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Trade wars could cost the global economy almost $500 billion, the PBOC’s global influence is set to surge, and U.S. CPI looms large. Here are some of the things people in markets are talking about.
Trade Wars Aren’t Cheap
A full-blown trade war could cost the global economy $470 billion, according to Bloomberg Economics. The U.S. decision to slap tariffs on steel and aluminum may just be the beginning, with President Donald Trump warning of more levies and other economies promising to respond. Cecilia Malmstrom, the European Union’s trade chief, vowed on Monday to “stand up to bullies.” In a scenario where the U.S. implements a 10 percent levy on imports and the rest of the world retaliates, analysis by Bloomberg Economics published Monday says the global economy would be 0.5 percent smaller by 2020 than it would have been without tariffs. According to economists Jamie Murray and Tom Orlik, that’s an extreme scenario, “but it’s no longer an impossible one.”
People’s Bank of the World?
When Zhou Xiaochuan hands over the reins of the People’s Bank of China after 15 years in control, his successor will take charge of a central bank with unprecedented global influence. The economy’s size has ballooned from $1.5 trillion in 2002 when he started to about $12 trillion today. China is estimated to have contributed more than a third of global growth last year, according to the International Monetary Fund. And the nation surpassed the U.S. as the world’s biggest oil importer last year, buying about 8.43 million barrels a day. As China seeks to reorganize its financial oversight system amid a crackdown on excess borrowing and financial frailty, the PBOC may soon be able to stand on the global stage buttressed by a more powerful role at home too. That means even if its direct financial linkages are still tiny when compared with the Federal Reserve, decisions taken by the bank will become increasingly crucial around the world.
Japanese Assets Shrug Off Land Scandal
Japan’s Nikkei stock index gained 1.7 percent and the yen rose 0.4 percent Monday, even after the government said that the names of Prime Minister Shinzo Abe, his wife and Finance Minister Taro Aso were deleted from documents at the heart of a land scandal that erupted last year, a revelation that threatens to derail his administration and its economic strategy. Aso apologized and said an internal investigation was ongoing as opposition lawmakers called for him to resign. He admitted that staff in his department tampered with the documents, but said all the blame rests with one of his subordinates who resigned last week. Abe also sought to limit the damage.
India Inflation Slows, America’s May Also
Inflation in India slowed for a second straight month, giving the central bank room to keep interest rates on hold for longer while providing relief to battered bond investors. Government data on Monday showed inflation rose 4.44 percent in February from a year ago, lower than the 5.07 percent rise in January and versus an expected 4.7 percent. The U.S. may see a similar slowdown on Tuesday, with its consumer-price index seen rising 0.2 percent month-over-month in February, compared with a previous reading of 0.5 percent. Excluding food and energy, prices were projected to advance 0.2 percent following a bigger-than-forecast 0.3 percent increase in January. Those earlier readings temporarily sent stocks tumbling when investors interpreted the data as an indication of the kind of inflation that would prompt the Federal Reserve to act more aggressively on interest-rate hikes, leading to higher borrowing costs for companies.
Coming Up…
Inflation angst may be about to get its time in the spot light when the U.S. reports February CPI. Before then we get Japan PPI, Australia's business ebullience and Malaysian industrial production. At some stage the OECD publishes its interim economic outlook. Europe's day will be highlighted by U.K. Chancellor Philip Hammond speaking on the economy, while the European Council and European Commission give Brexit statements to Parliament in Strasbourg. President Trump will visit California for the first time since he won office, taking in border wall prototypes in San Diego before heading to Los Angeles for a Republican National Committee fundraiser. Also looming in the U.S. is a special Congressional election in a Pennsylvania seat held by Republicans, seen as a possible bellwether for midterms.
What we’ve been reading
This is what caught our eye over the last 24 hours.
- Here’s the deal with the Trump/Kim Jong Un meeting.
- The key to avoiding recession in Australia? Mass immigration.
- Singapore’s exchange to ease rules to attract tech IPOs.
- China’s Belt and Road energy-project financing dropped by 28 percent last year.
- Some folks are going to great lengths to track Tesla Model 3 production.
- Afghanistan’s president puts peace on the table.
- The rich aren't happy that New Zealand is banning foreign boltholes.
©2018 Bloomberg L.P.
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