China growth mystery scares global economy in weakest shape in years

Bloomberg

The growing mystery of where China’s rapid slowdown is headed may become the biggest risk on the horizon, even as Brexit and a solution to US-China trade tensions are kicked into the long grass.
The global economy’s in its weakest shape since the financial crisis a decade ago, Bloomberg Economics analysis shows. And the reminders are all around: China got more affirming evidence of its big slowdown, with industrial output and retail sales softening and a jump in unemployment.
The question now is how big that slowdown will be, and what China’s stimulus — and the US-China negotiations — will do to put a floor under it. The Chinese premier pledged that they wouldn’t use quantitative easing or massive deficit spending to ease the pain.
Japan got more bad news on manufacturing sentiment and in hard investment data. Germany, Europe’s growth driver, can’t hide from the daunting external risks. And Turkey just entered its first recession in a decade. Still, here are a few reasons to believe things won’t be all bad.
Despite claims of progress in talks by both sides, a hoped-for summit between President Donald Trump and President Xi Jinping to sign an agreement to end their trade war will now take place at the end of April — if it happens at all. That comes after the Chinese central bank chief hailed movement on many “crucial” issues and Trump attempted to soothe Chinese concerns that he’d do to Xi what he did to Kim Jong Un. Meanwhile in Europe, uncertainty over how and when the UK will exit the European Union persists and no matter the path ahead, damage already has been done to the British economy.
Low inflation continues to befuddle central bankers the world over. Even as it gives relief to some emerging markets that rushed to tighten last year, it’s maddening Federal Reserve officials in its mystery and engendering mixed feelings among Indian policy makers ahead of the election there. The Fed chief offered some fresh relief for global peers in reiterating his understanding of the word “patience.” Bank of Japan held interest rates last week and downgraded their economic assessment, while observers are gloomy enough that they still see potential for stimulus as the Fed and ECB turn more dovish. The BOJ offers longer-term cautionary tales for other central banks as they eye the next downturn. Meanwhile, emerging-market stocks and currencies rebounded from two weeks of losses as US dollar weakness and China’s vow to keep supporting its economy overcame concern about the global growth outlook. Appetite for riskier assets also got a lift from China’s plans to cut the value-added tax and US Federal Reserve Chairman Jerome Powell’s comments that interest rates can remain on hold.
A meeting between President Donald Trump and President Xi Jinping to sign an agreement to end their trade war won’t take place this month and is more likely to happen in April at the earliest, three people familiar with the matter said.
People’s Bank of China Governor Yi Gang said the two sides have reached consensus on many crucial issues Trump’s top trade negotiator said the US must keep the option of raising tariffs on Chinese imports as a way to ensure Beijing lives up to a pact. China will cut the value-added tax effective from April 1 and address economic downward pressure with larger-scale tax and fee cuts this year, Premier Li Keqiang said at a briefing after the closing of the National People’s Congress.
Li also said the nation will rely on markets and use tools such as banks’ reserve requirement ratio Powell’s comments on rates came in the same week that a report showed that a key measure of underlying US inflation unexpectedly eased in February amid falling prices for autos and prescription drugs.
North Korea’s Kim Jong Un will soon decide whether to halt nuclear disarmament talks with the US, in the latest sign of fallout from his failed summit with President Donald Trump last month, the AP reported.