U.S.-China Speed Dating Isn’t Enough to Tame Global Headwinds

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Markets are struggling to decipher exactly what might have been promised in U.S.-China trade talks this week, while the U.S. government enters its third week of shutdown and sour global growth evidence piles up. Happy New Year, indeed.

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

Growing Pains

Germany stole this week’s undesirable growth-scare spotlight, with slumping factory orders and industrial output spreading recession-risk fear. Sentiment across the euro area already is on its worst losing streak in a decade. The World Bank piled on with a slashing of its 2019 world growth outlook, and Wall Street is seeing tumbling yields.

In China, auto sales dropped for the first time in more than 20 years and factory deflation is looming as policy makers keep propping things up. Watch these gauges to track a bottom for the world’s No. 2 economy. The shine of a stellar December jobs report is fading in the U.S. as a services gauge fell to a five-month low, and Samsung’s sad earnings are clouding South Korea’s outlook. Cheer up, Asia: We’re counting on you to carry the growth torch to 2030.

Read More:

  • U.K. Productivity Puzzle Continues With Smallest Rise Since 2016
  • Yen May Hit 100 in Months Ahead as BOJ Watches, Ex-Official Says
  • Macron Seeks to Drag France Into Era of Affirmative Action

Trade Spats and Chats

It’s a draw this week in the trade war. Three days of U.S.-China meetings started with a surprise cameo by a top Chinese aide, and have raised hopes of concrete progress, though markets are at risk of over-hyping if the diplo-speak on both sides proves empty. President Donald Trump is said to be clamoring for a deal to cushion the wayward stock market, and China so far has released a vague read on the talks as being “extensive, in-depth and detailed.” As the picture becomes clearer, here are seven key issues to watch.

Each side seeks sort of lasting detente as the economies are in need of soft landings. Chinese consumers might be indirectly boycotting Apple products. And the White House is simultaneously pushing a hard line on its tariff powers.

Read More:

  • As Clock Ticks to More Trump Tariffs, Data Shows Grim Outlook
  • Trump Tariffs Soften Fiscal Hit From Corporate Tax Cut, CBO Says
  • U.S. Deploys New Tactics in Prosecution of Chinese Chipmaker

Central Bankers Change Grip

Federal Reserve December meeting minutes revealed an even more dovish slant, leading some to blame Jerome Powell for sounding a bit too trigger-happy at the last press conference. Trump’s still complaining about interest-rate hikes, and his next pick for the board just withdrew from the process. The Bank of Canada also preached patience, holding its policy stance amid cheaper oil and as higher borrowing costs take their toll. Israel stood pat, and Brazil cut its rate outlook on sluggish inflation. Europe bucked the theme, with one central banker taking a balanced view on growth and the prospect for a hike later in 2019.

Read More:

  • A Decade of Negative Rates? Denmark May Be the First to Try It
  • CHINA REACT: PBOC Sets Policy Tone With First RRR Cut of Year
  • Fed May Get Less Bang for the Buck If It Repeats 2016 Rate Pause

Weekend Reading

  • If Economic Expansions Don’t Die of Old Age, What Kills Them?
  • A New Urban Divide and Other Gems From the Big Economics Shindig
  • AUSTRALIA INSIGHT: Avoid Recession – Lessons From Lucky Country
  • Economists Turn to Shutdown-Proof Reports as U.S. Data Delayed
  • Trump Claims Credit for Booming Job Market That Fed Let Run Hot
  • World Bank President Search to Test Trump’s America First Mantra
  • Brexit’s Key Question: Where in the World Does Britain Stand?
  • Criminal Probes Haunt Central Bankers From Black Sea to Baltics
  • Policy Stability Seen as Key African Central Bankers’ Terms End
  • Draghi Will Be Passing on Baton With ECB in Populist Crosshairs
  • Carney Squeezes in Extra BOE Forecasts in Tweak to 2020 Calendar

Chart of the Week

Britain Is Great for Expats Despite Brexit Changes, HSBC Says

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