London (CNN Business) – The markets closed last week on an anxious note. It is not difficult to see why: coronavirus continues to spread, and there are signs that some of the world’s major economies could fall into recession as the outbreak worsens preexisting weaknesses.
Take for example Japan: the third largest economy in the world fell 1.6% in the fourth quarter of 2019 as the country absorbed the effects of an increase in sales taxes and a powerful typhoon. It was the biggest contraction compared to the previous quarter since 2014.
Then there is Germany. The largest economy of Europe had a halt just before the outbreak of coronavirus, dragged by the troubled factories of the country. Germany’s ZEW indicator, observed closely, declined sharply in February, reflecting the fear that the virus could affect world trade.
Bank of America economist Ethan Harris points out the amount of smaller economies that are also suffering. Hong Kong is in recession and Singapore may soon suffer a similar fate. GDP data for the fourth quarter of Indonesia They reached a minimum in three years, while Malaysia had its worst reading in a decade, it told customers on Friday.
Meanwhile, growth engines such as China and India slowed in 2019. Fourth quarter GDP data for the latter will come out this week.
READ: The economic impact of the coronavirus in China and the world
All this highlights concerns about the ability of the global economy to withstand a shock of the coronavirus. Harris says the weak quarter was probably the result of persistent damage from the Chinese-American trade war and U.S. The coronavirus is ready to make things worse.
“Global equities recovered as the United States and China converged on a ceasefire, but companies with global supply chains remain very uncertain,” he said.
On the radar: even the United States may not be in a position as strong as previously thought. IHS Markit said Friday that the US service sector. UU. it contracted in February, and the reading reached a minimum in 76 months. It is the first time that the sector contracts in four years.
President Trump heads to India while trade tensions heat up
President Donald Trump is scheduled to arrive in India on Monday for a state visit with the Prime Minister of India, Narendra Modi.
In the end: a commercial beer struggle between the United States and one of the most crucial emerging economies in the world.
Last year, the Trump administration ended the special trade deal for India, eliminating a state that exempted billions of dollars of the company’s products from US tariffs. India increased tariffs on US exports in response.
READ: “I’ve never seen him eat a vegetable ”: a meatless menu awaits Trump in India
Since then, the United States has been busy with other trade conflicts, that is, achieving a truce with China. But after a “phase one” agreement with Beijing, the dispute with India could receive renewed attention. That could mean an agreement to step back, or a failure in communication and further escalation.
Expectation management: Larry Kudlow, Trump’s chief economic advisor, told reporters on Friday that they did not expect a large business component during the visit. “I think he can see his public willingness to negotiate with India,” he said. “He and Modi are friends.”
But Trump has also regularly called his friend to the president of China, Xi Jinping.
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