Global growth heading towards fragile soft landing: OECD

PARIS (Reuters) – Trade tensions and higher interest rates are slowing the global economy, though for now there are no signs of a sharp downturn, the OECD said on Wednesday, lowering its outlook for next year.

The Organisation for Economic Cooperation and Development forecast that global growth would slow from 3.7 percent this year to 3.5 percent in 2019 and 2020. It had previously projected 3.7 percent for 2019.

The global growth slowdown would be worst in non-OECD countries, with many emerging-market economies likely to see capital outflows as the U.S. Federal Reserve gradually raised interest rates. The OECD cut its outlook for countries at risk such as Brazil, Russia, Turkey and South Africa.

Rising interest rates could also spur financial markets to reconsider and thus reprice the risks to which investors are exposed, triggering a return to volatility, the OECD said.

“We’re returning to the long-term trend. We’re not expecting a hard landing, however, there’s a lot of risks. A soft landing is always difficult,” OECD chief economist Laurence Boone told Reuters in an interview.

“This time it is more challenging than usual because of the trade tensions and because of capital flows from emerging markets to countries normalizing monetary policy,” she added.

A full-blown trade war and the resulting economic uncertainty could knock as much as 0.8 percent off global gross domestic product by 2021, the OECD calculated.

Though at the source of the current tensions, the U.S. economy was expected to fare better than most other major economies, albeit because of costly fiscal stimulus.

SOFTER GROWTH IN U.S., CHINA

The OECD left its forecasts for the United States in 2018 and 2019 unchanged, projecting growth in the world’s biggest economy would slow from nearly 3.0 this year to slightly more than 2.0 percent in 2020 as the impact of tax cuts waned and higher tariffs added to business costs.

Trimming its outlook for China, the OECD forecast the country’s growth would slow from 6.6 percent to a 30-year low of 6.0 percent in 2020 as authorities tried to engineer a soft landing in the face of higher U.S. tariffs.

The outlook for the euro area was also slightly darker than in September, with growth seen slipping from nearly 2.0 percent this year to 1.6 percent in 2020 despite loose monetary policy over the period.

The Italian economy was seen slowing more than previously expected despite the expansionary budget of the populist-led government that has created friction with Brussels.

The OECD forecast Italian growth at only 1.0 percent this year, lingering at 0.9 percent in 2019 and 2020, as stalled job creation and higher inflation eroded the boost from the budget stimulus.

In Britain, the OECD forecast growth would pick up from 1.3 percent this year to 1.4 percent in 2019, supported by a looser budget and up from an estimate of 1.2 percent in September.

However, after the fiscal boost peaked in 2019, growth would fall back to 1.1 percent, the OECD said, urging the government to be prepared to respond if the economy weakened significantly due to Brexit.

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Russia loses Interpol presidency vote

Interpol has elected South Korean Kim Jong-yang as its president, rejecting the Russian frontrunner who had been accused of abusing the international police body’s arrest warrant system.

Mr Kim was chosen by Interpol’s 194 member states at a meeting of its annual congress in Dubai.

He beat Russia’s Alexander Prokopchuk, who had been widely tipped to win.

But there was growing concern that Mr Prokopchuk would use the role to target critics of Russia’s President Putin.

The election follows the disappearance of Interpol’s former president Meng Hongwei, who vanished on a trip to China in September. Beijing has since confirmed he has been detained and is being investigated for allegedly taking bribes.

Mr Kim, who had been serving as acting president, will serve out the remaining two years of Mr Meng’s term.

Why was Mr Prokopchuk controversial?

Mr Prokopchuk is a veteran of Russia’s interior ministry.

While he was Interpol’s Moscow bureau chief, he was accused of abusing the so-called red notice system – international arrest warrants – to target critics of the Kremlin.

There had been growing fears among Russian human rights groups and officials from other countries, including the US and the UK, that Moscow would use his position to target its political opponents.

One group of US senators said electing him would be “akin to putting a fox in charge of the henhouse”, while a prominent Kremlin critic said it would be like “putting the mafia in charge”.

Lithuania, which regained its independence from Russia during the collapse of the Soviet Union and is now a member of both Nato and the EU, had threatened to leave Interpol if Mr Prokopchuk was elected.

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US endorses South Korean candidate to lead Interpol, amid fears of abuse if Russian is elected

WASHINGTON (AFP) – The United States on Tuesday (Nov 20) threw its weight behind the South Korean candidate to lead Interpol, Kim Jong-Yang, as controversy rages over a Russian candidate to lead the organisation.

Kim is currently the acting president.

A vote is set to take place on Wednesday in Dubai on the final day of Interpol’s annual conference to replace former president Meng Hongwei, who is now detained in China on bribery charges.

“We strongly endorse Kim Jong-Yang, who is serving as its acting president,” Pompeo told reporters.

“We encourage all nations and organisations that are part of Interpol and that respect the rule of law to choose a leader with integrity. We believe Mr Kim will be just that.”

Critics have urged Interpol to reject Russian candidate Alexander Prokopchuk, over fears Moscow could abuse the role to target political opponents.

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Russia says no 'automatic' return of disputed islands to Japan

MOSCOW (AFP) – Russia said Sunday (Nov 18) that upcoming talks about resolving a dispute with Japan over a group of islands claimed by Tokyo would not necessarily result in Moscow relinquishing them.

“Can you say that this means an automatic return of some territories? Certainly not,” Kremlin spokesman Dmitry Peskov told Russian TV in remarks reported by the TASS agency.

The dispute over the Kuril chain goes back to the end of World War II, when their annexation by the Soviet Union was confirmed in peace treaties between the victorious powers and accepted by Japan.

Tokyo claims however that some islands, which it refers to as its Northern Territories, were not covered in the agreement and should be handed back.

The dispute has been standing in the way of a peace treaty between the two nations that would officially end World War II hostilities.

In September, Russian President Vladimir Putin suggested that both countries sign a peace treaty this year “without any preconditions”, but Tokyo said the territorial dispute should be settled first.

Last week, Putin and Japanese leader Shinzo Abe agreed in Singapore to accelerate talks about the four islands in question.

A 1956 joint declaration mentions just two islands, and was at any rate cancelled by the Soviet Union in 1960 after Japan signed a cooperation deal with the United States during the Cold War.

A Japanese foreign ministry spokesman said last week that Abe would travel to Russia early next year for the talks.

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Risking Trump ire, OPEC builds case for oil supply cut

LONDON (Reuters) – OPEC built a case on Tuesday for cutting oil output when it meets next month, warning that a supply glut could emerge in 2019 as the world economy slows and rivals increase production more quickly than expected.

Worried by a drop in oil prices and rising supplies, OPEC is talking again of reducing production just months after increasing it. Such a shift would anger U.S. President Donald Trump, who on Monday urged OPEC not to cut supply.

In a monthly report, the Organization of the Petroleum Exporting Countries said world oil demand next year would rise by 1.29 million barrels per day, 70,000 bpd less than predicted last month and the fourth consecutive reduction in its forecast.

Oil prices have dropped steeply from a four-year high above $86 a barrel in October, pressured by concern that global demand is weakening amid adequate supply, offsetting U.S. sanctions on Iran that have started to cut the OPEC country’s oil exports.

“Although the oil market has reached a balance now, the forecasts for 2019 for non-OPEC supply growth indicate higher volumes outpacing the expansion in world oil demand, leading to widening excess supply in the market,” OPEC said in the report.

“The recent downward revision to the global economic growth forecast and associated uncertainties confirm the emerging pressure on oil demand observed in recent months.”

Crude LCOc1 maintained an earlier decline after the release of the OPEC report, trading below $69 a barrel.

Together with Russia and other allies, OPEC had agreed in June to boost supply after pressure from Trump to lower prices. The move partially unwound output cuts that began in January 2017 in an effort to clear a glut that formed in 2014-2016.

The group meets on Dec. 6 to set policy for 2019.

PRODUCTION RISING

In the report, OPEC said its oil output rose further in October by 127,000 bpd to 32.90 million bpd after the June deal.

The biggest rises came from the United Arab Emirates and top exporter Saudi Arabia. These helped offset declines in Venezuela, where economic crisis has curbed output, and Iran, as buyers walked away before sanctions started this month.

The October production rate is considerably more than OPEC expects consumers will require next year.

OPEC said the world would need 31.54 million bpd from its 15 members in 2019, down 250,000 bpd from last month. This suggests there will be a 1.36 million bpd surplus in the market should OPEC keep pumping the same amount and other things remain equal.

Saudi Energy Minister Khalid al-Falih on Monday had outlined a case for supply restraint, saying OPEC and its allies agreed that analysis showed a need to cut output next year by around 1 million bpd from October levels.

Oil demand is slowing as the world economy decelerates – OPEC nudged down its 2019 growth forecast in the report. The recovery in oil prices that followed the 2017 OPEC-led supply cut is still prompting more growth in rival production.

Non-OPEC supply will rise in 2019 by 2.23 million bpd, the Vienna-based organization said, 120,000 bpd more than previously thought and far more than the increase in world demand.

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Kremlin dismisses Finnish allegation it may have disrupted GPS signal

MOSCOW (Reuters) – The Kremlin on Monday dismissed an allegation from Finnish Prime Minster Juha Sipila that Russia may have intentionally disrupted Finland’s GPS signal during NATO war games in the Nordic countries over the past few weeks.

Sipila made the allegations on Sunday.

Kremlin spokesman Dmitry Peskov told reporters on a conference call he had no information that Russia could have been responsible and said his country was regularly accused of all kinds of crimes, most of which were groundless.

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Frail Mikhail Gorbachev warns against return to the Cold War

MOSCOW (Reuters) – Mikhail Gorbachev, the last Soviet leader, warned on Thursday (Nov 8) against rising tensions between Russia and the United States and said there should be no return to the Cold War.

The frail 87-year-old was physically helped by aides to a cinema hall to watch the premiere in Russia of a new documentary about his life, his Soviet reforms in the 1980s and his arms control drive that helped end the Cold War.

His legacy has come under a pall as ties between Moscow and Washington have fallen to post-Cold War lows, following Russia’s annexation of Crimea in 2014 and rows over sanctions, election meddling and the poisoning of a spy in England.

He spoke briefly to a cinema hall in Moscow after “Meeting Gorbachev”, a new documentary directed by filmmakers Werner Herzog and Andre Singer, and was asked if the world would hold back from a new Cold War.

“We must hold back,” he said.

“And not just from the Cold War. We have to continue the course we mapped. We have to ban war once and for all. Most important is to get rid of nuclear weapons.”

Reviled by many Russians as the man whose reforms ultimately led to the Soviet breakup, Gorbachev is lauded in the West as the man who helped end the Cold War.

Gorbachev, whose visibly ailing health was in stark contrast to the vigorous reformist figure he cut in the 1980s, said the world was moving dangerously closer to a new arms race.

Last month in a column for the New York Times, Gorbachev denounced the United States after President Donald Trump said he planned to quit the Intermediate-Range Nuclear Forces treaty which Gorbachev and Ronald Reagan signed in 1987.

The pact eliminated all short- and intermediate-range land-based nuclear and conventional missiles held by both countries in Europe.

In a prepared, written message read out to the hall by an aide before the film, Gorbachev alluded to the article and said”I am convinced we can stop a new Cold War. I will do everything for this.”

“Most dangerous would be a return to confrontation, the start of a new arms race. They are already talking about a nuclear war as if this is something entirely acceptable. It is being prepared, scenarios are being discussed.”

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Russia probe under threat, Democrats say

The US inquiry into alleged Russian meddling during the 2016 election could be under threat after President Donald Trump fired Attorney General Jeff Sessions, top opposition Democrats say.

Nancy Pelosi, who leads Democrats in the House of Representatives, called the decision a “blatant attempt” to end or impede the investigation.

The probe has been criticised by Mr Sessions’s successor Matthew Whitaker.

The Democrats, who won the House in the mid-terms, have vowed to protect it.

Some Republicans appear to have shared the Democrats’ concern over the future of the inquiry, which is being led by Special Counsel Robert Mueller. Senator Susan Collins and Mitt Romney said it should not be impeded in any way.

Mr Mueller is investigating alleged collusion between the Trump campaign and Russia, resulting in a series of criminal charges against several Trump associates.

Mr Trump has vehemently denied any collusion took place, and repeatedly called for the inquiry to be shut down, calling it “the greatest political witch hunt in history”.

Democrats see this latest move as an attempt to do just that.

“It is impossible to read Attorney General Sessions’ firing as anything other than another blatant attempt by @realDonaldTrump to undermine and end Special Counsel Mueller’s investigation,” Ms Pelosi – a front-runner to become speaker of the House of Representatives following this week’s mid-terms – tweeted.

She went on to argue that, “given his record of threats to undermine and weaken the Russia investigation”, Mr Whitaker should follow in Mr Sessions’ footsteps and recuse himself.

Her words were echoed by Democratic party Senate leader Chuck Schumer, who added: “Clearly, the president has something to hide.”

Why was Sessions fired?

The sacking followed months of Mr Trump criticising Mr Sessions, mainly for his decision to step aside from the Russia inquiry in March 2017.

Mr Sessions removed himself from the probe after Democrats accused him of failing to disclose contacts he had had with the Russian ambassador as a senior adviser to Mr Trump’s campaign.

In July 2017 Mr Trump told the New York Times: “Sessions should have never recused himself, and if he was going to recuse himself, he should have told me before he took the job and I would have picked somebody else.”

In a resignation letter, Mr Sessions – a former Alabama senator who was an early supporter of Mr Trump – made clear the decision to go was not his own.

“Dear Mr President, at your request I am submitting my resignation,” he wrote in an undated letter.

What happens now?

Mr Whitaker can now assume control of the Mueller inquiry, which has been overseen by Deputy Attorney General Rod Rosenstein until now.

The president cannot directly fire the special counsel. But Mr Sessions’s replacement will have the power to do so, or end the inquiry.

Mr Whitaker expressed concerns over the investigation. In August 2017, he wrote a piece for CNN in which he stated that looking into Mr Trump’s personal finances, or those of his family, “goes beyond the scope of the appointment of the special counsel”.

He went on to call on Mr Rosenstein to “order Mueller to limit the scope of the investigation” or risk the inquiry starting “to look like a political fishing expedition”.

The deputy attorney general appointed Mr Mueller to lead the inquiry after Mr Trump fired FBI director James Comey in 2017.

The special counsel has also been investigating whether Mr Comey’s firing amounted to obstruction of justice.

There has also been a question mark over Mr Rosenstein’s future since it was alleged that he had discussed invoking a constitutional clause to oust President Trump.

What does this mean for the Mueller probe?

Analysis by Anthony Zurcher, BBC Washington

There had already been hints that Robert Mueller’s pre-election “quiet period” was about to come to an end. And, in fact, if the former FBI director is as meticulous as he’s reputed to be, he might have already made plans to deal with exactly this contingency.

That’s stepping into the unknown, however.

What’s certain is that if the special counsel tries to issue new indictments or expand his inquiry, Matthew Whitaker is now in a position to rebuff those requests. If Mr Mueller files a report detailing his conclusions, the new acting attorney general could keep the document from ever becoming public.

Those would be half-measures and insurance policies to limit damage. The president may also decide to instruct Mr Whitaker to fire the entire Mueller team – something Mr Trump says he has the power to do.

There’s some doubt about whether the president is right, but with the mid-terms behind him he could be itching to settle this Mueller business once and for all. And he’s one step closer to being able to do just that.

That almost certainly wouldn’t be the end of this story, but it’s the beginning of a new, fraught chapter.

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US midterms fallout: Trump fires Sessions, vows to fight Democrats if probes into administration launched

President Donald Trump on Wednesday forced out Attorney General Jeff Sessions a day after congressional elections, and vowed to fight if the U.S. House of Representatives’ new Democratic majority launches probes into his administration.

Sessions – an early Trump supporter who ran afoul of the president by recusing himself from an investigation into Russian meddling in the 2016 White House campaign – said in a letter to Trump that he had submitted his resignation “at your request.”

The 71-year-old former U.S. senator was informed on Wednesday morning by White House Chief of Staff John Kelly in a phone call that it was time to go, said an aide who spoke on condition of anonymity.

Sessions’ departure was the first in what could be a string of high-profile exits as Trump reshapes his team to gird for his own 2020 re-election effort. The Republican president named Sessions’ chief of staff, Matthew Whitaker, as acting attorney general and said he would nominate someone for the job soon.

Deputy Attorney General Rod Rosenstein was visiting the White House on Wednesday afternoon for what was described by an administration official as a regularly scheduled meeting.

Nancy Pelosi, the House Democratic leader who could be the next speaker, called Sessions’ ouster a “blatant attempt” to undermine the Russia probe and urged Whitaker to recuse himself from any involvement in a statement posted to Twitter.

During a combative news conference in which he tangled with reporters, Trump trumpeted his role in Republican gains in Tuesday’s midterm congressional elections, and warned of a “warlike posture” in Washington if Democrats investigated him.

Democrats will now head House committees that can probe the president’s tax returns, which he has refused to turn over since he was a candidate, possible business conflicts of interest and any links between his 2016 campaign and Russia, a matter being investigated by U.S. Special Counsel Robert Mueller.

Mueller is overseen by Rosenstein, who reports to Sessions.

Trump said he could fire Mueller if he wanted but was hesitant to take that step. “I could fire everybody right now, but I don’t want to stop it, because politically I don’t like stopping it,” he said.

Moscow denies meddling. Trump, calling the Mueller probe a witch hunt, has repeatedly said there was no collusion.

Trump was buoyed on Wednesday by victories that added to the Republican majority in the U.S. Senate, telling reporters at the White House that the gains outweighed the Democrats’ takeover of the House. He added that he was willing to work with Democrats on key priorities but felt any House investigations of his administration would hurt prospects for bipartisanship.

“They can play that game, but we can play it better,” Trump said of the possibility of Democratic investigations. “All you’re going to do is end up in back and forth and back and forth, and two years is going to go up and we won’t have done a thing.”

The divided power in Congress combined with Trump’s expansive view of executive power could herald even deeper political polarization and legislative gridlock in Washington.

There may be some room, however, for Trump and Democrats to work together on issues with bipartisan support such as a package to improve infrastructure, protections against prescription drug price increases and in the push to rebalance trade with China.

“It really could be a beautiful bipartisan situation,” Trump said.

He said Pelosi had expressed to him in a phone call a desire to work together. With Democrats mulling whether to stick with Pelosi, who was speaker when the party last controlled the House, or go in a new direction, Trump wrote in a tweet earlier that she deserves to be chosen for the position.

Pelosi, at a Capitol Hill news conference before news of Sessions’ firing, said Democrats would be willing to work with Trump where possible. But she added, “We have a constitutional responsibility to have oversight.”

“I don’t think we’ll have any scattershot freelancing in terms of this. We will have a responsibility to honor our oversight responsibilities and that’s the path we will go down. We again (will) try to unify our country,” she said.

The Democrats fell short of a tidal wave of voter support that would have won them control of both chambers of Congress. But in the 435-member House, the party was headed for a gain of around 30 seats, beyond the 23 they needed to claim their first majority in eight years.

A Senate majority would have allowed Democrats to apply even firmer brakes on Trump’s policy agenda and given them the ability to block any future Supreme Court nominees.

House Democrats could force Trump to scale back his legislative ambitions, possibly dooming his promises to fund a border wall with Mexico and pass a second major tax-cut package. Legislators could also demand more transparency from Trump as he negotiates new trade deals with Japan and the European Union.

“Today is more than about Democrats and Republicans; it’s about restoring the Constitution’s checks and balances to the Trump administration,” Pelosi told supporters at a victory party Tuesday night.

Trump also mocked Republican candidates who had refused to back his policies and ultimately lost their races, such as U.S. Representative Barbara Comstock of Virginia.

“They did very poorly. I’m not sure that I should be happy or sad but I feel just fine about it,” he said.

U.S. stocks jumped on Wednesday as investors, who often favor Washington gridlock because it preserves the status quo and reduces uncertainty, bought back into a market that had its worst month in seven years in October.

The Dow Jones Industrial Average ended Wednesday up 2.13 percent, while the broad-based S&P 500 index rose 2.12 percent. The dollar index, a measure of the greenback against a basket of currencies, was slightly weaker.

A Democrat-controlled House could hamper Trump’s attempts to further his pro-business agenda, fueling uncertainty about his administration. His corporate tax cuts and the deregulation that have played a large hand in the U.S. stock market’s rally since the 2016 election, however, are likely to remain untouched.

“With the Democrats taking over the House, we will now have to see what gridlock in Congress means for policy. As for the market impact, a split Congress has historically been bullish for equities and we expect to see the same pattern again,” said Torsten Slok, chief international economist for Deutsche Bank.

Democrats will use their new majority to reverse what they see as a hands-off approach by Republicans toward Trump’s foreign policy, and push for tougher dealings with Russia, Saudi Arabia and North Korea.

Foreign policy has been an area that Trump has approached in a very personal way, sometimes antagonizing allies such as Canada while making what critics see as unduly warm overtures to traditional U.S. rivals or foes.

Tom Perez, chairman of the Democratic National Committee, said Democrats could work with Republicans to produce a long-awaited bill to upgrade the nation’s roads, bridges and airports.

“Of course, we want to work in a bipartisan fashion. I think we can get an infrastructure bill,” he said.

Trump had hardened his rhetoric in recent weeks on issues that appealed to his conservative core supporters. He threw himself into the campaign, issuing warnings about a caravan of Latin American migrants headed through Mexico to the U.S. border and condemnations of liberal American “mobs” he says oppose him.

Every seat in the House was up for grabs on Tuesday and opinion polls had pointed to the Democratic gains. The party with the presidency often loses House seats in midterm elections.

The Republicans had an advantage in Senate races because elections were held for only 35 seats in the 100-member chamber and many of them were in states that often lean Republican.

Republicans built on their slim Senate majority by several seats and ousted at least three incumbent Democrats: Joe Donnelly in Indiana, Heidi Heitkamp in North Dakota and Claire McCaskill in Missouri.

In Florida, Democratic Senator Bill Nelson was trailing his Republican rival, Governor Rick Scott, by a slim margin, with the possibility of a recount looming. Republican Martha McSally was leading Democrat Kyrsten Sinema in the U.S. Senate race in Arizona with some votes still to be counted.

The Republican gains are sure to bolster the party’s efforts to get conservative federal judges through confirmation proceedings. In the 36 gubernatorial contests, Democrats won in several states that supported Trump in 2016 but lost high-profile races in Florida and Ohio.

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