Global Economy on Thin Ice With Frail Trio From China to Germany

© Reuters.  Global Economy on Thin Ice With Frail Trio From China to Germany © Reuters. Global Economy on Thin Ice With Frail Trio From China to Germany

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The vulnerability of global growth to trade conflicts and dependence on U.S. momentum were exposed as Asia’s biggest economies faltered and Germany barely dodged a recession.

A triple whammy of dreary data on Thursday began with sharp slowing in Japanese growth to a fraction of forecasts, before China reported the smallest increase in fixed-asset investment in at least two decades. In Europe, Germany posted surprise growth — but only after a deeper contraction than previously estimated.

The frailty signaled by the reports underscore the world’s need for a China-U.S. trade deal that could remove the uncertainty depressing factory output. It also highlights the risk that the U.S., where consumer strength has supported growth, might become the sole crutch of global momentum.

“We are in a manufacturing recession,” Saker Nusseibeh, chief executive officer of Hermes Fund Managers, said on Bloomberg TV. “Even in the U.S., there’s contraction in manufacturing. The difference is that the consumer in the States has been carrying the day in a far stronger quantum than the consumer in Germany.”

Weak global demand weighed on Japan, where annualized growth dropped to just 0.2% in the third quarter, compared with a 0.9% median forecast. Izumi Devalier, head of economics at Bank of America Merrill Lynch (NYSE:), reckoned forthcoming data might get even worse.

“We do think that fourth-quarter GDP numbers will be quite weak,” she told Bloomberg Television. “We wouldn’t be surprised at all if we had a sizable contraction.”

China had a similar theme, with both industrial output and retail sales missing estimates. Fixed-asset investment grew just 5.2% in the first 10 months of the year, the least since records began in 1998.

For now, the government and central bank in China have refrained from pumping major stimulus into the economy, preferring to make smaller adjustments to try and boost growth without a massive expansion in debt. The weakness revealed on Thursday raises the prospect that such restraint may not hold.

“We are very close to the Chinese government’s bottom line,” said Larry Hu, an economist at Macquarie Securities in Hong Kong. “When the downward trend will turn around depends entirely on when the government will step up their stimulus efforts.”

While Germany, Europe’s biggest economy, defied expectations of a recession with surprise growth in the third quarter, the pace was only 0.1% and investment in machinery and equipment fell. The contraction in the prior period was revised to 0.2%, larger than originally reported.

Growth in the euro zone as a whole was just 0.2% in the quarter. Nusseibeh described the region’s momentum as “incredibly weak.”

That leaves the U.S. as the bright spot in the global economy. Household sentiment there improved for a third month in November, according to a University of Michigan index. The labor market remains robust, with employers adding 128,000 new jobs in October.

In tune with that resilience, Federal Reserve Chairman Jerome Powell on Wednesday stuck to his view that interest rates are probably on hold after three straight reductions. Manufacturing and business investment are under pressure though, just as elsewhere, showing how prospects of a trade deal remain crucial to providing confidence.

The latest talks are currently centering on a U.S. demand that China detail how it plans to reach as much as $ 50 billion in agricultural imports annually, according to people familiar with the matter. Chinese negotiators are resisting a proposal for monthly, quarterly and annual targets for purchases, and also insist that the two sides must agree to rollback tariffs in phases if a deal is reached, the people said.

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Global optimism, UK spending promises lift long gilt yields to three-month high

© Reuters.  Global optimism, UK spending promises lift long gilt yields to three-month high © Reuters. Global optimism, UK spending promises lift long gilt yields to three-month high

By David Milliken

LONDON (Reuters) – British long-dated government bond yields rose to their highest in more than three months on Thursday as a global improvement in risk appetite and the prospect of big increases in public spending overshadowed a more dovish Bank of England.

Ten-year gilt yields () peaked at 0.814%, up around 9 basis points on the day and the highest since July 16, and 20- and 30-year yields gained a similar amount () ().

By contrast, two-year yields () barely budged — pinned down by an unexpected split vote at the Bank of England — and the two-year/10-year yield curve rose to its steepest since July 15 at 24 basis points.

The steepening yield curve reflected countervailing forces at play for different maturities of gilts.

Markets received a shock earlier in the day when two BoE policymakers unexpectedly voted to cut rates, and the majority said a rate cut could become necessary if Brexit uncertainty and a global slowdown did not ease.

One measure of interest rate expectations now prices in a two thirds chance of a quarter-point BoE rate cut by the end of next year, compared with just over half on Wednesday, pushing down on two-year and five-year gilt yields, which are already well below the BoE’s 0.75% Bank Rate.

But the broader tone in markets on Thursday was negative for fixed income assets, bolstered by increased optimism about a trade deal between the United States and China.

German 10-year Bunds , like their British counterparts, rose to their highest since mid-July.

And for longer-dated gilts, there was added upward pressure on yields from the second day of Britain’s election campaign, in which both the Conservative Party and the Labour opposition promised big increases in spending if they win the Dec. 12 vote.

The fiscal news was “arguably more significant” for gilts than the BoE decision, Capital Economics analyst Oliver Allan wrote in a note to clients.

Labour’s would-be finance minister, John McDonnell, promised an extra 150 billion pounds ($ 192 billion) of infrastructure spending during the next five years, on top of 250 billion pounds he has already promised for the coming decade.

McDonnell’s Conservative counterpart, Sajid Javid, said he would spend an extra 100 billion pounds.

Both plans would require a significant increase in gilt issuance over the medium term, and could push up inflation or BoE rates if the spending hits the economy at a time when it is close to full capacity.

However, Capital said it expected the increase in British yields to be limited as any significant rise would attract foreign investors at a time when yields on much euro zone debt are below zero.

“Although UK yields are low historically, they are not particularly low relative to those elsewhere in the developed world,” Allen said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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UK employers cut growth forecasts as Brexit, global slowdown weigh

LONDON (Reuters) – The British Chambers of Commerce cut its forecast for economic growth this year and 2020 on Monday, blaming a slower global economy, U.S.-China trade tensions and the persistent drag from Brexit.

The BCC, whose members employ about one in five British workers, cut its economic growth forecast for this year to 1.2% from its June forecast of 1.3% and lowered the figure for 2020 to 0.8% from 1.0%.

The BCC’s new 2020 prediction is well below the average 1.1% forecast for next year in a Reuters poll of economists, and would represent the slowest growth since the 2008-09 recession.

The group said its forecasts were based on the assumption that Britain avoids a damaging no-deal Brexit.

“Our latest forecast shows a number of warning lights are flashing for the UK economy, even if we are able to avoid a messy and disorderly exit from the EU in just a few weeks’ time,” BCC director general Adam Marshall said.

Prime Minister Boris Johnson has promised to take Britain out of the EU on Oct. 31, without a transition deal if necessary, but parliament has ordered him to delay Brexit if he cannot negotiate a new deal with Brussels next month.

The world economy is also losing momentum, largely due to an ongoing trade conflict between the United States and China which has hit goods exporters such as Germany especially hard.

Britain’s economy contracted by 0.2% in the three months to June, largely due to a hangover from preparations for the original March 29 Brexit date, but the BCC forecast a small bounce back to 0.3% growth in the current quarter.

Brexit uncertainty was hitting business investment – which was heading for its longest period of full-year declines in 17 years – and gains in productivity, limiting future rises in living standards, BCC economist Suren Thiru said.

The BCC forecast wage growth would average just under 3% over the next couple of years – a slower pace than so far this year – while inflation was seen holding at just over 2%, with Bank of England interest rates not rising until 2021.

Another employers group, the Institute of Directors, said a survey it conducted showed nearly 30% of member companies had or were considering setting up operations outside Britain because of Brexit.

Only 9% had or were considering setting up or moving operations back to Britain, the survey showed.

The survey also showed 51% of firms said a no-deal Brexit would be the worst outcome while 32% said further delay could have a worse impact.

“The idea of leaving the EU without a deal in place is certainly the bigger concern, but the prospect of repeated delays with no clear path forward is far from an appetizing prospect,” Allie Renison, the IoD’s head of trade policy, said.

The IoD survey of 952 companies was conducted between July 1 and 17.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Video: How a drop in the euro sparks a global rout

The euro is the linchpin holding everything together, but it’s breaking

The euro closed the week at the lowest level in two years but this might be just the beginning. The ZEW survey this week showed economic expectations tanking and the euro won’t be far behind unless Merkel reverses course and starts spending. If the euro goes, it will set off a cascading series of events, as I explain in this video.

Want me to make a more-detailed video on this topic? Let me know in the comments. Would you like us to make more videos in general? Let us know by subscribing to our YouTube channel.

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Forex – Yen Gains as Trade War, Global Growth Fears Weigh

© Reuters.  © Reuters.

Investing.com – The safe haven yen was broadly higher on Monday as uncertainty over the next stage in the U.S.-China trade war and growing fears over a slowdown in global growth hit market sentiment.

Uncertainty over the U.S.-China trade dispute persisted after U.S. President Donald Trump on Friday said he was not ready to make a deal with China and even cast doubt over a round of trade talks due to take place in September.

Goldman Sachs over the weekend cut its forecast for U.S. economic growth, warning that a trade deal was unlikely before the 2020 presidential election and that the risks of a recession were increasing.

“Overall, we have increased our estimate of the growth impact of the trade war,” the bank said in a note.

National Australia Bank downgraded its estimates for a range of major currencies as it now expects “nothing positive will happen” on the trade front at least through early 2020.

It expects the greenback to broadly hold firm in the face of policy easings by other major central banks while , and euro are seen on a slippery slope.

The greenback was down 0.18% against the to 105.46 by 0:27 AM ET (07:27 GMT), not far from a seven-month low of 105.25 hit on Friday.

The was also weaker against the Japanese currency at 118.04 yen and close to its lowest since April 2017. The was at lows not seen since 2016, trading at 127.27 yen.

The dollar was a touch lower against the after the Chinese central bank’s daily fixing came in firmer than market expectations. That helped eased some fears that Beijing would use its currency as a weapon in its trade war with Washington.

A week ago, China let its currency slip to weaker than 7 to the dollar for the first time since 2008, which some saw as an offset to U.S. tariffs. The change pressured emerging market currencies across Asia and boosted the yen.

All eyes will be on Chinese figures on July retail sales and industrial output due Wednesday to gauge the impact of the long-running tussle with the United States on domestic activity.

Market attention will also be on the U.S. Federal Reserve annual symposium at Jackson Hole later in the week, where investors hope to get some clarity on the future path of interest rates. Markets are expecting nearly 100 basis points of cut from the Fed by next year.

Sterling edged higher against the , rising 0.15% to 1.2050.

The pound reached two-year lows against the dollar on Friday after data showed the U.K. economy unexpectedly contracted in the second quarter, only adding to the bearishness over Brexit and the chance of a no-deal exit.

The was a touch lower against the dollar at 1.1185, as the prospect of snap elections in Italy weighed.

–Reuters contributed to this report

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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IMF’s Lipton: We still see the global economy as sluggish

Comments by acting IMF chief, David Lipton

David Lipton
  • Sluggish growth raises concern that a response is needed
  • China’s growth to slow gradually and more if trade dispute worsens
  • US economy has low jobless rate but no inflation pickup
  • All of Europe’s policy levers need to be ready for use
  • IMF baseline scenario is not for the world economy to stall or fall into a recession

ForexLive

He’s covering pretty much everything as he speaks in an interview with Bloomberg but isn’t really telling us much that we don’t already know. In case you weren’t aware, Lipton is now the acting IMF chief after Lagarde relinquished her position on 2 July as she is nominated to head the ECB next after October.

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Dollar awaits China data to gauge global growth pulse

© Reuters. An employee of a bank counts US dollar notes at a branch in Hanoi © Reuters. An employee of a bank counts US dollar notes at a branch in Hanoi

By Wayne Cole

SYDNEY (Reuters) – The dollar was all but flatlining in Asia on Tuesday as investors awaited readings on Chinese manufacturing and the European economy to gauge the pulse of the global economy.

China’s official purchasing management index (PMI) is forecast to hold at 50.5 in April after bouncing in March in what analysts hoped was evidence that policy stimulus was gaining traction in the economy.

A solid report could support risk assets and currencies leveraged to Chinese growth, including the Australian dollar, while pressuring the safe-haven yen.

Figures for economic growth in the Eurozone out later in the session are forecast to show a modest rise of 0.3 percent in the first quarter, but at least that would be up from the previous quarter and may be taken as a hint of stabilization.

Even such tentative growth could squeeze speculators who have been amassing large short positions in the euro, worth a net $ 14.8 billion in the week to April 23.

For now, the euro was steady at $ 1.1184, having edged away from a near two-year trough of $ 1.1110 hit last week.

The dollar was stuck at 111.67 yen, having traded a very tight range with Japan on holiday. Resistance is lined up at the recent top of 112.39, with support at 111.37 and 110.83.

Against a basket of currencies, the dollar was a fraction softer at 97.856, having eased from last week’s near two-year peak of 98.330.

The major hurdle for the dollar remains the Federal Reserve’s two-day policy meeting which ends on Wednesday with a statement and a news conference by Chairman Jerome Powell.

No change in policy is expected but the market is keen to hear how Powell resolves the divergence between solid economic growth and slowing inflation.

U.S. data overnight showed consumer spending enjoyed the sharpest rebound in 9-1/2 years in March, yet core inflation still slowed to a 14-month low.

The core personal consumption expenditures index, the Fed’s favored measure of inflation, slowed to 1.6 percent and further way from the central bank’s 2 percent target.

“A sustained acceleration in core inflation remains elusive and is contributing to low inflation expectations,” said ANZ economist Felicity Emmett. “This is not just an issue for the FOMC, it is a real concern for other major central banks.”

“We expect the dovish tone from central banks to continue for the foreseeable future,” she added. “Given evidence of a recovery in growth, this is very positive for risk assets.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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U.S. dollar share of global currency reserves fell in fourth quarter 2018

© Reuters. An employee counts U.S. dollar bills at a money exchange office in central Cairo © Reuters. An employee counts U.S. dollar bills at a money exchange office in central Cairo

By Saqib Iqbal Ahmed

NEW YORK (Reuters) – The U.S. dollar’s share of currency reserves reported to the International Monetary Fund fell in the fourth quarter, down for the third straight quarter, while the euro’s share of reserves grew to the largest in four years, data released on Friday showed.

Reserves held in U.S. dollars fell to $ 6.62 trillion, or 61.69 percent of allocated reserves, in the fourth quarter, from $ 6.63 trillion, or 61.94 percent, in the third quarter.

Total allocated reserves increased to $ 10.73 trillion in the third quarter from $ 10.71 trillion in the previous quarter.

Global reserves are assets of central banks held in different currencies, primarily used to support their liabilities. Central banks sometimes use reserves to help support their respective currencies.

While the dollar share of foreign exchange reserves contracted, the euro, the yen and the Chinese yuan’s share all increased.

The U.S. dollar remains the world’s dominant reserve currency but central banks around the globe appeared to continue to diversify their reserves away from the greenback.

“In terms of official flows, central banks’ building up reserves, there has been a move toward diversification and that has primarily been led by greater usage of other currencies in international payments,” said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

“The renminbi is moving up the rankings. If you look at SWIFT payments data you can see it is increasingly used as a payments currency. The euro, of course, continues to stabilize after the euro crisis,” he said.

The euro’s share of global allocated currency reserves rose to 20.69 percent in the fourth quarter of 2018 to the largest since the fourth quarter of 2014.

The share of allocated currency reserves held in yuan, also known as renminbi, rose to 1.89 percent, the highest since the IMF began reporting its share of central bank holdings in the fourth quarter of 2016.

The Chinese currency rose 0.1 percent on a spot basis against the dollar in third quarter even as Washington and Beijing continued to spar on trade-related issues.

The yen’s share of reserves rose to 5.20 percent in the fourth quarter to the largest since the second quarter of 2002.

Sterling’s share of global allocated FX reserves fell to 4.43 percent in the fourth quarter to the smallest since the second quarter of 2017, the data showed.

The British currency, which has been plagued by volatility in recent months amid uncertainty around the Brexit process, fell 2 percent during the fourth quarter of 2018.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Yen gains as global economic worries drive risk aversion

© Reuters. Illustration photo of U.S. Dollar and Japan Yen notes © Reuters. Illustration photo of U.S. Dollar and Japan Yen notes

By Shinichi Saoshiro

TOKYO (Reuters) – The yen gained against its peers on Monday, touching a six-week peak versus the dollar, as fears in markets of a global economic slowdown fueled demand for the Japanese currency.

The yen, a perceived safe-haven which attracts demand times of market turmoil and political tensions, was 0.15 percent higher at 109.79 to the dollar after brushing 109.70, its strongest since Feb. 8.

The Japanese currency rose 0.15 percent to 124.035 per euro and added 0.2 percent to 77.72 against the Australian dollar.

Stocks across Asia retreated, tracking global peers, after weaker-than-expected U.S. and European manufacturing data on Friday intensified fears of a global economic slowdown.

"Bad economic data should not come as a real surprise to the markets. But hopes for improvements in Sino-U.S. trade relationships had overshadowed economic woes, and now we are seeing some of the excessive expectations being curtailed," said Koji Fukaya, president of FPG Securities in Tokyo.

"The yen is gaining broadly, albeit by default, under such conditions."

The dollar had already taken a big hit against the yen on Friday when the spread between 3-month Treasury bills and 10-year note yields inverted for the first time since 2007 following weak U.S. manufacturing PMI data.

Historically, an inverted yield curve has signaled an impending recession.

A much weaker-than-expected German manufacturing survey released on Friday had also raised concerns for Europe’s biggest economy and the wider euro zone.

The currency markets showed limited response to an official report that concluded that U.S. President Donald Trump did not collude with Russia during the presidential elections in 2016.

Special Counsel Robert Mueller found no evidence of collusion between Trump’s campaign team and Russia, and did not present enough evidence to warrant charging the president with obstruction of justice, U.S. Attorney General William Barr said on Sunday.

The was little changed at 96.623 after scraping out a gain of 0.15 percent on Friday.

The euro was nearly flat at $ 1.1296 . The common currency has lost roughly 0.7 percent on Friday in response to the downbeat German manufacturing survey.

The Australian dollar, viewed as a liquid proxy for global growth, barely moved at $ 0.7077.

The pound was 0.1 percent lower at $ 1.3199

Sterling had rallied 0.8 percent on Friday, helped by a weaker euro and after European Union leaders gave British Prime Minister Theresa May a two-week reprieve to decide how Britain will leave the European Union. [GBP/]

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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