SThe Tock markets have been dreading a series of warning signals in major economies. At least this week there was a reversal of the US bond yield curve and news of a decline in the German economy. Here is a guide to trouble spots in the global economy that investors are dealing with.
The US is at the center of global stock market sales. Investors overlook that the International Monetary Fund expects the G7 economies to show the fastest growth of 2.6% this year, and this has not done a lower unemployment since Neil Armstrong hit the moon in 1969. Instead, Wall Street fears that higher US Federal Reserve rates, the waning effects of tax cuts and the trade war with China are driving the economy into recession.
The United Kingdom
The inclusion of the UK in the list of problem countries can be limited to one word: Brexit. The economy contracted by 0.2% in the second quarter as inventories accumulated ahead of the original EU departure date of 29 March. Strong employment growth and rising real wages may be enough to stimulate growth in the third quarter, but a disinterested Brext on 31 October could have a significant impact on Britain, the EU and the rest of the world.
Europe's most prolific exporter has noted that demand for machine tools, trucks and cars has declined sharply over the past year, especially from China. The slump in exports led to GDP declining by 0.1% in the second quarter. Business confidence dropped so dramatically that it reached its lowest level since the 2008 financial crash last month. Even so, after a decade of budget surpluses, the government has a lot of money and companies are not heavily in debt. So you have the power to survive storms.
Officially, China is growing at more than 6% a year, but the reality is worse than the headlines suggest. The country's president, Xi Jinping, is trying to change China to slower but higher growth. This process is hampered by the fragility of Chinese companies and banks for tighter credit conditions and the impact of Donald Trump's tariffs, which lead to a weakening of factory production and a slowdown in exports. China announced this week that industrial output reached a 17-year low in July.
The Brazilian domestic economy looks quite robust, but this has not prevented stocks and currency from coming under strong pressure. The largest economy in Latin America is hampered by problems in other parts of the world: its close neighbor Argentina is in financial collapse, slower growth in China means a decline in demand for Brazil's abundant natural resources, and there is concern that exports to the country are also in decline US will be stifled by a slowdown in the world's largest economy.
The return of Cristina Fernández de Kirchner, the controversial former left-wing president of Argentina, to political significance has put investors on the run. In a pre-election poll, she and her colleague, populist candidate Alberto Fernández, were on the right path to beat incumbent President Mauricio Macri, struggling to put the country's finances in order. The government has recently borrowed heavily and wasted most of its money on vanity projects and subsidies to important constituencies. Fernández and Kirchner are not questioned by the investors. There is already a sales signal for the country based on the assumption that the country will be in arrears in the event of a takeover.
A recovery in 2017 turned out to be brief when Rome argued with Brussels for its state budget and corporate confidence. The threats of leaving the euro and possibly the European Union as a whole may have disappeared from the rhetoric of Matteo Salvini, leader of the League Party, but corporate confidence remains. A banking sector burdened with bad debts and a corporate sector that is competing and losing with Chinese competitors are likely to cause a period of decline.
Singapore's economy is expected to fall into recession in the third quarter of 2019. It is due to the US-China trade war that continues to shake the Southeast Asian nation after confirming second-quarter growth this week. 3.3%. The city-state of 5.5 million people is a financial center that stores hundreds of billions of dollars in foreign savings. It was therefore a shock to investors that the decline in sales of manufactured goods to China could easily come to a standstill. A decline in Chinese tourists also hit the wholesale and retail trade.