- Geopolitics was front and centre overnight with the call between the Russian President Vladmir Putin and his U.S counterpart Joe Biden taking the main stage. The call lasted some 50 minutes and now sets the backdrop for three sets of negotiations on European security next month. Bilateral talks between the two superpowers will start in Geneva on the 9th of January 2022, followed by a Russia-NATO Council meeting in Brussels two days later and negotiations in Vienna within the OSCE framework on the 13th January, according to a Bloomberg news brief. Both leaders have agreed to keep the conversation going and oversee the talks directly. There has been much sabre-rattling and counter-threats between the two nations over the build-up of Russian troops at the Ukrainian border. It is hoped that the situation can be defused over the next couple of months, given the broader contagion effects conflict would cause.
- Equities topped out yesterday after posting record highs the day before. Both the Dow Jones and S&P 500 finished off their highs, which has filtered through to the Asian session this morning. Two major themes will be unpacked swiftly in the new year: the removal of stimulus by the central banks and inflation. Many state that the stimulus created by the developed markets has found its way into equities, and we are sitting on the largest asset price distortion since the Dot.COM bubble. Equally, inflation is rearing its head across the globe, so investors will be looking for stocks that provide refuge in times of inflation and have sound fundamentals should the correction take place.
- Equally, the investment community will be keeping a close eye on China. The world’s manufacturing hub experienced stop-start work scenarios in many of its regions over 2021 due to the COVID-19 virus. Added to that, we have had the Chinese authorities fixated on the transition to green energy. This has caused price dislocations in many commodities as Beijing instructed manufacturing centre’s to control energy usage. This decarbonisation trend is a global macro factor that will dictate the broader base metal price structure for decades to come. For this reason, we are bullish copper and do not see the red metal sinking to levels of $3500.00/tonne unless there is another COVID-19 type catastrophe that shuts global economic dynamism.
- As we enter the final day of trade for 2021, we give investors forewarning that trade will be even thinner today than it has been over the past couple of days. We have numerous countries experiencing a public holiday while most others opt for an early close.
- For the most part, the forex markets are in a consolidative phase as the dollar index anchors itself above 96.00. Gold is through the $1815.00/oz mark but on track for an annual loss of around $70.00/oz at current levels. In terms of emerging markets, the Turkish Lira has lost 44% of its value this year with absurd economic policy front and centre of that trade, while the likes of the South African rand have shed just short of 8% on the year. Only the Chinese Renminbi and the Taiwanese Dollar from the emerging market basket have recorded gains this year against the dollar.
- In Africa, there have been a number of stellar performers with the Zambian Kwacha taking first place, gaining just over 27% this year, followed by the Mozambique Metical at 16.7% and the Angolan Kwanza at 15%. On the flip side, the Ethiopian Birr took it on the chin as the pollical backdrop in the country coupled with its poor fiscal conditions reflected strongly in the currency’s performance, which shed 20% on the year.
- We wish our readers a prosperous 2022 but stress that we are certainly not out of the woods in terms of financial market volatility. Globally, 2022 will have its challenges as the central banks withdraw liquidity from the markets, and local markets will have their own idiosyncrasies to contend with.