Latest news with #globalrecession
RNZ News
28-06-2025
- Politics
- RNZ News
OMG! Is it WW3?, AI telling us what we want to hear
It was hard for media all around the world to work out what happened in the Middle East. But claims that WW3 and global recession might be upon us here were rolled back within a day. Also: Chat GPT's been accused of lying, making stuff up and gaslighting a UK journalist while Google's AI seems to be telling us what we want to hear. Is AI human after all?
South China Morning Post
25-06-2025
- Business
- South China Morning Post
Twin shocks of Israel-Iran war, Trump tariffs bring global recession closer
The outbreak of a new war in the Middle East, together with a destructive tariff war, makes for a lethal combination in a sluggish world economy. Notwithstanding the tentative ceasefire , the odds of imminent global recession have increased sharply. Advertisement One shock was bad enough. US President Donald Trump's tariffs imply downside risks to global growth. But the potential for a second shock – a war between Israel and Iran that has now ensnared the United States – compounds the problems for an increasingly vulnerable world economy. It fits with my theory of cyclical risk: it doesn't take much to tip an economy nearing 'stall speed' into outright recession This simple rule has worked remarkably well in predicting global recessions over the past 45 years. Unlike a recession in an individual economy, which generally reflects a contraction of real output, one at the global level typically involves about half the world's economies contracting while the remainder continue to expand. As a result, a worldwide recession is usually associated with global gross domestic product growth slowing to the still positive 2-2.5 per cent range – a shortfall of 0.8 to 1.3 percentage points from the post-1980 trend of 3.3 per cent. The exceptions were in 2009 and 2020, when the global financial crisis and the Covid-19 pandemic , respectively, caused outright contractions in global output. The stall speed holds the key to cyclical risk assessment. It can be thought of as a zone of vulnerability, measured by significant downside deviations from trend growth. Looking back over the past 45 years, I would place the global economy's stall speed in the 2.5-3 per cent range: when in this zone, the world lacks the resilience needed to withstand a shock. That is what happened in each of the past four global recessions. A trader reacts on the trading floor of the Indonesia Stock Exchange in Jakarta on October 8, 2008, after Indonesia's benchmark stock index plunged 10 per cent on fears about the global financial crisis. Photo: AP Fast-forward to today. According to the International Monetary Fund's latest World Economic Outlook, global GDP growth is expected to slow to 2.8 per cent in 2025 – right in the middle of the stall-speed zone. Whereas recent global recessions were the result of single shocks, today the world economy could be hit by two: a tariff war and a kinetic war in the Middle East . The possibility of a double-shock combination only increases the odds of global recession; in forecasting circles, it's as close to a smoking gun as you can get.
Yahoo
18-06-2025
- Business
- Yahoo
‘Big Short' investor warns the precarious tariff environment reminds him of WWI—and a trade war would send the U.S. into a recession
Should failed tariff negotiations lead to a trade war, the global economy is likely headed toward a recession, The Big Short investor Steve Eisman told CNBC this week. Eisman said the tariffs were the 'only real risk' to the markets and warned the U.S. should be especially concerned with negotiating with the European Union ahead of the approaching July 9 trade-deal deadline. Global markets will enter dire economic straits if President Donald Trump's ongoing tariff stance leads to an all-out trade war, warns billionaire investor Steve Eisman. The former managing director of Neuberger Berman—who successfully anticipated and profited from the 2008 stock market crash, and whose profile served as the basis for Michael Lewis' book (and later, the 2015 film) The Big Short—said in a CNBC interview on Tuesday the U.S. economy and markets will flourish if the Trump administration is able to facilitate truces with the various nations on which he has imposed tariffs. But if that doesn't happen, 'chances are, we go into a global recession.' 'The tariffs and the potential for a trade war, I think, is really the only risk to the market right now,' Eisman said. 'It's completely binary, and I really have no way of handicapping it.' Trump's whipsaw tariff decisions have rattled both consumers—who have sharply cut back on spending as a result of the levies—and investors, who, like Eisman, see tariffs as a threat to the global economy. A Bank of America Global Fund Manager Survey published this week found 47% of the 222 fund managers surveyed said they believed a global recession as a result of a trade war was the biggest 'tail risk' to markets. Trade deals, such as with the UK and a tentative truce with China, have tempered these concerns. JPMorgan Research lowered its probability of U.S. and global recessions from 60% to 40% at the end of May, citing decreased trade tensions as a result of Trump slashing Chinese tariffs. The U.S., however, has yet to resolve its trade issues with the European Union ahead of a crucial July 9 deadline. Eisman drew similarities between the rocky trade environment and lead-up to World War I, likely referring to a series of treaties forged in the decades before the war designed to settle regional skirmishes that, in reality, created two massive, and eventually opposing, alliances. 'Nobody wanted World War I, and yet, because of all the reciprocal treaties that existed between countries, they somehow ended up there,' he said. 'I don't think anybody wants a trade war, but it's certainly possible.' Though trade talks with China have taken center stage, Eisman argued the process of solidifying trade relations with Europe is 'more interesting,' given the EU's concerns with regulations, as well as value-added tax (VAT). With 27 member states, the EU has to balance myriad agendas, complicating a potential trade deal. 'Negotiating with Europe is like trying to herd cats given the way they're structured,' Eisman said. Trump has claimed the EU was created to 'screw' the U.S., threatening to impose, then later pausing, a 50% tariff on the union. As part of negotiations, the administration has tried to pressure the EU to loosen tech regulations he claims are inhibiting growth of U.S. companies. Trump also opposes VAT, essentially a sales tax that accumulates through each stage in a product's supply chain. The president has interpreted VAT as another trade barrier, arguing the tax puts undue financial pressure on U.S. businesses trying to export to Europe. Trump has signaled that the U.S. is not yet satisfied with provisions of the agreement, telling reporters on Tuesday, 'We're talking, but I don't feel that they're offering a fair deal yet.' Trump's former commerce secretary Wilbur Ross warned that after successful negotiations with China and the U.K., the Trump administration may become overconfident in negotiations with the EU, pushing away European allies. 'One fear is that if our government feels too chesty with their progress, they may overplay the hand and get to levels that are hard—maybe even impossible—for the other countries to give in,' Ross told Fortune last week. 'This is going to be hard, but our country's goal should be to help make European nations stronger and keep them close,' he added. This story was originally featured on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Entrepreneur
11-06-2025
- Business
- Entrepreneur
World Bank Cuts India's 2025-26 Growth Forecast to 6.3% Amid Global Trade Strains
The report emphasizes that while a global recession is unlikely, the decade may still end with the weakest seven-year growth stretch since the 1960s You're reading Entrepreneur India, an international franchise of Entrepreneur Media. India's economic growth forecast for 2025-26 has been revised downward by the World Bank to 6.3 per cent, a reduction from its earlier projection of 6.7 per cent in January, as weakening global demand and rising trade barriers weigh on exports. Despite the downgrade, India is still expected to remain the fastest-growing major economy, according to the Bank's latest Global Economic Prospects report released Tuesday. The revised outlook reflects growing concerns about global economic headwinds. "India is projected to maintain the fastest growth rate among the world's largest economies, at 6.3 per cent in FY25-26," the report said. However, it noted that exports are dampened by weaker activity in key trading partners and rising global trade barriers, leading to the downgrade. The broader context is one of global slowdown. The report projects global GDP growth to decelerate to 2.3 per cent in 2025, the slowest pace since 2008 outside of formal recessions. Heightened trade tensions and policy uncertainty are expected to drive global growth down this year. Growth forecasts have been cut for nearly 70 per cent of countries, spanning all regions and income levels. In South Asia, growth is already showing signs of fatigue. Following a lower-than-expected 6 per cent growth in 2024, the region's economy is forecast to slow to 5.8 per cent in 2025, with trade barriers, investor unease, and financial volatility dampening momentum. The World Bank noted that activity in South Asia is decelerating amid rising global trade barriers, heightened policy uncertainty, and financial market volatility. India's current economic performance has been uneven. While construction and services remained steady, and agricultural output rebounded after droughts, industrial output growth has slowed. Investment growth is also projected to weaken in the coming fiscal year, driven in part by surging global policy uncertainty. Still, the medium-term outlook remains cautiously optimistic. Growth is expected to recover to 6.6 per cent in FY26-27 and FY2027-28, helped by a strong services sector and a potential rebound in exports. However, the projection for FY26-27 has also been revised slightly downward to 6.5 per cent, 0.2 percentage point below earlier estimates. The report emphasizes that while a global recession is unlikely, the decade may still end with the weakest seven-year growth stretch since the 1960s. To counter the drag from rising trade frictions, it advises developing nations to diversify trade relationships and strengthen fiscal policies focused on vulnerable populations.
ABC News
15-05-2025
- Business
- ABC News
Donald Trump's economic agenda could irritate the money market into catastrophe
There are few signs the global financial system is on the brink of collapse… except for one key indicator. The bond market is flashing red. It's easy to get lost in the confusion and chaos of Donald Trump's economic agenda, but there's one consistent thread you can follow. Part of Trump's plan to make America great again is to lower the US budget deficit and thereby reduce foreign debt. This frees the world's biggest economy to spend big again, without the debt that comes with it. But this relies on finding new, significant, steady streams of income. Enter: reciprocal tariffs. The bond market, however, is proving a key barrier to their successful implementation. And if Trump's economic agenda continues to irritate the money market, the result could be catastrophic for the global economy. A few major economic events transpired in early April. Trump announced reciprocal tariffs on about 90 countries, including China and the European Union. The size and scope of the tariffs surprised financial markets. Share markets across the globe crashed due to fears the tariff hikes would ground trade, generate inflation and produce a produce a global recession. Crucially though, the bond market, from April 7, began to dive. Hedge funds — firms that make money from often complex trades — found themselves in a spot of bother. They had been making money by profiting from the difference between bond market futures and the spot or cash market. It's dubbed the "basis trade". Think buying apples cheaply from the kids' lemonade stand down the road and selling them at the big grocery store up the road, and pocketing the difference. It's called arbitrage. Hedge funds employing the popular "basis trade" strategy found themselves forced sellers in early April as soaring volatility and tightening financing conditions rattled markets. The trade had become so well-known and the margins so thin, these hedge funds had borrowed hundreds of billions of dollars to magnify what would otherwise be small profits. It caused a huge bond sell-off and the yields or interest rates on those bonds then spiked. Bond prices move in the opposite direction to yields. It was all too much for the US president. He framed it the other way around, suggesting the markets got a bit "yippy" or anxious. He began winding back his tariff rhetoric, explaining "deals" were on the way and reassuring financial markets it'd all be ok. Financial market volatility remained as various "deals" were made public, including with the UK, but the latest talks with China seemed to be a game changer. The world's two biggest economies agreed to pause their big, threatened tariffs for 90-days, leaving a 30 per cent tariff on Chinese goods entering the US. Financial markets loved it. It was a massive relief for them and provided some much-needed certainty, at least for the short-term. But — and that's a big "but" — like the game of whack-a-mole, it's produced another problem: US Treasury bond yields are climbing again. That's because investors are selling bonds and using the cash to buy stocks, with a renewed sense of optimism about the future. "The two markets often seem to look at different things and that's the case right now — US shares are celebrating the tariff backdown and bonds are starting to worry more about the US budget deficit with maybe still concerns about US economic policy and its safe haven status," AMP's head of investment strategy Shane Oliver said. "The deficit is now a bigger problem because the tax package is coming into view and tariff revenue and DOGE spending savings look like being smaller. "I suspect that the renewed rise in the bond yield could become more of a problem for shares, especially with shares now overbought after their huge rebound. "US exceptionalism looks to be back — well, maybe temporarily — for US shares, especially technology shares, but maybe not bonds!" And here's the key point. Earlier in April the unwinding of the bond market related to fears the US government was losing fiscal credibility. It saw a highly unusual environment where both shares and bonds were sold off. "What we had was bond yields rising at the same time that equity prices were falling," Barrenjoey chief interest rate strategist Andrew Lilley said. "So the problem wasn't increasing bond yields per say. The problem was that is an indication that everybody is very pessimistic about the economy — so pessimistic that bonds are no longer even a safe haven," he said. This time around bond yields and longer-term interest rates are rising because investors are gaining more confidence in the economic outlook. The problem is that, in the current highly volatile financial environment, the return to attractive US debt could cause further global economic shock waves, said Jamieson Coote Bonds co-founder Angus Coote. "I think anything over 5 per cent [for US 10-year US Treasury yields] becomes problematic for not necessarily US government — it will always be able to finance itself. That's the privilege that they have with that. "But I think the problem is more ... mortgages and stock markets and infrastructure, everything else that's passed off that 10-year [bond return]. "The [10-year US Treasury bond] — if that's getting above 5 per cent," and it's 4.5 per cent, "then that's a very high hurdle for investments to be compared against." In other words, why would you gamble with a stock market return of, say, 7 per cent when the US government in guaranteeing a return of 5 per cent? "So I think if we see a 50-basis point (0.5 percentage point) sell off from here, you're going to start to see some rumblings," Coote said. By "rumblings", Coote is referring to similar financial markets turbulence we saw in April. "I think they're probably looking at those 10-year US Treasury bond yields and if they get to 4.7 per cent, you start seeing people buy bonds and selling equities," he said. "So ... if it keeps creeping up, it's not good for the US economy [because] mortgage rates, financing costs, all that stuff goes up." This is because interest rates in the US, and indeed the world-over, are priced off the US 10-year government risk free bond rate. "That 10-year bond is the most important asset on the face of the planet, I think," Coote said. "It [can't] go too hard one way. So you'd be looking at mortgages at 7 per cent. It's expensive and so it slows the economy down." So, for now, financial markets are cautiously optimistic. But one of Australia's biggest investment banks, Barrenjoey, is concerned something sinister is lurking in the dark corners of the global economy. "So the only thing that investors are really concerned with at the moment is ... we're looking at data in a rear vision mirror of about two months and in the last two months we've had a mass panic over a cataclysmic global event," Andrew Lilley said. "Are we going to see a decline in the economic data that might push the US into a very short and sharp recession? That's the thing that we're still concerned with because sometimes that becomes reflexive. "Sometimes if there's a slowdown that's large enough, even if everybody thought it would only be temporary, you can start to trigger all these other issues. "That means that the recession can start feeding on itself." This financial market turbulence thing? It ain't over.
