Latest news with #globalrecession
Entrepreneur
2 days ago
- Business
- Entrepreneur
World Bank Cuts India's 2025-26 Growth Forecast to 6.3% Amid Global Trade Strains
The report emphasizes that while a global recession is unlikely, the decade may still end with the weakest seven-year growth stretch since the 1960s You're reading Entrepreneur India, an international franchise of Entrepreneur Media. India's economic growth forecast for 2025-26 has been revised downward by the World Bank to 6.3 per cent, a reduction from its earlier projection of 6.7 per cent in January, as weakening global demand and rising trade barriers weigh on exports. Despite the downgrade, India is still expected to remain the fastest-growing major economy, according to the Bank's latest Global Economic Prospects report released Tuesday. The revised outlook reflects growing concerns about global economic headwinds. "India is projected to maintain the fastest growth rate among the world's largest economies, at 6.3 per cent in FY25-26," the report said. However, it noted that exports are dampened by weaker activity in key trading partners and rising global trade barriers, leading to the downgrade. The broader context is one of global slowdown. The report projects global GDP growth to decelerate to 2.3 per cent in 2025, the slowest pace since 2008 outside of formal recessions. Heightened trade tensions and policy uncertainty are expected to drive global growth down this year. Growth forecasts have been cut for nearly 70 per cent of countries, spanning all regions and income levels. In South Asia, growth is already showing signs of fatigue. Following a lower-than-expected 6 per cent growth in 2024, the region's economy is forecast to slow to 5.8 per cent in 2025, with trade barriers, investor unease, and financial volatility dampening momentum. The World Bank noted that activity in South Asia is decelerating amid rising global trade barriers, heightened policy uncertainty, and financial market volatility. India's current economic performance has been uneven. While construction and services remained steady, and agricultural output rebounded after droughts, industrial output growth has slowed. Investment growth is also projected to weaken in the coming fiscal year, driven in part by surging global policy uncertainty. Still, the medium-term outlook remains cautiously optimistic. Growth is expected to recover to 6.6 per cent in FY26-27 and FY2027-28, helped by a strong services sector and a potential rebound in exports. However, the projection for FY26-27 has also been revised slightly downward to 6.5 per cent, 0.2 percentage point below earlier estimates. The report emphasizes that while a global recession is unlikely, the decade may still end with the weakest seven-year growth stretch since the 1960s. To counter the drag from rising trade frictions, it advises developing nations to diversify trade relationships and strengthen fiscal policies focused on vulnerable populations.
ABC News
15-05-2025
- Business
- ABC News
Donald Trump's economic agenda could irritate the money market into catastrophe
There are few signs the global financial system is on the brink of collapse… except for one key indicator. The bond market is flashing red. It's easy to get lost in the confusion and chaos of Donald Trump's economic agenda, but there's one consistent thread you can follow. Part of Trump's plan to make America great again is to lower the US budget deficit and thereby reduce foreign debt. This frees the world's biggest economy to spend big again, without the debt that comes with it. But this relies on finding new, significant, steady streams of income. Enter: reciprocal tariffs. The bond market, however, is proving a key barrier to their successful implementation. And if Trump's economic agenda continues to irritate the money market, the result could be catastrophic for the global economy. A few major economic events transpired in early April. Trump announced reciprocal tariffs on about 90 countries, including China and the European Union. The size and scope of the tariffs surprised financial markets. Share markets across the globe crashed due to fears the tariff hikes would ground trade, generate inflation and produce a produce a global recession. Crucially though, the bond market, from April 7, began to dive. Hedge funds — firms that make money from often complex trades — found themselves in a spot of bother. They had been making money by profiting from the difference between bond market futures and the spot or cash market. It's dubbed the "basis trade". Think buying apples cheaply from the kids' lemonade stand down the road and selling them at the big grocery store up the road, and pocketing the difference. It's called arbitrage. Hedge funds employing the popular "basis trade" strategy found themselves forced sellers in early April as soaring volatility and tightening financing conditions rattled markets. The trade had become so well-known and the margins so thin, these hedge funds had borrowed hundreds of billions of dollars to magnify what would otherwise be small profits. It caused a huge bond sell-off and the yields or interest rates on those bonds then spiked. Bond prices move in the opposite direction to yields. It was all too much for the US president. He framed it the other way around, suggesting the markets got a bit "yippy" or anxious. He began winding back his tariff rhetoric, explaining "deals" were on the way and reassuring financial markets it'd all be ok. Financial market volatility remained as various "deals" were made public, including with the UK, but the latest talks with China seemed to be a game changer. The world's two biggest economies agreed to pause their big, threatened tariffs for 90-days, leaving a 30 per cent tariff on Chinese goods entering the US. Financial markets loved it. It was a massive relief for them and provided some much-needed certainty, at least for the short-term. But — and that's a big "but" — like the game of whack-a-mole, it's produced another problem: US Treasury bond yields are climbing again. That's because investors are selling bonds and using the cash to buy stocks, with a renewed sense of optimism about the future. "The two markets often seem to look at different things and that's the case right now — US shares are celebrating the tariff backdown and bonds are starting to worry more about the US budget deficit with maybe still concerns about US economic policy and its safe haven status," AMP's head of investment strategy Shane Oliver said. "The deficit is now a bigger problem because the tax package is coming into view and tariff revenue and DOGE spending savings look like being smaller. "I suspect that the renewed rise in the bond yield could become more of a problem for shares, especially with shares now overbought after their huge rebound. "US exceptionalism looks to be back — well, maybe temporarily — for US shares, especially technology shares, but maybe not bonds!" And here's the key point. Earlier in April the unwinding of the bond market related to fears the US government was losing fiscal credibility. It saw a highly unusual environment where both shares and bonds were sold off. "What we had was bond yields rising at the same time that equity prices were falling," Barrenjoey chief interest rate strategist Andrew Lilley said. "So the problem wasn't increasing bond yields per say. The problem was that is an indication that everybody is very pessimistic about the economy — so pessimistic that bonds are no longer even a safe haven," he said. This time around bond yields and longer-term interest rates are rising because investors are gaining more confidence in the economic outlook. The problem is that, in the current highly volatile financial environment, the return to attractive US debt could cause further global economic shock waves, said Jamieson Coote Bonds co-founder Angus Coote. "I think anything over 5 per cent [for US 10-year US Treasury yields] becomes problematic for not necessarily US government — it will always be able to finance itself. That's the privilege that they have with that. "But I think the problem is more ... mortgages and stock markets and infrastructure, everything else that's passed off that 10-year [bond return]. "The [10-year US Treasury bond] — if that's getting above 5 per cent," and it's 4.5 per cent, "then that's a very high hurdle for investments to be compared against." In other words, why would you gamble with a stock market return of, say, 7 per cent when the US government in guaranteeing a return of 5 per cent? "So I think if we see a 50-basis point (0.5 percentage point) sell off from here, you're going to start to see some rumblings," Coote said. By "rumblings", Coote is referring to similar financial markets turbulence we saw in April. "I think they're probably looking at those 10-year US Treasury bond yields and if they get to 4.7 per cent, you start seeing people buy bonds and selling equities," he said. "So ... if it keeps creeping up, it's not good for the US economy [because] mortgage rates, financing costs, all that stuff goes up." This is because interest rates in the US, and indeed the world-over, are priced off the US 10-year government risk free bond rate. "That 10-year bond is the most important asset on the face of the planet, I think," Coote said. "It [can't] go too hard one way. So you'd be looking at mortgages at 7 per cent. It's expensive and so it slows the economy down." So, for now, financial markets are cautiously optimistic. But one of Australia's biggest investment banks, Barrenjoey, is concerned something sinister is lurking in the dark corners of the global economy. "So the only thing that investors are really concerned with at the moment is ... we're looking at data in a rear vision mirror of about two months and in the last two months we've had a mass panic over a cataclysmic global event," Andrew Lilley said. "Are we going to see a decline in the economic data that might push the US into a very short and sharp recession? That's the thing that we're still concerned with because sometimes that becomes reflexive. "Sometimes if there's a slowdown that's large enough, even if everybody thought it would only be temporary, you can start to trigger all these other issues. "That means that the recession can start feeding on itself." This financial market turbulence thing? It ain't over.
Zawya
13-05-2025
- Business
- Zawya
Asian markets cheer as pause in US-China trade war boosts risk appetite
TOKYO: Asian stocks joined the global rally and the U.S. dollar held on to most of its gains on Tuesday as investors heaved a sigh of relief after a temporary halt in the trade war between the U.S. and China eased worries of a global recession. Japan's Nikkei soared 2%, touching its highest level since February 25, and tech-heavy Taiwan also rose 2%, while Chinese stocks inched higher in early trading. That left the MSCI's broadest index of Asia-Pacific shares outside Japan at a six-month peak. The S&P 500 rose over 3% while Nasdaq soared 4.3% after the U.S. and China agreed to slash tariffs for at least 90 days. "The real win here was the shift in tone from both the U.S. and China. Words like 'mutual respect' and 'dignity' mark a sharp departure from the recent confrontational rhetoric, and that's what markets are cheering," said Charu Chanana, chief investment strategist at Saxo in Singapore. The U.S. said it will cut tariffs imposed on Chinese imports to 30% from 145% while China said it would cut duties on U.S. imports to 10% from 125%, providing relief to the markets, although concerns linger that tariffs could hurt the global economy. The U.S. dollar surged against the yen, euro and Swiss franc immediately after the agreement was announced but on Tuesday morning was slightly weaker, holding on to most of its gains. Some analysts highlighted the uncertainty caused by the tariffs that remain in place. "A de-escalation was inevitable and I think it's clear there won't be much durable that comes out of these talks," said Christopher Hodge, chief U.S. economist at Natixis. "When all is said and done, tariffs will still be dramatically higher and will weigh on U.S. growth." Ratings agency Fitch estimated that the U.S. effective tariff rate is now 13.1%, a notable decline from 22.8% prior to the agreement but still at levels last seen in 1941 and much higher than the 2.3% it was at the end of 2024. U.S. INFLATION TEST Investor focus will now switch to details of the agreement and what happens after 90 days but before that the spotlight will be on U.S. inflation data later on Tuesday. "Should we be treated to another set of soft CPI figures, it could allow traders to refocus on Fed policy and the potential for cuts, and take some steam out of the dollar's rebound," said Matt Simpson, senior market analyst at City Index. The shift in U.S.-China trade relations has led traders to pare back bets of Federal Reserve rate cuts, inferring that policymakers are likely to be under less pressure to ease interest rates to boost growth. Traders are now pricing in 57 basis points of cuts this year, down from over 100 basis points during the height of tariff-induced anxiety in mid-April. U.S. Treasury yields rose to a one-month high on Monday and were hovering near that level in early trading on Tuesday. The two-year yield was at 3.9873%, while the benchmark 10-year yield was last at 4.4512%. In cryptocurrencies, bitcoin eased 0.5% to $102,146 on Tuesday but remained above the key $100,000 level it breached last week. Oil prices eased a bit on Tuesday after hitting a two-week high in the previous session on trade deal optimism, while gold prices were steady after dropping 2% on Monday as investors exited some of the safe havens.
CNA
13-05-2025
- Business
- CNA
Asian markets cheer as pause in US-China trade war boosts risk appetite
TOKYO: Asian stocks joined the global rally and the US dollar held on to most of its gains on Tuesday (May 13) as investors heaved a sigh of relief after a temporary halt in the trade war between the US and China eased worries of a global recession. Japan's Nikkei soared 2 per cent, touching its highest level since Feb 25, and tech-heavy Taiwan also rose 2 per cent, while Chinese stocks inched higher in early trading. Singapore's Straits Times Index (STI) was up more than 1.5 per cent in early trade. That left the MSCI's broadest index of Asia-Pacific shares outside Japan at a six-month peak. The S&P 500 rose over 3 per cent while Nasdaq soared 4.3 per cent after the US and China agreed to slash tariffs for at least 90 days. "The real win here was the shift in tone from both the US and China. Words like 'mutual respect' and 'dignity' mark a sharp departure from the recent confrontational rhetoric, and that's what markets are cheering," said Charu Chanana, chief investment strategist at Saxo in Singapore. The US said it will cut tariffs imposed on Chinese imports to 30 per cent from 145 per cent while China said it would cut duties on US imports to 10 per cent from 125 per cent, providing relief to the markets, although concerns linger that tariffs could hurt the global economy. The US dollar surged against the yen, euro and Swiss franc immediately after the agreement was announced but on Tuesday morning was slightly weaker, holding on to most of its gains. Some analysts highlighted the uncertainty caused by the tariffs that remain in place. "A de-escalation was inevitable and I think it's clear there won't be much durable that comes out of these talks," said Christopher Hodge, chief US economist at Natixis. "When all is said and done, tariffs will still be dramatically higher and will weigh on US growth." Ratings agency Fitch estimated that the US effective tariff rate is now 13.1 per cent, a notable decline from 22.8 per cent prior to the agreement but still at levels last seen in 1941 and much higher than the 2.3 per cent it was at the end of 2024. US INFLATION TEST Investor focus will now switch to details of the agreement and what happens after 90 days but before that the spotlight will be on US inflation data later on Tuesday. "Should we be treated to another set of soft CPI figures, it could allow traders to refocus on Fed policy and the potential for cuts, and take some steam out of the dollar's rebound," said Matt Simpson, senior market analyst at City Index. The shift in US-China trade relations has led traders to pare back bets of Federal Reserve rate cuts, inferring that policymakers are likely to be under less pressure to ease interest rates to boost growth. Traders are now pricing in 57 basis points of cuts this year, down from over 100 basis points during the height of tariff-induced anxiety in mid-April. US Treasury yields rose to a one-month high on Monday and were hovering near that level in early trading on Tuesday. The two-year yield was at 3.9873 per cent, while the benchmark 10-year yield was last at 4.4512 per cent. In cryptocurrencies, bitcoin eased 0.5 per cent to US$102,146 on Tuesday but remained above the key US$100,000 level it breached last week. Oil prices eased a bit on Tuesday after hitting a two-week high in the previous session on trade deal optimism, while gold prices were steady after dropping 2 per cent on Monday as investors exited some of the safe havens.
Reuters
13-05-2025
- Business
- Reuters
Asian markets cheer as pause in US-China trade war boosts risk appetite
TOKYO, May 13 (Reuters) - Asian stocks joined the global rally and the U.S. dollar held on to most of its gains on Tuesday as investors heaved a sigh of relief after a temporary halt in the trade war between the U.S. and China eased worries of a global recession. Japan's Nikkei (.N225), opens new tab soared 2%, touching its highest level since February 25, and tech-heavy Taiwan (.TWII), opens new tab also rose 2%, while Chinese stocks (.SSEC), opens new tab inched higher in early trading. That left the MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab at a six-month peak. The S&P 500 rose over 3% while Nasdaq soared 4.3% after the U.S. and China agreed to slash tariffs for at least 90 days. "The real win here was the shift in tone from both the U.S. and China. Words like 'mutual respect' and 'dignity' mark a sharp departure from the recent confrontational rhetoric, and that's what markets are cheering," said Charu Chanana, chief investment strategist at Saxo in Singapore. The U.S. said it will cut tariffs imposed on Chinese imports to 30% from 145% while China said it would cut duties on U.S. imports to 10% from 125%, providing relief to the markets, although concerns linger that tariffs could hurt the global economy. The U.S. dollar surged against the yen, euro and Swiss franc immediately after the agreement was announced but on Tuesday morning was slightly weaker, holding on to most of its gains. Some analysts highlighted the uncertainty caused by the tariffs that remain in place. "A de-escalation was inevitable and I think it's clear there won't be much durable that comes out of these talks," said Christopher Hodge, chief U.S. economist at Natixis. "When all is said and done, tariffs will still be dramatically higher and will weigh on U.S. growth." Ratings agency Fitch estimated that the U.S. effective tariff rate is now 13.1%, a notable decline from 22.8% prior to the agreement but still at levels last seen in 1941 and much higher than the 2.3% it was at the end of 2024. Investor focus will now switch to details of the agreement and what happens after 90 days but before that the spotlight will be on U.S. inflation data later on Tuesday. "Should we be treated to another set of soft CPI figures, it could allow traders to refocus on Fed policy and the potential for cuts, and take some steam out of the dollar's rebound," said Matt Simpson, senior market analyst at City Index. The shift in U.S.-China trade relations has led traders to pare back bets of Federal Reserve rate cuts, inferring that policymakers are likely to be under less pressure to ease interest rates to boost growth. Traders are now pricing in 57 basis points of cuts this year, down from over 100 basis points during the height of tariff-induced anxiety in mid-April. U.S. Treasury yields rose to a one-month high on Monday and were hovering near that level in early trading on Tuesday. The two-year yield was at 3.9873%, while the benchmark 10-year yield was last at 4.4512%. In cryptocurrencies, bitcoin eased 0.5% to $102,146 on Tuesday but remained above the key $100,000 level it breached last week. Oil prices eased a bit on Tuesday after hitting a two-week high in the previous session on trade deal optimism, while gold prices were steady after dropping 2% on Monday as investors exited some of the safe havens.
