Elevate Weekly roundup – August 8th, 2020
EU Countries reopen and rebound
June was a decent recovery month for the Eurozone as countries started to reopen. However, it was not without a rise in new cases, on Friday, France (among other countries) saw its largest one day increase in cases in two months. Separately, leading health officials in the UK are warning for a second national lockdown.
Spain had its biggest monthly gain, up 14%, France up 12.7% and Germany 8.9%. We are likely to see these gains persist, albeit slightly less in July. It has been widely anticipated that size of the rebound is attributed to the pent-up demand linked to consumerism and general cycles. For example, automotive sales have been on hold and during this period of time, leases have expired, prompting a surge in renewals now that car dealers are back open. This is not unique to the Eurozone and we are seeing similar trends in North America and elsewhere.
Overall, Germany’s recovery seems to be the strongest, which had a lot to do with its strong trading links to China.
Global Trade
China’s exports showed another strong monthly rise in July. ‘Official’ figures showed a rise of 7.2% month over month and caps off a strong quarterly rebound. It is worth pointing out that some of this rebound has been state backed industrial growth. This is not a China only story and we are seeing exports rise in other countries, including Canada
Improving the Global Supply Chain in the Asia Pacific
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is an important vehicle for a more sustainable recovery in Canada’s recovery plan from the current pandemic.
Last week we had the pleasure of interviewing the Right Honorable Mary Ng, Federal Minister for Small Business, Export Promotion and International Trade. Ahead of her participation in the CPTPP (held virtually by Mexico), Minister Ng explained the importance of diversifying Canada’s trade and the CPTPP, a progressive and ambitious trade agreement. This is one way to support this diversification and create new opportunities.
The CPTPP has 11 members and is likely to grow with the addition of new members. It governs shared practices, rules-based trade and will be focused on improving the global supply chain in the Asia Pacific region, which, as most will be acutely aware has come under pressure recently.
Minister’s Ng’s interview will be posted next week.
Turkish Lira
The Turkish Lira was in the spotlight last week and under pressure (v $USD) after it was clear that the short-term borrowing market was showing signs of failing. Previously it had pegged its currency to the dollar at a set rate, but the Lira weakened further and broke through this rate, ending lower. In short, the cost of borrowing the currency is now at the highs not seen since last year and the central bank is struggling to keep it from falling further.
Gold Rush
Following on from yesterday’s note about gold, it is worth pointing out that an ETF (exchange traded fund, which basically tracks the price of gold) has attracted so much interest that the fund itself has grown to the point that it now owns more gold than the Japanese government. Combined with market uncertainty, this is pushing up the price of gold to record highs. (fund is SPDR)