Emerging Market Economist, Emerginomics

Tatiana Orlova

Emerging Market Economist

Emerginomics

Thematic (Sector/Industry)

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<p>In <a href="https://www.smartkarma.com/insights/gloves-come-off-in-fight-for-global-energy-markets-it-is-a-dangerous-game" target="_blank" data-smartkarma-citation="insights:20638">Gloves Come Off in Fight for Global Energy Markets. It Is a Dangerous Game</a> we explored how the energy policy conducted by the new US Administration was affecting the geopolitical landscape. It has been a few months since then. <strong>Policies pursued by President Trump's administration are rapidly changing the world, leading to events no one has expected to happen, to the creation of alliances which a short while ago no one dared to imagine, prompting sworn enemies to shake hands and make peace.</strong> In the current note, we summarise the recent geopolitical events which we find interesting or even extraordinary. Some of them have already moved the markets, some have reduced "tail risks", some may pave way for important developments in the future.</p>
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In Gloves Come Off in Fight for Global Energy Markets. It Is a Dangerous Game we explored how the energy policy conducted by the new US Administration was affecting the geopolitical landscape. It has been a few months since then. Policies pursued by President Trump's administration are rapidly changing the world, leading to events no one has expected to happen, to the creation of alliances which a short while ago no one dared to imagine, prompting sworn enemies to shake hands and make peace. In the current note, we summarise the recent geopolitical events which we find interesting or even extraordinary. Some of them have already moved the markets, some have reduced "tail risks", some may pave way for important developments in the future.


Gloves Come Off In Response to Trump Administration's Policies

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<p>Russian PM Medvedev is no President Erdogan and has not previously sought to influence central bank policy. Nevertheless, on Thursday 6 September, his casual remark caused a 1.3% weakening of the RUB vs. USD. A joint statement by the UK, US, Canada, France and Germany condemning the government which "most certainly" approved the Skripal poisoning, added fuel to the fire.</p>
<p>Understandably, Russian markets remain on tenterhooks while US Congressmen are deciding on the proposed new sanctions. However, we think the sharp market move also reflects how extremely jittery EM investors have become. </p>
<p>What could put an end to the indiscriminate selling of EM assets, or at least slow it down? </p>
<p><strong>First, policymakers in most affected EM economies need to demonstrate to investors that they still have tools required to stabilise markets and willingness to improve their policies. </strong></p>
<p><strong>Second, we think that the US Federal Reserve should at least acknowledge at the upcoming September meeting that the spreading EM crisis could eventually have some negative effects on the US economy.</strong> In the long run, the US needs to assume at least some responsibility for the health of the global economy to ensure that the US dollar retains its role as the global reserve currency. With the US Administration actively engaging in isolationist policies that may harm global growth, it is the Fed who needs to give a positive signal to the global markets.</p>
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Russian PM Medvedev is no President Erdogan and has not previously sought to influence central bank policy. Nevertheless, on Thursday 6 September, his casual remark caused a 1.3% weakening of the RUB vs. USD. A joint statement by the UK, US, Canada, France and Germany condemning the government which "most certainly" approved the Skripal poisoning, added fuel to the fire.
Understandably, Russian markets remain on tenterhooks while US Congressmen are deciding on the proposed new sanctions. However, we think the sharp market move also reflects how extremely jittery EM investors have become. 
What could put an end to the indiscriminate selling of EM assets, or at least slow it down? 
First, policymakers in most affected EM economies need to demonstrate to investors that they still have tools required to stabilise markets and willingness to improve their policies. 
Second, we think that the US Federal Reserve should at least acknowledge at the upcoming September meeting that the spreading EM crisis could eventually have some negative effects on the US economy. In the long run, the US needs to assume at least some responsibility for the health of the global economy to ensure that the US dollar retains its role as the global reserve currency. With the US Administration actively engaging in isolationist policies that may harm global growth, it is the Fed who needs to give a positive signal to the global markets.


Rouble Plunges Again Despite Efforts to Contain the Rout. What Is Required to Contain EM Sell-Off?

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Powershares Emerging Markets Sovereign Debt Portfolio (PCY US)

Gloves Come Off In Response to Trump Administration's Policies

In Gloves Come Off in Fight for Global Energy Markets. It Is a Dangerous Game we explored how the energy policy conducted by the new US...

Tatiana Orlova

Rouble Plunges Again Despite Efforts to Contain the Rout. What Is Required to Contain EM Sell-Off?

Russian PM Medvedev is no President Erdogan and has not previously sought to influence central bank policy. Nevertheless, on Thursday 6 September,...

Tatiana Orlova

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