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Trump urges Fed to do more than a 'small rate cut'

U.S. President Donald Trump on Monday urged the Federal Reserve to go beyond making a "small rate cut" this week, raising pressure on the central bank to lower borrowing costs by more than Wall Street expects. In a series of tweets ahead of the Fed's meeting scheduled for Tuesday and Wednesday, Trump reiterated his criticism of independent U.S. monetary policymakers, accusing them of acting too cautiously in comparison to China and Europe. The Republican president, who is seeking re-election in 2020 and had tied his efforts in part to the strength of the U.S. economy, is seeking a financial jolt from a cut in short-term borrowing rates to counter a global economic slowdown. Policymakers are widely expected to cut rates by a quarter percentage point on Wednesday, although some investors see chances of a half percentage point reduction. "The E.U. and China will further lower interest rates and pump money into their systems, making it much easier for their manufacturers to sell product. In the meantime, and with very low inflation, our Fed does nothing - and probably will do very little by comparison. Too bad!" he wrote on Twitter. "The Fed has made all of the wrong moves. A small rate cut is not enough, but we will win anyway!" he added. Fed policymakers have said repeatedly they will not take orders from the president. While they have been sending strong signals about an impending rate cut for weeks, they have made clear they think the nation's labor market still looks pretty solid. A cooling in U.S. factory activity might be a sign the American economy is feeling the chill from an economic slowdown across Europe, Asia and Latin America. At the same time, America's unemployment rate remains near a 50-year low. Given the conflicting signals, policymakers have left open the question of whether Wednesday's expected rate cut will inaugurate a series of quarter-percentage-point interest rate cuts that could stretch deep into next year, or something more limited.

Gold Fever Breaks Out in New ‘Bubble Game’ as Fed Preps a Cut

A top-ranked strategist at Societe Generale SA has a plan for clients fretting that a fresh wave of monetary easing will fan a bubble across assets. Ride the bull until 2020 -- when a U.S. recession and a debased dollar will make gold the perfect doomsday hedge, says Alain Bokobza. It’s the latest warning for investors betting that the Federal Reserve will help extend the business cycle with stimulus this week, and a sign of how gold fever is breaking out from London to New York. “Gold is the perfect response if you’re entering the bubble game,” the head of global asset allocation said in an interview in London. “Every time you have such a situation, gold has soared,” said Bokobza. His team ranks first among multi-asset strategists in the 2019 Extel survey. Worrywarts have long clung to bullion as the ultimate store of value in a low-rate world, but the sentiment is growing as the global pile of negative-yielding debt sits near $14 trillion and central banks shift to dovish mode. Exchange-traded funds holding precious metals have taken in around $4 billion this year, while hedge fund Crescat Capital is starting a long-only strategy focused on mining stocks. The SocGen strategist says bullion will defend traders against a weakening dollar, while providing a bulwark against a U.S. recession next year sparked by trade wars and a slump in corporate-profit growth. “Gold is one of the most correlated assets to the U.S. dollar -- rising most of the time when the dollar falls, and thus a good hedge against a falling U.S. currency.” The CEO of UBS Group AG warned last week of “dangerous” bubble risk spurred by central banks. For investors, the dilemma is that risk assets like stocks keep rallying to records even as fears grow over monetary impotence. SocGen strategists were rewarded for their cautious outlook last year when easing economic momentum and higher U.S. rates adjusted for inflation spurred a sell-off across markets. But some of their bearish projections for 2019 have misfired as the S&P 500 surged to a fresh record. “When momentum is so strong, it’s not so easy to go against it,” said Bokobza. “That’s why we haven’t recommended risk-averse asset allocation. But we have recommended assets that offer diversification.” The team is underweighting equities, while overweighting government bonds and credit and holding about 5% cash. Commodities is at its 10% maximum weight. Gold Fever HSBC Holdings Plc recently reaffirmed gold’s role as a haven in a study, showing it’s one of the few reliably uncorrelated assets around. The commodity is trading near a six-year high as U.S. real yields decline. “Precious metals are one of the few pockets of this market offering tremendous value to hedge against extreme monetary policies, bursting asset bubbles, and record global leverage,” Kevin Smith, chief investment officer at Crescat, wrote in a recent investor letter. He calls precious metals “incredibly undervalued” relative to other assets. Smith is also bullish on miners, which tend to outperform the underlying commodity but which trade at a discount to global equities. The VanEck Vectors Gold Miners ETF is down more than 10% over the past three years compared to a gain of about 30% for the MSCI World. “A new awareness of global fiat currency debasement polices is now in its early stages,” Smith wrote. “Gold should become a core asset for those who believe in this macro development.”

China vows to lengthen prison terms, fines for capital market cheaters

China's stock market watchdog vowed on Friday to change the law to increase prison terms and fines for cheaters in capital markets, following a series of high-profile corporate scandals that burnt investors. The China Securities Regulatory Commission (CSRC) is working to revise securities and criminal laws as soon as possible in a bid to raise maximum prison terms and fines, the regulator said in a statement on its website. CSRC, which has made similar statements in the past, did not give a timetable. Under the current securities law, a listed company that makes false disclosure is fined up to 600,000 yuan ($87,232), while the criminal law states those who conceal or intentionally destroy accounting records can be imprisoned for up to five years and fined up to 200,000 yuan. CSRC, which made the statement in response to criticism that the cost of cheating in capital markets is too low, said that current laws were too lenient. CSRC also said it would severely punish negligent auditors and investment bankers and actively support compensation claims made by victims of crime. There has been a slew of cases recently involving dishonest disclosures by China-listed companies. Kangmei Pharmaceutical Co, which overstated cash holdings in 2017 by $4.4 billion, faked its books for three consecutive years during 2016-2018, CSRC said in May following an investigation. In another high-profile scandal, Kangde Xin Composite Material Group Co, a producer of high polymer materials, cooked its books between 2015 and 2018, CSRC said on July 5. According to CSRC's latest disclosure on Friday, the regulator has halted reviews of IPO applications for about 30 companies that hired Ruihua Certified Public Accountants. Ruihua, auditor of Kangde Xin, is currently under investigation by the securities regulator for its role in the company's information disclosure breaches. There was no immediate answer from Ruihua to a telephone call from Reuters seeking comment on CSRC's filing.

Twitter revenue beats, sees rise in daily users viewing ads

Twitter Inc on Friday reported better-than-expected second-quarter revenue as design changes to its microblogging website attracted more users and advertisers, sending its shares up 10%. Twitter's revenue and number of users have been in focus since the social media platform started deleting millions of spam or fake accounts promoting hate speech or spreading political misinformation, contributing to declines in monthly users through 2018. Chief Executive Officer Jack Dorsey said the platform saw an 18% drop in reports of spammy or suspicious behavior across all Tweet detail pages, which show the replies to any given Tweet on the service. The company reported a rise in monthly active users in the first quarter, fueling speculation that Twitter was returning to growth, but has since stopped disclosing its MAU count. Instead, this quarter it reported monetizable daily active usage, a metric it created to measure only users exposed on a daily basis to advertising on the site and exclude those who access Twitter via aggregating sites like TweetDeck. Its monetizable daily active usage (mDAU) hit 139 million, beating analyst expectations of 135 million, according to IBES data from Refinitiv. "The strong growth in monetizable daily active users shows that Twitter users are sticking with the platform, and that should resonate with advertisers," eMarketer senior analyst Jasmine Enberg said. Dorsey said machine learning improvements to deliver more relevant content helped drive up this count. "We approach every problem now with technology first, and that has been a pretty marked shift within the company," he said. Twitter's revenue rose 18% from a year earlier to $841 million, beating Wall Street expectations of $829 million, based on Refinitiv data. Total advertising revenue rose to $727 million, an increase of 21% year-on-year, as the company continued to improve its ad platform and formats. Twitter has continued to bulk up its live and on-demand video content partnerships. On Thursday, NBCUniversal said they would team up to livestream parts of the 2022 Olympic Games, Twitter's latest move in a series of deals aimed at boosting sports conversation on the platform. It also expanded its multimedia features, launching a Snapchat-style camera feature in the Twitter app and releasing its own long-awaited tool for clipping and publishing video. Twitter also recently updated its policies on hateful conduct directed at religious groups and last month introduced a new policy to de-emphasize and label rule-breaking tweets from important sources like politicians, though this has not yet been used. WEAK FORECAST, HIGHER EXPENSES However, Twitter forecast third-quarter revenue between $815 million and $875 million, the midpoint of which was below analysts estimates of $869.3 million, partly due to ending some older ad formats. Total operating expenses, including cost of revenue, rose by 21% to $766 million, partly due to plans to hire more employees and reiterated that operating expenses would grow about 20% in 2019. Twitter's results come against the backdrop of regulatory scrutiny against big tech and social media firms like Facebook Inc, Alphabet Inc and Amazon.com Inc. Twitter has also constantly been in the spotlight due to U.S. President Donald Trump's prominent use, as well as criticism, of the platform. Twitter reported second-quarter profit of $1.1 billion, or $1.43 per share, compared with $100 million, or 13 cents per share, a year earlier. Profit was boosted by an income tax benefit of over $1 billion related to corporate restructuring.

Tesla set to lose over $5 billion in value after pushing profit timeline

Shares of Tesla Inc sank 11 percent on Thursday, on course to knock more than $5 billion off the electric carmaker's market value, a day after it disappointed Wall Street by softening its language on turning a profit this year. Only two Wall Street brokerage reduced their existing share price target for the firm but a batch of downbeat research notes from analysts focused on concern over shrinking margins for the Elon Musk-led firm, as it strives to find a path to sustainable profitability. The outlook given with second quarter numbers after markets closed on Wednesday said the firm would still aim to be profitable in the third and fourth quarter but put the emphasis on volume growth, increasing production capacity and generating cash. That contrasted with Musk's promises this time last year that the company would be profitable and cash flow positive "henceforth". "For Tesla to be more than niche, one of the core challenges will be for Tesla to improve its gross margin profile," a Credit Suisse analyst wrote in a research note. Wedbush Securities cut its price target on the stock from $230 to $220, citing the softer margin profile. The stock was down 11.34% at $234.84 in trading before the opening bell, still 3% above analysts' median price target of $227.5. Prices of its $1.8 billion junk bond , which debuted just shy of two years ago, also fell more than 2 full points in price in European trading, pushing its yield, which moves in the opposite direction, back above 8% for the first time since July 1. The spread of its yield over Treasuries, a key measure of the added risk investors assume for holding Tesla's speculative-grade rated debt over safer U.S. government securities, widened by nearly 50 basis points. In all, it was the bond's biggest loss since early last September when its chief accounting officer quit after just a month on the job and Musk was filmed smoking marijuana and wielding a sword on a webcast. A number of analysts were also concerned by the resignation as chief technology officer of the pioneer of the company's electric batteries, J.B. Straubel, the last of the company's old guard left in its top echelons outside Musk himself. ""Straubel has been at the forefront of the company's technology leadership, which we believe will increasingly be called into question as competitors catch up," Cowen analysts said.

Draghi Signals `Worse and Worse' Outlook Warrants ECB Stimulus

Mario Draghi set the stage for a radical round of additional European Central Bank easing to combat the euro area’s severe economic slowdown. While there are still signs of strength in the economy,“this outlook is getting worse and worse,” the ECB president said in Frankfurt after the Governing Council met. “It’s getting worse and worse in manufacturing, especially, and it’s getting worse and worse in those countries where manufacturing is very important. But because of value chains this propagates all over the euro zone. And so this must be taken into account.” Draghi spoke hours after the latest data showed business confidence crumbling in Germany, the region’s largest economy. Survey data shows euro-area manufacturing is contracting, raising the prospect of a broad recession. The council adjusted its pledge on interest rates -- already at record lows -- to signal that they could be cut further, and also it will restart its bond-buying program if needed. Draghi noted that consumer price growth remains well short of the ECB’s goal of just under 2%. “On the inflation front, we don’t like what we are seeing,” he said. “That’s very important.” The euro initially slid, before rebounding, and yields on German benchmark bonds fell to a record low. The Governing Council added a key line to its statement clarifying its “commitment to symmetry” in the target, potentially emboldening policy makers to pursue monetary stimulus for longer. That reflects a willingness to possibly keep price growth elevated for a while after a period of weakness to ensure price growth is entrenched. Staff only recently started studying a revamp of the ECB’s specific aim. “The Governing Council has tasked the relevant Eurosystem Committees with examining options, including ways to reinforce its forward guidance on policy rates, mitigating measures, such as the design of a tiered system for reserve remuneration, and options for the size and composition of potential new net asset purchases.”- ECB policy statement The move comes as central banks around the world turn dovish suggesting monetary easing will soon be amplified. The U.S. Federal Reserve is widely expected to cut rates next week. Turkey delivered the biggest interest-rate cut in at least 17 years earlier Thursday. Australia’s central bank chief Philip Lowe said he’s ready to ease policy further if his back-to-back cuts fail to revive economic growth. Risks from trade protectionism to Brexit are hitting economic confidence the world over, leaving the euro area’s export-focused economy particularly vulnerable. The ECB’s change of tack comes just months after it halted quantitative easing and started preparing to exit extraordinary stimulus. The U.S. Federal Reserve is expected to cut interest rates next week. While Draghi argued that employment and wage growth are sources of resilience, he emphasized that significant stimulus is still needed. Economists surveyed by Bloomberg have predicted that policy makers will cut the deposit rate by 10 basis points in September, and announce a new round of QE starting in January, running throughout 2020. What Bloomberg’s Economists Say “Taken together, the wording of today’s decision and press conference strengthen our conviction that the ECB will deliver a meaningful dose of stimulus in September.”-- Maeva Cousin and Jamie Murray. See their ECB REACT Bank shares rose after officials said they’re studying how to relieve lenders from some of the pains of negative rates by exempting some reserves. Banks have seen their profitability squeezed because of their struggle to pass the charge to customers. Draghi said that “if we are to lower interest rates that will come with mitigating measures.” The ECB’s next meeting in September will be Draghi’s penultimate before his eight-year term ends and he hands over to former International Monetary Fund chief Christine Lagarde. That decision will be backed by updated macroeconomic projections. “All this is pretty complex and needs preparation,” the president said. “We decided we wanted to see the next projections before taking action.”

Trump administration study shows food stamp move could limit food access for many

The Trump administration proposal to tighten eligibility for food stamps could undercut access to basic nutrition for millions of Americans, according to an analysis conducted by the U.S. Department of Agriculture (USDA), which runs the program. The study clashes with the administration's defense of the proposed rule change https://www.reuters.com/article/us-usa-trump-foodstamps/trump-administration-rule-would-cut-3-million-people-from-food-stamps-idUSKCN1UI0AH, unveiled on Tuesday, which it said would end what it saw as widespread abuse of the Supplemental Nutrition Assistance Program (SNAP) by Americans with sufficient resources. "The proposed rule may also negatively impact food security and reduce the savings rates among those individuals who do not meet the income and resource eligibility requirements for SNAP," the Agriculture Department said in the text of the rule published in the federal registry. On Tuesday, Agriculture Secretary Sonny Perdue had defended the rule change that would cut an estimated 3.1 million Americans from food stamp eligibility. He said the administration was "closing a loophole" that allowed exploitation of the program by Americans that had substantial savings and assets. Advocacy groups and Democrats bashed the proposal. Speaker of the U.S. House of Representatives, Nancy Pelosi, called it "cruel," and said it would "steal food off the table of working families and hungry children." The program provides free food to some 40 million Americans, or about 12 percent of the total U.S. population. Currently, 43 U.S. states allow residents to qualify for food stamps automatically through SNAP if they receive benefits from another federal program known as Temporary Assistance for Needy Families, or TAN, according to the USDA. The Agriculture Department wants to change that by requiring people who receive TANF benefits to pass a separate review of their income and assets to determine whether they are also eligible for free food from SNAP, officials said. If enacted, the rule would save the federal government about $2.5 billion a year, according to the USDA. The administration's latest push comes after efforts last year to pass new restrictions on SNAP were blocked by the Congress.

Senior Mexican lawmaker calls for tax on purchases from Amazon, Uber, other digital platforms

A senior Mexican lawmaker plans to present a bill in Congress to tax purchases on Amazon, Uber and AirBnB and other digital platforms to help fill a multibillion-dollar revenue hole after changes in how state oil company Pemex contributes to government finances. Alfonso Ramirez Cuellar, a member of President Andres Manuel Lopez Obrador's leftist National Regeneration Movement who chairs the budget committee in the lower house of Congress, told Reuters in an interview that applying Mexico's value-added tax to purchases on the platforms would help balance the government's books. "We believe applying VAT to purchases on the platforms is the best way to go about it. There are some very successful experiences with this in Latin America," said Ramirez Cuellar. Asked whether the proposed legislation would cover the Mexican operations of Amazon.com Inc , Uber Technologies Inc and AirBnB Inc, some of the world's most successful technology companies, Ramirez Cuellar said it would. He said the bill had not been written in consultation with the government but had the support of other lawmakers. The Mexican finance ministry did not respond to a request for comment on whether the government would back the proposal. MORENA and its allies have a majority in the lower house of Congress. If approved, Ramirez Cuellar said his legislation would make purchases across digital platforms, including e-commerce, ride hailing and home renting, subject to the standard 16% VAT charged on other purchases in Mexico. He said the bill would be presented during the next regular session of Congress, which runs from Sept. 1 through Dec. 15, and could become law by early next year. A spokeswoman for Uber said the company would continue to meet its fiscal obligations and contribute to a possible tax reform in Mexico. She said it had collaborated with efforts to regulate the digital economy elsewhere in Latin America, including in Argentina, Colombia, Chile and Uruguay. Argentina last year began charging VAT on purchases made via digital platforms, including Uber. The rules there make the payment provider, rather than the digital platform itself, responsible for withholding and payment of the tax. Ramirez Cuellar suggested a similar system of charging via payment providers could work in Mexico. A spokesman for Amazon declined to comment while a spokesman for AirBnB did not respond to a request for comment. In May, Uber and a host of other ride-hailing and delivery companies struck a deal with the Mexican government to withhold taxes from drivers' earnings. FISCAL CHALLENGE Ramirez Cuellar's committee faces the challenge of increasing tax revenues while sticking to the election promise of President Andres Manuel Lopez Obrador to not create new taxes. That challenge was exacerbated last week when highly-indebted Pemex presented a business plan that reduced its tax burden by 11 percentage points to 54% by 2021, which would equal an estimated loss to federal revenues of $6.6 billion over the next two years. That is good news for Pemex, which is under pressure from investors, but not so good for budget planners in Latin America's second-largest economy. In line with Lopez Obrador's promises, Ramirez Cuellar argued the plan for a VAT on digital platform purchases would not constitute a new tax but something closer to a tax system reform. In addition to taxing purchases on digital platforms, Ramirez Cuellar said the budget commission had also formed a working group that was exploring how to adequately charge companies, including Coca-Cola (NYSE:KO) Co and Nestle SA (SIX:NESN) , for their water usage. In response to a query from Reuters Coca-Cola said: "In all our operations we conduct ourselves with a strict observance of the law and we comply with our taxes and fees without any delays or current debts." "We are fully committed with Mexico, therefore, we operate following best practices in water use and efficiency," the company said in an emailed statement. Nestle did not respond to a request for comment. Ramirez Cuellar also said the committee had been analyzing the possibility of increasing so-called vice taxes levied on alcohol, tobacco and food the government deems unhealthy. "Tough conversations" with industry leaders on such possible measures have already been held, he said.

Johnson Wins, Trump Says He’ll Be ‘Great’ Leader

Boris Johnson was elected Conservative leader -- and Wednesday will be appointed U.K. prime minister. His pledge to pull the country of the European Union on Oct. 31 is popular with Brexit believers but has alarmed the moderate wing of the party, with resignations already coming in. Must read: Johnson, the face of the Brexit campaign, to succeed Theresa May Key Developments: Trump tweets his congratulations on Johnson’s victory Rory Stewart joins Hammond and Gauke in indicating he will resign Johnson has just over 3 months to deliver on his “do or die” pledge to deliver Brexit by Oct. 31; a group of lawmakers is planning a court battle to prevent him from suspending Parliament Sterling erased an earlier decline after Johnson’s decisive win over rival Jeremy Hunt Hammond’s Message to Johnson: Get a Brexit Deal (1:35 p.m.) Chancellor of the Exchequer Philip Hammond has delivered a message to Johnson: get a deal on Brexit. The in-between-the lines message is that Hammond won’t support Johnson if he pursues a no-deal Brexit. Hammond said on Sunday that he’d quit Wednesday if Johnson wins, and he’s an implacable opponent of no-deal departure, having rebelled against party orders last week in a vote on a provision that makes one less likely. Stewart Signals He’ll Quit Cabinet ( 1:20 p.m.) International development Secretary Rory Stewart on Tuesday reiterated his long-stated intention to resign in the event of Boris Johnson winning the leadership contest. The cabinet minister posted a tweet that congratulated the victorious candidate before saying it’s been an honor to serve in various ministerial roles and concluding with the comment: “Backbench tomorrow serving Cumbria.” It’s not his actual formal resignation, but rather an indication that he, like Justice Secretary David Gauke and Chancellor of the Exchequer Philip Hammond, intends to resign before Johnson takes the reins from Theresa May on Wednesday afternoon. Trump Wastes No Time Congratulating Johnson (12:29 p.m.) Donald Trump was quick to congratulate Johnson. The U.S. president has been highly critical of Theresa May, calling her Brexit strategy “ a disaster.” Tory MP Morgan Says Confidence Vote Unlikely (9 a.m.) Conservative MP Nicky Morgan said there’s unlikely to be a confidence motion against the government this week in Parliament, adding that MPs should give the new prime minister time to establish a Cabinet and lay out policies. The situation will become more unpredictable in September, she said. She told Bloomberg TV that while a no-deal Brexit would be a “highly undesirable outcome,” the Oct. 31 deadline should not be pushed again because businesses want the issue resolved. Morgan also called for the next prime minister to include members of the so-called One Nation caucus of moderate Tories in his Cabinet, citing Work and Pensions Secretary Amber Rudd and Health Secretary Matt Hancock. “Boris talks about unifying the party and that’s absolutely right,” Morgan said. “We have got to heal the divisions in the country, too, so he’s got to make sure there’s a spread of people around his table.” Unhappy Tories Could Back New Brexit Vote: Swinson (Earlier) Support in Parliament for a second Brexit referendum could get a boost from Tories unhappy with Boris Johnson and his apparent willingness to take the U.K. out of the European Union without a deal if he becomes prime minister, according to Jo Swinson, the new leader of the pro-EU Liberal Democrats. “There’s a chance there’ll now be more Conservative MPs, including some people who are currently or soon to be not in government, who can back a People’s Vote as a way out of this absolute Brexit mess,” Swinson told BBC radio. Parliament rejected a second Brexit referendum in a vote in March. Confidence Vote ‘Such a Risk’ for Tories, Gauke Says (Earlier) Justice Secretary David Gauke, who has said he’ll resign if Boris Johnson becomes prime minister, said his Conservative Party colleagues would be wary of bringing down the administration in a confidence vote because it risks bringing the Labour Party to power. “It may well end up with a Jeremy Corbyn government,” Gauke said on BBC radio on Tuesday. “The idea that there will be some sort of national government that gets formed, I don’t think anyone can say that whatsoever.” Gauke’s comments reflect the debate in Westminster about far Tory rebels would go to block a government attempt to pursue a no-deal Brexit. While Gauke, Chancellor of the Exchequer Philip Hammond and former Foreign Office minister Alan Duncan have said they’ll do everything they can to prevent it, the justice secretary’s remarks indicate there may be a line they won’t cross. Earlier: Next U.K. Prime Minister Faces Crises at Home and AbroadBrexit Bulletin: Already in DoubtU.K. Lawmakers Plan Scottish Suit to Block Parliament SuspensionIran Exposes Boris Johnson’s Brexit Bombast: Therese Raphael

IMF lowers global growth forecasts as trade, Brexit uncertainties persist

The International Monetary Fund on Tuesday lowered its forecast for global growth this year and next, warning that more U.S.-China tariffs, auto tariffs or a disorderly Brexit could further slow growth, weaken investment and disrupt supply chains. The IMF said downside risks had intensified and it now expected global economic growth of 3.2% in 2019 and 3.5% in 2020, a drop of 0.1 percentage point for both years from its April forecast, and its fourth downgrade since October. The global lender said economic data released so far this year and generally softening inflation pointed to weaker-than-expected global activity, with trade and technology tensions and mounting disinflationary pressures posing future risks. The IMF slashed its forecast for growth in global trade by 0.9 percentage point to 2.5% in 2019. Trade should rebound and grow by 3.7% in 2020, about 0.2 percentage point less than previously forecast. Trade volume growth declined to around 0.5% in the first quarter, it said, with the slowdown mainly hitting emerging Asian countries. "The principal risk factor to the global economy is that adverse developments - including further U.S.-China tariffs, U.S. auto tariffs, or a no-deal Brexit - sap confidence, weaken investment, dislocate global supply chains and severely slow global growth below the baseline," the IMF said. Weak trade prospects were creating headwinds for investment, and business sentiment was particularly pessimistic about new orders, although sentiment in the services sector had proven resilient, bolstering employment and consumer confidence. Other risks, including tensions in the Persian Gulf, had picked up in recent months, and civil strife in many countries raised the specter of "horrific humanitarian costs, migration strains ... and higher volatility in commodity markets." The IMF said growth was better than expected in advanced economies like the United States, and one-off factors that had throttled growth in the euro zone were fading as anticipated. The IMF raised its forecast for U.S. economic growth to 2.6% in 2019, but left its 2020 forecast for 1.9% growth unchanged. It lifted its growth forecast for the euro area to 1.6% in 2020, leaving the 2019 growth outlook unchanged at 1.3%. TARIFFS HITTING CHINESE ECONOMY At the same time, activity across emerging market and developing economies in Asia was disappointing, and second-quarter indicators for China suggested weaker activity there, the IMF said. Escalating U.S. tariffs and weakening external demand were pressuring China's economy, which was already in the midst of a structural slowdown. China's economy was now expected to grow 6.2% in 2019 and 6.0% in 2020, a 0.1 percentage point drop for each year, the IMF said. The IMF also cut its forecast for growth in emerging markets and developing economies to 4.1% in 2019 and 4.7% in 2020. It slashed the forecast for Latin America and the Caribbean downward by 0.8 percentage point to just 0.6% in 2019, reflecting downgrades to the forecasts for Brazil, Mexico and Argentina. Venezuela's economy was expected to shrink about 35% in 2019. Russia also had a weak first quarter, the IMF said, revising downward its forecast for economic output in the Commonwealth of Independent States by 0.3 percentage point to 1.9% in 2019. Slower global growth and the drop in inflation across advanced and emerging market economies had revived the risk of disinflation, the IMF said, warning that missteps in macroeconomic policies could have a severely debilitating effect on sentiment, growth and job creation. The fund urged countries to work at that multilateral level to reduce trade tensions and end uncertainty about the status of longstanding trade agreements between Britain and EU, and the United States, Mexico and Canada. "Countries should not use tariffs to target bilateral trade balances or as a substitute for dialogue to pressure others for reforms," it said. It also called for efforts to ensure continued enforcement of existing World Trade Organization rules, resolve the deadlock over its appellate body, and modernize WTO rules to cover digital services, subsidies, and technology transfer.