Federal Reserve chairman Jay Powell will be one of the key speakers at the virtual Jackson Hole meeting this week. Investors will also be watching rising US-China tensions and metal prices © FT montage; Bloomberg

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The world’s central bankers will convene virtually on Thursday and Friday for a discussion about the future of monetary policy. The annual event, typically held in Jackson Hole, Wyoming, was moved online earlier this year because of coronavirus. 

The global pandemic will lead the agenda for policymakers, who have grappled for months with an unprecedented economic collapse. A recovery began to take shape in recent months, but a reimposition of lockdown measures in many countries has threatened to undermine it. 

In the US, investors are hoping for more clarity from Federal Reserve chairman Jay Powell about the tools it may consider not only to limit the economic damage but also to address the issue of persistently low inflation.

Several Fed officials have already expressed a willingness to allow inflation to run above the central bank’s 2 per cent target to make up for prolonged periods of undershooting.

In Europe, investors will be looking for any clues about the likely next steps of the European Central Bank when its chief economist Philip Lane speaks about its monetary policy and the outlook for the eurozone economy.

Most analysts think the ECB will increase its €1.35tn emergency bond-buying programme, but this is not likely to happen until December at the earliest.

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Bank of England watchers will be looking for thoughts from Andrew Bailey on the merits of cutting interest rates below zero.

The BoE governor said this month that negative rates were “part of our toolbox” but the central bank had no immediate plans to use them. Even so, markets continue to price in a significant chance of sub-zero rates next year.

Although it is unclear at what level the Bank of Japan will be represented at the meeting, its experiences as a pioneer of strategies including quantitative easing, negative rates, yield curve control and massive asset-buying programmes will be of keen interest to its peers around the world. Colby Smith, Martin Arnold, Tommy Stubbington and Leo Lewis

Will the US broaden its assault on Chinese companies?

As US president Donald Trump takes further swipes at Chinese companies — with more likely during this week’s Republican convention — one question on investors’ minds is not whether US-China relations will deteriorate, but how many companies will be hit along the way.

As well as setting a 90-day deadline for the sale of Chinese video app TikTok, Mr Trump has turned his focus back on telecoms group Huawei with sanctions that one analyst described as a “death sentence”. The president has also signalled possible action against ecommerce giant Alibaba.

The latest sanction, which bars companies from selling Huawei chips made with US technology, has pummelled the shares of the Chinese company’s main suppliers. Taiwan’s MediaTek, which had become a key chip provider for the company following previous sanctions, finished the week down 12 per cent. 

However, few industry observers think global demand for semiconductors will take a lasting hit, even if the new restrictions drive Huawei out of business. Equity analysts at Morningstar said the move was a “short-term gut kick, fading to a midterm bruise” for the industry.

Meantime, local competitors such as Xiaomi and Oppo are expected to benefit. Morningstar estimated Xiaomi’s market value could jump 30 per cent if Huawei were forced out of smartphone production.

But analysts warn that with US-China ties fraying by the day, as Mr Trump makes a campaign against Beijing a key part of his bid for re-election, other companies could be targeted.

“If the Huawei ban was extended to other Chinese smartphone manufacturers, then it would also be very difficult for Xiaomi to make smartphones,” said Morningstar. Hudson Lockett

Have metals prices rallied too far, too fast?

Mining shares have been among the best-performing sectors this year, thanks to a recovery in commodity prices and a rally in gold and silver

Prices for base metals such as copper, nickel and zinc hit their highest levels in a year last week, while iron ore ore prices touched a six-year high.

The FTSE 350 Mining index has risen by 61 per cent after the World Health Organisation declared Covid-19 a pandemic on March 11, compared with a rise of just 14 per cent for the FTSE All-Share index.

But investors have sounded a note of caution over the mining sector after the FTSE 350 Mining index lost 2 per cent last week. On Thursday, copper miner Antofagasta reported a 22 per cent fall in earnings for the first half of the year owing to lower copper prices during that period, sending its shares down 3.8 per cent by Friday morning.

One reason is concern that prices for metals may have rallied too far, too fast on the back of stimulus in China and a rise in steel production. Another worry is the increased risk of a second wave of Covid-19 infections, which could hit economic growth outside China this year. 

Mines that were disrupted because of coronavirus in March are also returning to full production, which will add supply. 

Analysts at RBC said momentum seemed to be fading in mining equities but recommended watching for opportunities to buy, as prices of iron ore and copper are likely to rise next year. Henry Sanderson

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