‘A massive second-half recovery’: Biden, China and the global economy

‘A massive second-half recovery’: Biden, China and the global economy

Surging optimism about a boom in 2021 depends on heavy public spending and a rapid rollout of new Covid vaccines

Flurries of snow may have greeted Joe Biden as he stepped out for his inauguration as US president on a windy Wednesday in Washington, but financial markets were not concerned about the weather.

The past week has seen China post figures showing its economy avoided a contraction in 2020 and a new US administration promising to “act big” and pump up the economy.

Even in Europe, still in the middle of a painful second wave of coronavirus, Christine Lagarde, European Central Bank president, said that once Covid-19 vaccines were in widespread use across the continent, it too could look forward to a “recovery in demand as containment measures are lifted and uncertainty recedes”.

Ever since Mr Biden won the US presidential election and vaccines were shown to be effective, stock markets have raced ahead. The MSCI world index rose 12.2 per cent in November, followed by gains of 4.5 per cent and 3.6 per cent in December and so far in January respectively. When Mr Biden said on Wednesday that it was “a day of history and hope”, stock markets were far ahead of the new president.