Frank Kelly’s Geopolitical Week Ahead | September 1, 2024

Entering a hectic and likely historic autumn 

Summer is now over (per the UK Meteorological calendar, which says September 1 is the first day of autumn) and we are entering a hectic and likely historic autumn. The U.S. presidential election looms a little over two months away (the first presidential debate between former President Donald Trump and Vice President Kamala Harris is scheduled for September 10).  

Events markets will watch closely

But in the coming week, there will be some very significant events markets will watch closely. Beijing will be bustling this coming week as China hosts the China-Africa Forum.  Leaders from across Africa will attend the meeting to discuss climate issues, increased trade opportunities, and likely new loans from China to many of the attending countries. The meeting is all part of Beijing's efforts to expand its influence across the continent while securing critical mineral rights and increased trade opportunities. 

But that is not all that is happening in Beijing this week. UK Foreign Minister David Lammy is expected to visit for meetings with China's top diplomat, Wang Yi, and a possible meeting with President Xi Jinping. Additionally, Chief U.S. Climate Advisor to President Biden, John Podesta, will be visiting to discuss cementing new climate goals while, separately, U.S. Undersecretary of Commerce for International Trade, Marisa Lago, will travel to Tianjin, China for meetings with her counterpart on a wide range of issues that are stressing the U.S.-China relationship.  Both the Podesta and Lago meetings come on the heal of U.S. National Security Advisor Jake Sullivan's meeting with President Xi and Foreign Minister Wang last week. 

The big event in Europe this week: State elections in Germany

The big event in Europe this week is the state elections held today in Germany (Sunday) – the impact of which is shaking most of the rest of Europe and beyond. The states of Saxony and Thuringia held votes, and it appears the far-right Alternative for Germany (AfD) Party has won in Thuringia – the first time a far-right party has won a state poll since World War II.  The AfD took second place in Saxony – but just by a little more than a percentage point – to the Christian Democrat Party.  Additionally, the far-left Sahra Wagenknecht Alliance (BSW) showed growing strength in both elections, coming in third in both, while the ruling SPD Party came in a very weak fourth place.   

Both the AfD and the BSW strongly oppose military and financial aid to Ukraine, and both have expressed sympathy for Russian President Vladimir Putin's views on the War. However,  neither party is expected to win enough seats to form a ruling coalition.  And virtually no other party wants to create a coalition with the AfD due to their neo-Nazi leanings.

Forthcoming report on EU competitiveness

Also, this week in Europe, former Italian Prime Minister and  European Central Bank Chief Mario Draghi will meet with EU Parliamentary leaders to discuss a forthcoming "landmark" report on EU competitiveness. Last year, EU President Ursula von der Leyen asked Draghi to conduct the study and make recommendations on how the EU can better compete globally. The report is expected to make a number of seismic recommendations, primarily aimed at filling the productivity gap between the EU, the US, and China.

Russian President Vladimir Putin travels to Mongolia

Also this week, Russian President Vladimir Putin travels to Mongolia to commemorate the joint Soviet-Mongolian defeat of Japan in World War II. But the real significance of the trip is that Mongolia is a signatory of the International Criminal Court, which has a warrant out for Putin's arrest since 2023 for war crimes.  This is Putin's first visit to an ICC signatory nation since he directed the invasion of Ukraine.  Mongolia has no intention of honoring that signature or of arresting Putin, a blow to the ICC's stature.

Global financial and economic radar screen

Looking at the global financial and economic radar screen for the coming week, markets are looking at:

• The U.S. jobs report (non-farm payrolls) being released this coming Friday (will they be softer or stronger than expected, and will that, in turn, lead to a larger rate cut by the Federal Reserve later this month?).
• Also this week, the Federal Reserve releases its Beige Book, and the Bank of Canada meets to decide interest rates.
• Moving to Asia, China releases PMIs and the Caixin indexes, while Japan releases closely watched wage figures, and Australia releases second-quarter GDP figures.
• In Europe, markets will closely follow the EU Parliament's reception of the Draghi reported above.

Meanwhile, Germany will release closely watched industrial production and trade balance figures as well as factory orders—all critical indicators of whether the German economy is beginning to recover or is still struggling.