Global Economy: Is it just a cold, or something more serious?

Ztest Electronics

23/04/2018 08:00

(Repeats Friday story without changes)
    * ECB seen on hold on Thursday
    * Data eyed for clues about economic slowdown
    * Trump to discuss trade with Macron, Merkel 

    By Francesco Canepa
    FRANKFURT, April 20 (Reuters) - Is it just a cold or
something more serious?
    That's the question investors hope will be answered in the
coming week by a policy update from the European Central Bank,
fresh euro zone and U.S. economic data, and earnings reports
from some of the world's largest technology firms.
    Cold weather in the first quarter is among temporary factors
blamed for a spell of poor economic readings from Europe and the
United States, with some analysts already betting on a rebound
in the summer.
    But some fear this minor ailment will develop into something
more serious if any of a number of looming risks, ranging from a
trade war between the United States and China to a widening of
the Syrian conflict, comes to pass.
    ECB President Mario Draghi is expected to underscore these
concerns when he speaks on Thursday after a policy meeting which
is forecast to leave unchanged the ECB's plans for a gradual
exit from its aggressive monetary stimulus.
    "The soft patch should only strengthen the case for
gradualism which ECB officials have been building since the
start of the year," said Frederik Ducrozet, an economist at
Pictet Wealth Management.
    The ECB is expected to wind down its 2.55 trillion euro
bond-buying programme by the end of the year but some economists
have been pushing out their expectations for a rate hike to the
second half of 2019 after the recent soft data.
    The odds on a rate hike by the Bank of England in May have
also lengthened after a sharper-than-expected slowdown in
inflation in the first three months of 2018.
 urn:newsml:reuters.com:*:nL8N1RW6P3 urn:newsml:reuters.com:*:nL8N1RV1ZF
    Ironically, one of the few prices that Draghi and his peers
at major central banks might like to stay low -- that of oil --
has risen to a 3-1/2 year high this week as producer nations
continue to drain inventories.  urn:newsml:reuters.com:*:nL8N1RW5U8
    This makes fuel prices more expensive for importing
countries, eating into consumers' and companies' spending power.
    U.S. President Donald Trump was quick to react to the surge
in the price of crude, saying on Friday the oil output
reductions would not be tolerated.  urn:newsml:reuters.com:*:nL1N1RX0CT
    
    TRADE WAR
    It was the latest in a series of threats and protectionist
moves by the U.S. administration -- primarily aimed at China --
that have kept entrepreneurs, investors and consumers on edge
for the past year.
    Trump's administration has imposed tariffs on imports of
steel and aluminium and most recently banned U.S. companies from
selling parts to Chinese telecom equipment maker ZTE  000063.SZ 
for seven years.
    China announced hefty anti-dumping tariffs on imports of
U.S. sorghum and measures on synthetic rubber imports from the
United States, European Union and Singapore.
    "When investors do not know under what terms they will be
trading, when they don't know how to organise their supply
chain, they are reluctant to invest," Christine Lagarde, the
head of the International Monetary Fund, said on Thursday.
    Consumer spending is also showing early signs of faltering,
with Taiwan Semiconductor Manufacturing  2330.TW  citing softer
demand for smartphones when cutting its revenue forecasts.
    Investors will be looking for further evidence that the
economic cycle is turning down when Facebook  FB.O , Amazon
 AMZN.O  and Google's Alphabet  GOOGL.O  report their earnings
in the week.
    Trump will play host to French president Emmanuel Macron
during a three-day state visit that starts on Monday before
meeting German Chancellor Angela Merkel on Friday.
    The leaders are expected to discuss the situation in Syria
-- where the United States, Britain and France launched missile
strikes against Syrian targets on April 14 -- and a European
Union request for a permanent exemption from U.S. tariffs.
 urn:newsml:reuters.com:*:nL8N1RP6P3

 (Reporting by Francesco Canepa
Editing by Catherine Evans)
 ((@FranCanJourno francesco.canepa@thomsonreuters.com;
004906975651247; Reuters Messaging:
francesco.canepa.thomsonreuters.com@reuters.net))