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LGT Navigator: Trade conflict weighs on economic expectations

May 15, 2019

The ongoing and escalating trade dispute between the US and China is not only creating a tense mood on the stock markets, but is also leading to a gloomy assessment of economic expectations. The analysts and institutional investors surveyed monthly by the Mannheim-based economic research institute ZEW, showed their expectations for the coming half year in May to be 5.2 points down to minus 2.1 points.

The minutes of the US Federal Reserve's last monetary policy decision on March 20 confirmed the Fed's wait-and-see attitude. There are still "significant uncertainties" in the economic outlook, and latest US inflation data will probably not put pressure on the Fed to raise key interest rates again in the near future. ECB President Mario Draghi continues to see growth risks for the euro zone and recent economic data have confirmed that the pace of growth in the euro area is slowing. Nevertheless, the likelihood of a recession remains low.

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