Overseas Headlines- March 8, 2019

United States:

Deal or No Deal, Trump’s Trade War With China Has Scarred the Global Economy

A deal between the U.S. and China to drop tariffs couldn’t come soon enough for a global economy already showing strains from the trade war. Economists predicted that eye-for-an-eye tariffs by the U.S. and China could eat into world growth, and there’s evidence that’s happening. Export orders in China slumped last month to the lowest level in a decade amid signs of a deepening factory downturn in the world’s second biggest economy. In the euro area, a key gauge of manufacturing activity has dropped to a level consistent with contraction. “A deal is going to be a huge sigh of relief,” said Ethan Harris, head of global economics research at Bank of America Merrill Lynch. “In the last year, you’ve had this general chipping away of global confidence, and the trade war is a big part of that. But there’s probably been some permanent damage here, so the recovery won’t be as substantial as the damage. The darkening economic picture raises the stakes for a push by the U.S. and China to end their eight-month trade war, or at least reach a lasting truce that avoids any further escalation. The two sides are closing the gap on issues such as Chinese purchases of U.S. goods, buoying hopes that President Donald Trump could hold a deal-clinching summit with his Chinese counterpart Xi Jinping as early as the middle of this month.



BOE’s Saunders Sees No Rush to Hike Rates as Brexit Fog Persists

The Bank of England doesn’t need to rush to raise interest rates until the uncertainty of Brexit lifts, according to policy maker Michael Saunders. In a speech in London Wednesday, Saunders, considered one of the most hawkish members of the Monetary Policy Committee, said that tame inflation and a slowdown in growth meant officials could adopt a wait-and-see approach as Brexit plays out. BOE officials voted unanimously last month to hold interest rates at 0.75 percent, but Saunders’s comments may damp some speculation that he’s a candidate to dissent against that view before the U.K.’s future is clearer. Still, Saunders indicated he’s not entirely in line with all his colleagues. He said that he was “genuinely unsure” on the path ahead for policy after a no-deal Brexit in contrast to his colleague Gertjan Vlieghe, who last month indicated he thought a rate cut would be more likely in such a scenario. Saunders said he was “more agnostic” about the correct response. Should the U.K. avoid a chaotic exit, economic growth is likely to strengthen again, meaning limited and gradual interest-rate increases will be needed to keep inflation in check, he said. A “gradual” rate of tightening doesn’t mean “fantastically slow,” he said in response to questions following the speech. “The possibility that monetary tightening might be needed in the future does not necessarily mean we need to tighten now,” Saunders said.



South Africa Sees Land-Law Change by End-2019 at ‘Very Least’

Changes to South Africa’s constitution to make it easier to expropriate land without compensation will only come into effect by the end of the year at the earliest, according to the lawmaker who is overseeing the amendment. Lawmakers in both chambers of parliament — the National Assembly and the National Council of Provinces — in December approved a committee report that recommends the change to section 25 of the constitution. They set up a separate, ad-hoc committee to come up with the bill needed to effect the amendment, and on Feb. 12 the new body elected the ruling African National Congress’s Thoko Didiza as its chairwoman. The National Assembly, which adjourns from March 22 until after the national election on May 8, will on March 19 debate whether her committee should continue its work until the day before the vote, or whether it should revive the process after the polls, Didiza said in an interview Friday in Cape Town. “No wording of the change to Section 25 has been agreed to because, depending what the NA decides, that task will be given to drafters and then we will have to go through a public participation process about that,” she said. The NCOP “will also have to go through a similar process to change the section. So, I don’t see the section being changed and coming into effect before the end of the year, at the very least.”


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