“That was fast. Wall Street’s enthusiasm for the US-China trade truce has completely vanished. The Dow dropped 799 points, or 3.1%, on Tuesday. At one point, the index was down 818 points. The S&P 500 declined 3.2%, while the Nasdaq tumbled 3.8%.
“Big tech stocks fell sharply. Apple (AAPL) and Alphabet (GOOGL) lost more than 4% apiece. Amazon (AMZN) and Netflix plunged more than 5%.
“…investors are quickly realizing that the US-China trade war is not over. The tariffs already put in place remain. And new tariffs could be implemented if the two sides fail to make progress.”
“The sharp fall witnessed in the U.S. T-bond yields this week caused a yield curve inversion for the first time since the financial crisis presented by the yield on the 5-year note dropping below the yield on the 2-year note. Commenting on this development, Jeffrey Gundlach, chief executive officer of DoubleLine Capital, said that the yield curve inversion on short end maturities was a signal that the economy was poised to weaken.”
“Stocks in Asia declined on Wednesday after an overnight plunge on Wall Street as investors worried about a potential economic slowdown and the state of the U.S.-China trade war.
“The mainland Chinese markets, closely watched in relation to Beijing’s ongoing dispute with Washington, slipped by the end of their trading day.”
“European stocks were lower Wednesday morning, as resurgent trade worries worsened investor fears about global economic growth. The pan-European Stoxx 600 slipped 1.2 percent during early morning deals, with all sectors and major bourses in negative territory.”
““Unless government were to do something completely different to change tack, or indeed to pass this deal, then we will be leaving the EU on 29 March next year without a deal, so it defaults to no deal,” Andrea Leadsom told the BBC’s Today programme this morning.
“Lawmakers have come out heavily against Theresa May’s proposed withdrawal agreement, which would tie the UK into a temporary customs union with the EU that it cannot leave of its own accord.”
“Activity in Germany’s services sector eased in November due to rising cost pressures and waning business optimism, slowing growth in the private sector of Europe’s largest economy to a near four-year low, a survey showed on Wednesday.”
“The European Union and Italy have been in a standoff over the Italian government’s debt for weeks. Brussels — supported by the rest of the governments of Europe — seems to believe that Rome will soon back down, delivering another victory for European Union discipline. But that’s far from certain.
“Moreover, even if the Italian government does fall into line, the political consequences may prove disastrous for Europe.”
“The [US] housing market recession is coming. In recent months, we’ve seen shares of homebuilder stocks get hammered. Existing and new home sales have declined sharply. And the pace of home price appreciation has now declined for six straight months.
“The factors weighing on housing are not particularly new or novel — a lack of affordable housing supply and the rise in mortgage rates to seven-year highs are pressuring the market.”
“Plunging automobile sales add to evidence that higher borrowing costs are beginning to eat into Canadian economic growth, possibly faster than the central bank expected.
“Light vehicle sales dropped 8.2 percent November from a year earlier, according to the Automotive News Data Center in Detroit. It was the largest decline since 2009…”
“Australia’s economy slowed more than expected last quarter as consumers reacted to tepid wage growth by shutting their wallets, a disappointing outcome that sent the local dollar sliding as investors pushed out the chance of any rate hike.
“The news came as fears of a possible slowdown in the U.S. economy and the Sino-U.S. tariff slugged world shares and threatened future business investment.”
“Japan’s economy is expected to have contracted more sharply initially estimated in the third quarter, with analysts in a Reuters poll forecasting a steep drop in capital spending in a sign of rising headwinds in 2019 as global demand ebbs. The poll of 16 economists predicted the world’s third-biggest economy to have shrunk an annualized 1.9 percent in July-September, worse than the preliminary reading of a 1.2 percent contraction.”
“Oil fell on Wednesday as a swelling supply glut and signs of an economic slowdown weighed on crude prices a day ahead of an OPEC meeting at which the producer club is expected to decide supply cuts.”
“…the world economy may be facing grimmer prospects in 2019.
“In a fresh sign of mounting growth woes, Federal Reserve Chair Jerome Powell said last week that interest rates are “just below” neutral, a distinct change from his remarks in early October that the Fed was “a long way” from neutral.
“The change in phrasing by Powell, who has been under fire from US President Donald Trump about rate hikes, is considered a hint that Fed rate hikes may slow.
“The significant change in the Fed’s rate path apparently points to concerns that US economic growth might not hold up if the current monetary policy continues into the new year.
“The news follows General Motors’ recent announcement that it will lay off 14,000 workers and close five facilities in North America, which the car company said would prepare it for the future world of autonomous and electric vehicles. This move inevitably deepened global recession fears.
“Also, the recent slump in crude oil prices indicates slowing demand growth, a portent of sluggish global GDP expansion.”
^^^Lots of harbingers of our deflationary collapse here, as maxed-out consumers struggle to afford the output of the system in sufficient quantities for it to fulfil its growth mandate.
And of course if it cannot grow, the financial system will find itself in a situation of cascading defaults.