Global Policy, Lagarde’s Challenge, China Rate Cut: Eco Day

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Welcome to Monday, Europe. Here’s the latest news and analysis from Bloomberg Economics to help get your week started:

• The broad policy direction for many of the world’s central banks and governments now hinges on one question: how will the Chinese government respond to the economic shock?
• Finance leaders from across the world will gather in Saudi Arabia this week to discuss a global economy coming under increasing strain from the spread of coronavirus.
• “Nobody trusts you,” German lawmaker Joerg Meuthen told European Central Bank chief Christine Lagarde, railing about negative interest rates -- and while enduring bluster is par for the course for ECB presidents, the Feb. 6 encounter in the European Parliament also illustrated how politically charged that stimulus tool has become.
• China’s central bank provided medium-term funding to commercial lenders and cut the interest rate it charges for the money, a move widely anticipated by analysts to cushion the economy from the virus epidemic. Meantime, Bloomberg Economics sought to answer a tough but important question - how much of China is back at work and how much remains trapped in a virus-induced shutdown?
• U.K.’s chief Brexit negotiator will set out Britain’s goals for talks over its future relationship with the European Union in a speech in Brussels on Monday as the two sides prepare to thrash out an agreement before the end of the year.
• European Union governments were presented with a compromise over the bloc’s budget for the next seven years that’s unlikely to satisfy any of the warring camps and sets the stage for a clash between poorer and richer member states on Feb. 20.
• The U.S. said it will increase the tariff rate imposed on aircraft imported from the European Union to 15% from 10%, part of a spat in which the U.S. has sought to penalize the EU for offering subsidies to Airbus that harmed American aircraft maker Boeing.
• Japan’s economy lurched toward a possible recession after taking another battering from a sales-tax hike in the last quarter that left it at a low ebb as the coronavirus outbreak hit activity at the start of 2020.

To contact the reporter on this story: Jiyeun Lee in Hong Kong at jlee1029@bloomberg.net

To contact the editors responsible for this story: Paul Jackson at pjackson53@bloomberg.net, Jason Clenfield

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