At Least 7 Major Economies Will Hit Recession in the Next 12 Months
According to the latest report by research firm Nomura.
< 1 min
Six major economies will join the U.S. in falling to recession in the coming year, according to new research by Nomura.
The euro area, the U.K., Japan, South Korea, Australia, and Canada will also see economic growth contract, economists led by Rob Subbaraman wrote in a note. Tightening monetary policy, faster inflation, and worsening financial conditions are the main reasons for the downturn, they said.
Furthermore, the world economy’s “synchronised growth slowdown” means that countries won’t be able to rely on exports to pull them back into expansion.
China, the world’s second-biggest economy, may avoid another economic contraction after emerging from one in the second quarter of this year. The recession in the U.S. and the euro area will start in the fourth quarter, the team of economists wrote.
Central banks, led by the Federal Reserve, will remain focused on bringing down inflation even if it sacrifices economic expansion. Inflation will nevertheless remain sticky as price pressures have broadened after a surge in commodity prices.
“We expect central banks to err on the side of tightening too much than too little in order to regain their credibility,” the note said. After raising the key rate as high as 3.75% in February, the Fed will start cutting rates by 0.25 point a meeting starting in September 2023. The Nomura economists’ forecast also includes rate reductions from Australia, the U.K., Canada, South Korea, and the euro area.
Reprinted by permission of Barron’s. Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: July 4, 2022.
Copyright 2020, Dow Jones & Company, Inc. All Rights Reserved Worldwide. LEARN MORE
This stylish family home combines a classic palette and finishes with a flexible floorplan
Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.
The latest round of policy boosts comes as stocks start the year on a soft note
2 min
China’s securities regulator is ramping up support for the country’s embattled equities markets, announcing measures to funnel capital into Chinese stocks.
The aim: to draw in more medium to long-term investment from major funds and insurers and steady the equities market.
The latest round of policy boosts comes as Chinese stocks start the year on a soft note, with investors reluctant to add exposure to the market amid lingering economic woes at home and worries about potential tariffs by U.S. President Trump. Sharply higher tariffs on Chinese exports would threaten what has been one of the sole bright spots for the economy over the past year.
Thursday’s announcement builds on a raft of support from regulators and the central bank, as officials vow to get the economy back on track and markets humming again.
State-owned insurers and mutual funds are expected to play a pivotal role in the process of stabilizing the stock market, financial regulators led by the China Securities Regulatory Commission and the Ministry of Finance said at a press briefing.
Insurers will be encouraged to invest 30% of their annual premiums earning from new policies into China’s A-shares market, said Xiao Yuanqi, vice minister at the National Financial Regulatory Administration.
At least 100 billion yuan, equivalent to $13.75 billion, of insurance funds will be invested in stocks in a pilot program in the first six months of the year, the regulators said. Half of that amount is due to be approved before the Lunar New Year holiday starting next week.
China’s central bank chimed in with some support for the stock market too, saying at the press conference that it will continue to lower requirements for companies to get loans for stock buybacks. It will also increase the scale of liquidity tools to support stock buyback “at the proper time.”
That comes after People’s Bank of China in October announced a program aiming to inject around 800 billion yuan into the stock market, including a relending program for financial firms to borrow from the PBOC to acquire shares.
Thursday’s news helped buoy benchmark indexes in mainland China, with insurance stocks leading the gains. The Shanghai Composite Index was up 1.0% at the midday break, extending opening gains. Among insurers, Ping An Insurance advanced 3.1% and China Pacific Insurance added 3.0%.
Kai Wang, Asia equity market strategist at Morningstar, thinks the latest moves could encourage investment in some of China’s bigger listed companies.
“Funds could end up increasing positions towards less volatile, larger domestic companies. This could end up benefiting some of the large-cap names we cover such as [Kweichow] Moutai or high-dividend stocks,” Wang said.
Shares in Moutai, China’s most valuable liquor brand, were last trading flat.
The moves build on past efforts to inject more liquidity into the market and encourage investment flows.
Earlier this month, the country’s securities regulator said it will work with PBOC to enhance the effectiveness of monetary policy tools and strengthen market-stabilization mechanisms. That followed a slew of other measures introduced last year, including the relaxation of investment restrictions to draw in more foreign participation in the A-share market.
So far, the measures have had some positive effects on equities, but analysts say more stimulus is needed to revive investor confidence in the economy.
Prior enthusiasm for support measures has hardly been enduring, with confidence easily shaken by weak economic data or disappointment over a lack of details on stimulus pledges. It remains to be seen how long the latest market cheer will last.
Mainland markets will be closed for the Lunar New Year holiday from Jan. 28 to Feb. 4.
This stylish family home combines a classic palette and finishes with a flexible floorplan
Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.
