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World stocks remained two months high in the initial week of February 2019 where dollar and oil continued to gain, and some European markets struggled, hit by political instability, trade issues and Brexit. London FTSE gained 0.2 per cent to two months high as sterling softened against dollar. China’s markets remained closed in the week and South Korean market was also closed. Gains in nonfarm payrolls in US, stability in dollar and better than expected economic data, helped in improving US markets.
In the BRICs nations, Brazil has a steady growth, while, China is slowing and Russia is facing a number of geopolitical issues. China remains at the centre in the category where at the moment the numbers are not encouraging. The core Asian economies, Japan and some European countries are facing weaknesses, and are in need of stimulus to acknowledge the risks. The Australian markets were higher in the first few days of Feb. where misconduct report in the financial sector was examined by the Royal commission which made 76 recommendations for banking, financial advice and insurance sector.
EMs and China
Some EMs are considered better in the year where Brazil remains the top performing in BRICs where investors are putting money in iShare MSCI Brazil that gained 18 per cent despite political issues linked to new president Jair Bolsonaro. The whole MSCI EM Index was at 9.43 per cent higher than 8.4 per cent of S&P 500.
This year China may deliver weaker economic data due to changes in export and import figures after the announcement of tariffs. 2018 was a difficult year for the country but now many are expecting a positive growth in China. The benchmark Shanghai Composite Index was one of the worst performing in 2018, down by over 25 per cent, mostly over the fears of slowing economy and trade tensions with the US.
Growth in China was over 12 per cent in the month of January where 2019 can be better year for the market where HSBC forecasts a rise by 18 per cent in China. Interest rate indications by US will be in favor of China where, in 2018, the growth in rates led to increase in value of dollar that made investments in Yuan less attractive. Yuan was six months higher to dollar in the week. This year the Chinese markets already gained 5 per cent in the first month and the growing market may improve consumer confidence and mood.
Chinese economy continues to grow faster than other markets and the recent sell off at Shanghai provided opportunity to get stocks hit by trade issues at lower price. The manufacturing industry was down in 2018 to lowest in the last three years, where over 300 listed firms have been warned of losses of over $15 million. The recovery in emerging markets in the first month of 2018 where China’s Premier Li Keqiang hinted that it will not weaken Yuan to counteract tariffs led to positive reactions and boosted all emerging markets.
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