Non-economic forces

Posted by: Paul Donovan

24 Feb 2020
  • The main accomplishment of the G20 finance ministers' meeting was inserting the word "climate" into the final communique. Otherwise there were the standard calls for fiscal stimulus (with little hope of a reaction). The same result may have been accomplished if everyone had sent a couple of emails and then stayed home to binge-watch Netflix.
  • The German ifo business sentiment survey is due. Like all sentiment surveys, when there is a big news story the results tend to be more about instinct than reality (causing survey data to overreact). The coronavirus is a big news story and will probably depress the data.
  • Media reports suggest that China is speeding up the return to work in its manufacturing sector, and has lifted some restrictions in Wuhan. This should reduce fears around the supply chain. However, Italy has quarantined some areas, which may increase fear – fear is what matters economically.
  • Markets are contemplating political risks. German Chancellor Merkel's CDU had a weak result in local elections. (At just over 11% of the vote, it was their worst result in Hamburg in seventy-five years). US Senator Sanders won the Democratic Party's Nevada caucus. Investor attention switches to next Tuesday's series of contests.

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