“The EU has moved into full crisis mode, with officials now setting the terms the UK will have to meet for Brussels to open talks on avoiding an economic meltdown in the weeks after a no-deal Brexit.
“In anticipation of a no-deal outcome on 12 April after MPs voted down eight Brexit options on Wednesday, and the likely rejection of the withdrawal agreement on Friday, EU ambassadors on Thursday morning opened discussions on the terms to be set for the bloc to return to the negotiating table.
“The EU’s chief negotiator, Michel Barnier, told the diplomats during the meeting that a no deal was now “the most plausible outcome”, and that there was an urgent need to war-game the bloc’s response to it. The EU is to step up its “full-on crisis” preparations, according to a diplomatic note…
“Earlier on Thursday, Nathalie Loiseau, the former French minister spearheading Emmanuel Macron’s European election campaign warned against a second referendum, an option that was lost by 27 votes during the indicative vote process in the Commons.
““There is chaos, there is confusion,” Loiseau told the French channel BFM TV. “I’m against a new referendum because it would be a denial of democracy. Britain must leave.””
“Germany’s worst manufacturing survey in seven years sent investors rushing to buy bonds. For the first time in three years yields on German ten-year government debt fell below zero, meaning that investors are willing to pay to hold it. And later that day in America the yield on ten-year Treasury bonds fell beneath that on the three-month variety.
“The last time that happened was 2007… Europe should be a cause of deep concern.”
“Turkey’s lira slumped more than 5 percent on Thursday after central bank data showed that its reserves had fallen by almost $10 billion in three weeks.
“The lira was trading down 4.7 percent at 5.58 per dollar at 6:04 p.m. in Istanbul after falling to as low as 5.62 earlier. Yields on 10-year benchmark lira debt climbed to as high as 19.12 percent, extending the weakest levels since October.”
“Argentines continue to lose purchasing power to an inflation rate that reached 47.6 percent last year, the highest since 1991, and many are frustrated with the decision by President Mauricio Macri’s government to slash subsidies on utilities and public transportation. On average, in the past year natural gas has shot up 77.6 percent, electricity by 46 percent and water by 26 percent…
“A poll conducted in Buenos Aires and its suburbs showed that 65 percent of respondents said their income was not enough to make ends meet.”
“South African markets are on edge about an impending ratings review by Moody’s, with some economists fearful that a power crisis will cost the country its last investment-grade rating and lead to outflows of billions of dollars.
“Moody’s is indicatively scheduled to review the Baa3 rating and stable outlook it assigns South Africa later on Friday. The other two big rating agencies, S&P and Fitch, have already downgraded the sovereign to “junk”.”
“Factory activity in China likely contracted for a fourth straight month in March, a Reuters poll showed, suggesting the economy is still losing steam and adding to worries about faltering global growth.
“A downbeat reading, coming on the heels of the sharpest fall in industrial profits in at least 7 years, would underline the need for more stimulus as Beijing struggles to right the economy and end a bruising trade war with the United States.”
“The U.S. curve inverted last week for the first time in more than a decade as the 10-year yield dropped below the rate on the 3-month T-bill… Canada, where the yield curve also inverted last week, could be an alternative guide, even though its economy is one-tenth the size of the United States.
“Canada does not issue as many long-dated bonds as the U.S. Treasury, leaving that part of the curve to the provinces.
“While its market has not been directly impacted by central bank purchases, its economy is so closely tied to its southern neighbour that it rarely enters a recession without a U.S. contraction.”
“The struggling Australian property and stock markets have led to the biggest decline in household wealth in seven years, according to a Bloomberg report. The result highlights the pressure on the Reserve Bank of Australia (RBA) to resume slashing interest rates.
“Household wealth dropped 2.1% in the final three months of 2018, the largest decrease since the third quarter of 2011, said the Australian Bureau of Statistics.”
“US economic growth slowed at the end of 2018, falling well below the Trump administration’s projections and closing a strong year on a more worrying note. The commerce department said on Thursday that the US expanded at an annual rate of 2.2% in the last three months of the year, down from an initial estimate of 2.6%…
“The figure is well below the 5% growth rate that Donald Trump recently forecast and comes as evidence is mounting of a slowdown in other major markets including the eurozone and China.”
“A full retreat by the Fed as well as the European Central Bank arrested the fall in stock and commodity prices, but inflation expectations continue to fall in all major markets.
“That’s a different kind of deflation, brought on by buyer resistance to price increases. We saw that vividly in the February report on the US labor market, where employers simply stopped hiring in sectors where wages had risen the most. We observe it in the housing market, where buyers are pushing back against higher prices, and (once again) in the market for wireless telephone service.”
““We designed Cassandra to assess the risk of domestic credit and financial crises,” said Rob Subbaraman and Michael Loo, Economists at Nomura. Using five financial metrics, referred to as early warning indicators, Cassandra has signalled over two-thirds of all financial crises that have occurred since the early 1990s… So Cassandra has a pretty good track record for predicting periods of financial turmoil.
So what nation is deemed to be at most risk right now? According to the metrics at the end of September last year, Hong Kong remains head and shoulders above the rest.””