Set Five: G7 set for a breakdown of a society

Set Five: G7 set for a breakdown of a society

(Reuters) –

PHOTO FILE: French police stands near Grande Plage beach before the G7 summit in Biarritz, France, August 22, 2019. REUTERS / Sergio Perez


Has there been time in recent years when Western life was so divided? There does not appear to be an issue in relation to trade, climate change, exchange rates, government spending, Brexit, dealings with China, Iran and Russia – that each of the affluent groups agrees a nation G7. To date, their opinion is that the 24-26 Biarritz G7 summit is considered the first time since 1975 to the end without the ordinary society.

The president of the French president, Emmanuel Macron, put climate change at the center of the event. However, for most of the other subjects, President U. Donald Trump is an outlier. Locked in a trade war with China, it has promoted the idea of ​​import tariffs from the EU and elsewhere, and other members object to his proposal to re-adopt Russia to the G7.

Macron's new tax on high-tech firms also hampered Trump, which threatened French wine exports at risk.

Another issue for investors will be whether there has been any reference to fiscal stimulation, above all else in Germany, Chancellor Angela Merkel has done something.

Finally, it is the first on the world stage for British Prime Minister Boris Johnson who, after discouraging meetings with Merkel and Macron, could expect a more friendly exchange with Trump over Sunday breakfast. However, it remains to be seen how POTUS plays Johnson's own digital tax plan and agrees with other European leaders on the Russian issue.

(Graphic: Deforestation in Brazilian Amazon rain forest link png: here)

2 / SUMMER (BOND) goes t

Markets usually expect markets to be somewhat difficult during August dog days. However, in the case of bond traders there was no relief.

During this month the new records were declining global debt, with the market value of emerging negative debt worldwide up to $ 16 trillion. The whole summer is marked by a wide flight with quality, and a 3 month inflow of $ 155 billion was recorded in bond funds, according to American Bank Merrill Lynch.

The milestones for the month included the first Treasury bond yield conflict since 2007. This is not a reduction in the risk of recession; but markets have noted the fact that Federal Reserve policy makers and the last Fed meeting minutes show that many within the central bank of the United States are against a continuous cut cycle.

In the first instance, the total yield curves in the Netherlands, Germany and Sweden entered a negative territory for the first time. Germany auctioned its first 30-year negative band, while Denmark launched the world's first negative interest rate mortgage.

The sub-zero party has a potential challenge from the possibility that European governments could release their purse strings in final volumes to promote flailing economies. Even Germany may get its equitable budget policy and take more debts, Reuters reported. But markets are likely to be relatively easy now; The Minister for Finance, Olaf Scholz, has been considering a 50 billion euro package to be used during a crisis.

(Graphic: Government return on zero link: here)


The second reading of the US gross domestic product, to be carried out on Thursday, is highly hidden on data that is already clear – consumer spending, business investment and inventories. But one fresh data point will show how American profits flourished in the second quarter. After a strong growth in 2018 thanks to Trump's administrative tax cuts, profits year-on-year in C1 have increased since 2016. The June period should improve slightly but there will be nothing like last year.

A few sectors watch signs of fatigue – or lift – from Trump trade policies. Q1 profit growth of manufacturers slowed rapidly at the end of 2018, and we could well extend the settlement to R2. However, metal producers made up of Trump to help penal tariffs on steel and aluminum imports made the softer trend of 30% year-on-year profit growth, the strongest rate in almost seven years. Their Q2 numbers may provide some wishes again.

(Graphic: Tax fading talks? Link: here.jpg)


On 12 September, the European Central Bank manager, Mario Draghi will chair his penultimate policy meeting. For most of the eight years at Helm, euro area inflation has inflated targets and data on 30 August, consumer forecasts should show how far less than 2% of the ECB is on target. .

The data is likely to be seen as clarifying the need for more measures to start price growth. The data since the last ECB has met dissatisfied, and its meetings in July 25 reinforced that the bank is preparing to receive support.

The Reuters analysts estimate that core inflation data, extracting unprocessed food and energy, are examined by the ECB in policy decisions, which fell to 1.0% in August, which further exceeded 1.1%. July from 1.1%.

It is also considered that a narrower measure that does not include alcohol and tobacco prices is further reduced.

Such prudent soft inflation is likely to undergo debate due to the need to amend the ECB's inflation target, in favor of a more flexible target that would trigger greater motivation. The call data may also be renamed to require Germany to spend more.

(Graphic: Inflation link: here)


China's fixed fixed yuan has decreased by 2 percent within 2 weeks and is almost 7.1 per dollar, crisis in 2008 low. Having reduced nearly 3% from year to year it could further weaken it next week if Trump launches the euro slipping on EU export tariffs. What's more, the next batch of U.S tariffs – a 10% levy on many Chinese imports – will soon apply.

Short yuan trade looks like non-brain trading. From global growth and trade to the domestic economy and Chinese interest rate policy, everything on behalf of Yuan argues weaker. And while the Chinese authorities are not depreciating their currency to offset declining exports, state-controlled banks' operations only attempt to mitigate the decline rather than capture it.

The latest interest rate reforms aimed at lowering the economy's lending rates are in place, but the bank's main rate has only exceeded 6 basis points. The rates may fall longer in the coming weeks, but the feeling on the ground is that only if the FED gives deeper reductions in rates will happen.

(Graphic: yuan weakened Chinese connection: here.jpg)

Reporting at Sujata Rao, Ritvik Carvalho and Josephine Mason in London; Vidya Ranganathan in Singapore and Dan Burns in New York

Our Standards:The principles of Thomson Reuters Trust.


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