China Stimulus Hopes is This Week’s Most Influential Story So Far

There hasn’t been much volatility this week in the financial markets but that’s not because of the lack of news. This week’s key events have been spread across the globe.

United States

The partial U.S. government shutdown is now the longest ever and has left some 800,000 government employees furloughed or working without pay.

CNBC is reporting “The shutdown has been putting a strain on several U.S. airports as the absentee rate of Transportation Security Administration (TSA) screeners climbs. Some of the nation’s busiest airports have closed down security checkpoints, leading to long lines for travelers, due to staffing shortfall.”

“The partial U.S. government shutdown will cost Delta Air Lines about $25 million in revenue this month as fewer government contractors and employees are traveling,” the airline’s CEO Ed Bastian, said Tuesday.

According to a White House official, if the shutdown lasts the rest of the month, it could subtract a sizable half a percentage point from the gross domestic product. Wall Street economist estimates are calling for around a 0.1 percentage point cut to growth every two weeks.

Euro Zone

According to the Federal Statistics Office (Destatis), Germany’s economy witnessed lackluster growth in 2018, flash data released Tuesday showed. This was in line with expectations. German GDP grew 1.5 percent in 2018, compared with 2.2 percent in 2017. The figures point to the weakest rate of growth in five years. The Euro weakened on the news.

UK

In the UK, Prime Minister Theresa May’s plan on how Britain should exit the European Union was overwhelmingly voted down in the House of Commons.

Experts say the British government now has just three working days to map out a new plan of action. Some politicians from the country’s biggest opposition party believe a second referendum is now increasingly likely.

“The critical issue is now that she’s been defeated in the House of Commons, what does Theresa May do and I think, there’s only one way she can really go now – and that’s towards a referendum to give the people a chance to sort out this crisis,” Andrew Adonis, a Labour member of parliament who previously served as U.K. transport minister and education minister, told CNBC on Wednesday.

China

China on Tuesday signaled more stimulus measures in the near term. The National Development and Reform Commission (NDRC) said in a statement that China will aim to achieve “a good start” in the first quarter. Stock market and crude oil traders read this as an indication the government is ready to counter rising pressure. Central bank and finance ministry officials gave similar assurances.

“Further economic stimulus measures will be needed. The authorities seem to be taking their time to deliver this, perhaps chastened by the overkill of their stimulus in the financial crisis,” ING economists said in a note to clients.

The amount of stimulus some analysts are floating out there is 2 trillion yuan ($296.21 billion) worth of cuts in taxes and fees. Furthermore, China may allow local governments to issue another 2 trillion yuan in special bonds largely used to fund key projects, according to Reuters.