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Bond yields tumbled, supply chains are shifting, and the U.S. is no longer the world’s most competitive economy. Good morning. Jeff Sparshott here to take you through key developments in the global economy. Send us your questions, comments and suggestions by replying to this email.
Run to the Hills
Investors around the world pushed government bond yields near multiyear lows Tuesday, reflecting growing concern that global economic growth is slowing, Daniel Kruger and Sam Goldfarb report.
- Tepid economic data, geopolitical tensions and signs of caution from the Federal Reserve combined to worry investors and push the yield on the 10-year note to its lowest close since September 2017.
- Few see an imminent recession but many investors worry that economic growth could falter as the effects of Trump administration tax cuts fade, companies cut back on spending and higher tariffs restrict global trade.
- The 10-year fell further below the yield on the three-month note Tuesday, a phenomenon known as an inverted yield curve that has preceded every recession since 1975. But Fed officials would need to see a sustained inversion before they panic, and some investors prefer to watch the gap between 10- and two-year notes.
WHAT TO WATCH TODAY
The Bank of Canada releases a rate announcement at 10:00 a.m. ET. The U.S.-China trade dispute is likely to keep policy on hold.
The Richmond Fed’s manufacturing survey for May is expected to tick up to 5.5 from 3 a month earlier. (10 a.m. ET)
TOP STORIES
And the Winner Is…
Who really pays the cost of President Trump’s new tariffs on China? U.S. importers and consumers? Or China, by charging lower prices? A new report from New York Federal Reserve economists, together with U.S. import data, suggests a preliminary verdict: Both sides will pay. China won’t export as much, while U.S. buyers will face higher prices. The real winners are China’s neighbors: South Korea, Taiwan and Southeast Asia, Nathaniel Taplin reports.
No Manipulation
The Treasury Department passed on a chance to designate China as a currency manipulator but continued to highlight the nation’s currency practices as a source of concern. Treasury in its semiannual currency report said the nation “should make a concerted effort to enhance transparency of its exchange rate and reserve management operations and goals,” Josh Zumbrun reports.
What’s Wrong With the Housing Market?
Home-price growth sputtered in March, the latest sign that lower mortgage rates and a booming economy are doing little to boost the market. Home sales and price growth have been steadily slowing for about a year, bucking a strong U.S. economy overall, Laura Kusisto reports.
Soaring Confidence
American optimism about the economy continued to recover in May. The Conference Board’s index of U.S. consumer confidence rose close to the 18-year high it recorded last fall. The report suggests a possible rebound in consumer spending in the weeks and months ahead, David Harrison reports.
Economic Indicator: Jazz Hands
The Broadway theater boom continues. The industry’s shows set a new annual box-office record, with a combined gross of $1.83 billion in the 2018-19 season, according to the Broadway League, an industry trade group. The figure represented a 10.3% increase over 2017-18. Attendance for shows increased as well, reaching a record 14.8 million in 2018-19, Charles Passy reports.
You Don’t Win Bronze, You Lose Gold and Silver
Singapore leapfrogged the U.S. to become the world’s most competitive economy, according to the latest rankings by Swiss-based IMD World Competitiveness Center. The report’s take on the U.S.’s drop from first the third: “The initial boost to confidence from President Donald Trump’s first wave of tax policies appears to have faded in the United States,” and its competitiveness “was hit by higher fuel prices, weaker hi-tech exports and fluctuations in the value of the dollar.” Hong Kong remained in second place. Europe fared worse. The Netherlands fell two places to sixth while Germany slid two points to 17th and France dropped three spots to 31st. Venezuela came in last behind Mongolia. —Brian Blackstone
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
The Congressional Research Service has a new report card out on the Republican tax overhaul. Maybe it gets a gentleman’s C? “On the whole, the growth effects tend to show a relatively small (if any) first-year effect on the economy. … There is no indication of a surge in wages in 2018 either compared to history or relative to GDP growth. … The data appear to indicate that not enough growth occurred in the first year to cause the tax cut to pay for itself,” the independent, nonpartisan CRS writes.
Beijing is gearing up to use its dominance of rare earths to hit back at Washington. “A flurry of Chinese media reports on Wednesday, including an editorial in the flagship newspaper of the Communist Party, raised the prospect of Beijing cutting exports of the commodities that are critical in defense, energy, electronics and automobile sectors. The world’s biggest producer, China supplies about 80% of U.S. imports of rare earths,” Jason Rogers, David Stringer and Martin Ritchie write at Bloomberg.
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from Real Time Economics https://on.wsj.com/2HIyTq8
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