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·       The U.S. economy is likely growing at the slowest pace since President Donald Trump took office, but it is not yet heading for a recession as some fear, economists said

Worries about a global recession were fed this week by the 2018 GDP report from China, showing the slowest annual growth rate in nearly three decades, at6.6 percent. High profile investors, like Bridgewater founder Ray Dalio, are also warning of a recession from the World Economic Forum in Davos, Switzerland.

·       The safe-haven Japanese yen kept overnight gains against the dollar as concerns about slowing global growth and U.S.-Sino trade tensions drove investors away from risky assets.

Slackening global demand is one of the factors that is expected to see the Bank of Japan cut its inflation forecasts and stick to its ultra-easy policy at its rate review later in the day.

The yen, widely considered a safe-haven during times of market turmoil or economic stress, pushed up slightly against the dollar at 109.4, adding to a 0.5percent gain in the last session.

"Nervousness around global growth and trade tensions is certainly a factor driving the markets right now," said Michael McCarthy, chief markets strategist at CMC Markets.

"Markets have also seen a spectacular run since late December..so the recent correction in equities can also be due to positioning."

·       The Bank of Japan cut its inflation forecasts and stuck to its ultra-loose monetary policy on Wednesday, as pressure on the economy mounts and slowing global demand threatens its years-long efforts to foster durable growth.

The central bank maintained its view that Japan’s economy, the world’s third largest, will continue to expand at a modest pace. Yet the rising pressure on global growth from a trade war between the United States and China - Japan’s biggest trading partners - has many analysts wary about the outlook.

A Reuters poll of economists showed those external factors have increased the chances of Japan sliding into a recession this coming fiscal year starting in April, making it ever so harder for the BOJ to reach its 2 percent inflation target.

·       China will step up fiscal spending this year to support its economy, focusing on further cuts in taxes and fees for small firms, finance ministry officials said on Wednesday.

The government may unveil more fiscal stimulus during the annual parliamentary meeting in March, including bigger tax cuts and more spending on infrastructure projects, economists say.

China’s fiscal spending rose 8.7 percent to 22.1 trillion yuan ($3.3 trillion) in 2018, while revenue increased 6.2 percent to 18.3 trillion yuan, said Li Dawei, an official at the finance ministry.

Beijing delivered about 1.3 trillion yuan of cuts in taxes and fees in 2018.

·       Britain’s opposition Labour Party is highly likely to back an amendment by lawmaker Yvette Cooper that could prevent a no-deal Brexit, the second most powerful man in the party said.

The Cooper amendment makes time for a piece of legislation Cooper has proposed, which gives May until Feb. 26 to get a deal approved by parliament.

If the government fails to get a deal through by that date, parliament would be given a vote on asking the EU for a postponement of the Article 50 deadline to prevent Britain leaving without a deal on March 29. The proposal is for a nine-month extension, to Dec. 31.

·       Deputy Prime Minister Matteo Salvini on Wednesday said he hoped the French people would not choose President Emmanuel Macron’s party at the European parliament elections later this year, heightening a dispute between Rome and Paris.

Relations between Italy and France, traditionally close allies, have grown frosty since the far-right League and anti-establishment 5-Star Movement formed a coalition last year and took aim at pro-EU Macron’s En Marche (On the Move) party.

·       Gulf Arab economies will grow at a slower pace than previously forecast, a quarterly Reuters poll of economists found, as oil output cuts, lower crude prices and weaker global growth put pressure on regional economies.

Gross domestic product in Saudi Arabia, the largest Gulf Arab economy and the world’s largest oil exporter, will grow 2.1 percent in 2019 and 2.2 percent in2020, the poll of 22 economists projected. Three months ago, the forecasts were for growth of 2.5 percent in 2019 and 3.0 percent in 2020.

The benchmark price for Brent crude oil LCOc1 averaged around $71.6 per barrel last year. So far this year, it has only averaged around $60 per barrel, and economists are predicting prices below $70 a barrel in 2019, based on lower demand growth and oversupply concerns.

Supply cuts led by the Organization of the Petroleum Exporting Countries and some non-OPEC allies, including Russia, are likely to support oil prices to an extent, but they will weigh on GDP growth, economists said.

Riyadh plans to increase spending by 7 percent this year to an all-time high in an effort to boost non-oil growth. The latest poll raises the median forecast for Saudi’s fiscal deficit this year to 5.6 percent of GDP from 4 percent, and to 5.9 percent from 2.8 percent for 2020.

·       Oil prices were steady on Wednesday on hopes that increased Chinese spending would stem an economic slowdown that is showing signs of spreading and has been weighing on financial markets.

International Brent crude oil futures were at $61.49 per barrel at 0314 GMT, virtually unchanged from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $52.98 per barrel, 3 cents below their last settlement.

Steen Jakobsen, chief economist at Denmark’s Saxo Bank, said in a first quarter 2019 outlook that “the global economy is suffering”, but added that China’s government will do all it can for stability.

Chinese finance ministry officials said on Wednesday that the government would step up fiscal spending this year to support its economy.

Another key support would be for the United States and China to find a solution to their bitter trade dispute, Jakobsen said, but to prevent a sharp economic slowdown, a solution needs to show itself before Feb. 5, the Lunar New Year.

Should a deal be reached by then, “we will see powerful support for the Chinese economy”, he said, as well as the launch of strong stimulus programs to keep the economy growing.

Reference: Reuters, CNBC