Growth is expected to be the weakest since the beginning of the decade, Georgieva said according to the minutes of the speech. The IMF will therefore adjust its official forecasts for 2019 and 2020 downwards next week. According to an IMF forecast, the trade conflict between the US and China could cause global economic output to fall by up to USD 700bn (or about 0.8% of global GDP) next year, roughly the size of the entire Swiss economy. And should the global economy weaken even more than previously expected, a coordinated response from fiscal policy could become necessary, Georgieva said. "Our research shows that spending increases are more effective and have a multiplier effect when countries act together."
In the US, producer prices rose unexpectedly weakly in September, which could be a setback for the Federal Reserve's hopes of achieving its inflation target in the coming quarters. Compared to the same month last year, they rose by 1.4%, as the US Department of Labor announced in Washington on Tuesday. This is the lowest rate since November 2016. Analysts had expected an average increase of 1.8%. In the previous month, the rate had also been 1.8%. Meanwhile, the US Federal Reserve has again pumped fresh money into the financial system. A total of USD 76.35bn was made available to the banks via repo transactions to counteract bottlenecks in the money market.
Just before the trade talks in Washington, which begin tomorrow, the US government seems to want to increase the pressure on China by putting eight Chinese technology giants on a "black list" yesterday. According to this list, the companies concerned can only do business with American companies with the approval of the US authorities. The US government is thus sanctioning alleged human rights violations by Chinese companies against Muslim minorities in western China. The Chinese leadership sharply criticized the US decision. "We urge the US to correct the mistakes immediately and reverse the decisions," said a Chinese State Department spokesman on Tuesday. He announced determined resistance from the Chinese side.
Following yesterday's verbal attack by US President Donald on Twitter towards Turkey, the stock exchange in Istanbul was initially only moderately impressed. The BIST 30 index lost -0.8% to 126,251 points in early trading on Tuesday. The only modest decline is probably also due to the Lira, which had already depreciated massively by more than -2.5% the previous day. A cheaper lira should support the country's export industry.
In the dispute over a Brexit in three weeks, the British government has sharpened the tone and blamed the EU for a possible failure of the talks. A Brexit agreement with the EU is very unlikely, both Prime Minister Boris Johnson and Chancellor Angela Merkel, who spoke out in favour of Northern Ireland remaining permanently in the European Customs Union and the Internal Market, said after a phone call yesterday. EU Council President Donald Tusk criticized Johnson's negotiating tactics. Tusk told Johnson that it was not a question of winning a "stupid blame game". It is about the future of Europe and Great Britain, about the security and the interests of the people. The pound sterling promptly dropped by half a percent. There was no more dramatic market reaction as Berlin did not confirm Merkel's statements. Finally, Johnson could still be forced by the Benn Act to apply for an extension if no agreement was reached on 19 October. Should this actually happen – albeit under mutual blame – the pound should be able to breathe a sigh of relief.
|08:30||FR||BdF Business Sentiment||98.66|
|US||Johnson & Johnson||Q3|
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Source: LGT Bank (Switzerland) Ltd.
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