“It’s tempting to think the global economy is riding out the trade war turmoil. Tempting, but mistaken. Look closely: The slowdown has begun.”
“One of the paradoxes of this year’s trade tensions is that in many parts of the world, it doesn’t yet feel like a crisis.
“For all the turmoil in emerging-market currencies, equity investors in major markets seem … relaxed? The milestone passed with little fanfare, but the S&P 500 index closed at a record high of 2,914.04 on August 29. The day before, India’s Nifty 50 did the same. Other indexes in developed markets are only moderately below their January peaks.
“With President Donald Trump expected to start implementing the next round of tariffs on $200 billion of Chinese goods within hours, it’s tempting to think the global economy is riding out the turmoil. Tempting, but mistaken. Look closely: The slowdown has begun.
“Take trade volumes. It’s been extraordinarily unusual for the momentum of global commerce to head anywhere but up in recent decades. The only notable occasions when the world trade monitor compiled by the CPB Netherlands Bureau for Economic Policy Analysis has turned down in a sustained way since 2000 have been on the eve of the 2001 and 2008 recessions and during the 2015 commodity slump.
“You can now add 2018 to that list, with the index coming in negative throughout the second quarter of this year…
“For a better picture of what lies ahead, have a look at the way the world’s container-shipping lines are planning for the future. Order books that ran in excess of 1,000 vessels before the 2008 financial crisis haven’t cracked one-fifth of that level since Trump came to power. If the global economy is going to ride out this latest round of tension, the merchant fleets on which trade depends aren’t seeing it.”
“Beijing has laid the ground for another round of tit-for-tat tariffs in the US-China trade war as it declared its readiness to retaliate if Washington imposes a fresh set of duties on $200bn (£155bn) of Chinese goods, which could happen as soon as this week… Beijing’s economic ministry spokesman, Gao Feng: “If the United States, regardless of opposition, adopts any new tariff measures, China will be forced to roll out necessary retaliatory measures.””
“Russia is ready to take the emergency step of buying its own rouble debt if a new wave of US sanctions threatens to upend the market. “In a very stressful scenario when we see the conditions of a market failure” both “the central bank and the government have the tools to intervene on the open market to cushion the adjustment period,” Deputy Finance Minister Vladimir Kolychev said in a Bloomberg TV interview.”
“For the third time in a year, Turkish, Russian and Iranian leaders will convene in Tehran to discuss a road map for Syria’s Idlib as well as closer economic cooperation to ward off the impact of unilateral U.S. sanctions.”
“Turkey is in the process of constructing a site for a Russian missile system despite warnings from the United States to not buy the platform, according to a source with firsthand knowledge of an intelligence report covering the subject.”
“Much has been said about the importance of a trade deal with the U.S. for the Canadian economy, as officials from both sides of the border continue to try to hash out a new agreement. But, even if a new NAFTA deal is reached, it will not prevent the Canadian economy from slowing down… Rising interest interest rates will hold consumers back from spending and make housing affordability even more costly…”
“The UK high street has posted its worst August performance for three years, in further evidence of the pressure on traditional retailers. Underlying sales at physical stores slid 2.7% last month… “With inflation continuing to bite on the weekly shop and the heatwave driving discretionary spending to bars and entertaining, there is even less disposable income heading to the high street,” said Sophie Michael, BDO’s head of retail and wholesale.”
“The Great Recession helped push student debt passed $1.5 trillion, up from about $671 billion at the beginning of 2008, according to Federal Reserve Bank of New York data. The crash, which began 10 years ago this month with the collapse of Lehman Brothers, created a perfect storm of high unemployment, stagnant wages and the declining value of American homes meant that families had fewer resources to use to pay for college.”
“Expect more short-term pain, investors said, after emerging-market stocks tipped into a bear market. The MSCI Emerging Market Index closed down 0.3% in New York on Thursday. That took its decline from a high of 26 January to just over 20%, the threshold for a bear market… Emerging-market assets are under pressure from a stronger dollar and rising US interest rates, as well as American protectionism. Contagion concern has come to the fore in recent weeks as the most vulnerable developing economies — Argentina and Turkey — fell into crises.”
“Construction companies say they can’t afford credit under President Mauricio Macri’s financial plan, which has raised interest rates to 60 percent. Argentina’s construction sector could be forced to shed some 40,000 jobs in the next few months because sky high-interest rates are making it difficult for businesses to finance projects, experts warn.”
“Jair Bolsonaro, the far-right candidate who is leading the polls in Brazil’s presidential race, is in a serious condition but out of danger after being stabbed while campaigning just a month before the election.”
“The [Philippine] peso extended its slump Thursday, hitting the lowest level in nearly 13 years at 53.80 against the US dollar, in line with the fall of other Asian currencies and following reports that inflation rate accelerated to a nine-year peak. The peso shed P0.25 Thursday to close at 53.80 from 53.55 a dollar Wednesday. It was the local currency’s weakest finish in almost 13 years.”
Australia’s dollar is finding itself in unusual company these days, getting sold along with former emerging-market darlings such as the Indonesian rupiah and Indian rupee. “As a rout grips developing markets, the Aussie – viewed as a barometer for global risk appetite – is also bearing the brunt of investor angst.”“