“The United States is putting “a knife to China’s neck” on trade issues, a senior Chinese official has said, as the two sides struggle to find a way to end a months-long standoff over trade.
“A day after both sides heaped fresh tariffs on each other’s goods, vice-commerce minister Wang Shouwen said the resumption of talks on the matter depended on the “will” of the US.
“US tariffs on $200bn worth of Chinese goods and retaliatory taxes by Beijing on $60bn worth of US products kicked in on Monday as the trade dispute between the world’s two biggest economies escalated, unnerving global financial markets.
“China also accused the United States of engaging in “trade bullyism”, and said Washington was intimidating other countries to submit to its will, according to a white paper on the dispute published by China’s state council, or cabinet, on Monday.
“Asian shares were broadly down on Tuesday amid nervousness on markets about the ongoing dispute…”
“The US could start to sell short the stocks of Chinese firms listing on the US markets – that is, bet that they will fall in value – and use the media to exaggerate weaknesses in the Chinese economy, the report warned. This could put significant downward pressure on those stocks…
“The US could also encourage – and even pressure – US firms to exit their investments in China. The US may target the highly leveraged segment of China’s economy to do damage to China’s financial and property markets, triggering a financial crisis.
“The currency market could also take a beating if the US were to take financial positions reinforcing expectations that the yuan would continue to weaken against the US dollar. Such a tactic would likely trigger funds to rapidly move into “safe haven” assets, causing a sell-off in Chinese assets, real estate in particular. This, in turn, could produce massive capital outflows that would cause a systemic crisis in China’s financial system, the report warned.”
“China is building a nationwide system to monitor the income and expenditure of local governments in a bid to control debt, the official China Daily reported on Tuesday, citing finance ministry officials. As China steps up infrastructure spending in a bid to offset the economic impact of trade frictions with the United States, it has vowed to minimize financial risk and prevent local governments from taking on too much debt.”
“North Eastern Electric Power Corp., an Indian state-run power generator, planned to raise 3 billion rupees ($41.3 million) selling bonds. It couldn’t manage 5 percent of that amount, prompting it to scrap the sale on Monday.
“Three Indian companies have pulled 58 billion rupees ($800 million) of debt sales this month, the most in at least a decade, according to data compiled by Bloomberg.”
“Leader of the Opposition in the National Assembly Shehbaz Sharif on Monday came down hard on the Pakistan Tehreek-e-Insaf (PTI) government’s economic policies, saying the “flag-bearers of change” have dropped an ‘inflation bomb’ on people in the form of ‘mini-budget’… The former Punjab chief minister also took the government to task for increasing the price of gas, saying it will prove to be detrimental for economy. “The masses will bear the burden of increase in the price,” he said.”
“Iran’s consumer price index increased from 116.2 to 134.6 or around 16% during the summer (June 22-Sept. 22).
“According to data provided by the Statistical Center of Iran, the second quarter’s inflation has been the biggest quarterly inflation that the Iranian economy has seen thus far, the Persian daily Donya-e-Eqtesad reported.”
“Business confidence among Turkish manufacturers tumbled to a nine-year low this month and two other measures of economic health also declined, data showed on Monday, reinforcing expectations of a downturn in the second half of the year. Once seen as a star emerging market, Turkey has been rocked by a sell-off in the lira, which has lost some 40 percent so far this year, stoking inflation and raising concerns about a wave of bad debts for banks.”
“Under a tight blockade by Israel and Egypt, the people of Gaza are well acquainted with suffering. Now the Trump administration will be compounding their suffering by cutting much needed financial aid. Staff at the United Nations Relief and Works Agency for Palestine Refugees in Gaza have gone on strike paralysing the impoverished region. America has blown a massive hole in the UNRWA budget. The agency as a result has resorted to online crowdsourcing for funds…
“In January of this year the Trump administration froze some $300 million of its $365 million in aid to the Agency. Finally, this September, the totality of US contributions were cut leaving millions of Palestinian refugees in the lurch.”
“Faki stressed that ceilings and red lines will be set for foreign debt in order to reduce [Egypt’s] borrowing. To save money, resort to loans should be restricted to only when absolutely necessary.
“He suggested selling off state lands and companies for this purpose, believing that this alone could save 1 trillion pounds ($55.6 billion) at the least.”
“Philippine leader Rodrigo Duterte suffered the biggest ratings slump of his presidency in the third quarter, an independent pollster said on Tuesday, amid signs of public unease about rising inflation and the cost of staple foodgrain rice.”
“In a provocatively titled video, “Will one phone call drop home prices by 80 per cent?”, Digital Finance Analytics founder Martin North, economist John Adams and PhD student Sean Quinn, who was in Ireland at the time, discussed what would happen here in a similar scenario [to GFC 1.0]. They debated whether, in the event of a major financial crisis, Australia should similarly agree to guarantee its banks — or let the whole system collapse and “reset”.”
“Flights could cease between the UK and the rest of the EU if Britain crashes out of the bloc without a deal, the government has said. In its latest set of “no deal” notices, the government said flights could be disrupted because the EU-issued aviation licences would not be valid and airlines would have to seek individual permissions to operate with respective states.”
“Apparently, investors believe that this boom is going to last, or at least that other investors think it should last, which is why they are bidding up stock prices in a dramatic response to the earnings increase. The reason for this confidence is hard to pin down, but it must be rooted in the public’s loss of healthy skepticism about corporate earnings, together with an absence of popular narratives that tie the increase in earnings to transient factors… A bear market could come without warning or apparent reason…”
“Your blood should be boiling as you read this. It means that some CEOs are managing their companies’ buyback programs in order to increase their bonuses.
“[Companies are] using an ‘Accelerated Share Repurchases’ to goose earnings… As you might imagine, companies using ASRs to manipulate earnings are engaging in financial engineering for cosmetic purposes rather than promoting genuine long-term value for shareholders.“
“The $37 billion in new supply of 2-year Treasury notes on Monday were sold at the highest yield at auction since June 2008 to the weakest demand since December 2008. Demand was lackluster despite low prices… The 2-year yield is a gauge of market expectations of interest-rate hikes.”
If it does go this high, demand destruction and popping debt bubbles mean it won’t stay there for long:
“Major oil trading houses are predicting the return of US$100 crude for the first time since 2014 as OPEC and its allies struggle to compensate for U.S. sanctions on Iran’s exports. With Brent crude already jumping to an almost four-year high on Monday, that’s exactly the kind of price surge President Donald Trump has been seeking to prevent by pressuring the Organization of Petroleum Exporting Countries to raise production.”
Read yesterday’s ‘Economy’ thread here.
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