Behind Market Turmoil, Potentially Good News

Nonetheless, there are many ways things may not go according to plan: Growth may abruptly downshift as a tax-cut fueled “sugar high” recedes; tight labor markets and tariffs could push up inflation; or emerging market turmoil could spread.

In its semiannual outlook released this week, the International Monetary Fund said the U.S. economy is already operating above its normal capacity, and the fiscal boost coming from lower taxes and increased spending “could lead to an inflation surprise,” triggering rapid rate increases, global financial turmoil, and a stronger dollar, all bad for global growth.

11 Other Related Articles

Washington Post -
As stocks tumble, the U.S. wonders: Is this economy as good as it gets?

“It probably won’t be long before there is evidence of slowing economic data,” said Paul Ashworth, chief U.S. economist at Capital Economics.

President Trump’s trade war with China is starting to take a bite out of growth, energy prices are rising, the global economy is slowing and U.S. interest rates are going up. These forces mean Americans will be paying more to buy staples and facing higher borrowing costs to purchase a home or car or invest in a business.

The Guardian -
Trump 'disappointed' in Fed chair Jerome Powell as global stocks tumble

President Donald Trump has blamed an “out of control” Federal Reserve for sharp drops on global stock exchanges and said he was “disappointed” with the central bank’s chair, Jerome Powell.

Part of the recent rout in US stocks has been down to sharp falls in the so-called Faang companies – Facebook, Apple, Amazon, Netflix and Google. The tech giants’ share prices have soared in recent months – Apple and Amazon became the first two companies ever to be valued at more than $1tn.

The Guardian -
Why are stock markets falling and how far will they go?

A volatile week across global stock markets has escalated into a heavy sell-off, with European stock markets plunging to their lowest level in 20 months on Thursday.

Borrowing costs Italy have hit a five-year high and the Milan stock exchange has fallen sharply in recent weeks.

European stocks open sharply lower

European stocks were sharply down in early trade after concerns about a trade war and higher US bond yields stoked global investor concerns.

The Fed last month abandoned its description of its policy as "accomodative", reflecting a view that the economy is strong enough not to need the kind of stimulus it received in the after-math of the financial crisis. The prospect of dwindling US stimulus has been compounded by a trade war between the world's two largest economy - which the IMF has warned could harm growth.

Chinese man faces US aviation spy charges

In a speech last week, US Vice-President Mike Pence accused Beijing of directing "its bureaucrats and businesses to obtain American intellectual property - the foundation of our economic leadership - by any means necessary".

Prosecutors allege that from 2013 Mr Xu targeted leading aviation companies as well as industry experts to obtain "highly sensitive" technical information. They say he invited employees to travel to China for an "exchange of ideas" or under the guise of delivering university presentations.

The Guardian -
World stock markets dive as Trump attacks 'crazy' US rate hikes

Shares in the Asia-Pacific region dropped sharply on Thursday following a big sell-off on Wall Street overnight as Donald Trump condemned “crazy” US interest rate hikes.

Trump has boasted about the rise of US stock markets to record highs under his presidency and played down Wednesday’s sell-off, describing it as a long-awaited “correction”. “Actually it’s a correction that we’ve been waiting for a long time, but I really disagree with what the Fed is doing,” Trump told reporters before a political rally in Pennsylvania.

The Guardian -
Senior Chinese official charged with stealing US trade secrets

A spy for the Chinese ministry of state security has been arrested and indicted on charges of economic espionage and attempting to steal trade secrets from several US aviation and aerospace companies, according to the justice department.

“This indictment alleges that a Chinese intelligence officer sought to steal trade secrets and other sensitive information from an American company that leads the way in aerospace,” said John Demers, the assistant US attorney general for national security.

US trade war would make world 'poorer'

The International Monetary Fund has warned a trade war between the US and China risks making the world a "poorer and more dangerous place" in its latest assessment of the global economy.

However, Chancellor Philip Hammond is still expected to borrow around £16bn in 2023 to plug the gap between tax revenues and public spending.

The Guardian -
Trump's trade war with China and Europe will hit global growth – IMF

Donald Trump’s trade war with China and Europe is forecast to hit global growth this year and reverberate through 2019, the International Monetary Fund has warned in its latest health check on the global economy.

The escalation of the US president’s protectionist policies, which has resulted in the world’s largest economy doubling import duties on some Chinese goods, has dragged down the forecast for growth this year and next, with the world’s largest trading countries, including the US, France, Germany and China, among the hardest hit.

Washington Post -
Trump’s tariffs will harm growth in 2019, IMF predicts

The International Monetary Fund has cut its U.S. growth forecast for next year, warning that President Trump’s protectionist trade policies will harm growth domestically and around the world.

The IMF repeatedly singled out Trump’s trade actions as disruptive to global growth and prosperity, especially the imposition of tariffs on roughly half of the goods that the United States imports from China.

The Guardian -
China pumps $109bn into economy as trade war bites on growth

As higher US interest rates and fears of a trade war piles pressure on economies around the world, China’s central bank said on Sunday that it was cutting the reserve requirement ratios (RRRs) by 1% from 15 October to lower financing costs and spur growth in the world’s second-biggest economy.

However, it will raise fears that Beijing – under pressure from the higher dollar and tariffs – is again delaying plans to reduce huge debt in the Chinese economy in favour of a short-term fix to stabilise growth.

“Four hostile newspapers are more to be feared than a thousand bayonets...” ― Napoléon Bonaparte