Global economy weekahead - Nice start to the year. Pity about the rest of it | Reuters

By Jeremy Gaunt | LONDON LONDON The world economy has begun the year in fine form.

Reuters February 05, 2017 21:48:25 IST
Global economy weekahead - Nice start to the year. Pity about the rest of it
| Reuters

Global economy weekahead  Nice start to the year Pity about the rest of it

By Jeremy Gaunt

LONDON The world economy has begun the year in fine form. America is cruising along, China is growing faster than expected, Britain is muffling the Brexit downdraft. Even the usually lagging euro zone is perky.Pity about what lies ahead.Almost every major economy's data releases these days seem to follow a similar pattern.First, they are generally positive - either better than previously or only a little weaker. Then, policymakers and economists come out and say there are too many uncertainties ahead to know whether it will continue or crumble."Geopolitical risks are mounting and increasingly catching market attention in such fashion as to risk overshadowing most other developments," Canada's Scotiabank told its clients.The risks are primarily political. How will U.S. President Donald Trump's "America First" protectionist talk translate into policy? Will Brexit finally come back to bite Britain by cutting off commercial growth and breeding inflation.For the euro zone, meanwhile, the risks are existential. Elections in France, Italy, Germany and the Netherlands could result in anti-euro political parties gaining significant ground or even taking office. And Greece's hold on its place in the currency union remains flimsy.In the past week the extra money investors demand to buy French bonds rather than German ones jumped - much of it because of a comment to Reuters by an official of the far-right National Front that it would put leaving the euro at the heart of its economic platform.Polls suggest National Front candidate Marine Le Pen will not win the presidency - but after the Trump and Brexit surprises last year nothing can be ruled out.

Other risks are more Keynesian, revolving around whether years of stimulus from central banks in the form of asset-buying and negligible interest rates are finally producing inflation, which in turn will stop consumers from buying, slowing economic growth.Economics can be very much a game of whack-a-mole.UP NEXT
The coming week may well be dominated by China, which returns from a holiday with a large slate of data, including the services purchasing managers index, foreign reserves data and possibly trade figures.

China grew a faster-than-expected 6.8 percent in the fourth quarter, boosted by higher government spending and record bank lending.But the economy still faces headwinds from a cooling housing market and possible protectionist measures from the United States.The foreign exchange reserves, meanwhile, are on the verge of falling below $3 trillion, although the pace of declines could be slowed by capital controls and the dollar's retreat.China is being cautious. It raised a number of policy rates on Friday against what Deutsche Bank described as a dilemma.

"Policy needs to be tightened for financial stability considerations, but (the central bank) wants to control the pace and magnitude so that ... the tightening does not trigger disruptive adjustments (bubble burst), and ... does not jeopardise the stabilising growth outlook," it said. In the euro zone, there will be German, French, Spanish and Italian industrial production data. All are expected to show growth.Germany's volatile factory orders may be under particular scrutiny. They fell 2.5 percent month-on-month in November, a plunge from a 5 percent rise the month before.Economists polled by Reuters expect a bounce back.Meanwhile, a wish-you-were-a-fly-on-the wall moment occurs on Thursday when European Central Bank President Mario Draghi goes to Berlin for talks on the euro zone economy with German Chancellor Angela Merkel.For the United States, the weekly outlook is thin, with monthly trade figures a highlight with a little changed $45 billion deficit expected.Any significant policy moves, however, are likely to be found on Twitter feed @realDonaldTrump. (Additional reporting by Kevin Yao in Beijing; Editing by Robin Pomeroy)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:


also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.