Investors to gauge global data for insight into world economy beset by trade war

China is planning how to retaliate and has told Washington that it must remove all extra tariffs (Reuters File photo)

The trade war between the U.S. and China continues to loom large over the world economy.

The two negotiating teams are on a break this week after talks ended Friday in Washington, without a deal yet still alive.

President Donald Trump last week boosted duties on more Chinese sales to the U.S. and is paving the way to extending them to all America’s imports from its rival unless Beijing makes concessions and strikes a pact within a month.

Meantime, China is planning how to retaliate and has told Washington that it must remove all extra tariffs, set targets for Chinese purchases of goods in line with real demand, and ensure that the text of the deal is “balanced” to ensure the “dignity” of both nations.

“If the new tariffs stick, U.S. consumers may absorb the costs,” said Tom Orlik, chief economist at Bloomberg Economics. “And China’s central bank, among others, will likely cut interest rates.”

Tariff Impact on the Chinese Economy
With the outlook for global growth now darkening again, investors will look to a series of data from around the world on Wednesday for insight into its recent health.

Here’s our weekly rundown of key economic events:

The trade war aside, there’s plenty of key indicators set for release around the region too this week. On Wednesday, investment, output, retail sales and unemployment numbers from China will give the latest reading on whether the recent stabilization in its economy is holding. Industrial output and retail sales likely eased, according to Bloomberg Economics.

India’s inflation report due Monday is set to show a modest acceleration in prices. And after Australia’s central bank flagged jobs as the determining factor in its interest-rate outlook, Thursday’s employment report takes on extra significance. Indonesia’s central bank also meets Thursday to set monetary policy with economists at this stage expecting no change.

The U.S. and Canada

The main event outside the trade war are April retail-sales data due Wednesday that are expected to be more subdued than March. Economists surveyed by Bloomberg News see sales rising 0.2% after 1.6% in March. Housing starts and several factory reports will give a further sense of second-quarter economic momentum. “The data will likely reflect a tepid pace of activity in the current quarter, as producers struggle to work off a multi-quarter inventory overhang,” said Carl Riccadonna, chief U.S. economist at Bloomberg Economics. Federal Reserve officials Richard Clarida and Eric Rosengren both speak Monday on the central bank’s review of its strategy. The Bank of Canada releases its review of the financial system on Thursday and Governor Stephen Poloz will speak about it.

Europe, Middle East and Africa

Gross domestic product for Germany and bordering countries in eastern Europe will be published on Wednesday. This flurry of data will fill in details that weren’t available when the surprisingly strong euro-zone growth number was revealed at the end of April. It may shed light on whether Europe’s biggest economy is starting to trough after a sharp slowdown that challenged policy makers’ assumptions on the strength of overall expansion and forced them to reactivate the European Central Bank’s stimulus stance.

In the U.K., the first jobs report since the Bank of England threatened faster rate hikes will show how tight the labor market and wages are in an economy facing alleged capacity constraints and a state of constant suspense on how and when it may be severed from its major trading partner. Those data will be published on Tuesday. In Turkey, a series of data releases will provide an update on the economy after a decision to cancel and repeat March’s election for mayor of Istanbul battered the currency and forced the central bank into a back-door interest-rate increase. Industrial production data on Tuesday could give an indication of how long the nation’s recession may last.

Latin America

Faced with a sputtering economy and uncertainty about the approval of a government reform plan, Brazil’s central bank will on Tuesday explain its decision to keep borrowing costs at an all-time low of 6.5% as it releases the minutes of its latest monetary policy meeting. Mexico’s central bank is also expected to remain on the sidelines on Thursday, leaving its benchmark rate on hold at a decade high of 8.25%. “High inflation in April supports the decision to keep monetary conditions tight, countering calls for lower interest rates following weak economic growth,” said Felipe Hernandez of Bloomberg Economics.

In Argentina, data due on Wednesday are likely to show inflation slowing to about 4% in April from the previous month, following President Mauricio Macri’s decision to freeze prices and postpone subsidy cuts.