Wednesday , April 21 2021

This weekend may be the last chance to overcome the global decline

Dr. Bakar is particularly associated with world trade and global growth and the status of the three largest economic regions in the world – the United States, China and Europe.

Reducing oil prices may give an even clearer signal, given that OPEC and its allies reduced production by 1.2 million barrels a day last year, while tightening America's sanctions on Iran and turmoil in Venezuela took over even more production out of the market.

Nevertheless, domestic oil inventories in the United States have grown, and instead of cutting production cuts at their meeting later this month, OPEC may need to consider raising them to avoid petroleum suppression that will reduce prices further.

Increase forecasts

This week, the World Bank has downgraded global growth forecasts of 2.9% to 2.6% and predicted a slowdown in global trade growth from 3.6% to 2.6%. Meanwhile, Christine Lagarde of the International Monetary Fund said on Wednesday that tariffs for goods imposed by the United States and China will reduce 0.5 percent of global growth next year.

International Monetary Fund Director Christine Lagarde says tariffs will hurt growth in 2020.

International Monetary Fund Director Christine Lagarde says tariffs will hurt growth in 2020.Credit:AP

And these projections do not include the impact of endangered US tariffs on another $ 300 billion ($ 430 billion) of Chinese exports to the United States, nor its tariffs, from Monday, to a similar amount of Mexico if Mexico does not leak immigrants at the border with the United States.

That is the global outlook that caused the reserve bank to reduce the cash rate, which is already on a historic unprecedented level, by 25 basis points this week.

It is also why the inversion of part of the bond yield curve in the United States – investors who earn less interest on long-term bonds than short-term – signal a significant slowdown in the United States.

The rate of three-month government bonds of 2.34 percent is higher by 21 basis points of 2.13 percent yield on ten-year bonds – investors invest long-term securities and force short-term bond prices to decline and their yields (there is an inverse relationship between both).


Unpleasant things ahead

Conventionally, investors would expect to get a higher return on the risks and uncertainties of holding a 10-year bond, so the unusual shape of the yield curve and the spread of the spread between quarterly and ten-year bonds is an indicator that investors believe that something is getting uncomfortable.

Markets are now pricing in nearly three 25-fold rate cuts by the US Federal Reserve this year, as it became clear that the world's biggest economy is weakening.

The number of jobless jobs this week – the US economy has created only 27,000 new jobs, pending 173,000 – is the weakest growth in employment in nearly a decade.

Production data in the US are also the lowest in a decade. This week, the latest US Index of Product Production Managers was released, which fell to 50.5 percent in May, the lowest since September 2009. China is publishing similar weak figures for the manufacturing sector, while Europe is declining.

Wonderful tariffs?

Donald Trump tweets about the success of his economic governance – "perhaps the best ever " – It's obvious that the commercial wars he took to "make America" ​​and his "beautiful" tariffs now caring for global and American growth.

Donald Trump's "Wonderful" tariffs now complain about global and American growth.Credit:AP

With the impact of its tax cuts of $ 1.5 billion and a $ 1.3 billion hybrid of sugar, discretionary spending has declined, the US economy could experience Peak Trump. If so, the economic wounds of trade wars would have been self-inflicted.

The worsening data for the US and global economies could suggest that a meeting of G20 finance ministers in Japan (our Josh Friedenberg) this weekend could be the last opportunity to prevent a global slowdown in the level of recession.

The Japanese summit will give US Treasury Secretary Steve Munachin a meeting with the Governor of the National Bank of China, Yi Gang, and maybe reopen trade talks that collapsed dramatically amid allegations by both sides last month – or at least to prepare the basis for another round of talks.

It could be the last chance to avoid another round of US tariffs for China, and even more so in the gas pipeline for Europe, and perhaps Japan, which would ruin global trade and growth, while innocent passers-bys, such as Australia, fought badly in the process.

Stephen is one of the most respected business journalists in Australia. He was recently co-founder and co-editor of the Business Spam and Associate Editor and senior columnist of The Australian.

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