The key trends of the world economy development are voiced
Uncertainty in the political sphere continues to create risks in the financial market. At the moment, the focus of investors’ attention is on the parliamentary elections in the EU, trade agreements between the US and China, and Brexit. Trends in the global economy are marked by a period of frozen growth, but most of all the situation has affected the manufacturing industry. However, analysts predict that in the second half of the year the situation should stabilize, and China’s GDP growth will have a positive impact on the economic development of Europe.
Trends in the development of the world economy and consequences of undervalued rates in the EU
The presidential elections in France in 2017 did not have a proper impact on the work of the European Central Bank, so it was not possible to change the consequences of negative interest rates – their value remained at the same level. Overall, the value of domestic demand in the euro zone is stable due to the absence of risks in the currency block.
The slowdown in manufacturing has been exacerbated by a temporary decline in the German automotive industry (due to the introduction of new emission standards). In the near future, however, this will lead to stimulation of industry in Germany.
The European economy is expected to rebound and grow in the middle of the year. The ECB decision to maintain the interest rate until 2020 threatens a repeat of the situation in Japan. However, this will not affect Europe’s risk assets and will not lead to a sharp fall in quotations.
China’s economic policy
In 2020, China’s GDP growth rate fell by 0.5%, to 6-6.5%. In order to smooth the negative growth rate of the economy and ensure stable conditions in the labor market, it was decided to reduce the VAT rate. At the same time, amendments to the budget policy are being considered and targeted expenditures are being increased. Increasing economic growth has become a key issue, and the urgency of economic reforms and reducing the debt burden have moved to the background.
The world market welcomed the results of the All-China Meeting, noting that as the trade agreement between official Beijing and Washington is reached, GDP growth will accelerate significantly. This fact is partly taken into account in quotations of Chinese securities, which attracts investors and stimulates economic impulses at the exchange.
The state of macroeconomics in the USA
As for the macroeconomic situation in the United States, the manufacturing industry has noticeably lost ground in 2020. However, despite the instability of the situation, the suspension of the government, the growth of foreign trade duties, economic processes in the country are stable.
At the beginning of 2020, stock markets managed to recover the losses of the second half of last year, and the introduction of changes in the rhetoric of the US Federal Reserve contributed to this. Thanks to this, the main asset packages managed to recover over 70% of losses, and some even exceeded the maximum.
As of today, all conditions are reduced to the growth of the stock market. But if we take into account the political statements of the World Central Banks, the U.S. Treasury bonds pegged to changes in inflation rates are not of high value for investors on the stock exchange. There is a trend of investing in favor of Eurobonds of developing countries.