A widely followed bond market barometer of economic sentiment stirred fears of slowing US economic growth on Tuesday as traders braced for the Federal Reserve raising interest rates at its meeting this month. The yield curve— which reflects the difference between shorter and longer-term US borrowing rates — fell to an 11-year low. When short-term bond yields rise above long-term ones it is seen by some investors as an indicator that monetary policy is too tight. The difference between two and 10-year Treasury yields dropped to under 12 basis points on Tuesday, its lowest level since June 2007. Monday’s 5bp decline was the measure’s biggest fall since March. “People perceive the Fed will continue to tighten despite a possible slowdown,” said Tom di Galoma, a managing director at Seaport Global Securities. “It’s all adding up to an inversion of the yield curve. That points to a recession coming in the next 12 to 18 months.”
The French government said on Tuesday it would suspend planned fuel tax increases for six months in response to violent protests against the measures by the so-called gilets jaunes movement. Edouard Philippe, prime minister, announced the moratorium on the tax increase, scheduled for January 1, after meeting MPs from the governing party. “These decisions must ease tensions and bring back serenity to the country,” Mr Philippe said in a televised address. “No tax deserves to endanger the unity of the nation.” The move marks the first time in Emmanuel Macron’s 18-month presidency that he has backed down on measures in the face of street protests, and comes as he faces record low approval ratings.
Qatar plans to quit Opec from next year as relations with its Arab neighbours sour, ending a near six-decade-long membership of the oil price cartel. The emirate’s oil minister told reporters on Monday the decision to leave the group of big oil exporting countries had come after Qatar reviewed the ways it could enhance its role abroad while shifting the focus of the country towards gas. The move comes amid a deteriorating political situation between Qatar and its neighbours. Four Arab states — Saudi Arabia, the United Arab Emirates, Bahrain and Egypt — have imposed a trade and travel embargo on the country since June last year over allegations that Qatar supports terrorism. However, Saad al-Kaabi, Qatar’s oil minister, insisted the decision to quit Opec, which the country joined in 1961, was not linked to the political and economic boycott.
Donald Trump, the US president, and Xi Jinping, China’s president, are facing hurdles in building on the fragile truce they reached in their trade war, after the two countries left many thorny issues unresolved and offered different interpretations of the agreement. In a much-anticipated working dinner in Buenos Aires following the G20 summit, Mr Trump and Mr Xi agreed on Saturday to a temporary ceasefire, in which the US president suspended his decision to impose higher tariffs on Chinese imports next year. Mr Trump suggested on Sunday night that the US had won one concession during the talks from Beijing on duties on the import of cars from the US into China. “China has agreed to reduce and remove tariffs on cars coming into China from the US,” Mr Trump wrote on Twitter on Sunday, without providing a timeline or any further details. Beijing did not immediately confirm any change in duties.
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March 2021
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