Market Overview

Economic results of the week: growth slowdown, trade war, rates hike in Asia, preliminary Brexit agreement

The global economy took another blow this week, with Germany and Japan – the world’s third- and fourth-largest economies – both showing contractions in the third quarter and renewing fears of a synchronized slowdown. Trade wars are dragging on, the falling oil price opened a new front of concern and Asian leaders are worried that the region is doing the heavy lifting on global economic growth.

The White House is offering reassurance that the world’s two biggest economies are still in conversation “at all levels” about trade, and China’s drawing up some potential terms of agreement, even as the U.S. also is striking a definitely-maybe tone on the potential of imposing fresh tariffs on car imports. The ongoing tensions have firms all over the world taking a careful look at global supply chains. Bloomberg analysis of the tech sector shows how hard it would be to draw that “iron curtain” that former Treasury chief Hank Paulson alluded to last week. Meanwhile, the China slowdown showed up in Singles’ Day data, though there are signs that the economy might have some better days ahead.

To Hike and to Hold

Asian central bankers were on the front lines this week, Indonesia and the Philippines – among the region’s most aggressive interest-rate hikers this year – taking more policy action to shore up their currencies and tamp down inflation, while Thailand held. Chatter about a potential interest-rate cut in China has gotten a little louder amid the building economic growth risks. And Japan reached an unenviable mark as the central bank’s trove of assets overtook the size of the economy. Meanwhile in Mexico, the central bank also raised its key rate, saying President-elect Andres Manuel Lopez Obrador’s decision to cancel a $13 billion airport and broader policy uncertainty with the new administration have worsened the inflation outlook by weakening the peso. From Singapore’s third annual FinTech Festival, IMF Managing Director Christine Lagarde nudged central banks to consider issuing digital currencies, but the European Central Bank still thinks they are “evil spawn.” And in the U.S., new San Francisco Fed boss Mary Daly said she sees a potential December hike and two moves in 2019 and Fed Chairman Jerome Powell warned the economy could face headwinds next year.

It was a breath-stopping week for European Union tensions as negotiators reached a provisional deal for British withdrawal from the bloc, only for a wave of U.K. government resignations to undermine Prime Minister Theresa May’s proposals. The EU revealed its contingency plans to save markets in case of a no-deal Brexit. Italian officials are holding firm on their controversial budget – presenting a red-hot dilemma for the bloc – and taking swipes at the euro. As if that weren’t enough, economic growth is stalling in the euro area, and here are fresh reasons to worry that robots are coming for you, Eastern Europe.

Global Slowdown Looks More Likely in Trade Turmoil: Economy This Week, Bloomberg, Nov 16
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