London
(CNN Business)1. Markets and geopolitics: Summer is usually a quiet time for markets. This year could
be different.
Washington's
conflicts with Tehran and Beijing could create a volatile environment for
traders should tensions continue to escalate.
The primary
concern for investors is that messy geopolitics will exacerbate the slowdown in
global economic growth.
"Leading
indicators are already turning down," said Abi Oladimeji, chief investment
officer at Thomas Miller Investment. "The sensitivity to negative shocks
is particularly high."
Last week, a
wave of dovish rhetoric from central bankers was enough to push stocks into
record territory.
The S&P
500 notched an all-time high after the Federal Reserve left the door open for a
move next month to slash rates. A cut in July is now seen by markets as a
given.
Also giving
a boost: European Central Bank President Mario Draghi, who said the bank is prepared to unleash new
stimulus measures if necessary.
Now that the
bankers have had their say, attention is turning to other unknowns.
US President
Donald Trump and Chinese President Xi Jinping are working toward a high stakes meeting at
the G20 summit in Osaka, which kicks off Friday.
Trade
negotiations have resumed ahead of their conversation. But there's plenty of uncertainty
about whether the meeting will actually produce a truce that helps reduce
tensions.
"It
goes beyond what you can reasonably analyze," Oladimeji said.
Analysts at
Bank of America Merrill Lynch said that while they don't expect Trump and Xi to
strike a deal at G20, Trump may hold off on additional tariffs for now.
"We
only expect a deal after further weakness in the equity markets, more damage to
the economy and some pushback from US consumers," the analysts said in a
note.
Meanwhile,
oil prices are moving higher as the
situation between Iran and the United States remains hot, sparking concerns
about potential supply disruptions. US oil prices gained 9% last week,
according to Refinitiv. Brent crude prices increased 5%.
The conflict
flared earlier this month when two tankers were attacked near the Strait of
Hormuz, an incident that US authorities blamed on Tehran. It ratcheted up again
Thursday when Iran shot down a US military drone.
Trump said
he was prepared to complete military strikes against the country but called
them off due to concerns about casualties.
Investors
will need to stay alert. It wasn't long ago that oil plunged into a bear market as economic
fears coincided with evidence of a supply glut.
OPEC will
meet at the beginning of July. Its members and allies including Russia will
need to decide whether to extend production cuts that expire at the end of
June.
CNN