Investment

Decoupling, one of the biggest risk to the global economy

Global Markets may still underestimate the impact of China’s strict zero-Covid policy. Until now, nearly 400 million people across the mainland China are under full or partial lockdown. 

Investors probably do not aware of this zero-Covid policy as much more attention remains focused on the Russian-Ukraine war and the US Federal Reserve rate hikes.

However, more and more analysts are ringing warning bells as Shanghai, a city of 25 million and one of China’s premiere manufacturing is under the indefinite lockdown. The quarantines left the largest port in the world understaffed. Food supplies stuck in shipping containers, incoming cargo is now stuck at Shanghai marine terminals and cargo airlines were cancelled all flight in and out of the city. Sony, Apple supplier plants, Quanta Factory and Tesla factory in and around Shanghai, are idle.

The impact on China is major and the ripple effect on the global economy is also significant.

The ongoing disruption to manufacturing and shipping in China may help accelerate the US president Joe Biden to reduce US dependence on products and supply chains from China. Some US economic leaders believe that decoupling is underway. However, it is extremely difficult. Globalization is not something that is easy to be reversed because it would be incredibly costly. 

Investment

Precious metals hit hard as Fed Chair Powell Stays


Gold and silver futures were sharply down the U.S. trading session Monday while President Joe Biden confirmed Federal Reserve Chairman Jerome Powell for his second term. The precious metals prices were under a huge pressure and selling pressure accelerated overnight. 

December gold was last down nearly USD 41.10 at USD 1,810.4 and December Comex Silver was last down USD 0.421 at USD 24.36 per ounce.

Someone argued that another term for Powell was just an excuse for bullions future traders taking profits after recent good price gains. Some analysts believe bullion markets are likely to continue to be supported by the inflation trade and to be sought out as a hedge against rising and even problematic price inflation.