Market Watch 22.02.2021

1. Facebook's ban in Australia. Last Thursday, Facebook decided to block news sharing in Australia, stopping the people from accessing vital information on government health and emergency service sites, provoking a deadlock on the platform. The restriction came after Canberra tried to make the social media company and Google pay news publishers for content. Many websites have been hit by the ban, including Australia's Bureau of Meteorology, Queensland Department of Health and Hobart Women's Shelter. The ban has been interpreted as "arrogant as they were disappointing," according to Australia's prime minister, who got in contact with other national leaders over the issue. Many other nations think that the BigTech companies consider themselves way too essential and bigger than governments and that the rules should apply to them. Australian MPs began a discussion about a proposed law, which could redefine trade between publishers and tech companies worldwide. Canada, the EU and the UK have said they were thinking about similar actions. The timing could be worse, considering that many people are checking the respective platforms for health information. On Saturday, the Australian prime minister announced that negotiations are back on the Facebook company's table.

2. New administration=New relations? Last week, the first call among Joe Biden and Xi Jinping, President of China, took place, after Joe Biden’s inauguration. During the call, the US President raised concerns about China's "coercive" behaviour and unreasonable economic practices, the protests in Hong Kong and human rights abuses. The Chinese President's reaction was a diplomat one, emphasizing that the two countries should cooperate instead of hurting each other. However, Xi Jinping made it clear that Hong Kong, Taiwan, and Xinjian were internal affairs under China's government's jurisdiction and that the US should respect China's decisions and interests. The two Presidents had also discussed how to combat the pandemic and take more actions to prevent climate change or stop the traffic of weapons. During the term of the former US President, Donald Trump, the US, and China's relations reached the lowest level since political ties have been established due to the US President's aggressive position. With the new administration, Chinese politicians hope that the situation will change, with less competition and restrictions among the two countries however, the early events suggested that a middle way will not be easy to be found.

3. Global support for African states. The pandemic has affected the entire world, but the most disadvantaged countries remain the underdeveloped ones. Besides their" usual" problems, like famines or unemployment, or corrupt government, the pandemic came as another burden for them. French President Emmanuel Macron urged Europe and the US to allocate 5% of their current vaccine supplies where the vaccination campaigns are slowly or almost nonexistent. In this humanitarian support, China and Russia agree to fill the gap as well. The issue raised by the French President is that the African nations are buying the vaccines such as those made by AstraZeneca at "astronomical prices," two or three times the price, compared with the ones paid by the Western countries. "We are allowing the idea to take hold that hundreds of millions of vaccines are being given in rich countries and that we are not starting in poor countries," he said during a G7 meeting. The German Chancellor Angela Merkel supported the idea, however, it was rejected by the US, which does not intend to donate any doses before they can ensure they have enough jars for domestic supply. Even if the EU had been slower in providing vaccines for its citizens, the French President believes that distributing a small share of the doses to African nations would not affect the process of vaccination across Europe. He said that the governments do not have to give significant amounts of quantities to the African states, but at least a small percentage for increasing the vaccination process worldwide. It is in all states' interests to spread the process to keep the borders open.

4. Consequences of rising inflation. In response to the pandemic, inflation wreaks havoc in government spending and the central banks' liquidity. Asset managers face several questions from clients over the risks of inflation. They are rushing to keep up portfolios from inflationary risks, fearing that a revival threatens to spoil investors' situation again. "Inflation is an escalating concern among institutional investors," said Michael John Lytle, chief executive of Tabula. Last year in October, the IMF predicted that the average annual inflation rate in developed economies would double from 0.8% last year to 1.6% in 2021. Meanwhile, Citigroup, an investment banking company, estimated that global inflation would grow from last year's average of 2% to 2.3% this year. The ups and downs in the commodities market also pointed out that the inflationary pressures are escalating. For example, brent crude, the international oil benchmark, has increased from about $20 a barrel at the end of April to more than $60 a barrel. Copper, the world's most important industrial metal, has reached an eight-year high above $8,400 a tonne, up more than 70% from its low last March. In the previous year, central banks have already invested $6.6tn in liquidity into financial markets, being forced now to provide at least another $5.8tn in additional liquidity as policymakers continued to complain.

5. 'America is back'. In the last four years under the Trump administration, the US has been led under the "Make America great again" concept, focusing more on its interest and ignoring the relations with most parts of the world. Under Biden's hand, the new administration wants to return America to its older position as a trusted leader and renew the transatlantic alliances. In his first speech addressed to the EU, Joe Biden emphasized that the EU and US should tighten their ties and be ready for long-term strategic competition with China. He pointed out that the world is facing a contest between democracy and autocracy. "I'm sending a clear message to the world: America is back. The transatlantic alliance is back.", Biden said. The US's new path has been received well by most EU leaders, such as Angela Merkel and Emmanuel Macron. She said that Germany is prepared to open a new chapter in the transatlantic partnership, but she is aware that there are situations where Germany and the US will not always converge. One example is the gas pipeline Russia is building to Germany, which Washington strongly opposes. And also, the relations with China. The US wants to build a common front with the EU against Beijing, but some EU leaders, including Merkel, are reluctant to support a hard line in China's relations. The time will say where the US's new approach will lead in relations with the rest of the world.

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