Brace for world economy’s most important week of 2018


LONDON • The world economy’s most important week of the year?

That’s what Bank of America Corp strategists asked clients in a report ahead of five days of presidential standoffs, trade tensions and central bank meetings.

Each carries the potential to propel financial markets and shape the outlook for global growth after signs it slowed in the first quarter.

So here’s what to watch for:

Investors get their first opportunity to pass judgement on what happened at the summit of leaders from the Group of Seven (G-7). The gathering ended with US President Donald Trump broadsiding allies via Twitter, undermining the bloc and potentially causing fresh friction over trade.

Trump and North Korea leader Kim Jong-un convene in Singapore for their on-off summit, the first such meeting ever.

Trump last week predicted “great success” and said it’s possible he could sign an agreement with Kim to formally end the Korean War.

Back in Washington, the government releases a monthly report on inflation that will be a key gauge of how hot — or not — the US economy is getting.

UK Prime Minister Theresa May’s flagship Brexit legislation returns to the lower House of Commons after receiving a battering in the upper House of Lords, where it was amended 15 times. Ministers will be trying to overturn most of those defeats, with a combination of compromises and attempts to win rebel pro-European Union lawmakers round. In two days of debating and votes tomorrow and Wednesday, the key questions are about what kind of vote Parliament gets on the final Brexit deal, and whether Britain should be trying to stay in a customs union.

The US Federal Reserve is set to hike its benchmark interest rate for a second time this year.

Chairman Jerome Powell holds a press conference, and he and his colleagues will also publish new projections which could show them tilting toward four increases this year as a whole, rather than the three they hinted at in March. Elsewhere, Argentina’s central bank is expected to keep its benchmark rate 40% as it tries to stabilise the peso.

Also today, Italy’s auction of debt will draw scrutiny by handing investors another opportunity to react to the election of the populist government and its promises of hefty spending increases. The risks for the securities are already seen in the fact that the gap between Italian 10-year yields and those of Spain is at its widest since 2012. In the UK, inflation data will help the Bank of England determine whether to raise interest rates.

The European Central Bank is shifting closer to the end of its bond-buying programme with Thursday’s meeting of policymakers poised to hold the first formal talks on when and how to do it. About a third of respondents to a Bloomberg survey of economists predicted president Mario Draghi will set an end-date for purchases today, while 46% said he will wait until July to reveal details.

Vladimir Putin, the Russian president, and Mohammed Salman, the powerful Saudi crown prince, meet at the opening game of the World Cup soccer tournament. The encounter could influence the global oil market given it comes a week before a crucial OPEC meeting in Vienna, providing a last-minute chance for the two leaders to iron out a possible oil-output increase.

China releases retail sales and industrial production data which will shed light on the strength of the world’s second largest economy.

The Bank of Japan (BoJ) is likely to end the week exactly where it started with no tightening of monetary policy on the agenda. The BoJ is still buying vast quantities of Japanese government bonds and will have been encouraged to keep doing so by data showing its still far off its 2% inflation target and that the economy shrank in the first quarter.

June 15 is the deadline for the US to publish the final list of Chinese products subject to US$50 billion (RM200 billion) in tariffs, which could be imposed shortly after. Also today, the Russian central bank sets interest rates with economists currently leaning toward no change in the 7.25% benchmark although there is a chance of a cut.