U.S. Plays Grinch as China Sends Along Some Trade-War Gifts

(Bloomberg) -- It’s a one-way gift exchange this week between the U.S. and China, while sour growth signs are putting a damper on the holiday season. A shock resignation in India put central-bank autonomy back in the limelight.

Here’s our weekly wrap of what’s going on in the world economy.

Central Banks Under Fire

It’s a bad year to be a central banker. Urjit Patel had had enough, and the Reserve Bank of India boss called it quits just when it seemed his team was making amends with the government. The swift replacement with a former bureaucrat did little to make Prime Minister Narendra Modi’s week better, especially with unfavorable state election results. And the RBI already had enough to worry about.

Cheer up, Urjit: You’re hardly alone as Jerome Powell is still taking heat from the White House, and is now setting out on a charm offensive. Goldman sees the chance of a Federal Reserve interest-rate hike in March at less-than-even odds. Meanwhile, Mario Draghi called time on the European Central Bank’s flagship deflation-fighting tool. And all the drama around central-bank autonomy might be just a bit overstated, Bloomberg Economics shows.

Read More:

• Trump Attacks May Rally Fed’s Would-Be Dissenters Around Powell
• Fed Piles Up $66 Billion in Paper Losses as It Faces Trump Wrath
• The Pros and Cons of a PBOC Rate Cut as China’s Economy Slows

The Two Big Ones

Trump is playing a strong hand with no real fresh concessions while China said it will remove the retaliatory duty on automobiles imported from the U.S. for three months and delay some high-tech goals. Executives on both sides are squirming about the Huawei CFO’s arrest and subsequent release on bail, and China registered its complaints, but Trump hasn’t yet intervened. The U.S. still plans to restrict high-tech exports and target Chinese hackers amid a deeper battle with China for global influence. Meanwhile, Chinese factory and consumer data turned down while investment strengthened.

Read More:

• Vietnam Is Poised to Win From the U.S.-China Trade War
• Trade War Damage to China’s Economy Is Already Done, Citi Says
• Factories in the U.S. Are Posting Job Openings Like Never Before

Growth Gloom

Economies around the world will finish 2018 on a Scrooge-y note. American CFOs see a recession within two years. The No. 2 and No. 3 economies are showing cracks, with China’s data showing weakness at home and from abroad and Japan’s growth sinking more than expected. France is weighing on the euro area. German investors oddly feel more upbeat, yet Angela Merkel’s successor faces a laundry list of structural challenges. South Africa’s got a basket of troubles to tackle next year. Brazil’s betting on a turnaround with a gang of University of Chicago guys. The hard landing is here in Turkey. And for more to spook you, here are Nomura’s “gray swans” for 2019. A rare silver lining: U.K. wages are running at their fastest pace since 2008.

Read More:

• Saudi Arabia Is Said to Review Expat Fees as Economy Feels Sting
• RBA Uncovers One Part of Economy That’s Booming: Illegal Drugs
• Korea’s Minimum Wage Hikes Loom as Hurdle to Jobs Growth in 2019

Ther-exit

The bad news is getting worse in Europe, which already is licking its economic wounds from a challenging year on several fronts. Theresa May survived a no-confidence vote while vowing to make her own exit after Brexit, and businesses have stayed worried. Traders aren’t looking kindly on France after President Emmanuel Macron cried mercy with protesters, pledging more spending alongside tax cuts. That’s giving the EU an extra headache, and Italy more gusto as populists there prepare a budget analysis.

Read More:

• Brexit Begins to Bite as Workers Turn to Voting With Their Feet
• Future of ‘Macronomics’ Tested by Violence on French Streets

Weekend Reading

• Americans Can Thank Today’s Teenagers for Tomorrow’s Consumption
• The Last Days of a Central Banker Under Fire in Modi’s India
• How Asia Fell Out of Love With China’s Belt and Road Initiative
• Blue Collar Worker Shortage Turns U.S. Labor Market on Its Head
• Trump’s Tax Cuts Had an Impact—But Not the One Backers Hoped For
• Long-Term Opioid Use May Keep Workers Sidelined, Fed Letter Says
• No Happy New Year for Central Banks Fretting on 2019 Outlook
• Ahead of Fed, Shift on ’19 Policy Call Premature: Eco Week Ahead

Chart of the Week

GLOBAL INSIGHT: Fed, BOE, RBI -- Gauging Independence Risk

To contact the editor responsible for this story: Zoe Schneeweiss at zschneeweiss@bloomberg.net

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