An isolated <a href="https://www.wionews.com/world/russias-vladimir-putin-voices-cautious-optimism-on-ukraine-in-meeting-with-french-president-emmanuel-macron-244252">President Donald Trump arrived Saturday for the G7 summit </a>in Biarritz bearing threats of tariffs against host France and a decision to deepen his trade war with China, despite fears of the US or even global recession.

Trump dislikes the kind of multilateral forums epitomized by the G7, insisting on a policy of "America first" and his skills, honed in a real estate career, of one-to-one deal-making.

Ahead of the summit in the elegant French seaside resort, he has criticized most of his partners, rowing with them over Iran, trade, global warming and Brexit.

And on the eve of his trip, he brushed aside concerns of<a href="https://www.wionews.com/business-economy/gold-hits-over-the-six-year-peak-on-risk-off-sentiment-242745"> global economic slowdown </a>to exchange new tariffs with China, insisting "we'll win."

In another piece of brinkmanship, he also confirmed right before departing on the Marine One helicopter that he would retaliate against France's iconic wine exports if President Emmanuel Macron didn't retreat on a new tax that will hit US digital giants like Google.

"We'll be taxing their wine as they've never seen before," he vowed.

The other G7 leaders from&nbsp;Britain, Canada, France, Germany, Italy and Japan, are waiting for Trump with a mixture of alarm and resignation.

Macron has even decided that for the first time the G7 won't issue a group statement at the end of the summit, given the extent of divisions.&nbsp;

At last year's meeting in Canada, Trump withdrew his signature in fury at Canadian Prime Minister Justin Trudeau.&nbsp;

It would be "pointless," Macron said.

Is the World economy at stake?&nbsp;

Other G7 leaders are already alarmed at the fallout from the escalating US-China trade war.

But Trump, bullish as ever, steeply ramped up tariffs against China on Friday after Beijing slapped its new tariffs against US products.

Trump says he alone can take on the Chinese after decades of intellectual property theft and a slate of other unfair trading practices.

He called the struggle "a little spat."

At the G7 he is expected to seek allies, but the other leaders are deeply sceptical about whether Trump's crusade can ever succeed or&nbsp;whether it will tip a slowing world economy over the edge.

The first working event of the G7 will be a session early Sunday that the White House specifically asked at the "last minute" to be added to the agenda: a meeting of the leaders on economic growth.

Trump will tell his partners "to write&nbsp;the rules for this century, in contrast to the unfair trade practices that we see coming out of China," a senior administration official told reporters.

Trump will also urge the Europeans, Canada and Japan to shake up their economies along US lines.

"You’ll have the president engaging in honest conversations," the official said.

Cozy no more

Despite the diplomatic storm clouds gathering over Biarritz, on the Atlantic coast, Trump said the trip "will be very productive."

But there are questions over the future of the G7 as Trump's nationalist approach turns it into something more like a 6+1.

G7s always used to be cozy affairs, giving the leaders of like-minded, capitalist democracies a chance to relax and talk frankly in the context of largely shared values.

However, there is increasingly little common ground between Trump and what would ordinarily be among the closest of US allies.

Yet another diplomatic&nbsp;hand grenade went off days before the trip, when Trump reiterated his desire to recreate the <a href="https://www.wionews.com/world/macron-seeks-ukraine-progress-from-putin-in-rare-pre-g7-talks-243465">G8 format with Russia</a>, expelled in 2014 after Vladimir Putin's invasion of Crimea.

Other G7 leaders have rebuffed this, but Trump, who will host the G7 next year, is unlikely to give up easily.

Another point of contention is Brexit, the chaotic decision by Britain to quit the European Union.

British Prime Minister Boris Johnson has staked much on striking a bilateral trade deal with the United States as a key step in his country's new go-it-alone strategy.

While Johnson finds it tough going with Merkel and Macron, he's likely to encounter a much warmer Trump, who says the EU has "not treated the UK very well."

An isolated President Donald Trump arrived Saturday for the G7 summit in Biarritz bearing threats of tariffs against host France and a decision to deepen his trade war with China, despite fears of the US or even global recession.

An isolated President Donald Trump arrived Saturday for the G7 summit in Biarritz bearing threats of tariffs against host France and a decision to deepen his trade war with China, despite fears of the US or even global recession. Trump dislikes the kind of multilateral forums epitomized by the G7, insisting on a policy of "America first" and his skills, honed in a real estate career, of one-to-one deal-making. Ahead of the summit in the elegant French seaside resort, he has criticized most of his partners, rowing with them over Iran, trade, global warming and Brexit. And on the eve of his trip, he brushed aside concerns of global economic slowdown to exchange new tariffs with China, insisting "we'll win." In another piece of brinkmanship, he also confirmed right before departing on the Marine One helicopter that he would retaliate against France's iconic wine exports if President Emmanuel Macron didn't retreat on a new tax that will hit US digital giants like Google. "We'll be taxing their wine as they've never seen before," he vowed. The other G7 leaders from Britain, Canada, France, Germany, Italy and Japan, are waiting for Trump with a mixture of alarm and resignation. Macron has even decided that for the first time the G7 won't issue a group statement at the end of the summit, given the extent of divisions. At last year's meeting in Canada, Trump withdrew his signature in fury at Canadian Prime Minister Justin Trudeau. It would be "pointless," Macron said. Is the World economy at stake? Other G7 leaders are already alarmed at the fallout from the escalating US-China trade war. But Trump, bullish as ever, steeply ramped up tariffs against China on Friday after Beijing slapped its new tariffs against US products. Trump says he alone can take on the Chinese after decades of intellectual property theft and a slate of other unfair trading practices. He called the struggle "a little spat." At the G7 he is expected to seek allies, but the other leaders are deeply sceptical about whether Trump's crusade can ever succeed or whether it will tip a slowing world economy over the edge. The first working event of the G7 will be a session early Sunday that the White House specifically asked at the "last minute" to be added to the agenda: a meeting of the leaders on economic growth. Trump will tell his partners "to write the rules for this century, in contrast to the unfair trade practices that we see coming out of China," a senior administration official told reporters. Trump will also urge the Europeans, Canada and Japan to shake up their economies along US lines. "You’ll have the president engaging in honest conversations," the official said. Cozy no more Despite the diplomatic storm clouds gathering over Biarritz, on the Atlantic coast, Trump said the trip "will be very productive." But there are questions over the future of the G7 as Trump's nationalist approach turns it into something more like a 6+1. G7s always used to be cozy affairs, giving the leaders of like-minded, capitalist democracies a chance to relax and talk frankly in the context of largely shared values. However, there is increasingly little common ground between Trump and what would ordinarily be among the closest of US allies. Yet another diplomatic hand grenade went off days before the trip, when Trump reiterated his desire to recreate the G8 format with Russia, expelled in 2014 after Vladimir Putin's invasion of Crimea. Other G7 leaders have rebuffed this, but Trump, who will host the G7 next year, is unlikely to give up easily. Another point of contention is Brexit, the chaotic decision by Britain to quit the European Union. British Prime Minister Boris Johnson has staked much on striking a bilateral trade deal with the United States as a key step in his country's new go-it-alone strategy. While Johnson finds it tough going with Merkel and Macron, he's likely to encounter a much warmer Trump, who says the EU has "not treated the UK very well."

Isolated Donald Trump descends on G-7, talking trade war

The world's top financial policymakers admitted Sunday that <a href="https://www.wionews.com/world/in-historic-first-g20-weighs-ageing-as-global-risk-225592">trade tensions had worsened</a>, posing a risk for the global economy, after a G20 meeting that laid bare differences between the United States and other nations.

Following 30 hours of wrangling in what one official described as a "tense" atmosphere, the G20 finance minister and central bank chiefs produced a final statement acknowledging that "growth remains low and risks remain tilted to the downside".

"Most importantly, trade and geopolitical tensions have intensified," <a href="https://www.wionews.com/world/trade-war-tariff-threats-to-challenge-g20-finance-leaders-solidarity-225361">the G20</a> said, adding they "stood ready to take further action" if required.

As a compromise pushed by Washington, the statement omitted language from a previous draft that mentioned a "pressing need to resolve trade tensions".

The statement capped two days of talks in the western Japanese city of Fukuoka that also tackled the thorny issue of taxing internet giants and, for the first time, the economic challenges posed by ageing.

But trade battles were front and centre of policymakers' minds as the US and China continue to threaten each other with tariffs that economists fear could slam the brakes on global growth.

The IMF has said US-China tariffs could shave global GDP by 0.5 per cent in 2020 or about US$455 billion, stressing the need to resolve the differences to avoid plunging the world economy into another crisis.

IMF chief Christine Lagarde said that trade conflicts pose the "principal threat" to the global economic outlook.

Tariffs imposed by the world's top two economies could make a "significant dent" in the global recovery, added Lagarde.

The G20 ministers heaved a sigh of relief just hours before the meeting when the US and Mexico clinched a deal over immigration that stopped Washington imposing five-per cent tariffs on Mexican goods.

But US Treasury Secretary Steven Mnuchin told reporters that Washington stood ready to impose more tariffs on China if President Donald Trump and China's Xi Jinping fail to strike a deal at the G20 summit later this month in Osaka.

"If China wants to come back to the table and negotiate on the basis that we were negotiating, we can get a great historic deal. If they don't, we'll proceed with our tariffs," Mnuchin told reporters on Saturday.

He tweeted on Sunday he had had a "constructive" meeting with China's central bank governor Yi Gang, during which there was a "candid discussion on trade issues".

Taking a different line from the other policymakers, Mnuchin said the slowdown in some parts of the world was not due to trade difficulties and even said the friction could benefit some countries if companies relocated from China to avoid tariffs. "There will be winners and losers," said the treasury secretary.

&nbsp;'I don't like them'&nbsp;

The quandary of reforming the global tax system to take into account the rise of internet giants such as Google and Facebook was another issue exercising the minds of policymakers in the coastal city.

In the final statement, the G20 agreed to "redouble our efforts for a consensus-based solution with a final report by 2020".

However, here again, the Fukuoka meeting exposed a difference of opinion over what form this reform should take.

Frustrated by a lack of global action on the issue, some countries such as Britain and France have already introduced a so-called digital tax, but Mnuchin was blunt in his assessment of these policies.

"I would say the US has significant concerns with the two current taxes that are being proposed by France and the UK but let me give them some good credit for proposing them in the sense (that) they have created an urgency to deal with this issue," Mnuchin said at a public meeting before the formal G20 started.

"Although I don't like them, I do appreciate the impetus for these issues," added the top US finance official.

Appropriately for a meeting held in Japan -- which is on track to become the world's first "super-aged" society in which more than 28 per cent of the population is over 65 -- the G20 ministers discussed for the first time the "challenges and opportunities" posed by ageing.

They suggested getting more women and elderly people into the workforce and "promoting elderly-friendly industries", as well as reforming the fiscal and banking systems to take into account ageing populations.

"You basically have a very large portion of mankind that is ageing and then the workforce is shrinking," OECD Secretary-General Angel Gurria told AFP in an interview.

Solving the issue will require wholesale changes to the way society is organised, added Gurria.&nbsp;

The world's top financial policymakers admitted Sunday that trade tensions had worsened, posing a risk for the global economy, after a G20 meeting that laid bare differences between the United States and other nations.

The world's top financial policymakers admitted Sunday that trade tensions had worsened, posing a risk for the global economy, after a G20 meeting that laid bare differences between the United States and other nations. Following 30 hours of wrangling in what one official described as a "tense" atmosphere, the G20 finance minister and central bank chiefs produced a final statement acknowledging that "growth remains low and risks remain tilted to the downside". "Most importantly, trade and geopolitical tensions have intensified," the G20 said, adding they "stood ready to take further action" if required. As a compromise pushed by Washington, the statement omitted language from a previous draft that mentioned a "pressing need to resolve trade tensions". The statement capped two days of talks in the western Japanese city of Fukuoka that also tackled the thorny issue of taxing internet giants and, for the first time, the economic challenges posed by ageing. But trade battles were front and centre of policymakers' minds as the US and China continue to threaten each other with tariffs that economists fear could slam the brakes on global growth. The IMF has said US-China tariffs could shave global GDP by 0.5 per cent in 2020 or about US$455 billion, stressing the need to resolve the differences to avoid plunging the world economy into another crisis. IMF chief Christine Lagarde said that trade conflicts pose the "principal threat" to the global economic outlook. Tariffs imposed by the world's top two economies could make a "significant dent" in the global recovery, added Lagarde. The G20 ministers heaved a sigh of relief just hours before the meeting when the US and Mexico clinched a deal over immigration that stopped Washington imposing five-per cent tariffs on Mexican goods. But US Treasury Secretary Steven Mnuchin told reporters that Washington stood ready to impose more tariffs on China if President Donald Trump and China's Xi Jinping fail to strike a deal at the G20 summit later this month in Osaka. "If China wants to come back to the table and negotiate on the basis that we were negotiating, we can get a great historic deal. If they don't, we'll proceed with our tariffs," Mnuchin told reporters on Saturday. He tweeted on Sunday he had had a "constructive" meeting with China's central bank governor Yi Gang, during which there was a "candid discussion on trade issues". Taking a different line from the other policymakers, Mnuchin said the slowdown in some parts of the world was not due to trade difficulties and even said the friction could benefit some countries if companies relocated from China to avoid tariffs. "There will be winners and losers," said the treasury secretary. 'I don't like them' The quandary of reforming the global tax system to take into account the rise of internet giants such as Google and Facebook was another issue exercising the minds of policymakers in the coastal city. In the final statement, the G20 agreed to "redouble our efforts for a consensus-based solution with a final report by 2020". However, here again, the Fukuoka meeting exposed a difference of opinion over what form this reform should take. Frustrated by a lack of global action on the issue, some countries such as Britain and France have already introduced a so-called digital tax, but Mnuchin was blunt in his assessment of these policies. "I would say the US has significant concerns with the two current taxes that are being proposed by France and the UK but let me give them some good credit for proposing them in the sense (that) they have created an urgency to deal with this issue," Mnuchin said at a public meeting before the formal G20 started. "Although I don't like them, I do appreciate the impetus for these issues," added the top US finance official. Appropriately for a meeting held in Japan -- which is on track to become the world's first "super-aged" society in which more than 28 per cent of the population is over 65 -- the G20 ministers discussed for the first time the "challenges and opportunities" posed by ageing. They suggested getting more women and elderly people into the workforce and "promoting elderly-friendly industries", as well as reforming the fiscal and banking systems to take into account ageing populations. "You basically have a very large portion of mankind that is ageing and then the workforce is shrinking," OECD Secretary-General Angel Gurria told AFP in an interview. Solving the issue will require wholesale changes to the way society is organised, added Gurria.

G20 says worsening trade wars pose risk to world economy

The head of the International Monetary Fund said Tuesday that <a href="https://www.wionews.com/world/chinas-top-trade-negotiator-to-visit-us-despite-tariffs-216689">fresh trade tensions between the United States and China</a> were the main threat to the world economy.

"Clearly the tensions between the United States and China are the threat for the world economy," Christine Lagarde told journalists at a conference in Paris, adding that recent "rumours and tweets" made an agreement between the countries less likely.&nbsp;

President Donald Trump jolted global markets on Monday by threatening on Twitter that <a href="https://www.wionews.com/world/trump-announces-higher-us-tariffs-on-china-goods-216186">tariffs already imposed on $200 billion in Chinese exports</a> to US would more than double to 25 per cent on Friday from their current level of 10 per cent.

Also speaking at the Paris Forum event, French Economy Minister Bruno Le Maire warned about the impact of a trade war between the world's two biggest economies.

<div class="videoWrapper trancodeVideo"><iframe allowfullscreen="" autoplay="1" class="includeVideo" frameborder="0" height="350" src="https://www.wionews.com/videos/gravitas-fresh-tariffs-on-china-trump-spooks-global-markets-with-a-few-tweets-216519/embed" style="width:100%;max-width:560px;" width="560"></iframe></div>

"We are looking very carefully at the current negotiations between China and the US. We want these negotiations to stick with principles of transparency and multilateralism," he said, speaking in English.

He called on the two sides to "avoid decisions that would threaten and jeopardise world growth in the coming months."

"Raising tariffs is always a deadlock and a negative decision for everybody -- for the US, for China, for the eurozone, for Europe and for growth all over the world," he said.

Le Maire cautioned that during a period of slowdown in world growth there should not be "negative decisions that could accelerate that slowdown."

China said Tuesday its top trade negotiator will visit the United States for talks with his American counterparts this week.

The countries have been locked in talks to resolve tensions that have seen both of them impose tariffs on goods worth $360 billion.

Treasury Secretary Steven Mnuchin has described the negotiations as 90 per cent complete but told reporters that in recent days the talks went "substantially backwards", which he blamed on China reneging on previous commitments.

The head of the International Monetary Fund said Tuesday that fresh trade tensions between the United States and China were the main threat to the world economy.

The head of the International Monetary Fund said Tuesday that fresh trade tensions between the United States and China were the main threat to the world economy. "Clearly the tensions between the United States and China are the threat for the world economy," Christine Lagarde told journalists at a conference in Paris, adding that recent "rumours and tweets" made an agreement between the countries less likely. President Donald Trump jolted global markets on Monday by threatening on Twitter that tariffs already imposed on $200 billion in Chinese exports to US would more than double to 25 per cent on Friday from their current level of 10 per cent. Also speaking at the Paris Forum event, French Economy Minister Bruno Le Maire warned about the impact of a trade war between the world's two biggest economies. "We are looking very carefully at the current negotiations between China and the US. We want these negotiations to stick with principles of transparency and multilateralism," he said, speaking in English. He called on the two sides to "avoid decisions that would threaten and jeopardise world growth in the coming months." "Raising tariffs is always a deadlock and a negative decision for everybody -- for the US, for China, for the eurozone, for Europe and for growth all over the world," he said. Le Maire cautioned that during a period of slowdown in world growth there should not be "negative decisions that could accelerate that slowdown." China said Tuesday its top trade negotiator will visit the United States for talks with his American counterparts this week. The countries have been locked in talks to resolve tensions that have seen both of them impose tariffs on goods worth $360 billion. Treasury Secretary Steven Mnuchin has described the negotiations as 90 per cent complete but told reporters that in recent days the talks went "substantially backwards", which he blamed on China reneging on previous commitments.

IMF chief Christine Lagarde says US-China tensions 'threat' to world economy

Global growth in 2019 should be even slower than previously expected but a "precarious" rebound later this year is likely, the head of the International Monetary Fund said Tuesday.

In a speech ahead of next week's spring meetings in Washington with the World Bank, IMF chief Christine Lagarde said the world economy was vulnerable to shocks from Brexit, high debt levels and trade tensions, as well as unease on financial markets.

"The expected rebound in global growth this year is precarious," she said in an address at the US Chamber of Commerce. "This is a delicate moment that requires us to handle with care."

Lagarde said the IMF next week was due to cut its global growth forecasts even further than it had in January, with more than two-thirds of the world economy likely to see slowing growth.

Next week's meetings -- a twice-yearly conclave of central bankers and finance ministers -- come with the backdrop of fraught negotiations between Beijing and Washington to resolve their eight-month trade war.

Gloom about slowing growth in Asia, Europe and the United States, as well as the protected US-China trade war, have sparked periodic jitters on markets since last year.

At the start of the year, the fund had already lowered its expectations several notches from a prior outlook, calling for global GDP to expand by 3.5 per cent this year and next.

Elsewhere on Tuesday, the World Trade Organization announced in Geneva it was slashing its 2019 forecast for growth in global trade to 2.6 per cent, down from the 3.7 per cent predicted earlier.

"We had this synchronized acceleration of growth a couple of years ago. Now it's synchronized deceleration," Lagarde said following her speech. "I don't want to be overly dramatic, because we don't see a recession."

A 'monopoly problem'?&nbsp;

But Lagarde pointed to some grounds for optimism, saying major central banks, including the US Federal Reserve, were showing patience about the speed of interest rate increases, while China had moved to stimulate its economy.

She called on member governments to help avert mounting dangers by modernizing tax systems, cutting public debts and reducing wealth inequalities through spending on education, health and infrastructure, recommendations the IMF has made before.

Lagarde repeated warnings about imposing tariffs, saying such barriers to trade were "potentially self-inflicted wounds" that threatened to dent economic growth and leave no winners.

But Lagarde also said governments should address the dangers posed by the concentration of market power in the hands of corporate giants, especially in the tech sector, with major players often able to block out competition and garner the lion's share of profits for themselves.

While IMF research showed this concentration had so far had little effect on business investment, production and worker pay, according to Lagarde, there was still a danger that it could weigh on all of them.

"I am not saying that we currently have a monopoly problem," she said. "But I am saying that we should take appropriate measures so that it does not become a problem."

Speaking to CNBC later, Lagarde also said new IMF research showed that an all-out trade war between the United States and China -- with 25 per cent duties on all traded merchandise -- could shave up to 1.6 per cent off of annual growth in China and 0.6 per cent off US GDP growth.

While there were signs of progress in talks between the United States and China, a deal should be "signed, sealed and delivered" before it can restore certainty to global trade, she added.

Global growth in 2019 should be even slower than previously expected but a "precarious" rebound later this year is likely, the head of the International Monetary Fund said Tuesday.

Global growth in 2019 should be even slower than previously expected but a "precarious" rebound later this year is likely, the head of the International Monetary Fund said Tuesday. In a speech ahead of next week's spring meetings in Washington with the World Bank, IMF chief Christine Lagarde said the world economy was vulnerable to shocks from Brexit, high debt levels and trade tensions, as well as unease on financial markets. "The expected rebound in global growth this year is precarious," she said in an address at the US Chamber of Commerce. "This is a delicate moment that requires us to handle with care." Lagarde said the IMF next week was due to cut its global growth forecasts even further than it had in January, with more than two-thirds of the world economy likely to see slowing growth. Next week's meetings -- a twice-yearly conclave of central bankers and finance ministers -- come with the backdrop of fraught negotiations between Beijing and Washington to resolve their eight-month trade war. Gloom about slowing growth in Asia, Europe and the United States, as well as the protected US-China trade war, have sparked periodic jitters on markets since last year. At the start of the year, the fund had already lowered its expectations several notches from a prior outlook, calling for global GDP to expand by 3.5 per cent this year and next. Elsewhere on Tuesday, the World Trade Organization announced in Geneva it was slashing its 2019 forecast for growth in global trade to 2.6 per cent, down from the 3.7 per cent predicted earlier. "We had this synchronized acceleration of growth a couple of years ago. Now it's synchronized deceleration," Lagarde said following her speech. "I don't want to be overly dramatic, because we don't see a recession." A 'monopoly problem'? But Lagarde pointed to some grounds for optimism, saying major central banks, including the US Federal Reserve, were showing patience about the speed of interest rate increases, while China had moved to stimulate its economy. She called on member governments to help avert mounting dangers by modernizing tax systems, cutting public debts and reducing wealth inequalities through spending on education, health and infrastructure, recommendations the IMF has made before. Lagarde repeated warnings about imposing tariffs, saying such barriers to trade were "potentially self-inflicted wounds" that threatened to dent economic growth and leave no winners. But Lagarde also said governments should address the dangers posed by the concentration of market power in the hands of corporate giants, especially in the tech sector, with major players often able to block out competition and garner the lion's share of profits for themselves. While IMF research showed this concentration had so far had little effect on business investment, production and worker pay, according to Lagarde, there was still a danger that it could weigh on all of them. "I am not saying that we currently have a monopoly problem," she said. "But I am saying that we should take appropriate measures so that it does not become a problem." Speaking to CNBC later, Lagarde also said new IMF research showed that an all-out trade war between the United States and China -- with 25 per cent duties on all traded merchandise -- could shave up to 1.6 per cent off of annual growth in China and 0.6 per cent off US GDP growth. While there were signs of progress in talks between the United States and China, a deal should be "signed, sealed and delivered" before it can restore certainty to global trade, she added.

'Precarious' global rebound expected in late 2019: IMF chief

Part of the US Treasury yield curve "inverted" this week, setting off debate over whether it is delivering a classic signal of oncoming recession or it has just developed a short-term kink that can be explained away by technical reasons.

Whatever the reason, investors and economists ignore this message from the bond market at their peril: yield curve inversions - when shorter-dated securities yield more than longer maturities - have preceded every US recession in recent memory by anywhere from 15 months to around two years.

"The yield curve has sent a chill down investors' spines in regard to the future outlook of the US economy," said Chad Morganlander, senior portfolio manager at Washington Crossing Advisors in New Jersey. "It's the what-if scenario."

To be sure, this week's inversion has been limited so far to the front-end of the yield curve rather than more closely studied recession harbingers such as the gap between 2-year and 10-year note yields. In the current instance, yields on five-year notes have dropped below those on both two-year and three-year securities.

Still, in December 2005, for instance, a comparable inversion at the front of the curve was followed shortly afterward by an inversion between 2- and 10-year yields. The Great Recession began in December 2007.

That pattern was also evident in late 1988 in advance of the 1990 recession. Ahead of the 2001 recession, the entire curve dropped into inversion in sync in February 2000.

TECHNICAL GLITCH OR FUNDAMENTAL WARNING?

In the current instance, investors and economists are debating whether this warns of economic weakness ahead or if it reflects other factors, such as a recent reversal of large speculative bets on declining bond prices and the Federal Reserve's large holdings of Treasuries.

A central focus is whether it means the market is second guessing the Fed, which has been raising interest rates for three years and is expected to lift them further, including at their next meeting in two weeks.

Jeffrey Gundlach, chief executive officer of DoubleLine Capital and a closely watched bond investor, comes down on the side of it being a fundamental signal. It reflects "total bond market disbelief in the Federal Reserve's prior plans to raise rates through 2019," he told Reuters.

At the same time, this week's move does coincide with an ongoing positioning shift in the Treasury market.

Hedge funds and other speculators had amassed a record level of bets on declines in Treasury prices through the futures market, with the heaviest bets lodged against 5-year maturities. But they have slashed those by more than half in the last few weeks, and that may have contributed to the out-sized rally in 5-year note prices in particular. Bond prices and yields move in opposite directions.

"A lot of it is momentum," said John Canavan, market strategist with Stone &amp; McCarthy Research Associates in New York. "I do think it's overdone with short-covering and unwinding of money-losing positions."

Another current factor that was absent in previous inversion episodes is the Fed's $3.92 trillion stockpile of bonds accumulated to soften the effects of the 2008 financial crisis. While it has been shrinking its holdings for more than a year, its bond portfolio remains the world's largest and is seen as a force in suppressing longer-dated yields.

RECORD ECONOMIC EXPANSION

Those potential explanations aside, the US economy is in the middle of its second-longest expansion on record, and economists and investors are mindful that a downturn is inevitable.

Some business sectors like auto and housing are flagging due partly to rising interest rates, while debt-laden companies have raised concerns whether they could keep up with their debt payments as borrowing costs are rising.

Fed officials have cited these developments that bear watching, but several of them have repeatedly cautioned about the inversion of yield curve as the most reliable indicator that a recession is on the horizon.

Some traders said the dramatic curve flattening may be overdone and may revert if the government's November payrolls report out on Friday were to show solid jobs and wage growth.

While the risk of the entire yield curve inverting grows in anticipation of slower domestic growth, the economy appears on sure footing due to a solid job market and mild inflation.

Last year's massive federal tax cut has bolstered business confidence, but trade tension between Washington and major US trade partners looms as a possible economic drag, analysts said.

And, even if the latest kink in the yield curve is indeed the first signal of a downturn as many suspect, it does not indicate when it will actually begin nor how severe it will be.

"It’s a sloppy predictor because at some point after yield curve inversion you could get a recession that could be one year, two year, three years," said Nicholas Colas, co-founder at DataTrek Research in New York. "And as far as what it means to markets, you could still have another very solid year after inversion."

Part of the US Treasury yield curve "inverted" this week, setting off debate over whether it is delivering a classic signal of oncoming recession or it has just developed a short-term kink that can be explained away by technical reasons.

Part of the US Treasury yield curve "inverted" this week, setting off debate over whether it is delivering a classic signal of oncoming recession or it has just developed a short-term kink that can be explained away by technical reasons. Whatever the reason, investors and economists ignore this message from the bond market at their peril: yield curve inversions - when shorter-dated securities yield more than longer maturities - have preceded every US recession in recent memory by anywhere from 15 months to around two years. "The yield curve has sent a chill down investors' spines in regard to the future outlook of the US economy," said Chad Morganlander, senior portfolio manager at Washington Crossing Advisors in New Jersey. "It's the what-if scenario." To be sure, this week's inversion has been limited so far to the front-end of the yield curve rather than more closely studied recession harbingers such as the gap between 2-year and 10-year note yields. In the current instance, yields on five-year notes have dropped below those on both two-year and three-year securities. Still, in December 2005, for instance, a comparable inversion at the front of the curve was followed shortly afterward by an inversion between 2- and 10-year yields. The Great Recession began in December 2007. That pattern was also evident in late 1988 in advance of the 1990 recession. Ahead of the 2001 recession, the entire curve dropped into inversion in sync in February 2000. TECHNICAL GLITCH OR FUNDAMENTAL WARNING? In the current instance, investors and economists are debating whether this warns of economic weakness ahead or if it reflects other factors, such as a recent reversal of large speculative bets on declining bond prices and the Federal Reserve's large holdings of Treasuries. A central focus is whether it means the market is second guessing the Fed, which has been raising interest rates for three years and is expected to lift them further, including at their next meeting in two weeks. Jeffrey Gundlach, chief executive officer of DoubleLine Capital and a closely watched bond investor, comes down on the side of it being a fundamental signal. It reflects "total bond market disbelief in the Federal Reserve's prior plans to raise rates through 2019," he told Reuters. At the same time, this week's move does coincide with an ongoing positioning shift in the Treasury market. Hedge funds and other speculators had amassed a record level of bets on declines in Treasury prices through the futures market, with the heaviest bets lodged against 5-year maturities. But they have slashed those by more than half in the last few weeks, and that may have contributed to the out-sized rally in 5-year note prices in particular. Bond prices and yields move in opposite directions. "A lot of it is momentum," said John Canavan, market strategist with Stone & McCarthy Research Associates in New York. "I do think it's overdone with short-covering and unwinding of money-losing positions." Another current factor that was absent in previous inversion episodes is the Fed's $3.92 trillion stockpile of bonds accumulated to soften the effects of the 2008 financial crisis. While it has been shrinking its holdings for more than a year, its bond portfolio remains the world's largest and is seen as a force in suppressing longer-dated yields. RECORD ECONOMIC EXPANSION Those potential explanations aside, the US economy is in the middle of its second-longest expansion on record, and economists and investors are mindful that a downturn is inevitable. Some business sectors like auto and housing are flagging due partly to rising interest rates, while debt-laden companies have raised concerns whether they could keep up with their debt payments as borrowing costs are rising. Fed officials have cited these developments that bear watching, but several of them have repeatedly cautioned about the inversion of yield curve as the most reliable indicator that a recession is on the horizon. Some traders said the dramatic curve flattening may be overdone and may revert if the government's November payrolls report out on Friday were to show solid jobs and wage growth. While the risk of the entire yield curve inverting grows in anticipation of slower domestic growth, the economy appears on sure footing due to a solid job market and mild inflation. Last year's massive federal tax cut has bolstered business confidence, but trade tension between Washington and major US trade partners looms as a possible economic drag, analysts said. And, even if the latest kink in the yield curve is indeed the first signal of a downturn as many suspect, it does not indicate when it will actually begin nor how severe it will be. "It’s a sloppy predictor because at some point after yield curve inversion you could get a recession that could be one year, two year, three years," said Nicholas Colas, co-founder at DataTrek Research in New York. "And as far as what it means to markets, you could still have another very solid year after inversion."

Is recession setting in? Analysing the inverted US yield curve

India&#39;s second tryst with destiny starts from the midnight of June 30th when Asia&#39;s third largest economy rolls out her most ambitious tax reform. Prime Minister Narendra Modi and Finance Minister Arun Jaitley have collectively staked the reputation of the world&#39;s fastest growing major economy as a haven for reform when they unveil the Goods and Services Tax &nbsp;(GST) regime from Saturday, July 1st.

What prompts this economy measured at $2.4 trillion and growing at 7 per cent a year to revamp its British-era tax structure? Why would 1.25 billion people suddenly decide they need a new tax code? Why would 28 different state governments, some of them diametrically opposed to the Bharatiya Janata Party at the Centre, agree to be a part of a symphony that plays a common tune?&nbsp;

Some of these questions are complex and may take many months to answer but the road map for this pioneering tax rejig points to forging an economic union, a single national tax market, common tax laws and a common tax base for the country.

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<h5>A population exceeding the combined citizenry of the United States, the European Union, Japan, Russia and Brazil will ring in the new tax structure from the Central Hall of Parliament on the stroke of midnight on June 30th.</h5>
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There is no other comparable project this size anywhere in the world. A population exceeding the combined citizenry of the United States, the European Union, Japan, Russia and Brazil will ring in the new tax structure from the Central Hall of Parliament on the stroke of midnight on June 30th.&nbsp;

As the world sleeps, India will walk into to a new dawn. This event will be addressed by Prime Minister Modi and overseen by President Pranab Mukherjee, who steered the GST Bill as the finance minister during the previous UPA government.

India is young. Her 70-odd years as an independent nation has seen a potentially great economy being held back by a multitude of taxes and dozens of hierarchies, often pulling in different directions. But it has taken this economy, liberalised in 1991, a little over a quarter of a century to become the world&#39;s 3rd largest on purchasing power parity. Today&#39;s industrialist counts global companies as his rivals apart from homegrown peers. And there is a new breed of Indian entrepreneurs raring to take on the world on their terms. They need enabling tax laws that help take on global corporations on their turf.

Hopefully, the GST, even with all its so-called ills, will deliver a world class regime that will catalyse fresh growth in India against a slowing global economic order.

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<h5>Collection and payment of taxes will be at a single point, therefore, easier.</h5>
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So, what does the GST do?

To begin with, this fully online indirect tax replaces 12 central and state level taxes. This single, common tax will help the economic supply chain breathe easy. This chain will be fattened up and yet be flexible as taxes paid on input costs and raw materials will be claimed back. This will lead to lower costs and, consequently, better prices for the end consumer. Goods will move faster now as trucks will not be stopped at any entry points of states. Collection and payment of taxes will be at a single point, therefore, easier. Large, if not all, parts of the informal economy will move into the formal order. And finally, India&#39;s tax regime will be comparable to those in advanced economies.

Sure, there are quibbles. But there always have been naysayers who want to remain outside the ambit of the formal tax structure.

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<h5>&quot;There are too many returns to file and everything is computerised!&quot;,&nbsp;some moan.</h5>
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`We are not ready,&#39; say lakhs of traders, small businessmen, companies and even large corporations. `Delay it by another quarter,&#39; they shout from industry pulpits. &quot;There are too many returns to file and everything is computerised!&quot;,&nbsp;some moan. The last ones are particularly hilarious because you would think honest tax payers would welcome online payment of tax minus the hassles!

There will be nitpickers who will find fault at everything that any government does to improve the overall life of citizens. We must ignore such voices that clamour for the old order to continue. The next two quarters will be defining moments of India&#39;s upward trajectory as a world economic power. Sure, growth may slowdown further. Companies might take a while longer to adjust to online filing of returns. Lofty stock prices may take a small tumble. And the economy may wobble just a bit more. These things happen in the life of a young nation.

Use this opportunity to ride on to the finest economy the world has at this moment. You should be buying any dips in the market. This gravy train will get thicker and fatter as time passes.

No one has won betting against the Indian economy in the longer run. No one.

So make no mistake: the GST is here to stay.

&nbsp;

GST will deliver a world class regime that will catalyse fresh growth in India against a slowing global economic order

India's second tryst with destiny starts from the midnight of June 30th when Asia's third largest economy rolls out her most ambitious tax reform. Prime Minister Narendra Modi and Finance Minister Arun Jaitley have collectively staked the reputation of the world's fastest growing major economy as a haven for reform when they unveil the Goods and Services Tax (GST) regime from Saturday, July 1st. What prompts this economy measured at $2.4 trillion and growing at 7 per cent a year to revamp its British-era tax structure? Why would 1.25 billion people suddenly decide they need a new tax code? Why would 28 different state governments, some of them diametrically opposed to the Bharatiya Janata Party at the Centre, agree to be a part of a symphony that plays a common tune? Some of these questions are complex and may take many months to answer but the road map for this pioneering tax rejig points to forging an economic union, a single national tax market, common tax laws and a common tax base for the country. A population exceeding the combined citizenry of the United States, the European Union, Japan, Russia and Brazil will ring in the new tax structure from the Central Hall of Parliament on the stroke of midnight on June 30th. × There is no other comparable project this size anywhere in the world. A population exceeding the combined citizenry of the United States, the European Union, Japan, Russia and Brazil will ring in the new tax structure from the Central Hall of Parliament on the stroke of midnight on June 30th. As the world sleeps, India will walk into to a new dawn. This event will be addressed by Prime Minister Modi and overseen by President Pranab Mukherjee, who steered the GST Bill as the finance minister during the previous UPA government. India is young. Her 70-odd years as an independent nation has seen a potentially great economy being held back by a multitude of taxes and dozens of hierarchies, often pulling in different directions. But it has taken this economy, liberalised in 1991, a little over a quarter of a century to become the world's 3rd largest on purchasing power parity. Today's industrialist counts global companies as his rivals apart from homegrown peers. And there is a new breed of Indian entrepreneurs raring to take on the world on their terms. They need enabling tax laws that help take on global corporations on their turf. Hopefully, the GST, even with all its so-called ills, will deliver a world class regime that will catalyse fresh growth in India against a slowing global economic order. Collection and payment of taxes will be at a single point, therefore, easier. × So, what does the GST do? To begin with, this fully online indirect tax replaces 12 central and state level taxes. This single, common tax will help the economic supply chain breathe easy. This chain will be fattened up and yet be flexible as taxes paid on input costs and raw materials will be claimed back. This will lead to lower costs and, consequently, better prices for the end consumer. Goods will move faster now as trucks will not be stopped at any entry points of states. Collection and payment of taxes will be at a single point, therefore, easier. Large, if not all, parts of the informal economy will move into the formal order. And finally, India's tax regime will be comparable to those in advanced economies. Sure, there are quibbles. But there always have been naysayers who want to remain outside the ambit of the formal tax structure. "There are too many returns to file and everything is computerised!", some moan. × `We are not ready,' say lakhs of traders, small businessmen, companies and even large corporations. `Delay it by another quarter,' they shout from industry pulpits. "There are too many returns to file and everything is computerised!", some moan. The last ones are particularly hilarious because you would think honest tax payers would welcome online payment of tax minus the hassles! There will be nitpickers who will find fault at everything that any government does to improve the overall life of citizens. We must ignore such voices that clamour for the old order to continue. The next two quarters will be defining moments of India's upward trajectory as a world economic power. Sure, growth may slowdown further. Companies might take a while longer to adjust to online filing of returns. Lofty stock prices may take a small tumble. And the economy may wobble just a bit more. These things happen in the life of a young nation. Use this opportunity to ride on to the finest economy the world has at this moment. You should be buying any dips in the market. This gravy train will get thicker and fatter as time passes. No one has won betting against the Indian economy in the longer run. No one. So make no mistake: the GST is here to stay.

GST: India's push into a higher economic orbit.

Britain&#39;s shock decision to leave the European Union will not be as damaging to developing Asian&nbsp;economies as feared, the World Bank said on Wednesday as it increased its growth forecast for the region this year.&nbsp;Countries in the Mekong region led by Myanmar are projected to expand at the fastest pace in the next three years, the bank said in an updated report on East Asia and the Pacific, though Thailand was projected to be a laggard.

World Bank chief Asia economist Sudhir Shetty said the upgrade for the regional economy came after the group noticed positive early results from the June 23 vote by Britain to leave the EU.&nbsp;&quot;That has translated also into relative stability in terms of exchange rates and in terms of capital flows, so that has been helpful for this region,&quot; he told Asia-based journalists in a video conference from Washington.

Global markets went into freefall immediately after the vote as dealers feared a recession in Britain that could hit the global economy. But since then, world markets have rallied and Britain&#39;s economy is picking up.&nbsp;Shetty said based on the bank&#39;s initial analysis &quot;the bottom line right now is that there&#39;s likely to be very little impact of Brexit&quot; over the short term, as the region is &quot;not very connected&quot; to Britain in terms of trade and financial links.

The region&#39;s developing economies will grow 5.8 per cent this year, the Washington-based institution said, up 0.1 percentage point from its forecast made in April. It also tipped 5.7 per cent growth in 2017 and 2018.

The bank, however, warned a hike in US interest rates, widely expected in December, and a potential sharp slowdown in China could impact its forecast.

Myanmar, which has embraced democracy following decades of military rule, will grow 7.8 per cent this year, 8.4 per cent in 2017 and 8.3 per cent in 2018.&nbsp;Once isolated Myanmar has rapidly transformed itself into one of the world&#39;s fastest growing economies since its once brutal junta handed power to a reformist government in 2010, sparking the lifting of most international sanctions and a flood of foreign investment.

The impoverished nation has boasted average growth rates above eight per cent the past five years.&nbsp;However, while the World Bank report noted stronger-than-expected growth in Thailand during the first half of 2016 it added that &quot;a broad-based and self-sustaining recovery has yet to take hold.&quot; It projected 3.1 per cent expansion for 2016, up from 2.8 per cent last year.

Thailand&#39;s economy has struggled with years of political instability since the military seised power in 2014.

(AFP)

Countries in the Mekong region led by Myanmar are projected to expand at the fastest pace in the next three years, the bank said

Britain's shock decision to leave the European Union will not be as damaging to developing Asian economies as feared, the World Bank said on Wednesday as it increased its growth forecast for the region this year. Countries in the Mekong region led by Myanmar are projected to expand at the fastest pace in the next three years, the bank said in an updated report on East Asia and the Pacific, though Thailand was projected to be a laggard. World Bank chief Asia economist Sudhir Shetty said the upgrade for the regional economy came after the group noticed positive early results from the June 23 vote by Britain to leave the EU. "That has translated also into relative stability in terms of exchange rates and in terms of capital flows, so that has been helpful for this region," he told Asia-based journalists in a video conference from Washington. Global markets went into freefall immediately after the vote as dealers feared a recession in Britain that could hit the global economy. But since then, world markets have rallied and Britain's economy is picking up. Shetty said based on the bank's initial analysis "the bottom line right now is that there's likely to be very little impact of Brexit" over the short term, as the region is "not very connected" to Britain in terms of trade and financial links. The region's developing economies will grow 5.8 per cent this year, the Washington-based institution said, up 0.1 percentage point from its forecast made in April. It also tipped 5.7 per cent growth in 2017 and 2018. The bank, however, warned a hike in US interest rates, widely expected in December, and a potential sharp slowdown in China could impact its forecast. Myanmar, which has embraced democracy following decades of military rule, will grow 7.8 per cent this year, 8.4 per cent in 2017 and 8.3 per cent in 2018. Once isolated Myanmar has rapidly transformed itself into one of the world's fastest growing economies since its once brutal junta handed power to a reformist government in 2010, sparking the lifting of most international sanctions and a flood of foreign investment. The impoverished nation has boasted average growth rates above eight per cent the past five years. However, while the World Bank report noted stronger-than-expected growth in Thailand during the first half of 2016 it added that "a broad-based and self-sustaining recovery has yet to take hold." It projected 3.1 per cent expansion for 2016, up from 2.8 per cent last year. Thailand's economy has struggled with years of political instability since the military seised power in 2014. (AFP)

World Bank predicts Brexit won't impact developing Asian economies as feared

Central bankers, in charge of the vast bulk of the world&#39;s economy,&nbsp;delved deep into the weeds of money markets and interest rates over a three-day conference here, and emerged with a common plea to their colleagues in the rest of government: please help. 
 
Mired in a world of low growth, low inflation and low-interest rates, officials from the Federal Reserve, Bank of Japan and the European Central Bank said their efforts to bolster the economy through monetary policy may falter unless elected leaders stepped forward with bold measures. 
 
These would range from immigration reform in Japan to structural changes to boost productivity and growth in the US and Europe. 
 
Without that, they said, it would be hard to convince markets and households that things will get better, and encourage the shift in mood many economists feel are needed to improve economic performance worldwide. 
 
During a Saturday session at the symposium, such a slump in expectations about inflation and about other aspects of the economy was cited as a central problem complicating central banks&#39; efforts to reach inflation targets and dimming prospects in Japan and Europe.&nbsp; 
 
ECB executive board member Benoit Coeure said the bank was working hard to prevent public expectations about inflation from becoming entrenched &quot;on either side&quot; - neither too high nor too low. But the slow pace of economic reform among European governments, he said, was damaging the effort. 
 
&quot;What we have seen since 2007 is half-baked and half-hearted structural reforms. That does not help supporting inflation expectations. That has helped entertain disinflationary expectations,&rdquo; Coeure said. 
 
Bank of Japan governor Haruhiko Kuroda said he is in regular talks with Japanese Prime Minister Shinzo Abe about opening Japan to more immigration and other politically sensitive changes needed to improve potential growth, currently estimated at only around one percent annually.&nbsp; 
 
Fed Chair Janet Yellen devoted the final page of her keynote talk on possible monetary policy reforms to a list of fiscal and structural policies she feels would help the economy. 
 
Fiscal policy was not on the formal agenda for the conference, but it was a steady part of the dialogue as policymakers thought through policies for a post-crisis world. One of the central worries is that households and businesses have become so cautious and set in their outlooks - expecting little growth and little inflation - that they do not respond in expected ways to the efforts central banks have made. 
 
That has included flooding the financial system with cash, and voicing a steady commitment to their inflation targets in an effort to make people believe they will be met. 
 
Kuroda acknowledged that household expectations have not moved, and said the BOJ was prepared to continue its battle to figure out how to shift them. In modern monetary theory, households and business expectations are felt to play a defining role in spending and investment decisions, and thus in shaping inflation and growth. 
 
&quot;Japanese inflation dynamics remain vulnerable,&quot; Kuroda said. &quot;It could be that long-term inflation expectations are yet to be anchored in Japan&quot; at the bank&#39;s 2 per cent target. 
 
The concern about expectations is a paradox. The Fed, for example, fought a difficult battle with inflation in the 1970s, hiking interest rates to recession-provoking levels and eventually winning a war of credibility over its ability to rein in price increases. 
 
Some central bankers remain fearful of clipping that cord. 
 
But they also are hunting for ways to jolt the economy out of its doldrums, and a fiscal push is a possible tool. 
 
In a lunch address by Princeton University economist Christopher Sims, policymakers were told that it may take a massive program, large enough even to shock taxpayers into a different, inflationary view of the future. 
 
&quot;Fiscal expansion can replace ineffective monetary policy at the zero lower bound,&quot; Sims said. &quot;It requires deficits aimed at, and conditioned on, generating inflation. The deficits must be seen as financed by future inflation, not future taxes or spending cuts.&quot; 
 
It was not clear whether such ideas will catch on. But there was a broad sense here that the other side of government may need to up its game. 
 
(Reuters)

Mired in world of low growth and inflation, officials said their efforts to boost economy may falter unless elected leaders stepped forward

Central bankers, in charge of the vast bulk of the world's economy, delved deep into the weeds of money markets and interest rates over a three-day conference here, and emerged with a common plea to their colleagues in the rest of government: please help. Mired in a world of low growth, low inflation and low-interest rates, officials from the Federal Reserve, Bank of Japan and the European Central Bank said their efforts to bolster the economy through monetary policy may falter unless elected leaders stepped forward with bold measures. These would range from immigration reform in Japan to structural changes to boost productivity and growth in the US and Europe. Without that, they said, it would be hard to convince markets and households that things will get better, and encourage the shift in mood many economists feel are needed to improve economic performance worldwide. During a Saturday session at the symposium, such a slump in expectations about inflation and about other aspects of the economy was cited as a central problem complicating central banks' efforts to reach inflation targets and dimming prospects in Japan and Europe. ECB executive board member Benoit Coeure said the bank was working hard to prevent public expectations about inflation from becoming entrenched "on either side" - neither too high nor too low. But the slow pace of economic reform among European governments, he said, was damaging the effort. "What we have seen since 2007 is half-baked and half-hearted structural reforms. That does not help supporting inflation expectations. That has helped entertain disinflationary expectations,” Coeure said. Bank of Japan governor Haruhiko Kuroda said he is in regular talks with Japanese Prime Minister Shinzo Abe about opening Japan to more immigration and other politically sensitive changes needed to improve potential growth, currently estimated at only around one percent annually. Fed Chair Janet Yellen devoted the final page of her keynote talk on possible monetary policy reforms to a list of fiscal and structural policies she feels would help the economy. Fiscal policy was not on the formal agenda for the conference, but it was a steady part of the dialogue as policymakers thought through policies for a post-crisis world. One of the central worries is that households and businesses have become so cautious and set in their outlooks - expecting little growth and little inflation - that they do not respond in expected ways to the efforts central banks have made. That has included flooding the financial system with cash, and voicing a steady commitment to their inflation targets in an effort to make people believe they will be met. Kuroda acknowledged that household expectations have not moved, and said the BOJ was prepared to continue its battle to figure out how to shift them. In modern monetary theory, households and business expectations are felt to play a defining role in spending and investment decisions, and thus in shaping inflation and growth. "Japanese inflation dynamics remain vulnerable," Kuroda said. "It could be that long-term inflation expectations are yet to be anchored in Japan" at the bank's 2 per cent target. The concern about expectations is a paradox. The Fed, for example, fought a difficult battle with inflation in the 1970s, hiking interest rates to recession-provoking levels and eventually winning a war of credibility over its ability to rein in price increases. Some central bankers remain fearful of clipping that cord. But they also are hunting for ways to jolt the economy out of its doldrums, and a fiscal push is a possible tool. In a lunch address by Princeton University economist Christopher Sims, policymakers were told that it may take a massive program, large enough even to shock taxpayers into a different, inflationary view of the future. "Fiscal expansion can replace ineffective monetary policy at the zero lower bound," Sims said. "It requires deficits aimed at, and conditioned on, generating inflation. The deficits must be seen as financed by future inflation, not future taxes or spending cuts." It was not clear whether such ideas will catch on. But there was a broad sense here that the other side of government may need to up its game. (Reuters)

Global central bankers send plea for help to governments

Activity in China&#39;s manufacturing sector eased unexpectedly in July as orders cooled and flooding disrupted business, an official survey showed, adding to fears the economy will slow in coming months unless the government steps up a huge spending spree. 
 
While a similar private survey showed business picked up for the first time in 17 months, the increase was only slight and the much larger official survey on Monday suggested China&#39;s overall industrial activity remains sluggish at best. 
 
Both surveys showed persistently weak demand at home and abroad were forcing companies to continue to shed jobs, even as Beijing vows to shut more industrial overcapacity that could lead to larger layoffs. 
 
And other readings on Monday pointed to signs of cooling in both the construction industry and real estate, which were key drivers behind better-than-expected economic growth in the second quarter. 
 
The official Purchasing Managers&#39; Index (PMI) eased to 49.9 in July from the previous month&#39;s 50.0 and below the 50-point mark that separates growth from contraction on a monthly basis. 
 
Analysts polled by Reuters predicted a level of 50.0. 
 
While the July reading showed only a slight loss of momentum, Nomura&#39;s chief China economist Yang Zhao said it may be a sign that the impact of stimulus measures earlier this year may already be wearing off. 
 
That has created a dilemma for Beijing as the Communist Party seeks to deliver on official targets, even as concerns grow about the risks of prolonged, debt-fuelled stimulus. 
 
&quot;The government has realised the downward pressure is great but they&#39;ve also realised that stimulus to stimulate the economy continuously is not a good idea and they want to continue to focus on reform and deleveraging,&quot; Zhao said. 
 
Heavy flooding, particularly along the Yangtze River, contributed to July&#39;s manufacturing contraction along with slowing demand and the cutting of overcapacity in some industries, the statistics bureau said. 
 
Falling activity at smaller firms also was a key reason for July&#39;s poor figure, the statistics bureau said, but performance at larger companies improved, in a sign that the government is becoming more reliant on big state firms to generate growth. 
 
Bumpy Outlook 
 
&quot;Today&#39;s data do not bode well for GDP growth in the second half,&quot; ANZ economists Louis Lam and David Qu wrote in a note. 
 
Fiscal policy would be the key tool for boosting growth in coming months, while the central bank was expected to keep its policy settings accommodative, they added. 
 
While many analysts believe the world&#39;s second-largest economy may be slowly stabilising, conditions still look patchy. 
 
Industrial profits rose at the fastest pace in three months in June, but gains were concentrated in just a few industries including electronics, steel and oil processing. 
 
Spurred by rebounding prices and stronger construction demand, China&#39;s steel output and exports have been near record levels. But it one of the key sectors being targeted by officials for capacity cuts and tougher pollution controls. 
 
Indeed, the PMI showed factory output in July still expanded solidly, though the pace cooled to 52.1 from 52.5 in June. 
 
Total new orders hovered just inside expansionary territory at 50.4, slightly down from June, but new export orders contracted as overseas demand remains weak and the impact of Britain&#39;s vote to leave the European Union hurt sentiment. 
 
A private PMI survey by Caixin/Markit was more mixed. 
 
Its 50.6 reading was stronger than expected and the first expansion since February 2015, sparking hopes that some of the government&#39;s stimulus was starting to trickle down to smaller private firms which have been under greater stress than larger state-backed enterprises. 
 
But overall order growth was modest and export orders continued to fall. 
 
The Caixin report tends to give more weight to light industry, whereas the official survey is skewed more toward heavy industries, said Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, according to Caixin. 
 
An official survey on the services sector was more upbeat, showing growth accelerated to 53.9 in July from 53.7 in June. 
 
But it, too, contained several worrying notes, with construction services growth solid but cooling and the property services sector weakening, adding to worries that China&#39;s housing boom may have peaked. 
 
Beijing has been counting on a strong services sector to pick up the slack as it tries to shift the economy away from a dependence on heavy industry and manufacturing exports. 
 
(Reuters)

Flooding has disrupted business, adding to fears the economy will slow in coming months unless the government steps up a huge spending spree

Activity in China's manufacturing sector eased unexpectedly in July as orders cooled and flooding disrupted business, an official survey showed, adding to fears the economy will slow in coming months unless the government steps up a huge spending spree. While a similar private survey showed business picked up for the first time in 17 months, the increase was only slight and the much larger official survey on Monday suggested China's overall industrial activity remains sluggish at best. Both surveys showed persistently weak demand at home and abroad were forcing companies to continue to shed jobs, even as Beijing vows to shut more industrial overcapacity that could lead to larger layoffs. And other readings on Monday pointed to signs of cooling in both the construction industry and real estate, which were key drivers behind better-than-expected economic growth in the second quarter. The official Purchasing Managers' Index (PMI) eased to 49.9 in July from the previous month's 50.0 and below the 50-point mark that separates growth from contraction on a monthly basis. Analysts polled by Reuters predicted a level of 50.0. While the July reading showed only a slight loss of momentum, Nomura's chief China economist Yang Zhao said it may be a sign that the impact of stimulus measures earlier this year may already be wearing off. That has created a dilemma for Beijing as the Communist Party seeks to deliver on official targets, even as concerns grow about the risks of prolonged, debt-fuelled stimulus. "The government has realised the downward pressure is great but they've also realised that stimulus to stimulate the economy continuously is not a good idea and they want to continue to focus on reform and deleveraging," Zhao said. Heavy flooding, particularly along the Yangtze River, contributed to July's manufacturing contraction along with slowing demand and the cutting of overcapacity in some industries, the statistics bureau said. Falling activity at smaller firms also was a key reason for July's poor figure, the statistics bureau said, but performance at larger companies improved, in a sign that the government is becoming more reliant on big state firms to generate growth. Bumpy Outlook "Today's data do not bode well for GDP growth in the second half," ANZ economists Louis Lam and David Qu wrote in a note. Fiscal policy would be the key tool for boosting growth in coming months, while the central bank was expected to keep its policy settings accommodative, they added. While many analysts believe the world's second-largest economy may be slowly stabilising, conditions still look patchy. Industrial profits rose at the fastest pace in three months in June, but gains were concentrated in just a few industries including electronics, steel and oil processing. Spurred by rebounding prices and stronger construction demand, China's steel output and exports have been near record levels. But it one of the key sectors being targeted by officials for capacity cuts and tougher pollution controls. Indeed, the PMI showed factory output in July still expanded solidly, though the pace cooled to 52.1 from 52.5 in June. Total new orders hovered just inside expansionary territory at 50.4, slightly down from June, but new export orders contracted as overseas demand remains weak and the impact of Britain's vote to leave the European Union hurt sentiment. A private PMI survey by Caixin/Markit was more mixed. Its 50.6 reading was stronger than expected and the first expansion since February 2015, sparking hopes that some of the government's stimulus was starting to trickle down to smaller private firms which have been under greater stress than larger state-backed enterprises. But overall order growth was modest and export orders continued to fall. The Caixin report tends to give more weight to light industry, whereas the official survey is skewed more toward heavy industries, said Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, according to Caixin. An official survey on the services sector was more upbeat, showing growth accelerated to 53.9 in July from 53.7 in June. But it, too, contained several worrying notes, with construction services growth solid but cooling and the property services sector weakening, adding to worries that China's housing boom may have peaked. Beijing has been counting on a strong services sector to pick up the slack as it tries to shift the economy away from a dependence on heavy industry and manufacturing exports. (Reuters)

China manufacturing activity eases unexpectedly

Britain&#39;s vote to leave the European Union heightened risks for the world economy, finance chiefs from the G20 group of leading countries said on Sunday at a meeting in China. 
 
The outcome of last month&#39;s referendum &quot;adds to the uncertainty in the global economy&quot;, said China&#39;s finance minister Lou Jiwei, who hosted the meeting. 
 
But he added that EU member countries were &quot;well positioned to proactively address the potential economic and financial consequences stemming from the UK referendum&quot;.
The International Monetary Fund (IMF) has warned risks to the global economy are growing, as it called on some G20 nations to boost government spending.

Central bank chiefs and finance ministers from the world&#39;s top 20 economies gathered in the southwestern Chinese city of Chengdu on Saturday to tackle a slowing global economy facing new uncertainties with Britain voting to leave the European Union (EU).

&quot;Global growth remains weak, and downside risks have become more salient,&quot; the IMF said in a report released ahead of the G20 meeting.

&quot;Growth could be even lower if the current increases in economic and political uncertainty in the wake of the &#39;Brexit&#39; vote continue.&quot;

The IMF wants advanced economies like Germany and the United States to channel more public spending into infrastructure investment to help boost global growth, an issue that has sparked divisions among G20 members.

&quot;Reforms that facilitate the scaling up of infrastructure investment would help raise productive capacity, boost short-term demand directly, and catalyse private investment,&quot; it said.
(AFP) 
 
&nbsp;

The IMF has called on some advanced economies like Germany and the US to channel more public spending to help boost global growth

Britain's vote to leave the European Union heightened risks for the world economy, finance chiefs from the G20 group of leading countries said on Sunday at a meeting in China. The outcome of last month's referendum "adds to the uncertainty in the global economy", said China's finance minister Lou Jiwei, who hosted the meeting. But he added that EU member countries were "well positioned to proactively address the potential economic and financial consequences stemming from the UK referendum". The International Monetary Fund (IMF) has warned risks to the global economy are growing, as it called on some G20 nations to boost government spending. Central bank chiefs and finance ministers from the world's top 20 economies gathered in the southwestern Chinese city of Chengdu on Saturday to tackle a slowing global economy facing new uncertainties with Britain voting to leave the European Union (EU). "Global growth remains weak, and downside risks have become more salient," the IMF said in a report released ahead of the G20 meeting. "Growth could be even lower if the current increases in economic and political uncertainty in the wake of the 'Brexit' vote continue." The IMF wants advanced economies like Germany and the United States to channel more public spending into infrastructure investment to help boost global growth, an issue that has sparked divisions among G20 members. "Reforms that facilitate the scaling up of infrastructure investment would help raise productive capacity, boost short-term demand directly, and catalyse private investment," it said. (AFP)

G20: Brexit adding uncertainty to slowing global economy

France and Britain were vying for fifth place on the list of the world&#39;s biggest economies on Wednesday, with France nudging ahead after a renewed slump in the Pound in the wake of the Brexit vote, Reuters calculations showed. 
 
Britain&#39;s gross domestic product stood at 1.864 trillion Pounds in 2015, according to the last available figures from the International Monetary Fund. 
 
The average exchange rate for the year in question is commonly used for comparisons between countries. But using the current exchange rate, France has pulled slightly ahead. 
 
With the Pound falling below 1.17 Euros overnight for the first time since 2013, that means the size of the British economy in 2015 is now equivalent to 2.172 trillion Euros - less than France&#39;s official GDP of 2.182 trillion Euros last year. 
 
Britain&#39;s vote in a referendum on June 23 to quit the EU has hammered financial markets, rattled businesses and punished the pound, which was trading at 1.1650 Euros as of 1440 GMT. 
 
But volatile exchange rates meant the figures were hard to pin down. Britain briefly regained fifth spot after the pound broke above 1.17 Euros for a few hours on Wednesday, only to sag again in mid-afternoon trade. 
 
Britain and France, which have similar populations, have swapped positions before in the rankings. 
 
In 2014 Britain overtook France, six years after the financial crisis caused the pound to fall and allowed France to regain a crown it had lost in 1997. 
 
(Reuters)

The size of the British economy in 2015 is now 2.172 trillion Euros - less than France's official GDP of 2.182 trillion Euros last year

France and Britain were vying for fifth place on the list of the world's biggest economies on Wednesday, with France nudging ahead after a renewed slump in the Pound in the wake of the Brexit vote, Reuters calculations showed. Britain's gross domestic product stood at 1.864 trillion Pounds in 2015, according to the last available figures from the International Monetary Fund. The average exchange rate for the year in question is commonly used for comparisons between countries. But using the current exchange rate, France has pulled slightly ahead. With the Pound falling below 1.17 Euros overnight for the first time since 2013, that means the size of the British economy in 2015 is now equivalent to 2.172 trillion Euros - less than France's official GDP of 2.182 trillion Euros last year. Britain's vote in a referendum on June 23 to quit the EU has hammered financial markets, rattled businesses and punished the pound, which was trading at 1.1650 Euros as of 1440 GMT. But volatile exchange rates meant the figures were hard to pin down. Britain briefly regained fifth spot after the pound broke above 1.17 Euros for a few hours on Wednesday, only to sag again in mid-afternoon trade. Britain and France, which have similar populations, have swapped positions before in the rankings. In 2014 Britain overtook France, six years after the financial crisis caused the pound to fall and allowed France to regain a crown it had lost in 1997. (Reuters)

After Pound drops, France overtakes Britain as world's fifth-largest economy

Financial movers and shakers gathered in France on Saturday urged a clear and timely political response to lift the uncertainty caused by Britain&#39;s shock vote to leave the European Union. 
 
A raft of top business leaders and intellectuals have gathered in the southern French city of Aix-en-Provence for a three-day meeting to discuss how to react to the fallout from last week&#39;s &quot;Brexit&quot; vote. 
 
Participants swiftly agreed on at least one thing - nobody is quite sure what is going to happen next, the underlying source of their worries. 
 
Britain has not yet begun the process of disengaging itself from the European Union, with arguments raging after the country was split 52 per cent to 48 per cent in the referendum. 
 
Renault-Nissan automaker giant head Carlos Ghosn said the loss of Britain in itself from the EU bloc was not so much the problem as that the uncertainties such a move would provoke. 
 
&quot;Worried? Yes,&quot; said Ghosn. &quot;Not because of Brexit but worried by the uncertainty that has engendered.&quot; 
 
For Ghosn, &quot;companies, good or bad, are capable of adapting to everything. All kinds of situations&quot;. 
 
But with Britain&#39;s new status regarding the European Union not clear he said firms would have to live with uncertainty. &quot;We are going to navigate as we go along,&quot; said Ghosn, not least regarding the post-Brexit future of Nissan&#39;s factory employing 8,000 in the north east of England. 
 
&#39;Could cause damage&#39; 
 
Oil giant Total&#39;s CEO Patrick Pouyanne said for his part that Brexit would &quot;not have a direct impact&quot; as likely sterling weakness could bring down production costs for the group&#39;s North Sea operations. 
 
&quot;On the other hand, Brexit will have European growth impacts on the macro-economic front and that could cause damage,&quot; Pouyanne said. 
 
&quot;There is an element of more uncertainty, instability, in a world which is already facing up to a range of geopolitical difficulties, with Daesh (Islamic State), Ukraine, a swathe of financial crises and now Brexit.&quot; 
 
US ratings agency SP Global Ratings cut its rating for the EU by one notch last Thursday citing the uncertainty created by the Brexit vote. 
 
&quot;The only message I would like to transmit is we have to act fast,&quot; said Pouyanne or risk allowing uncertainty to &quot;destroy confidence&quot; in the whole bloc. 
 
Time to make decisions 
 
Politicians indicated they understand that message and its urgency. 
 
&quot;The first thing to do is lift the uncertainty as soon as possible so that economic actors are able to take decisions quickly, including decisions pertaining to investment and development,&quot; French minister of finance Michel Sapin said on Friday. 
 
&quot;Today,&quot; Sapin added, &quot;I feel economic actors are demanding political decisions - perhaps a revamping of politics?&quot; 
 
Paris is looking to use Brexit as a chance to bolster the attractiveness of France, and Prime Minister Manuel Valls gave an interview to Saturday&#39;s Le Parisien in which he set out France&#39;s stall to that end. 
 
&quot;We are working on means of reinforcing our attractiveness. I am thinking notably of tax policy or the status of expatriates. So I say to large international companies - Welcome to Paris! Come and invest in France,&quot; said Valls. 
 
&quot;We are the number one financial market place in the eurozone in terms of direct and indirect employment with 1.2 million jobs,&quot; Muriel Penicaud, director general of Business France, a public body tasked with showing off France&#39;s plus points to the business world, told AFP. 
 
The group has just published a paper highlighting reasons to do business in Paris, insisting the capital offers &quot;a robust stock market regulatory and financial system&quot;. 
 
(AFP)

Elites gathered for three days to panic about Brexit uncertainty in the markets

Financial movers and shakers gathered in France on Saturday urged a clear and timely political response to lift the uncertainty caused by Britain's shock vote to leave the European Union. A raft of top business leaders and intellectuals have gathered in the southern French city of Aix-en-Provence for a three-day meeting to discuss how to react to the fallout from last week's "Brexit" vote. Participants swiftly agreed on at least one thing - nobody is quite sure what is going to happen next, the underlying source of their worries. Britain has not yet begun the process of disengaging itself from the European Union, with arguments raging after the country was split 52 per cent to 48 per cent in the referendum. Renault-Nissan automaker giant head Carlos Ghosn said the loss of Britain in itself from the EU bloc was not so much the problem as that the uncertainties such a move would provoke. "Worried? Yes," said Ghosn. "Not because of Brexit but worried by the uncertainty that has engendered." For Ghosn, "companies, good or bad, are capable of adapting to everything. All kinds of situations". But with Britain's new status regarding the European Union not clear he said firms would have to live with uncertainty. "We are going to navigate as we go along," said Ghosn, not least regarding the post-Brexit future of Nissan's factory employing 8,000 in the north east of England. 'Could cause damage' Oil giant Total's CEO Patrick Pouyanne said for his part that Brexit would "not have a direct impact" as likely sterling weakness could bring down production costs for the group's North Sea operations. "On the other hand, Brexit will have European growth impacts on the macro-economic front and that could cause damage," Pouyanne said. "There is an element of more uncertainty, instability, in a world which is already facing up to a range of geopolitical difficulties, with Daesh (Islamic State), Ukraine, a swathe of financial crises and now Brexit." US ratings agency SP Global Ratings cut its rating for the EU by one notch last Thursday citing the uncertainty created by the Brexit vote. "The only message I would like to transmit is we have to act fast," said Pouyanne or risk allowing uncertainty to "destroy confidence" in the whole bloc. Time to make decisions Politicians indicated they understand that message and its urgency. "The first thing to do is lift the uncertainty as soon as possible so that economic actors are able to take decisions quickly, including decisions pertaining to investment and development," French minister of finance Michel Sapin said on Friday. "Today," Sapin added, "I feel economic actors are demanding political decisions - perhaps a revamping of politics?" Paris is looking to use Brexit as a chance to bolster the attractiveness of France, and Prime Minister Manuel Valls gave an interview to Saturday's Le Parisien in which he set out France's stall to that end. "We are working on means of reinforcing our attractiveness. I am thinking notably of tax policy or the status of expatriates. So I say to large international companies - Welcome to Paris! Come and invest in France," said Valls. "We are the number one financial market place in the eurozone in terms of direct and indirect employment with 1.2 million jobs," Muriel Penicaud, director general of Business France, a public body tasked with showing off France's plus points to the business world, told AFP. The group has just published a paper highlighting reasons to do business in Paris, insisting the capital offers "a robust stock market regulatory and financial system". (AFP)

Business leaders urge swift response to Brexit worries

JPMorgan Chase &amp; Co said on Friday it has won approval from India&#39;s central bank to open three more branches in the country even as most foreign banks are scaling back their operations in India. 
 
The bank&#39;s press released said the new branches will be located in the capital New Delhi and in the southern cities of Bengaluru and Chennai, and&nbsp;are expected to be operational in the next few months. 
 
&quot;This is another significant milestone for growing our Indian franchise and deepening our banking footprint,&quot; said Kalpana Morparia, CEO, South &amp; South East Asia, JPMorgan, in the statement.&nbsp; 
 
&quot;The expansion endorses our long-term commitment to India, a key market for JP Morgan, as well as for many of our clients,&quot; she said in the statement. 
 
JP Morgan said it will provide all existing products and services through the new branches, including cash management, trade finance 
and foreign-currency payments. 
 
In the last few years, India has seen almost an exodus of foreign banks from a host of services that they provided in the country. 
 
In January, British bank Barclays Plc said it would shut its India equities business to cut costs and boost profits. 
 
Later in May HSBC Holdings Plc said it planned to close 24 branches in India as part of its strategic review of its retail banking and wealth management business. 
 
(Reuters)

The bank plans to expand its business in India at a time when other foreign banks like Barclays Plc are scaling down or closing shop

JPMorgan Chase & Co said on Friday it has won approval from India's central bank to open three more branches in the country even as most foreign banks are scaling back their operations in India. The bank's press released said the new branches will be located in the capital New Delhi and in the southern cities of Bengaluru and Chennai, and are expected to be operational in the next few months. "This is another significant milestone for growing our Indian franchise and deepening our banking footprint," said Kalpana Morparia, CEO, South & South East Asia, JPMorgan, in the statement. "The expansion endorses our long-term commitment to India, a key market for JP Morgan, as well as for many of our clients," she said in the statement. JP Morgan said it will provide all existing products and services through the new branches, including cash management, trade finance and foreign-currency payments. In the last few years, India has seen almost an exodus of foreign banks from a host of services that they provided in the country. In January, British bank Barclays Plc said it would shut its India equities business to cut costs and boost profits. Later in May HSBC Holdings Plc said it planned to close 24 branches in India as part of its strategic review of its retail banking and wealth management business. (Reuters)

JP Morgan to open 3 new branches in India

Global stock markets lost about $2 trillion in value on Friday after Britain voted to leave the European Union, while sterling suffered a record one-day plunge to a 31-year low and money poured into safe-haven gold and government bonds. 
 
The blow to investor confidence and the uncertainty the vote has sparked could keep the Federal Reserve from raising interest rates as planned this year, and even spark a new round of emergency policy easing from major central banks. 
 
The move blindsided investors, who had expected Britain to vote to stay in the EU, and sparked sharp repricing across asset classes. Mainland European equity markets took the brunt of selling as investors feared the vote could destabilise the 28-member bloc by prompting more referendums. 
 
The traditional safe-harbor assets of top-rated government debt, the Japanese yen and gold all jumped. Spot gold rose over 4 per cent and the yield on the benchmark 10-year US Treasury note fell to a low of 1.406 per cent, last seen in 2012, but climbed higher in afternoon trading. 
 
Stocks tumbled in Europe. Frankfurt and Paris each fell 7 per cent to 8 per cent. Italian and Spanish markets posted their sharpest one-day drops ever, falling more than 12 per cent led by a dive in European bank stocks. Italy&#39;s Unicredit fell 24 per cent while Spain&#39;s Banco Santander fell 20 per cent. 
 
London&#39;s FTSE, however, dropped 3.2 per cent, with some investors speculating that the plunge in sterling could benefit Britain&#39;s economy. 
 
&quot;Big institutional customers saw this morning&#39;s event as a much more longer-term opportunity. So names that were really dislocated found plenty of bids, plenty of support,&quot; said Ken Polcari, director of the NYSE floor division at O&rsquo;Neil Securities in New York. 
 
Still, Britain&#39;s big banks took a $100 billion battering, with Lloyds, Barclays and RBS plunging as much as 30 per cent, although they cut those losses in half later in the day. 
 
Stocks on Wall Street traded down around 3 per cent, with the Dow Jones industrial average dropping as much as 544 points. 
 
The Dow Jones industrial average fell 520.19 points, or 2.89 per cent, to 17,490.88. The S&amp;P 500 slid 65.75 points, or 3.11 per cent, to 2,047.57 and the Nasdaq Composite lost 182.46 points, or 3.72 per cent, to 4,727.58. 
 
MSCI&#39;s all-country world stock index fell 4.4 per cent. 
 
Voting results showed a 51.9/48.1 per cent split for leaving, setting the UK on an uncertain path and dealing the largest setback to European efforts to forge greater unity since World War Two. 
 
The British pound dived by 18 US cents at one point, easily the biggest fall in living memory, to its lowest since 1985. The euro slid 3 per cent to $1.1050 as investors feared for its very future. 
 
Sterling was last down 7.4 per cent at $1.3775, having carved out a range of $1.3228 to $1.5022. The fall was even larger than during the global financial crisis and the currency was moving two or three cents in the blink of an eye. 
 
The Bank of England, European Central Bank and the People&#39;s Bank of China all said they were ready to provide liquidity if needed to ensure global market stability. 
 
 
Shockwaves 
The shockwaves affected all asset classes and regions. 
 
The safe-haven yen jumped 3.9 per cent to 102.21 per dollar, having been as low as 106.81. The dollar&#39;s peak decline of 4 per cent was the largest since 1998. 
 
Emerging market currencies across Asia and eastern Europe and South Africa&#39;s rand all buckled on fears that investors could pull out. Poland&#39;s zloty slumped 4 per cent. 
 
Europe&#39;s safety play, the 10-year German government bond, surged with yields tumbling back into negative territory and a new record low. 
 
MSCI&#39;s broadest index of Asia-Pacific shares outside Japan slid almost 3.3 per cent. Tokyo&#39;s Nikkei saw its worst fall since 2011, down 7.9 per cent. 
 
Investors stampeded into low-risk sovereign bonds, with US 10-year notes gained around 1.5 points in price to yield 1.570 per cent. Earlier, the yield dipped to 1.406 per cent. 
 
The rally even extended to UK bonds, despite a warning from ratings agency Standard &amp; Poor&#39;s that it was likely to downgrade Britain&#39;s triple-A credit rating if it left the EU. Yields on benchmark 10-year gilts fell 27 basis points to 1.096 pct. 
 
Across the Atlantic, investors were pricing in less chance of another hike in US interest rates given the Federal Reserve had cited a British exit from the EU as one reason to be cautious on tightening. 
 
&quot;A July (hike) is definitely off the table,&quot; said Mike Baele, managing director with the private client reserve group at US Bank in Portland, Oregon. 
 
Fed funds futures were even toying with the chance that the next move could be a cut in US rates. 
 
Oil prices slumped by more than 4 per cent amid fears of a broader economic slowdown that could reduce demand. US crude shed $2.36 to $47.77 a barrel while Brent fell 4.7 per cent to $48.50 before. 
 
Industrial metal copper sank 2.1 per cent but gold galloped nearly 5 per cent higher thanks to its perceived safe haven status. 
 
(Reuters)

Global stock markets lose about $2 trillion in value, sterling plunges to 31-year low

Global stock markets lost about $2 trillion in value on Friday after Britain voted to leave the European Union, while sterling suffered a record one-day plunge to a 31-year low and money poured into safe-haven gold and government bonds. The blow to investor confidence and the uncertainty the vote has sparked could keep the Federal Reserve from raising interest rates as planned this year, and even spark a new round of emergency policy easing from major central banks. The move blindsided investors, who had expected Britain to vote to stay in the EU, and sparked sharp repricing across asset classes. Mainland European equity markets took the brunt of selling as investors feared the vote could destabilise the 28-member bloc by prompting more referendums. The traditional safe-harbor assets of top-rated government debt, the Japanese yen and gold all jumped. Spot gold rose over 4 per cent and the yield on the benchmark 10-year US Treasury note fell to a low of 1.406 per cent, last seen in 2012, but climbed higher in afternoon trading. Stocks tumbled in Europe. Frankfurt and Paris each fell 7 per cent to 8 per cent. Italian and Spanish markets posted their sharpest one-day drops ever, falling more than 12 per cent led by a dive in European bank stocks. Italy's Unicredit fell 24 per cent while Spain's Banco Santander fell 20 per cent. London's FTSE, however, dropped 3.2 per cent, with some investors speculating that the plunge in sterling could benefit Britain's economy. "Big institutional customers saw this morning's event as a much more longer-term opportunity. So names that were really dislocated found plenty of bids, plenty of support," said Ken Polcari, director of the NYSE floor division at O’Neil Securities in New York. Still, Britain's big banks took a $100 billion battering, with Lloyds, Barclays and RBS plunging as much as 30 per cent, although they cut those losses in half later in the day. Stocks on Wall Street traded down around 3 per cent, with the Dow Jones industrial average dropping as much as 544 points. The Dow Jones industrial average fell 520.19 points, or 2.89 per cent, to 17,490.88. The S&P 500 slid 65.75 points, or 3.11 per cent, to 2,047.57 and the Nasdaq Composite lost 182.46 points, or 3.72 per cent, to 4,727.58. MSCI's all-country world stock index fell 4.4 per cent. Voting results showed a 51.9/48.1 per cent split for leaving, setting the UK on an uncertain path and dealing the largest setback to European efforts to forge greater unity since World War Two. The British pound dived by 18 US cents at one point, easily the biggest fall in living memory, to its lowest since 1985. The euro slid 3 per cent to $1.1050 as investors feared for its very future. Sterling was last down 7.4 per cent at $1.3775, having carved out a range of $1.3228 to $1.5022. The fall was even larger than during the global financial crisis and the currency was moving two or three cents in the blink of an eye. The Bank of England, European Central Bank and the People's Bank of China all said they were ready to provide liquidity if needed to ensure global market stability. Shockwaves The shockwaves affected all asset classes and regions. The safe-haven yen jumped 3.9 per cent to 102.21 per dollar, having been as low as 106.81. The dollar's peak decline of 4 per cent was the largest since 1998. Emerging market currencies across Asia and eastern Europe and South Africa's rand all buckled on fears that investors could pull out. Poland's zloty slumped 4 per cent. Europe's safety play, the 10-year German government bond, surged with yields tumbling back into negative territory and a new record low. MSCI's broadest index of Asia-Pacific shares outside Japan slid almost 3.3 per cent. Tokyo's Nikkei saw its worst fall since 2011, down 7.9 per cent. Investors stampeded into low-risk sovereign bonds, with US 10-year notes gained around 1.5 points in price to yield 1.570 per cent. Earlier, the yield dipped to 1.406 per cent. The rally even extended to UK bonds, despite a warning from ratings agency Standard & Poor's that it was likely to downgrade Britain's triple-A credit rating if it left the EU. Yields on benchmark 10-year gilts fell 27 basis points to 1.096 pct. Across the Atlantic, investors were pricing in less chance of another hike in US interest rates given the Federal Reserve had cited a British exit from the EU as one reason to be cautious on tightening. "A July (hike) is definitely off the table," said Mike Baele, managing director with the private client reserve group at US Bank in Portland, Oregon. Fed funds futures were even toying with the chance that the next move could be a cut in US rates. Oil prices slumped by more than 4 per cent amid fears of a broader economic slowdown that could reduce demand. US crude shed $2.36 to $47.77 a barrel while Brent fell 4.7 per cent to $48.50 before. Industrial metal copper sank 2.1 per cent but gold galloped nearly 5 per cent higher thanks to its perceived safe haven status. (Reuters)

World stocks tumble after Britain votes to leave the EU

It is a sign of caution that spreads through the global economic outlook when four of the world&#39;s top central banks, all due to meet within days of each other, are almost unanimously expected to make no change to their extraordinary stimulus programs.

While the US&nbsp;Federal Reserve, Bank of England, Swiss National Bank and the Bank of Japan are all dealing with varying amounts or shortages of inflation, none are expected to act ahead of one of the biggest risk events of 2016.

Britain&#39;s referendum on whether to remain in or leave the European Union has been creeping from the back to the front of investors&#39; minds. During the last full week of campaigning before the June 23 vote, it may dominate most discussion.

Janet Yellen&#39;s Fed has spent most of the past month or so dropping hints that a summer rate hike was on the way. However, disappointing May hiring data and a UK vote that is too close in the polls to have confidence in the outcome have toned down her message, making a rate rise on June 15 now highly unlikely.

That leaves financial markets stuck in a holding pattern with renewed fears about global growth pushing against safety nets that central banks have built up over the years, according to Valentin Marinov, head of G10 FX strategy at CA-CIB.

So a packed week of data releases for the world&#39;s largest economy, including retail sales, housing starts, building permits as well as inflation, will at best be able to help build the case for a Fed rise as soon as July, rather than September.

&quot;Weak labour market data have messed up the carefully-prepared script for the Fed&#39;s next rate move. An interest rate rise at the meeting next week is off the table,&quot; wrote Christoph Balz, economist at Commerzbank, in a note.

&quot;However ... the U.S. labour market recovery is not over yet and a rate hike at the meeting in July is therefore still on the agenda.&quot;

A recent Reuters poll showed four-fifth&nbsp;of a sample of 90 economists expect a rate rise in either July or September, with most leaning toward the latter month, and with many saying a hiring rebound could seal an earlier move.

June jobs data won&#39;t be released until early July. But for the most part, the economy has been performing well: an analysis of key economic releases since the last Fed meeting shows 70 per cent have come in at or above Reuters poll forecasts.

US&nbsp;retail sales may stage a milder 0.4 per cent rise on the month after a 1.3 per cent surge in April, while housing starts and permits will be watched closely after a blowout month in April for pending and new home sales.

Core consumer price inflation is likely to remain on a relatively steady course a few ticks above 2 per cent.

In Britain, where not a soul expects the Bank of England to change policy just ahead of the EU referendum but instead focus on contingency planning and market liquidity in the event of a vote to leave, price pressures are weaker.

Headline inflation, which the BoE targets, is forecast to rise to 0.4 per cent, with core inflation at 1.3 per cent. The UK jobless rate is forecast to hold steady at 5.1 per cent, close to what many would call full employment.&nbsp;

But with a slowdown this year in the UK economy which a majority of analysts attribute to jitters ahead of the referendum, talk about interest rates has shifted from the next rate rise to whether they will need to be cut.

In Japan, the dearth of inflation is much more severe, much as it has been for the better part of two decades and there is little hope for a revival any time soon.

So while the Fed is forecast to take a pass in June and possibly lift its federal funds rate gingerly in July, the Bank of Japan is forecast to take a pass on June 16 and do the opposite in July by piling on more stimulus.

Much of it will depend on the Yen exchange rate, which appears now to be out of the BOJ&#39;s control, having surged earlier this year when it surprised the markets by introducing by a narrow majority a negative deposit rate policy.

In Zurich, the SNB is also expected to leave its negative key rate unchanged at a midpoint of -0.75 per cent, according to a Reuters poll. There may be some signs of inflation turning but again, what the Swiss Franc does will matter a lot and what drives it is not completely within the SNB&#39;s control.

United States, England, Switzerland and Japan

It is a sign of caution that spreads through the global economic outlook when four of the world's top central banks, all due to meet within days of each other, are almost unanimously expected to make no change to their extraordinary stimulus programs. While the US Federal Reserve, Bank of England, Swiss National Bank and the Bank of Japan are all dealing with varying amounts or shortages of inflation, none are expected to act ahead of one of the biggest risk events of 2016. Britain's referendum on whether to remain in or leave the European Union has been creeping from the back to the front of investors' minds. During the last full week of campaigning before the June 23 vote, it may dominate most discussion. Janet Yellen's Fed has spent most of the past month or so dropping hints that a summer rate hike was on the way. However, disappointing May hiring data and a UK vote that is too close in the polls to have confidence in the outcome have toned down her message, making a rate rise on June 15 now highly unlikely. That leaves financial markets stuck in a holding pattern with renewed fears about global growth pushing against safety nets that central banks have built up over the years, according to Valentin Marinov, head of G10 FX strategy at CA-CIB. So a packed week of data releases for the world's largest economy, including retail sales, housing starts, building permits as well as inflation, will at best be able to help build the case for a Fed rise as soon as July, rather than September. "Weak labour market data have messed up the carefully-prepared script for the Fed's next rate move. An interest rate rise at the meeting next week is off the table," wrote Christoph Balz, economist at Commerzbank, in a note. "However ... the U.S. labour market recovery is not over yet and a rate hike at the meeting in July is therefore still on the agenda." A recent Reuters poll showed four-fifth of a sample of 90 economists expect a rate rise in either July or September, with most leaning toward the latter month, and with many saying a hiring rebound could seal an earlier move. June jobs data won't be released until early July. But for the most part, the economy has been performing well: an analysis of key economic releases since the last Fed meeting shows 70 per cent have come in at or above Reuters poll forecasts. US retail sales may stage a milder 0.4 per cent rise on the month after a 1.3 per cent surge in April, while housing starts and permits will be watched closely after a blowout month in April for pending and new home sales. Core consumer price inflation is likely to remain on a relatively steady course a few ticks above 2 per cent. In Britain, where not a soul expects the Bank of England to change policy just ahead of the EU referendum but instead focus on contingency planning and market liquidity in the event of a vote to leave, price pressures are weaker. Headline inflation, which the BoE targets, is forecast to rise to 0.4 per cent, with core inflation at 1.3 per cent. The UK jobless rate is forecast to hold steady at 5.1 per cent, close to what many would call full employment. But with a slowdown this year in the UK economy which a majority of analysts attribute to jitters ahead of the referendum, talk about interest rates has shifted from the next rate rise to whether they will need to be cut. In Japan, the dearth of inflation is much more severe, much as it has been for the better part of two decades and there is little hope for a revival any time soon. So while the Fed is forecast to take a pass in June and possibly lift its federal funds rate gingerly in July, the Bank of Japan is forecast to take a pass on June 16 and do the opposite in July by piling on more stimulus. Much of it will depend on the Yen exchange rate, which appears now to be out of the BOJ's control, having surged earlier this year when it surprised the markets by introducing by a narrow majority a negative deposit rate policy. In Zurich, the SNB is also expected to leave its negative key rate unchanged at a midpoint of -0.75 per cent, according to a Reuters poll. There may be some signs of inflation turning but again, what the Swiss Franc does will matter a lot and what drives it is not completely within the SNB's control.

Caution pervades at four of world's top central banks

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