Seesaw Economy Takes Hold, And Most Aren’t Taking Any Chances
Fed officials aren’t the only ones that aren’t ready to bet that the second quarter will be hugely better than the first.
(Bloomberg) --
While glass-half-full observers focus on prospects for brighter days ahead, Federal Reserve officials aren’t the only ones that aren’t ready to bet that the second quarter starting next week will be hugely better than the first.
Here’s our weekly wrap of what’s going on in the world economy.
Fed and Friends
Fed officials played as a team this week, with three regional presidents roundly supporting a cautionary approach and a fourth saying he wouldn’t be surprised if his rosier outlook turns out wrong. The U.S. central bank’s dovish turn won the backing of economists in a Bloomberg survey, but it isn’t enough for their prospective new colleague, Stephen Moore, whose nomination to the board hasn’t been so popular.
It was a wild week of decisions: Hungary pulled off a dovish tightening, Nigeria unexpectedly cut for the first time since 2015 and Egypt surprisingly didn’t lower rates. New Zealand was more en vogue, keeping rates unchanged while signaling more toward a future cut than a hike. Malaysia also channeled its inner dove, slashing economic growth forecasts and promising to remain supportive.
In a pullback against getting too easy: The European Central Bank acknowledged risks to negative rates, and China’s central bankers will ease policy less aggressively this year than last alongside steady liquidity injections, according to Bloomberg surveys.
Read More:
- Yellen Says She’s ‘Not a Fan of MMT’ as List of Detractors Grows
- TURKEY INSIGHT: Credibility Exposed, But Hike to Be Unwound
- Euro-Area Banks Can Expect ECB Loan Details by June, Rehn Says
Tricks of Trade
U.S. negotiators headed to Beijing for more trade talks, but it’s become increasingly difficult to live up to their president’s pledge of an “excellent” deal and the negotiations may go on for weeks or even months. Negotiators have been working line-by-line through the text of an agreement that can be put before President Donald Trump and counterpart Xi Jinping, according to officials familiar with the matter. Having scored a domestic win with some vindication out of the U.S. special counsel’s report on 2016 election meddling, Trump might enjoy some breathing room as he works toward a leaders’ meeting with Xi. For China’s part, officials are pledging to lower tariffs and take more steps to appeal to foreign investors. Here’s a QuickTake on where things stand.
But Trump’s vulnerable to pressure elsewhere on his trade agenda: Congress is proving a real hurdle to enacting his new Nafta deal and the World Trade Organization is expected to rule on a national-security dispute, crossing a red line set out by the U.S. president.
Read More:
- Talk About Anything But Huawei During President Xi’s Paris Trip
- U.S. and China Got Into a Trade War and Mexico Won
- CHINA INSIGHT: No Over-Commitment to ‘Stable’ Yuan in Trade Pact
Winners, Maybe
Most of the army that’s weighed in on the inverted yield curve has downplayed what it means for the imminence of a U.S. recession. Still, U.S. economic growth cooled by more than initially reported last quarter, signaling mounting challenges to the expansion as it nears a record duration. Elsewhere, China is improving in fits and starts, Europe showed signs of relief with German sentiment picking up, and Morgan Stanley charted the continent’s biggest fiscal boost in a decade.
Read More:
- Election Cash Splash Spurs Southeast Asia’s Biggest Economy
- Austria Unexpectedly Has First Budget Surplus Since 1974
- FRANCE INSIGHT: Consumers Hold the Key to Economic Prospects
Losers, Probably
Thailand elections this week were marred by technical difficulties and claims of unfairness, and a close vote count prompted a power struggle. Whoever wins, the economic challenges are clear. In Turkey, economic woes are haunting President Recep Tayyip Erdogan in local votes on Sunday. And in Ukraine, which also goes to polls that day, clarity on the political outlook is still months away, and economic uncertainty will linger for years. Meanwhile, Brexit turmoil is dragging on, hurting London house prices and leading to desperate measures in some households.
Factories in Asia saw more softness with Korean production dropping by the most in two years and a weak output bounce in Japan.
Read More:
Weekend Reading
- Drowning in Debt, Freaked-Out Canadians Brace for a Reckoning
- The Health of a Country’s Economy Is Hiding in Plain Tweets
- ‘Poor Man’s Monetary Policy’ Lurks in a Low-Neutral Rate Future
- Central Bank Risk Tool Gets IMF Endorsement Amid Easy Money
- Weidmann Hits French Roadblock on Path to Replace Draghi at ECB
- Italians Cherish Easy Money While German Speakers Want It Gone
- How Big Is the Global Gender Gap? Depends Which Number You Look At
- As Another Man Takes Throne, Japan's Women Hope It's Their Era
Chart of the Week
To contact the editor responsible for this story: Zoe Schneeweiss at zschneeweiss@bloomberg.net
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