18 to 24 May: The coronavirus might take the backseat as markets’ focus shifts towards geopolitics

The latest world trade figures for March showed a pronounced decline in world trade volumes, as they fell 4.3% YoY, according to the CPB’s latest World Trade Monitor report. From a regional breakdown, the decline was the sharpest in the Eurozone (-9% YoY; including both intra- and extra-Eurozone foreign trade). Elsewhere, foreign trade volumes decreased 5.2% YoY in the US and 0.5% YoY in China. Unsurprisingly, global industrial production volume weakened as well – falling 4.7% YoY in March. On a forward-looking basis, we might see dreadful world foreign trade data in 2Q20, as the number of idle container ships has been rising throughout May.

On the global political front, there is a lot going on, again. At a meeting of mainland China’s National People’s Congress last week, authorities said they would go around Hong Kong’s own legislature and draft measures against secession, foreign influence and terrorism via additions to the territory’s constitution. In response to China’s declaration, thousands protested in Hong Kong against China’s interventionist approach. Furthermore, the tensions between the US and China continued to boil, as China denounced a recent move by the US to blacklist certain Chinese entities. In our opinion, markets’ focus could shift from the coronavirus’ implications towards geopolitics in the near term.

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