International
World economy in 2022: the big factors to watch closely
Will we now see a proper pandemic recovery?

Will 2022 be the year where the world economy recovers from the pandemic? That’s the big question on everyone’s lips as the festive break comes to an end.
One complicating factor is that most of the latest major forecasts were published in the weeks before the omicron variant swept the world. At that time, the mood was that recovery was indeed around the corner, with the IMF projecting 4.9% growth in 2022 and the OECD projecting 4.5%. These numbers are lower than the circa 5% to 6% global growth expected to have been achieved in 2021, but that represents the inevitable rebound from reopening after the pandemic lows of 2020.
So what difference will omicron make to the state of the economy? We already know that it had an effect in the run-up to Christmas, with for example UK hospitality taking a hit as people stayed away from restaurants. For the coming months, the combination of raised restrictions, cautious consumers and people taking time off sick is likely to take its toll.
Yet the fact that the new variant seems milder than originally feared is likely to mean that restrictions are lifted more quickly and that the economic effect is more moderate than it might have been. Israel and Australia, for example, are already loosening restrictions despite high case numbers. At the same time, however, until the west tackles very low vaccination rates in some parts of the world, don’t be surprised if another new variant brings further damage to both public health and the world economy.
As things stand, the UK thinktank the Centre for Economics and Business Research (CEBR) published a more recent 2022 forecast just before Christmas. It predicted that global growth would reach 4% this year, and that the total world economy would hit a new all-time high of US$100 trillion (£74 trillion).
The inflation question
One other big unknown is inflation. In 2021 we saw a sudden and sharp surge in inflation resulting from the restoration of global economic activity and bottlenecks in the global supply chain. There has been much debate about whether this inflation will prove temporary, and central banks have been coming under pressure to ensure it doesn’t spiral.
So far, the European Central Bank, Federal Reserve and Bank of Japan have all abstained from raising interest rates from their very low levels. The Bank of England, on the other hand, followed the IMF’s advice and raised rates from 0.1% to 0.25% in December. This is too little to curb inflation or do any good besides increase the cost of borrowing for firms and to raise mortgage payments for households. That said, the markets are betting that more UK rate rises will follow, and that the Fed will also start raising rates in the spring.
Yet the more important question regarding inflation is what happens to quantitative easing (QE). This is the policy of increasing the money supply that has seen the major central banks buying some US$25 trillion in government bonds and other financial assets in recent years, including about US$9 trillion on the back of COVID.
Both the Fed and ECB are still operating QE and adding assets to their balance sheets every month. The Fed is currently tapering the rate of these purchases with a view to stopping them in March, having recently announced that it would bring forward the end date from June. The ECB has also said it will scale back QE, but is committed to continuing for the time being.
Of course, the real question is what these central banks do in practice. Ending QE and raising interest rates will undoubtedly hamper the recovery – the CEBR forecast, for example, assumes that it will see bond, stock and property markets falling by 10% to 25% in 2022. It will be interesting to see whether the prospect of such upheaval forces the Fed and Bank of England to get more dovish again – particularly when you factor in the continued uncertainty around COVID.
Politics and global trade
The trade war between the US and China looks likely to continue in 2022. The “phase 1” deal between the two nations, in which China had agreed to increase its purchases of certain US goods and services by a combined US$200 billion over 2020 and 2021 has missed its target by about 40% (as at the end of November).
The deal has now expired, and the big question for international trade in 2022 is whether there will be a new “phase 2” deal. It is hard to feel particularly optimistic here: Donald Trump may have long since left office, but US strategy on China remains distinctly Trumpian, with no notable concessions having been offered to the Chinese under Joe Biden.
Elsewhere, western tensions with Russia over Ukraine and further escalation of economic sanctions against Putin may have economic consequences for the global economy – not least because of Europe’s dependency on Russian gas. The more engagement that we see on both fronts in the coming months, the better it will be for growth.
Whatever happens politically, it is clear that Asia will be very important for growth prospects in 2022. Major economies such as the UK, Japan and the eurozone were all still smaller than before the pandemic as recently as the third quarter of 2021, the latest data available. The only major developed economy that has already recovered its losses and regained its pre-COVID size is the United States.
Economic growth by country since 2015

On the other hand, China has managed the pandemic well – albeit with strict control measures – and its economy has achieved strong growth since the second quarter of 2020. It has been struggling with a heavily over-indebted property market, but appears to have handled these problems relatively smoothly. Though the jury is out on the extent to which China’s debt problems will be a drag in 2022, some such as Morgan Stanley argue that strong exports, accommodative monetary and fiscal policies, relief for real estate sector and a slightly more relaxed approach to carbon reduction point to a decent performance.
As for India, whose economy has seen double dips during the pandemic, it is showing a strong positive trend with 8.5% expected growth in the year ahead. I therefore suspect that emerging Asia will shoulder global growth in 2022, and the world’s economic centre of gravity will continue to shift eastwards at an accelerated pace.
Muhammad Ali Nasir does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
economic growth reopening global growth pandemic bonds government bonds qe fed federal reserve real estate trump recovery global trade interest rates india japan european europe uk russia ukraine chinaInternational
Stock Market Today: Stocks turn lower as Treasury yield rise mutes earnings gains
A mixed set of big tech earnings, alongside modestly higher Treasury yields, has stocks moving lower into the start of the Wednesday session.

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International
People in Europe ate seaweed for thousands of years before it largely disappeared from their diets – we wonder why?
The decline of seaweed as part of the staple diet in Europe remains a mystery.


How are we sure people ate seaweed?
We identified several types of molecules in the dental calculus that collectively are characteristic of seaweed. We refer to these as “biomarkers”. They include a set of chemical compounds called alkylpyrroles. When we detect these compounds together in calculus, we can be fairly sure where they came from. The same goes for other compounds characteristic of seaweed and freshwater plants. To have become embedded in dental calculus, the seaweed and freshwater plants had to have been in the mouth and most probably chewed. Biomarkers do not survive in all our samples, but where they do, they’re found consistently across many individuals we analysed from different places. This suggests seaweed was probably a routine part of the diet.Perceptions of seaweed
Today, seaweed is often seen as the scourge of beaches. It accumulates at the high-water mark where it can create a slippery and sometimes smelly barrier to the sea. But it is a wondrous world of its own. There are over 10,000 species of seaweed worldwide living in the intertidal zone (where the ocean meets the land between high and low tides) and the subtidal zone (a region below the intertidal zone that is continuously covered by water). Around 145 of these species are eaten today and in parts of Asia it is commonplace. Seaweed is edible, nutritious, sometimes medicinal, abundant and local. Although overconsumption can cause iodine toxicity, there are no poisonous intertidal species in Europe. It is also available all year round, which would have been particularly useful in the past, when food supplies were less reliable.Reconstructing ancient diets
Reconstructing ancient diets is challenging and is generally more difficult as you go back in time. This helps explain why we’ve only just realised how much seaweed was being eaten by ancient Europeans. In archaeology, evidence for ancient diets often comes from physical remains: animal bones, fish bones and the hard parts of shellfish. Evidence for plants as part of the diet before farming, however, is rare. Techniques to study molecules from archaeological remains have been around for some time. A key method is known as carbon/nitrogen (C and N) stable isotope analysis. This is widely used to reconstruct ancient human and animal diets based on the relative proportions of these elements in bone collagen. But the presence of plants has been difficult to identify, due to their low nitrogen content. Their presence is masked by an overwhelming signal for animals and fish.Hiding in plain sight
The evidence for seaweed had been present all along, but unrecognised. Our discovery provides a perfect example of how perceptions of what we regard as food influence interpretations of ancient practices. Seaweed was detected in chunks that had been chewed (and presumably spat out) at the 12,000-year-old site of Monte Verde, Chile. But when it is found at archaeological sites, it is more commonly interpreted as having been used for things other than food, such as fuel and food wrappings. In European archaeology, there is a longstanding perception that Mesolithic hunter-gatherers ate lots of seafood, but that when people started farming, they focused on food sourced from land, such as their livestock. Our findings hammer another nail into the coffin of this theory. Today, only a few traditional recipes remain, such as laverbread made from the seaweed species Porphyra umbilicalis in Wales. It’s still not clear why seaweed declined as a staple source of food in Europe after the Middle Ages.What are the implications?
Our unexpected discovery changes the way we understand past people. It also alters our perceptions of how they understood the landscape and how they exploited local resources. It suggests, not for the first time, that we vastly underestimate ancient people. They had a knowledge, particularly about the natural world, that is difficult for us to imagine today. The finding also reminds us that archaeological remains are minute windows into the past, reinforcing the care required when developing theories based on limited evidence. The consumption of plants, upon which our world depends, has been habitually left out of dietary theories from our pre-agrarian past. Rigid theories have sometimes forgotten that humans were behind these archaeological cultures – and that they were probably similar to us in their curiosity and needs. Today seaweed sits, largely unused as food, on our doorstep. Making the edible species a bigger component of our diets could even contribute to making our food supplies more sustainable.
The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.
european europeInternational
EUR/AUD bearish breakdown supported by additional China fiscal stimulus and AU inflation
Weak PMI readings from the Eurozone, an increase in China’s budget deficit ratio, and renewed inflationary pressures in Australia may trigger a persistent…

- Weak PMI readings from the Eurozone, an increase in China’s budget deficit ratio, and renewed inflationary pressures in Australia may trigger a persistent bearish sentiment loop in EUR/AUD.
- Watch the key short-term resistance at 1.6700 for EUR/AUD.
- A break below 1.6250 key medium-term support on the EUR/AUD may trigger a multi-week bearish impulsive down move.
The Euro (EUR) tumbled overnight throughout the US session as it erased its prior gains against the US dollar recorded on Monday, 23 October; the EUR/USD shed -104 pips from yesterday’s intraday high of 1.0695 to close the US session at 1.0591, its weakest performance in the past seven sessions.
Yesterday’s resurgence of the USD dollar strength has been attributed to a robust set of October flash manufacturing and services PMI data from the US in contrast with weak readings seen in the UK and Eurozone that represented stagflation risks.
Interestingly, the Aussie dollar (AUD) has outperformed the US dollar where the AUD/USD managed to squeeze out a minor daily gain of 21 pips by the close of yesterday’s US session. The resilient movement of the AUD/USD has been impacted by positive news flow out from China, Australia’s key trading partner.
China’s national legislature has just approved a budgetary plan to raise the fiscal deficit ratio for 2023 to around 3.8% of its GDP which was above the initial 3% set in March and set to issue additional sovereign debt worth 1 trillion yuan in Q4. This latest round of additional fiscal stimulus suggests that China’s top policymakers are expanding their initial targeted measures to address the ongoing severe liquidity crunch in the domestic property market as well as to reverse the persistent weak sentiment inherent in the stock market.
In addition, the latest set of Australia’s inflation data surpassed expectations has also reinforced another layer of positive feedback loop in the Aussie dollar which in turn may put Australia’s central bank, RBA on a “hawkish guard” against cutting its policy cash rate too soon.
The less lagging monthly CPI Indicator has risen to an annualized rate of 5.6% in September, above consensus estimates of 5.4%, and surpassed August’s reading of 5.2% which has translated into a second consecutive month of uptick in inflationary growth.
In the lens of technical analysis, a potential bearish configuration setup has emerged in the EUR/AUD cross pair from a short to medium-term perspective.
Major uptrend phase of EUR/AUD is weakening
Fig 1: EUR/AUD medium-term trend as of 25 Oct 2023 (Source: TradingView, click to enlarge chart)
Even though the price actions of the EUR/AUD have been oscillating within a major ascending channel since its 25 August 2023 low of 1.4285 and traded above the key 200-day moving average so far, the momentum of this up movement is showing signs of bullish exhaustion.
Yesterday (24 October) price action ended with a daily bearish reversal “Marubozu” candlestick coupled with the daily RSI momentum indicator that retreated right at a significant parallel resistance in place since March 2023 at the 65 level which suggests a revival of medium-term bearish momentum.
EUR/AUD bears are now attacking the minor ascending support
Fig 2: EUR/AUD minor short-term trend as of 25 Oct 2023 (Source: TradingView, click to enlarge chart)
The EUR/AUD has now staged a bearish price action follow-through via the breakdown of its minor ascending support from its 29 September 2023 low after a momentum bearish breakdown that was flashed earlier yesterday (24 October) during the European session as seen from the 4-hour RSI momentum indicator.
Watch the 1.6700 key short-term pivotal resistance (also the 50-day moving average) for a further potential slide toward the intermediate supports of 1.6460 and 1.6320 in the first step.
On the other hand, a clearance above 1.6700 invalidates the bearish tone to see the next intermediate resistance coming in at 1.6890.
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