Carmen Reinhart -- the World Bank’s incoming chief economist -- just declared that globalization is probably dead, and flaring trade tensions between the world’s two biggest economies is supporting that theory.
At the National People’s Congress, the pinnacle of its political calendar, China on Friday reiterated its commitment to implementing the phase-one trade deal signed with the U.S. The agreement, signed in January, compels it to buy goods in goals that seemed lofty even before the Covid-19 pandemic hit demand and battered supply chains.
Yet within hours, White House economic aide Kevin Hassett told CNN the U.S. is closely studying economic penalties for China related to the nation’s plan to enact sweeping national security legislation in Hong Kong.
That’s not all: President Donald Trump escalated his rhetoric against China over the pandemic, the Senate approved legislation that could lead to Chinese companies being barred from trading on U.S. stock exchanges, and a retirement-savings plan for federal workers deferred a plan to include Chinese stocks in its investments.
Beijing’s fight isn’t just with Washington: Last week, it slapped anti-dumping duties on Australian barley for five years and suspended meat imports from four processing plants in the nation after the government in Canberra called for an independent investigation into the origins of the coronavirus.
With China’s NPC continuing this week, and Trump never far away from a microphone, investors will be on the lookout for more comments to help decipher the situation.
What Bloomberg’s Economists Say...
“With the global economy in a historic slump, and growing fears of slide back into U.S.-China trade war, the echoes of the Great Depression are getting harder to ignore. A rapid bounce back from the lockdown recession already looks tough to achieve, add in fresh barriers to trade and capital flows, and it will get even harder.”
--Tom Orlik, chief economist
Elsewhere in the world economy, Federal Reserve Chairman Jerome Powell and European Central Bank President Christine Lagarde address the public, and South Korea and Kenya are predicted to cut interest rates.
Click here for what happened last week and below is our wrap of what’s coming up in the world economy.
U.S. and Canada
The weekly jobless claims report will indicate if U.S. workers are getting any relief from the pandemic, while other data will show the depth of damage to incomes and consumer spending in April. Revised figures will show whether the economy suffered a deeper hit in the first quarter than originally reported, and there will also be reports on consumer sentiment, housing and trade.
Investors will also be all ears for any insights on the economy from Fed Chairman Powell, who speaks in a virtual event Friday.
Bank of Canada Governor Stephen Poloz gives the final speech of his term on Monday, delivering the annual Hanson lecture via webinar.
Europe, Middle East and Africa
Britain’s finance minister, Rishi Sunak, is expected to spell out how he’ll taper his much-heralded job retention plan. It’s the toughest decision he’s had to make in his short -- yet eventful -- career. If he gets it wrong, he risks cratering businesses and triggering a wave of unemployment.
In the euro area, confidence figures may show sentiment is stabilizing after dramatic drops in April, but won’t shift the view that there’s a very uneven recovery ahead.
ECB speakers, including President Lagarde, will likely emphasize how getting the euro area out of the worst recession on record will require more action, especially from governments. That view will be backed up by inflation data, which is forecast to show a reading of just 0.1% for May.
Elsewhere in the region, the central banks of Israel, Hungary, Poland and Nigeria are predicted to keep rates unchanged, while Kenya may lower borrowing costs yet again.
Asia
On Tuesday, Singapore’s government is set to present a fourth set of stimulus measures to boost an economy that started the year with its worst performance since the global financial crisis and is expected to struggle even more this quarter. On Thursday, the Bank of Korea meets, with economists expecting a rate cut to 0.5%, according to an early tally of those surveyed.
Latin America
On Tuesday, Mexico’s statistics agency publishes its final reading on first-quarter output, confirming that the economy suffered its deepest contraction in over a decade. Later in the week, the central bank updates economic forecasts and scenarios in its quarterly inflation report, before posting the minutes from its May meeting where policy makers cut the key rate for the eighth time in 10 months.
On Friday in Brazil, first-quarter data should capture the onset of what economists expect to be the deepest recession in at least four decades. Reports from Brazil’s central bank during the week will likely show a sharp deterioration in both the current account and primary budget balance, giving investors added cause to sell their Brazilian assets and currency.
Central banks in Colombia, Guatemala and the Dominican Republic hold interest-rate decisions.
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