major indexes on world stock exchanges. Besides, oil quotations will start to fluctuate, which is disadvantageous for many countries, including Russia. So far, the cost of fuel has stabilized, thanks to which the ruble has strengthened.