The IMF joins the UN, the Bank of International Settlements and, er, Gordon Brown, in sounding the alarm on the global economy. A blind man could see this coming:
“The world economy is at risk of another financial meltdown, following the failure of governments and regulators to push through all the reforms needed to protect the system from reckless behaviour, the International Monetary Fund has warned.
“With global debt levels well above those at the time of the last crash in 2008, the risk remains that unregulated parts of the financial system could trigger a global panic, the Washington-based lender of last resort said…
“A dramatic rise in lending by the so-called shadow banks in China and the failure to impose tough restrictions on insurance companies and asset managers, which handle trillions of dollars of funds, are highlighted by the IMF as causes for concern.
“The growth of global banks such as JP Morgan and the Industrial and Commercial Bank of China to a scale beyond that seen in 2008, leading to fears that they remain “too big fail”, also registers on the IMF’s radar.
“The warning from the IMF Global Financial Stability report echoes similar concerns that complacency among regulators and a backlash against international agreements, especially from Donald Trump’s US administration, has undermined efforts to prepare for another downturn.
“The former UK prime minister Gordon Brown said last month that the world economy was “sleepwalking into a future crisis,” and risks were not being tackled now “we are in a leaderless world”.”
“The total number of global equity issuances fell sharply from 1,344 in Q2 2018 and 1,288 in Q3 2017 to just 1,129 in Q3 2018. Like we mentioned earlier, this trend can be attributed partially to the fact that the third quarter is seasonally slow period. However, there was a noticeable weakness in global equity markets over the most recent quarter due to growing fears of a trade war.”
“One has to be surprised at the equanimity of both U.S. policymakers and world financial markets about the deepening Italian economic crisis. This is particularly the case considering that, unlike Greece, Italy is too big an economy to fail for the euro to survive and too big and costly an economy for its European partners to save… Italy has the world’s third-largest sovereign debt market with more than $2.5 trillion in outstanding government debt.”
“Perhaps the clearest indicator of the rising fear about Italy is the yield on the country’s benchmark 10-year government bond. Yields reflect the surety with which investors think they will get their money back, and they tend to move in tandem with the stability of a country’s economic and political situation…
“Italian bond yields have jumped more than 20% in just over a week.”
“Greek banking shares are down sharply amid investor fears over lenders’ needs to reduce their large stock of bad loans resulting from the financial crisis.
“The index of bank stocks was down 10 percent in Athens on Wednesday. Piraeus Bank led the losses, at about 27 percent….”
“Just as Iceland looks back at a decade of recovery since its financial and economic collapse, the north Atlantic island is once again grappling with an existential challenge for one of its key industries. Tourism and the foreign cash it provides was instrumental in digging the 340,000-person nation out of its deep hole. Now, the industry is cooling fast and problems are mounting for its airlines after years of rapid expansion. Rewind to 10 years ago, and a similar tale could be told about the nation’s banks.”
“Primera Air, a Denmark-based airline owned by Icelandic businessman Andri Már Ingólfsson, has filed for bankruptcy and ceased operating, RÚV reports. Arion Banki has lost the equivalent of millions of US dollars in the venture. The sudden collapse on Monday left passengers stranded on both sides of the Atlantic…”
“The chief executive of the partly taxpayer-owned Royal Bank of Scotland has said a no-deal Brexit could lead to recession. Ross McEwan, appointed CEO in October 2013, told the BBC any dip in growth would affect the bank’s profits and share price.
“UK Government Investments holds a 62.4% of RBS shares after the 2008 bailout and subsequent disposals.”
“Tesco has warned that opportunities to stockpile food in order to prepare for a no-deal Brexit are “very, very limited”.
“Chief executive Dave Lewis said that ensuring supplies of food remain uninterrupted was the “single biggest challenge” facing supermarkets as the UK prepares to leave the EU.”
“New car sales crashed by 20 per cent last month, the worst performance for the British motor trade since the collapse of Lehman Brothers bank, the financial crisis and the dislocation of the world economy ten years ago.
“It means that car sales this year in the UK are now running much lower than expected…”
“Major auto makers, with the exception of Fiat Chrysler, posted lower U.S. sales last month behind the ongoing slump in the car market and softer retail demand, even amid elevated incentive levels…
“…signaling an anticipated second-half slowdown continued in September.”
“Brazilians headed to the polls this weekend are finding it tougher to afford the basics than they have in years. Nearly one in three (32%) say they did not have enough money to afford food they needed in the past year, while a quarter (25%) say they lacked enough money for shelter.
“Both figures are about twice as high as they were before the 2014 election and the subsequent recession.”
“Pakistan’s economy is in deep financial crisis and exploring bailout package from the International Monetary Fund (IMF). Pakistan is also seeking investment from friendly countries to reduce debt which includes China and Saudi Arabia.
“Islamabad needs to arrange a whopping $20 billion instantly to avoid a major financial crisis.”
“India is facing an “economic crisis” due to its huge oil imports, two local TV channels cited Transport Minister Nitin Gadkari as saying on Thursday, ahead of a meeting of key ministers to discuss the falling rupee and the nation’s widening trade deficit. India, the world’s third biggest oil importer, depends on overseas markets to meet 80 percent of its oil needs.”
“The financial squeeze on India’s farmers is set to worsen because of record high fuel prices and surging costs of fertilisers, posing a challenge to Indian Prime Minister Narendra Modi in an election that must be held by May.”
Great picture from Quartz.
“India’s housing market has struggled for growth in recent years and if the central bank raises interest rates this week, there could be a further slowdown in the sector, experts told CNBC.
“A rate hike would “definitely have a negative impact” on the housing market outlook, Ramesh Nair, CEO and country head at real estate services firm JLL India, told CNBC.”
““Global trade outlook continues to look challenging as China-US trade tension shows no sign of easing. Hong Kong – as a major entrepôt for mainland China – is another indicator for broader regional trade and a more sensitive indicator as well,” HSBC said in a recent research note…
“China’s housing market is expected to slow throughout early 2019.”
“China is planning to sell $3 billion in U.S. dollar bonds this month, wooing foreign investors at a time of heightened trade tensions with the U.S. and turbulence in its own stock market. If successful, it would be the country’s second dollar-bond sale in a year… The offering is coming at a delicate time for the world’s second-largest economy. China’s gross domestic product growth is slowing, and the pace of investment in factories and public-works projects has cooled this year.”
“Australia’s housing slump has increased the possibility of debt downgrades for the country’s big banks, according to a report from Pacific Investment Management Co. “We have grown more cautious with the external credits of Australian banks,’’ according to a note to clients from Pimco that was written by analysts and portfolio managers including Taosha Wang. “The probability of a market-moving agency downgrade that causes major banks to lose their AA- rating for the first time in history is now higher than before.’’”