United States:
U.S.-China Trade Talks Falling Short on Make-Or-Break IP Issues
Ever since negotiators from the U.S. and China sat down in Beijing after a Christmas meltdown in global markets, President Donald Trump has sought to calm investors and claim his trade talks are making great strides. But that glosses over a more uncomfortable reality. According to people close to the discussions, the two sides have so far made little progress on the issue any deal Trump strikes with China may ultimately be judged on: ending what the U.S. has dubbed as decades of state-coordinated Chinese theft of American intellectual property. China’s alleged IP theft and its related practice of forcing foreign companies to hand over technology to gain access to its market formed a large part of the agenda for the three days of early-January talks. Yet the discussions amounted more to an airing of grievances than constructive negotiations, according to participants and others briefed on the talks. That stands in contrast to movement on other fronts that has lifted stocks in recent sessions, including a Bloomberg report on Friday that China offered a path to reducing its trade surplus to zero by 2024. European stocks and U.S. equity futures dipped Monday, while Asian markets posted modest gains. The next round of talks is scheduled for Jan. 30-31, when Chinese leader Xi Jinping’s top economic emissary Liu He will visit Washington.
Europe:
Italy’s Growth Outlook Is Cut by IMF in Warning to Government
The International Monetary Fund revised down its forecast for Italy’s economic growth this year, warning that any new tensions over public finances may hurt the nation’s output, borrowing costs and banking system. The fund’s new estimate for 2019 matches revised projections that the Bank of Italy published in its quarterly economic bulletin on Friday. Deputy Premier Luigi Di Maio of the populist Five Star Movement criticized the central bank over the weekend, saying it “is often wrong” and questioning the timing of its report. The euro region’s third-biggest economy is seen growing 0.6 percent in 2019, down from an October estimate of 1 percent, the IMF said Monday in an update to its World Economic Outlook. The gross domestic product is forecast to rise 0.9 percent in 2020, unchanged from the prior projection, the Washington-based fund said. The export-reliant country’s slowdown is part of a broader weakening in the euro region, with powerhouse Germany’s economic prospects also revised down. Italy’s projected 2019 growth is the lowest among the nations listed individually in the IMF overview of its latest projections. Italy is also singled out for the risks related to its public debt, which at more than 130 percent of output is the euro region’s second-biggest ratio after Greece. “Italian spreads have narrowed from their October–November peaks but remain high. A protracted period of elevated yields would put further stress on Italian banks, weigh on economic activity, and worsen debt dynamics.” The Italian government last year clashed with the European Union over its budget targets that were eventually revised in a last-minute deal. The tense talks with the EU’s executive arm prompted an increase in the nation’s borrowing costs, which had a limited impact on the loan rates for families and businesses.
Asia:
China’s Softer Slowdown Is No Respite for Global Growth Worries
China isn’t set to come to the rescue of a weakening world economy even amid signs policy makers are successfully cushioning some of its slowdown. A wave of data released on Monday showed December gauges of consumption and factory output in the world’s second-largest economy accelerated and investment held up even as expansion in the fourth quarter dipped to 6.4 percent, the softest since 2009. The upshot of all the numbers is that while a slump may for now be avoided, the government’s preference for drip-feed stimulus means a rebound in growth is also unlikely too. That risks disappointing the investors and business leaders descending on Davos for the World Economic Forum’s annual meeting and who are already concerned by trade wars, the U.S. government shutdown and Brexit. “If China continues with its measured and piecemeal approach to stimulus, global growth will continue to lose momentum,” said Katrina Ell, an economist with Moody’s Analytics in Sydney. “The big unknown is how far China will go. Beijing’s preference has been to avoid repeating previous massive stimulus support, but they may be forced into more aggressive action if momentum continues to wane.” China’s economy, which contributes about a third of global growth, is on a long-term slowing trajectory as it shifts from the investment-led model of the past while carrying a heavy debt load. The government’s response with targeted stimulus measures is also being tested by the standoff with U.S. President Donald Trump over trade at a time when the global expansion is already looking shakier. Capital Economics estimates slower China expansion will shave about 0.2 percentage point off global growth this year, compared to 2018, while Citigroup Inc. warned in a Jan. 14 note that the China slowdown may “blow the global economy off course.”
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