We are at the beginning of a second big transition. Our economies, our work and our lives will change hugely as we slowly adjust to the new demands of a technological age that could go one of two ways: towards a brutalised form of capitalism, or an inclusive one. It is a massive political responsibility for world leaders, but a neglected one.
For centuries, the Chinese state has governed its distant ethnic frontiers with both carrot and stick. In the past, emperors proffered ‘imperial grace’ (Ä“n) for those ‘barbarians’ willing to submit (at least nominally) to Chinese dominion, while reserving the right of ‘imperial might’ (wÄ“i) for those who resisted.
The US corporate earnings season is almost half over. Fears that the US S&P 500 would report the first decline in income since 2009 have eased.
One of the key reasons is that operating margins appear to have improved more than anticipated. Many had seemed to exaggerate the impact of the dollar’s appreciation. It is true that many corporations have cited the dollar’s rise as a factor dampening the value of their foreign sales. However, many analysts have confused this with a comprehensive evaluation.
The US dollar remains on the defensive even after both Japan and the UK disappoint. Japan reported an unexpected 1.9% decline in March retail sales. The UK’s initial estimate of Q1 15 GDP was 0.3%, below expectations for a 0.5% expansion, and half the pace of Q4 14 growth.
The market’s response has been limited. The dollar’s trading range is a little more than 10 pips around JPY109.00. Sterling initially fell about half a cent on the disappointment but quickly resurfaced back above the $1.5200 level.
Over the past decade, many developing countries have made substantial progress toward reducing poverty, and remittances sent by migrant workers have hugely contributed to this progress.
The Asian Infrastructure Investment Bank (AIIB) has become part of Xi Jinping’s ‘Chinese Dream’ of national rejuvenation. The United States’ failure to block other developed economies from joining the AIIB seems to have brought this part of the ‘Chinese dream’ closer to its realisation. But it is way too early to celebrate. A bigger AIIB does not necessarily mean a better one. Beijing must prepare to play an institutional game with other members inside the AIIB.
Japanese Prime Minister Shinzo Abe’s weeklong visit to the United States this week and his speech on Wednesday to a joint session of the US Congress represent an unusual opportunity for Japan’s diplomacy. Abe is the first Japanese prime minister to address a joint meeting of Congress.
Japanese Prime Minister Shinzo Abe and his Liberal Democratic Party (LDP) are negotiating with their coalition partner, Komeito, to introduce legislation recognising a limited exercise of collective self-defence. There is rising anxiety about Japan’s neighbours’ perception of this endeavor and what effect this will have on regional stability, given the Abe cabinet’s right-wing revisionist views of Japan’s history.
With several central bank meetings this week, including the Federal Reserve, and Q1 GDP figures from the UK, US and Spain, and month-end position adjustments, ahead of the May 1 holiday, it promises to be an eventful week. However, it gets off to a slow start. The US dollar is firmer, but largely confined to its pre-weekend ranges. The US dollar is trading within a range around a half a big figure against all the major currencies.
There have been three developments to note today.
A disappointing string of data challenges ideas that the US economy had returned to a growth path that was sufficiently strong enough to permit the Federal Reserve to begin normalizing monetary policy. This will culminate with the first estimate of Q1 GDP on April 29. There still seems to be some downside risk to the consensus of 1.0% annualized growth.
