Home Week in Macro An Easter Peace to the Trade War?

An Easter Peace to the Trade War?

As we go through Lent, China’s 13th National People’s Congress might be hungry for a resolution to the trade war with the USA.

At China’s annual Lianghui, the still-underway double meeting of China’s top political bodies, Chinese Prime Minister Le Keqiang revealed China’s official growth target to be between 6.0% and 6.5%, its lowest rate since 1990. China’s slowing economic momentum, bond issuance to finance new investments, and new draft laws on foreign investments and patents to placate the United States in an effort to de-escalate the trade war were also high on the agenda.

On that note, the United States and China appear to be inching closer to a trade deal, to the tentative relief of markets. Reports surfaced last week that U.S. President Donald Trump and his counterpart Xi Jinping may be meeting at Mr Trump’s Mar-a-Lago resort at the end of the month to finalise a deal. Stumbling blocks remain, however, including the speed at which tariffs are lifted. The U.S. requires time for verification of Chinese compliance while Mr Xi’s domestic political needs require faster implementation.

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Benjamin Netanyahu, Israel’s Prime Minister, faces a renewed uphill climb in his battle to retain his premiership ahead of elections to the Knesset on April 9. Hit by a recommendation by the country’s attorney general to indict him over corruption charges and a new centrist coalition formed to unseat him, Mr Netanyahu appears to have his back to the wall. However, the chaotic nature of Israeli democracy may lead Mr Netanyahu to be viewed as a force for stability, despite his own intensifying overtures to fringe far-right parties.

Back in Europe, the ECB kept its interest rates unchanged but launched a new round of targeted longer-term refinancing operations (TLTROs). These operations are a means to provide accommodating liquidity to the currency area’s banks at a time of slowing economic growth. The decision was expected but raised concerns about the central bank’s ability to react should an actual recession hit the currency area.

Up north, the Norwegian government recommended that the country’s sovereign wealth fund, exclude oil exploration and production companies from its investment portfolio. The proposal aims to reduce the risk posed by volatility in oil prices to the Norwegian economy. Norges Bank first recommended such a divestment in November 2017.

Across the pond, the week concluded with the smallest increase in US employmentsince November 2017, according to figures published by the US Bureau of Labor Statistics. Taken together with slowing GDP growth in the last quarter of 2018, these figures show the US economy in a ‘late-cycle’ phase and reaching peak economic growth, consistent with forecasts for 2019.

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