October 9, 2019
U.S. Loses Top Spot to Singapore in Competitiveness Rankings
“The U.S. dropped from the top spot in the World Economic Forum’s annual competitiveness report, losing out to Singapore. Hong Kong, the Netherlands and Switzerland made up the rest of the top five, according to the WEF survey published on Wednesday. On the U.S., it noted growing uncertainty among business leaders and said trade openness has declined. The forum focused its report on continued low productivity growth a decade after the financial crisis, calling this the $10 trillion question — the amount injected by the world’s four major central banks through 2017. In line with others, its view is that while monetary stimulus helped pull the global economy out of recession, it wasn’t the solution for all problems. With a new slowdown emerging, the WEF said fiscal policy has been underused. It joined the chorus calling for more government support, particularly in investment to boost productivity. The WEF also said central banks must take some blame for weak productivity, as their trillions of stimulus keep zombie firms alive, sometimes crowding out stronger businesses. Given monetary policy resources are so depleted, it said investment-led stimulus would be an “appropriate action to restart growth in stagnating advanced economies.” While the U.S. drops down to second in the survey of 141 countries, the WEF said it remains an “innovation powerhouse,” ranking first in business dynamism and second on innovation capability. Also in the top 10 were Japan, Germany, Sweden, the U.K. and Denmark. Canada and France were ranked 14th and 15th respectively, while China was in 28th place.”
BOE Warns U.K. May Face Economic Turmoil in No-Deal Brexit
“The Bank of England warned of significant market volatility and “material risks” of economic disruption in the event of a no-deal Brexit at the end of this month. The BOE’s Financial Policy Committee, in its last scheduled meeting before the current deadline of Oct. 31, said the financial system is prepared for the fallout of Britain abruptly leaving the European Union. Still, asset prices could fall sharply and financial conditions could deteriorate. “Financial stability is not the same as market stability,” the committee said. “Significant further asset price volatility is to be expected in a disorderly Brexit.” The BOE said the EU should do more to contain remaining risks to financial markets, including to 17 trillion pounds ($20 trillion) of non-cleared swaps maturing after October, and that these risks could “amplify volatility or spill back to the U.K.” Prime Minister Boris Johnson has promised the U.K. will leave the EU with or without a deal by the end of the month — triggering the biggest upheaval in the country’s trading arrangements in a generation. A British official said on Tuesday that a deal was effectively impossible because of disagreements between the EU and U.K. about the status of Northern Ireland. While the BOE has said planning for a no-deal scenario has helped to limit the potential damage to the economy, the central bank’s worst-case scenario still sees a dramatic 5.5% drop in GDP. BOE Governor Mark Carney says the goal is to prevent problems in the financial plumbing so that the sector doesn’t make things worse for the broader economy.”
China Open to Small Trade Deal If Trump Eases Tariff Threats
“China is still open to reaching a partial trade deal with the U.S., an official with direct knowledge of the talks said, signaling that Beijing is focused on limiting the damage to the world’s second-largest economy. Negotiators heading to Washington for talks starting Thursday aren’t optimistic about securing a broad agreement that would end the trade war between the two nations, said the official, who asked not to be named as the discussions are private. But China would accept a limited deal — like those it has sought since 2017 — as long as no more tariffs are imposed by President Donald Trump, including two rounds of higher duties set to take effect this month and in December, the official said. In return, Beijing would offer non-core concessions like purchases of agricultural products without giving in on major sticking points, the official said, without offering further details. In the past, China offered government purchases of American commodities and other short-term gestures aimed at appeasing Trump, only to be rebuffed and pushed with tariffs into pursuing a broader agreement. Heading into these talks, it’s unclear whether the the U.S. president is under enough domestic pressure with a weakening economy and an impeachment probe to settle for an incremental win this time around. S&P 500 futures rose 0.8% on the news and the offshore yuan extended gains. Separately, the Financial Times reported that China is offering to increase purchases of American soybeans to 30 million tons annually from 20 million presently, citing people briefed on the talks. That would be around the level China was purchasing before the trade war started.”
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