Global stock markets rose on strong European and US shares on Thursday, with stocks brushing off a rapid re-acceleration in coronavirus cases and oil and the dollar extending their first-half rallies. On Wall Street, the S&P 500 reached its sixth consecutive all-time closing high on upbeat economic data, and European shares ended higher on a rally in crude prices. Cameron Brandt, Director of Research at EPFR Global, discussed further.

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In terms of data, as far as emerging markets equities are concerned, he said, “We have started to see an uptick ex-China over the past week or so. To put it in context, after months of wondering whether the reflation stories are going to generate too much inflation, there seems to have been some thought been given over the past couple of weeks to the fact that it might be that growth is transitory and not inflation.”

There has been a surge for reflation stories that are just starting up and India’s recovery has been delayed by the COVID experience it has gone through recently.

“There has definitely been a preference for developed markets but I am beginning to sense a little bit of a change there,” he stated.

On being asked if after Fed’s recent meeting, steel prices could be cut in July in the Asian markets, he said that the fund flows to commodities have dipped. “We are seeing a little bit of uncertainty about the growth picture, investors are certainly kicking the tyres. So, the consensus that it will just march higher for the foreseeable future - if not punctured - is not inflating as rapidly as it has been for a while,” he said.

He believes Fed’s recent meeting where they signalled that they are starting to pay attention to inflation has also taken some of the air out of the inflation hedge flows, which was a big component of the money one is seeing going in the commodities over the past few months.

In Q3, India and Mexico are going to see a definite pickup in flows. “The reflation stories which haven’t been bought into remain pretty attractive to investors and India’s forecast is still talking for double-digit gross domestic product (GDP) growth for the full year. So, India is certainly the market people are looking at,” he said.

“Interestingly South Africa and Turkey are seeing some money simply because they are still perceived as offering a stronger chance of rebound than some of the more popular emerging markets,” he further mentioned.

For the full interview, watch the accompanying video.

(Edited by : Dipika)

First Published:Jul 2, 2021 9:48 AM IST