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The G20 summit in Rio de Janeiro had been billed as a moment for “the West and the Rest” to show unity, yet the various agendas that have been brought to Brazil by world leaders have brought disorder and tension. North Koreans are fighting in Europe for the first time. Israel is resisting US efforts to halt fighting with Hezbollah and Hamas. China regularly conducts military exercises surrounding Taiwan. Nuclear war is suddenly a risk amid surging tensions over Russia’s invasion of Ukraine, and this is all before Donald Trump returns to the White House.
The sense of global disorder played out vividly in the traditional “family photo” with US President Joe Biden, Canadian Prime Minister Justin Trudeau and Italian premier Giorgia Meloni missing when the picture was taken on the summit’s first day. They were found for a retake the following day, however you get the feeling both here and at the COP conference, Trump’s return is looming over proceedings. Four years ago, Biden declared “America’s back” and told his fellow world leaders that Trump had been an aberration. Unfortunately for him it is now Biden that is fading from view.
Vladimir Putin’s war on Ukraine reached its 1,000th day with an escalation in the conflict that rattled markets and probably dominated discussions at the G20. Ukraine took advantage of newly granted US permission for long-range ATACMS missile strikes into Russia by hitting an ammunition store, allegedly full with weapons for the newly arrived North Koreans. In return, Russia announced Putin had signed off on a revised nuclear doctrine that permits a response to a conventional attack that threatens its sovereignty. Under its terms, a nuclear response can be triggered by an attack with “conventional weapons” if it threatens Russia’s “territorial integrity.” It also stated that Russia can use nuclear weapons on a non-nuclear armed nation if it is itself supported by a nuclear ally – such as the US or Britain.
Chinese Premier Xi’s main objective at the G20 summit was to push for a peaceful world with fewer trade barriers so he can focus on reviving China’s economy. Xi repeatedly sought assurances that nations would uphold international free trade as Trump threatens 60% tariffs on Chinese goods, and he continued to walk a tightrope on Russia’s war in Ukraine. Whilst Xi put on his best diplomatic show, Swedish authorities said they had detected a Chinese ship moving near two telecom cables that failed within hours of each other on the Baltic Sea bed in recent days. Prosecutors in Stockholm have launched a preliminary investigation into suspected sabotage, hours after Germany dubbed the cable failure part of a “hybrid operation”. On Sunday morning at about 10am, Swedish authorities registered problems with a data cable under the Baltic Sea from the Öland island to Lithuania. At 4am on Monday, telecoms operators in Finland and Germany reported problems with another cable called C-Lion-1. Both cables had apparently been severed and German defence minister Boris Pistorius said, “nobody believes that these cables were severed by accident.”
Xi was not the only leader looking for global trade assurances. Keir Starmer used his biggest international summit since becoming prime minister to say Britain was “looking outward to the world again.” Asserting a global role for his government proved more elusive. On one hand, he cast the UK as a staunch defender of the liberal world order. On the other, he passed up a chance to condemn the sentencing of democracy activists in Hong Kong hours after he met with Xi. It has not been a great week for the UK Prime Minister, or “Starmer the Farmer Harmer” as he has been referred to in the press. Being up in London myself and seeing the huge turnout from the farming community campaigning against the 20% Inheritance Tax Levy on farmland above £1m, it is clear the fallout from Rachel Reeves budget continues.
This week’s UK inflation figures showed a jump up to 2.3% and there are suggestions as the budgetary tax rises take hold, inflation could soon move back up to 3%. As always, there is much to consider on a geopolitical front that impacts on markets. There is a well used phrase that suggests stock markets like to climb a wall of worry. Well, if they can strap on their hiking boots there still remains every chance that 2024 will be one of the better years in recent memory for portfolio returns. Do have a good weekend.
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