Thursday, January 10, 2019 9.30AM /
Ottoabasi Abasiekong for Proshare WebTV
As the year 2019 unfolds with rising expectations, we highlight five (5) key developments to watch that will likely shape the global political-economy, markets and business space.
US-China Trade Relations
The United States of America (USA) and China are two global economic giants grinding axes over who is cheating and who is not in international trade. The consequence has been countervailing tariffs that have shrunk global business. So far the battle has cost the US and China an estimated $6bn in 2018.
This has created uncertainty in international trade circles and pulled down the size of international trade, incomes and growth. Economists note that markets in 2019 will be eager to see if a deal can be worked out between the US and China to set the global economy back on a path of steady growth.
How the US and China approach trade will be one development that will certainly shape the global economy in 2019.
The United Kingdom is a global economic power, it is member of the G-7 group of industrialized nations, G-20 economic forum and presently a leaving member of the European Union.
Its decision to vote “Yes” to leaving the EU has been termed “Brexit”, and has brought a dramatic shift to the UK’s future.
The Prime Minister Mrs Theresa May has faced the stiff challenge of negotiating the terms of the exit with the European Commission, and Q1, 2019 is the timeline set for UK to finalize its departure.
May needs the support of her party and the Parliament to proceed with and conclude Britains Brexit plan but over the last few months this has been an uphill task.
Total assets of British banks is valued at GBP 8trillion and this could be under threat with Brexit, indeed recently concerns have been raised over the movement of goods and services worth $800bn from the UK to other countries still in the EU.
How Brexit is negotiated will be an important development for global business and financial markets in 2019.
Interest Rate Hikes by US, UK monetary authorities
All eyes in 2019 will be on the US Federal Reserve Board Chairman , Mr Jerome Powell, and Mr Mark Carney, Bank of England (BOE) Governor, as they set to raise monetary policy rates.
Analysts and research groups expect 2 or 3 more interest rate hikes by the Fed in 2019.
For the BOE nothing more than 2 rate hikes are expected while the European Central Bank (ECB) should conclude its asset purchase programme, and begin to raise interest rates by Q3, 2019.
This will have a significant effect on global portfolio investments, particulaly in emerging and frontier economies like Brazil, Nigeria, and Indonesia.
International Oil Price
The direction of international crude oil price will be another key global development to watch in 2019.
From meetings of the Organisation of Petroleum Exporting Countries (OPEC), to shale oil production in the U.S , market participants and governments will continue to monitor developments.
The International Energy Agency (IEA) in its outlook for 2019 projects a global oil demand of 1.4million barrels per day.
S&P Global Ratings has lowered its average oil price forecasts for 2019 by $10 per barrel to $55 for Brent and $50 per barrel for WTI.
The current international crude oil price is between $58 and $60 per barrel.
Developments in the middle-east, relationship between US and North Korea, concerns over terrorist attacks in key economies, insurgency in parts of East and West Africa, will be hot button issues to watch in 2019.
Stratfor in its report also warns that “A great power rivalry among the United States, China and Russia will accelerate a high-stakes arms race and increase competition in cyberspace. Global governance around these building threats will prove elusive as divisions deepen in the international system”.
Effective ways of mediation and conflict resolution should be deployed to avert avoidable confrontations in the global space.