“China’s weakening economy is roiling export markets in the rest of Asia — and there’s more pain to come.
“From Hong Kong to Japan, exports data for December showed a marked downturn as supply-chain disruptions triggered by US-China tensions and a cyclical slowdown in the world economy, led by China, hit the trade-reliant region.
“More bad news is in store for January: Bloomberg Economics’ early indicator shows China’s economy slowed further this month, while Thursday’s purchasing managers index is set to show another decline in factory output.
“Nikkei PMIs for seven of the region’s economies are due Friday, with four of them already in contraction or less than half a point from contraction. A separate business survey on Wednesday showed South Korea manufacturers’ confidence for February at the most depressed level since the global financial crisis a decade ago.
“Hong Kong’s worse-than-expected plunge in exports was telling for its broadly subdued demand from the rest of Asia, especially mainland China. Trade-dependent Singapore posted its biggest fall in exports in more than two years, while in Indonesia, the biggest economy in Southeast Asia, the drop in shipments was the worst since mid-2017.
“South Korea and Taiwan had a pair of ugly exports reports last week, and Japan followed with the second decline in four months. January data for Vietnam, where trade accounts for twice the nation’s gross domestic product, showed a 1.3% contraction in exports from a year ago, the worst performance in five years.”
“Singapore businesses have turned bearish about prospects, two government surveys showed
“…sentiment is weakest in the electronics industry amid a turn in the business cycle and concerns about the continuing trade war between the U.S. and China.”
“South Korea’s industrial output extended weakening in December to reflect the downtrend in the chip segment with indicators for present and future economic activities in the longest slump since the oil crisis of the early 1970s…
“…raising alarm about a recession in the making.”
“Samsung Electronics, the world’s biggest smartphone and memory chip maker, reported a slump in fourth-quarter net profits on Thursday, January 31, blaming a drop in demand for its key products. Net profits in the October-December period were 8.46 trillion won ($7.6 billion), it said, down 31% year-on-year… the picture is changing, with chip prices falling as global supply increases and demand weakens.”
“China has gone from a boon to world growth to a source of fragility. The policy response, driven mainly by Beijing and the Federal Reserve, is likely to be equally global in nature. The Fed took a big step on this front Wednesday, scrapping a preference to hike interest rates, citing global economic and financial conditions and waning price pressures. The principal worry is China and the weakness and deflationary pressures it’s exporting. China isn’t mentioned directly in the Federal Open Market Committee’s statement but it’s there in all but name.”
“The Federal Reserve may wind down its gradual asset-shedding operation sooner than thought, leaving the U.S. central bank with a bigger balance sheet than earlier anticipated, Fed Chairman Jerome Powell said Wednesday… late last year, prominent investors took to blaming the Fed’s balance sheet runoff for market volatility. President Donald Trump took up the drumbeat against the programme in December, tweeting at the Fed to “stop with the 50 B’s” – a reference to the $50 billion monthly cap.”
“Pending-home sales [in the US] slid 2.2% in December to a reading of 99, and were 9.8% lower compared to a year ago, marking the 12th straight month of annual declines, the National Association of Realtors said Wednesday. That’s the lowest reading since April 2014.”
“Billionaire apartment developer Harry Triguboff has warned this year could be worse than 2018 for Sydney and Melbourne’s already battered housing markets.
“The Meriton founder called for easing of taxes to coax foreign buyers back into the market and for young people to be able to access their superannuation to buy a home. “It may be as bad as last year, it may be worse,” he told The Australian. “Australia is completely dependent on the Chinese (buyers). (The slowdown) must affect the broader economy.””
“Concern about Brexit’s impact on the U.K. economy is growing, with consumer worries near crisis-era levels, investment falling and the property market suffering. Nationwide Building Society said Thursday that house-price growth ground close to a halt as values rose just 0.1 percent in January from a year earlier.”
“British car production fell by 9 percent last year, the biggest drop since the 2008-9 recession, and investment slumped by nearly half due to fears about Brexit, an industry body said on Thursday.”
“The average cost for British lenders of issuing secured debt has leapt to its highest since just after the 2016 EU referendum, JPMorgan data shows, as investors fret that political turmoil could tip the economy into recession.”
“German retail sales plummeted by 4.3pc on the month in December, the fastest rate in 11 years, data released by the state statistics office on Thursday showed, sending a worrying signal about household spending in Europe’s biggest economy.
“The fall in real terms was far weaker than a Reuters consensus forecast for a 0.6pc drop.”
“German economic growth is set to weaken to the slowest pace in six years in 2019, held back by a deteriorating environment for global commerce hobbled by worries about trade disputes and Brexit.”
“Italian Premier Giuseppe Conte said the economy probably shrank in the fourth quarter, plunging Italy into a recession that would put pressure on the populist government’s spending plans.
“At an event in Milan, Conte said: “I expect a further contraction of gross domestic product.””
“Hedge funds haven’t been chasing the January rebound in U.S. equities on the heels of their worst year since 2011. According to Macro Risk Advisors, these big-money managers are acting much more like it’s the aftermath of the 2008 financial crisis than the relatively low-volatility environment that’s dominated for most of the past five years.”
“A surge in gold purchases by central banks to the highest since 1967 helped push global demand for the metal up 4 percent last year, the World Gold Council (WGC) said on Thursday…
“Driving the increase were central banks which bought 651.5 tonnes – 74 percent more than in 2017 and the second highest annual total on record – as countries including China and Poland
joined Russia, Turkey and Kazakhstan in adding to their reserves, the WGC said.”