In recent months, the equity and bond markets of the emerging and developed countries They lived a rather turbulent period. There Surprising speed with which a respite was reached in the commercial war between the United States and China suddenly improved the climate on the markets. Has everything back to normal? It is the question to which the analysis of the Team EEC and Emerging Markets of Raiffeisen Capital Management.
Recovery after the initial shock
The shock due to the duties and attributable to the so -called “Liberation Day “ was followed by a decrease in the world stock markets; The US dollar has undergone a strong flexion compared to the euro and yen and the returns of long -term US government bonds have increased. Above all, the latter factor should have pushed the President of the United States to suspend the duties only a week after the announcement, however expressly excluding China. Since then, the share markets have recorded a strong recovery and also the risk prizes on the bonds of the emerging countries have returned to decrease. However, uncertainty remained (especially for many companies) and, which is noteworthy, the US dollar continued to undergo pressure.
Loving of tensions between the United States and China
In the second weekend of Maggior, however, the United States and China They have surprisingly announced a substantial loosening of commercial tensions, even if for the moment only for the next 90 days. Both parties reduced the absurdly high customs duties from well over 100% to 10% (China) and 30% (USA) and have agreed a framework aimed at concrete negotiations. However, it is not yet clear whether in the end you will actually reach an agreement or if at the expiry of the 90 days there will be a new escalation, whose effects are today difficult to evaluate. It should be noted that the geopolitical situation is currently in strong turmoil. The trade and customs duties are “only” a piece of the mosaic that is taking shape in the new structure of world power. The equity markets reacted with great relief. Many have already reached new historic maximums (for example Brazil and Hungary) or are not far from reaching them.
Averted the worst scenario
After the worst for the world economy has been averted, we still read in the analysis, it remains to be understood how much they have been caused in recent months. In addition, a basic uncertainty remains pending the achievement of definitive agreements and also a highly reduced tariff level still represents a considerable burden compared to the situation prior to the Trump settlement. If there are no new escalations, the possibilities that China reaches or touch its growth objective of approximately 5% are quite good and even a recession in the United States could be avoided, at least for the moment. This is at least the current vision of the financial markets, which reflect a clearly lower probability of recession for the United States and also cuts in interest rates by the Federal Reserve less marked or more late.
Great turnaround for the dollar?
After the massive influences of capital in the United States in recent years, nEl 2025 We observe an opposite movement. CI are some clues that indicate that, even with a loosening of the tension on the commercial front, many companies, financial investors and states will at least partially reduce their strong attention to the United States and their financial markets, which should lead to a weakening of the US currency. In the past, a US US dollar was almost always positive for emerging market assets. Overall, there are currently several factors that indicate that the US dollar will tend to weaken in the coming years, which is also in the interest of the current US administration. This should represent a push for emerging market assets.
Emerging markets, overall good perspectives
The drop in the price of oil following the increase in the production of the OPEC+ countries and the fall expectations for the global economy – explain the analysts – is helping all emerging markets which depend on oil imports. Most moderate or favorable assessments in many emerging countries offer further support for equity courses. If agreements are actually achieved on the commercial front between the United States and China, this could significantly improve the climate also towards investments in emerging countries.
Speaking of climate: military conflicts between India and Pakistan They have so far been considered with relative serenity by most of the investors and also by the financial markets of the two countries. Even our management team currently believes that there will not be a significant escalation and that the impact on the economy and financial markets of southern Asia will be limited. Of course “there is no guarantee in this sense and a certain residual risk It cannot undoubtedly be excluded “.
