Tensions between the US and China at the G20-summit

The dispute has caused many irritations among other countries, especially because of the protectionist policies of the US and China. Also in the financial market, expectations are not high, says Mary Pieterse-Bloem, Professor of Financial Markets at Erasmus School of Economics and Global Head Fixed income in the Global Investment Center of the Private Bank of ABN AMRO. ‘If an agreement is reached, it can bring about a revival in the stock markets. The more concrete the agreements, the better.’

For the bond market it is a bit more complicated. In recent weeks, interest rates there have fallen to new lows, anticipating new stimulus measures by the European and American central banks. They fear that the economies of the Eurozone and the US will slow down, partly due to the trade war. ‘The question is therefore whether a G20 deal will influence central bank policy. If that is the case, interest rates could rise.’

However, Mary Pieterse-Bloem is not convinced this will happen. In an article in the Dutch newspaper de Telegraaf she tells that the relationship between America and China is now very difficult. The president has also put the relationship with the Federal Reserve, the system of central banks, on edge. ‘Trump continuously puts pressure on the Fed, he believes that interest rates should be lowered. By waiting a while to close a deal with China, the Fed is more likely to lower interest rates in July, in order to limit the economic damage.’ Trump will then still get his way, explains Mary Pieterse-Bloem. And if later this year he still makes a deal with Xi Jinping, he stimulates the U.S. economy from two sides. With his re-election campaign already underway, this gives him an advantage with the American electorate.

The full article can be downloaded below (in Dutch).