Latest news with #US-driven
AU Financial Review
6 days ago
- Business
- AU Financial Review
ASX to fall; investors fret Iran attack will upend long bull run
The price of oil will spike as markets open and could even soar beyond $US100 a barrel after the Trump administration's intervention into a weeks-long war between Israel and Iran unsettles financial markets. While the price of Brent crude has drifted more than 10 per cent higher since Israel first launched an attack on Iranian nuclear assets two weeks ago, traders fear US President Donald Trump's authorisation of bombing at the weekend will lead to a rapid escalation in the conflict. In particular, traders are worried that Iran could constrict travel through the Strait of Hormuz, a key shipping route for oil that connects the Persian Gulf and the Gulf of Oman. If this closes, prices could increase significantly, pushing inflation higher and disrupting expectations that central banks including the Reserve Bank of Australia will keep cutting rates. 'For markets, this shatters the illusion of containment. What was a regional proxy conflict is now a high-stakes, US-driven air war targeting [weapons of mass destruction] infrastructure – with unpredictable spillovers across energy markets, global shipping lanes, and risk sentiment,' wrote SPI Asset Management's Stephen Innes of the bombing of nuclear facilities. 'This is no longer a waiting game – it's a market moment that demands positioning, not passivity,' he said in his Dark Side of the Boom newsletter. The S&P/ASX 200 is priced to open 0.2 per cent lower on Monday, although those futures were set before the weekend strikes. Wall Street had ended the last week mostly lower, although traders had hedged their bets and markets had remained largely flat for days. The S&P fell 0.2 per cent, while the Dow and the Nasdaq rose 0.1 per cent and 0.2 per cent respectively. The ASX 200 eased 0.5 per cent last week, the first weekly drop in three months.
African Manager
6 days ago
- Business
- African Manager
China is set to be resilient to global trade shocks
The year started for China with a positive tone on the back of a turnaround in private sector sentiment, driven by a more supportive economic policy mix, optimism around the country's capabilities on artificial intelligence (AI), and a stabilization in manufacturing activity. Importantly, this came after years of subdued investor appetite and volatile growth on the back of real estate wounds, regulatory stringency, limited official stimulus, and the trauma from hard pandemic lockdowns. Such positive outlook and turnaround translated into stronger activity and constant upgrades in growth expectations since September 2024. However, global macro prospects were suddenly shaken by a radical shift in US trade policies in February, when president Trump announced a massive increase in import tariffs. China, in particular, was singled out by the US with 'embargo like' 140% tariffs and much less room for exemptions. After bilateral negotiations started, tariffs were reduced to a more manageable but still high 40% rate. Despite this major shock, China's economy appears to be resilient. In fact, across major economies, China seems to be the least affected by growth expectations downgrades since US tariffs 'Liberation Day,' even if the country is by far the largest exporter globally. 2025 growth expectations downgrades (Bloomberg consensus, % real GDP growth for the year) Sources: Bloomberg, QNB analysis In our view, three main factors sustain a more optimistic economic take on China in the face of the US policy shock. First, despite being the world's largest exporter and a key node in global manufacturing, the overall impact from US tariffs on China's growth is very limited. This is largely due to the declining importance of the US as an export destination and Beijing's strategic reorientation of trade flows. In the early 2000s, the US accounted for nearly 20% of Chinese exports, but this share has declined to around 15% in recent years, equivalent to around 2.8% of the country's GDP. Exports grew stronger in markets such as Southeast Asia, the EU, and Belt and Road countries, helping to offset US-driven losses. Moreover, exports themselves have been declining in overall importance to China's economic model, now contributing less than 20% to GDP – compared to 35% in 2006 – amid a policy-led pivot toward domestic consumption, high-tech innovation, and services. These structural shifts, coupled with adaptive trade strategies, have helped insulate China from the full brunt of Trump-era tariffs, reducing their macroeconomic impact and sustaining the country's external surplus. Chinese exports of goods in perspective (USD Bn, total for 2024) Sources: Haver, QNB analysis Second, tariffs are blunt tools in a world of fragmented supply chains, and China's central role in global production networks has significantly diluted their effectiveness. Unlike the bilateral trade flows of the past, modern goods cross multiple borders during assembly, making it hard to isolate national value added. Multinational firms adapt quickly, shifting final assembly to third countries while maintaining Chinese inputs through transhipment. These workarounds often outpace enforcement, undermining the intent of protectionist policies. Additionally, a substantial share of Chinese exports – such as critical components in electronics, machinery, and pharmaceuticals – are not easily substitutable and remain essential to US firms and supply stability. As a result, tariffs are unlikely to trigger reshoring and China is expected to retain its role as an indispensable link in global manufacturing. Third, US tariffs are expected to be offset by the devaluation of the Chinese renminbi (RMB), particularly in real effective terms, which is enhancing China's price competitiveness globally. Since the escalation of the 'trade war' in February, the RMB has weakened against the USD, but even more so against a broader basket of currencies, resulting in a meaningful depreciation of China's real effective exchange rate (REER). This has lowered the relative cost of Chinese exports in non-USD markets, helping Chinese firms gain market share globally despite higher US tariffs. The REER adjustment acts as an automatic stabilizer for China. In effect, the RMB's adjustment is helping to preserve or even increase external demand, ensuring continued export surplus, further underscoring the limitations of unilateral trade barriers. All in all, China's growth prospects this year remain moderately robust despite continued trade tensions. This is due to a structural decline in US export dependence, the ineffectiveness of tariffs in a globalized supply chain environment, and the competitive tailwind from a weaker RMB collectively cushioning the Chinese economy from material external shocks.
Qatar Tribune
21-06-2025
- Business
- Qatar Tribune
China is set to be resilient to global trade shocks
The year started for China with a positive tone on the back of a turnaround in private sector sentiment, driven by a more supportive economic policy mix, optimism around the country's capabilities on artificial intelligence (AI), and a stabilization in manufacturing activity. Importantly, this came after years of subdued investor appetite and volatile growth on the back of real estate wounds, regulatory stringency, limited official stimulus, and the trauma from hard pandemic lockdowns. Such positive outlook and turnaround translated into stronger activity and constant upgrades in growth expectations since September 2024. However, global macro prospects were suddenly shaken by a radical shift in US trade policies in February, when president Trump announced a massive increase in import tariffs. China, in particular, was singled out by the US with 'embargo like' 140% tariffs and much less room for exemptions. After bilateral negotiations started, tariffs were reduced to a more manageable but still high 40% rate. Despite this major shock, China's economy appears to be resilient. In fact, across major economies, China seems to be the least affected by growth expectations downgrades since US tariffs 'Liberation Day,' even if the country is by far the largest exporter globally. In our view, three main factors sustain a more optimistic economic take on China in the face of the US policy shock. First, despite being the world's largest exporter and a key node in global manufacturing, the overall impact from US tariffs on China's growth is very limited. This is largely due to the declining importance of the US as an export destination and Beijing's strategic reorientation of trade flows. In the early 2000s, the US accounted for nearly 20% of Chinese exports, but this share has declined to around 15% in recent years, equivalent to around 2.8% of the country's GDP. Exports grew stronger in markets such as Southeast Asia, the EU, and Belt and Road countries, helping to offset US-driven losses. Moreover, exports themselves have been declining in overall importance to China's economic model, now contributing less than 20% to GDP – compared to 35% in 2006 – amid a policy-led pivot toward domestic consumption, high-tech innovation, and services. These structural shifts, coupled with adaptive trade strategies, have helped insulate China from the full brunt of Trump-era tariffs, reducing their macroeconomic impact and sustaining the country's external surplus. Second, tariffs are blunt tools in a world of fragmented supply chains, and China's central role in global production networks has significantly diluted their effectiveness. Unlike the bilateral trade flows of the past, modern goods cross multiple borders during assembly, making it hard to isolate national value added. Multinational firms adapt quickly, shifting final assembly to third countries while maintaining Chinese inputs through transhipment. These workarounds often outpace enforcement, undermining the intent of protectionist policies. Additionally, a substantial share of Chinese exports – such as critical components in electronics, machinery, and pharmaceuticals – are not easily substitutable and remain essential to US firms and supply stability. As a result, tariffs are unlikely to trigger reshoring and China is expected to retain its role as an indispensable link in global manufacturing. Third, US tariffs are expected to be offset by the devaluation of the Chinese renminbi (RMB), particularly in real effective terms, which is enhancing China's price competitiveness globally. Since the escalation of the 'trade war' in February, the RMB has weakened against the USD, but even more so against a broader basket of currencies, resulting in a meaningful depreciation of China's real effective exchange rate (REER). This has lowered the relative cost of Chinese exports in non-USD markets, helping Chinese firms gain market share globally despite higher US tariffs. The REER adjustment acts as an automatic stabilizer for China. In effect, the RMB's adjustment is helping to preserve or even increase external demand, ensuring continued export surplus, further underscoring the limitations of unilateral trade barriers. All in all, China's growth prospects this year remain moderately robust despite continued trade tensions. This is due to a structural decline in US export dependence, the ineffectiveness of tariffs in a globalized supply chain environment, and the competitive tailwind from a weaker RMB collectively cushioning the Chinese economy from material external shocks. — By QNB Economics
Qatar Tribune
07-06-2025
- Business
- Qatar Tribune
Is there further upside for gold prices?
Gold occupies a unique role in modern investing. It generates no cash flow, incurs storage costs, and has limited industrial utility – yet it continues to hold enduring appeal among households, sovereigns, and institutional investors. Gold's historical legacy as a monetary anchor has recently intersected with a more contemporary function: risk mitigation. This demand for gold has been supported by the idea that the yellow metal provides a key utility as a portfolio diversifier protecting against inflation, financial crisis, international conflicts and civil strife. Importantly, gold's resilience in the face of economic shocks, such as the Great Financial Crisis (GFC) of 2008-09 or the Covid-19 pandemic, underscores its role as a hedge against systemic risks and macroeconomic instability. In recent years, gold has rallied significantly, a process that has accelerated over the last few months. In fact, before the most recent pullback, gold prices reached $3,500 per ounce, making sequential all-time highs for months. After such significant rally, which amounts to 114 percent in price appreciation since the pandemic and 92 percent since the Russo-Ukrainian conflict began, it is natural that analysts and investors would question whether there is still more upside for gold over the coming years. In fact, gold has decisively outperformed all major asset classes, challenging the perception that it merely serves as a defensive hedge. A sustained outperformance highlights that gold, while traditionally valued for its safety during crisis, can also generate robust returns under different macroeconomic conditions. Gold's consistent gains relative to equities, bonds, and commodities since early 2020 suggest that it merits consideration not only as protective allocation but as strategic, return-enhancing asset within a diversified portfolio. This dual characteristic – providing resilience during uncertainty while also delivering meaningful capital appreciation during periods of higher investor risk appetite – further strengthens the case for gold as a core holding. This is especially valid for environments of elevated inflation, currency de-basement, foreign exchange depreciation, or systematic market volatility. In our view, despite the surge in prices, there is still further upside for prices over the medium-term, as global macro conditions are favourable for gold. Two main factors sustain our position. First, gold's appeal has been further bolstered by secular or long-term geopolitical trends, including the intensifying economic rivalry between West and East, a decline in international cooperation, escalating trade disputes, increasing political polarization, and the 'weaponization' of economic relations via sanctions. This has particularly intensified after the Russo-Ukrainian conflict and the US-driven 'trade wars.' In an era marked by more geopolitical instability, gold's status as a tangible, jurisdictionally neutral asset that can serve as collateral in various markets becomes increasingly significant. Reflecting this movement, central banks globally have been accumulating gold at a rate unseen in generations. According to the World Gold Council, after the Russo-Ukrainian conflict in 2022, central bank additional demand for gold more than doubled from 450 tons per year to more than one thousand tons per year. Surprisingly, despite the increase in official demand for gold from central banks, there is still a lot of room for a much longer process of gold accumulation or portfolio rebalancing towards the precious metal. While large advanced economies tend to hold around 25 percent of their foreign exchange (FX) reserves in gold, large EM-based central banks hold only less than 8 percent of their FX reserves in gold. Given that these EM-based central banks hold around $6 trillion in FX reserves, there is scope for a continued multi-year process of portfolio rebalancing from these reserve managers. This supports a steady long-term institutional demand for gold. Second, foreign exchange (FX) movements are poised to lend additional support to gold prices. Historically, gold has shown a strong inverse correlation with the USD – typically rising when the USD weakens and falling when it strengthens. The USD has already depreciated by more than 6.9 percent against a basket of major currencies so far this year. Moreover, despite this sharp depreciation, currency valuations still suggest that the USD remains overvalued by more than 15 percent, indicating further room for depreciation ahead. A softer USD is likely to support gold prices going forward, as it enhances global purchasing power for USD-denominated commodities like gold, stimulating demand and providing an additional tailwind for prices. Moreover, as investors seek protection against the erosion of purchasing power associated with USD depreciation, they often turn to gold as an alternative store of value. Consequently, a declining USD typically drives higher demand and upward price momentum for gold. All in all, despite sharp rally in recent months, there is still further upside for gold over the medium-term. This is supported by strong momentum across different macro regimes, long-term geopolitical trends with central bank portfolio rebalancing, and FX movements. — By QNB Economics
Forbes
22-05-2025
- Business
- Forbes
China Market Update: Bond Markets Start Intimidating Investors
CLN Asian equities were risk-off due to President Trump's budget, which, according to the WSJ, is expected to increase the deficit by $2.7 trillion over the next decade. The US 30 Treasury bond yield has risen from a September 2024 low of 3.92% to 5.14% this morning, while the Japanese Treasury bond yield has risen from 2% to 2.97% over the same period. James Carville's reincarnation quote as the bond market comes to mind: 'You can intimidate everybody.' Based on my recent travels to Europe and Asia, one shouldn't expect much sympathy or appetite for US investments from foreign investors following the recent trade 'negotiations'. Maybe the increased volatility could lead to a desire to resolve trade issues. It was very quiet except for the US-driven macro narrative, after a poor US trading day yesterday, which weighed on US-listed China stocks, as risk off is risk off. Hong Kong had a poor session as growth stocks favored by investors took the brunt of market action. XPeng +5.8% after strong results and guidance yesterday though CATL -2.25% despite the Hong Kong listing being fast-tracked for MSCI inclusion. Xiaomi was off -2.3% despite founder Jun Lei's comments on the coming July launch of their SUV model YU7 in addition to announcing their use of Qualcomm's Snapdragon 8 chips. Li Auto -2.77% lowered its 2025 production target to 640,000 from 700,000. Hong Kong banks were a safe haven though it was simply an off day despite Mainland investors buying $495 million worth of Hong Kong-listed stocks via Southbound Stock Connect. Mainland China was also weak though indices were not off as much as Hong Kong. Mainland banks also held up though the National Team's favorite ETFs had a light volumes. The Shanghai government announced expansion of its subsidy programs as the top down directive to expand from auto/EV/hybrid and home appliances to electronics gets implemented locally. The State Council hosted several agencies in a press conference on financial policies to support the science and technology sectors following yesterday's release. Again quiet so we'll keep things concise! New Content Read our latest article: New Drivers For China Healthcare: AI Med-Tech Innovation, Cancer Treatment, & Favorable Balance of Trade Please click here to read Chart1 Chart2 Chart3 Chart4 Chart5 Chart6
