“Enforcing whatever the two countries agree to with respect to Intellectual Property Right protections was always going to be the most difficult part of the trade negotiations. There are no easy ways to accomplish this goal without substantially changing behavior, but the U.S. seems to have chosen a path that is unlikely to work.
“Besides not being effective, the reason I am not as optimistic as I once was that the trade war will be successfully resolved in the short term is that the U.S. approach has also struck at a bedrock issue in China. Meanwhile, Trump’s determination to restore balance and fairness in the relationship between China and the U.S. is a bedrock issue with him. As a result, he is willing to take steps in dealing with China that no country or U.S. has ever contemplated.
“In this sense, the negotiators on both sides are truly between a rock and a hard place. It is going to take a very creative compromise to bring the talks to a successful resolution, and the world may have to wait some time for such an agreement to appear.”
“Panasonic has joined the growing list of companies to sever ties with Huawei by announcing that it will stop supplying some components to the Chinese technology conglomerate after a US ban over security concerns. The decision by the Japanese firm on Thursday sent Asia Pacific shares falling again and came a day after four major Japanese and British mobile carriers said they would delay releasing new Huawei handsets.”
“Recent trade war escalation showed how sensitive to adverse events are Chinese companies…
“…debt in China has enormously grown and we are concerned that over time China may not be able to deal with it, which will result in an extreme downturn.
“Such a situation will strongly affect the whole world because China’s share in global GDP is significant.”
“The world’s second-largest economy was already slowing before the US-China trade conflict erupted.
“DW explores how different sectors of the Chinese economy are affected, and how tariffs could exacerbate the slump.”
“Chinese regulators are preparing to open up trading of bond futures to domestic banks, as the government seeks to increase hedging tools…”
“Japanese manufacturing activity swung back into contraction in May as export orders fell at the fastest pace in four months, highlighting why policy makers and investors remain anxious about the growing economic impact of a bruising Sino-U.S. trade war…
““The re-escalation of US-China trade frictions has heightened concern among Japanese goods producers,” said Joe Hayes, economist at IHS Markit, which compiles the survey.”
“While tax hikes are rarely popular anywhere, in Japan increases in the national sales tax proved especially toxic, squelching economic growth and damaging political careers.
“Yet Prime Minister Shinzo Abe is planning to let it rise again in October, after two delays, despite a wobbly economy and escalating trade tensions.”
“Euro zone business growth accelerated a touch this month but not as much as expected, bogged down by a deepening contraction in the bloc’s manufacturing industry which is increasingly affecting service firms, a survey showed.
“Last month, European Central Bank President Mario Draghi raised the prospect of more support for the struggling euro zone economy if its slowdown persists and Thursday’s survey is likely to add to the concerns of policymakers.”
“German business confidence in May was the weakest in more than four years amid an escalation of global trade tensions that are weighing heavily on the economy.
“The drop in the Ifo index was bigger than forecast and takes the closely-watched gauge to its lowest since November 2014.”
“Theresa May is thought to be on the brink of resignation as she faces a growing cabinet revolt over her Brexit plan and humiliation for the Conservative Party in today’s European elections.
“The prime minister is expected to announce a departure plan on Friday after failing to quell a ministerial mutiny over her revised EU withdrawal agreement. Commons leader Andrea Leadsom, the most prominent Brexiteer in the cabinet, quit late on Wednesday and other ministers were expected to follow her out of the door.”
“British Steel has collapsed, putting more than 4,000 jobs directly at risk and threatening a further 20,000 in the company’s supply chain. The company has been put into compulsory liquidation after talks broke down between the government and British Steel’s private equity owners Greybull Capital.”
“The Icelandic krona is continuing its slide against a basket of currencies midweek as the bankruptcy of a budget airline has triggered a recession, prompting the central bank to spring into action.
“The latest financial crisis comes roughly a decade since the island nation was on the brink of insolvency following the collapse of several major banks that contributed to the global catastrophe.”
“Turkey’s options to rescue itself from the spiral of a weakening currency and a painful economic downturn are becoming more and more limited, Reuters reported citing analysts.
“Should foreign investment run out and cash buffers become exhausted, Turkey may have few financial options left other than building large current account surpluses that may require a much deeper and longer domestic recession, Reuters said.”
“A four-year conflict between the Libyan central bank and rival branches is threatening to worsen the battle for the capital Tripoli, with at least 300 people dead and thousands displaced during weeks of fighting.
“It is feared the financial crisis will hinder efforts to reunify the divided banking system, fuelling prospects of a financial implosion and economic war alongside the military one.”
“In January, Zimbabwean President Emmerson Mnangagwa announced a 150% jump in fuel prices, triggering widespread protests that led to the deaths of 17 people after a brutal military crackdown.
“The country is currently on “security alert” owing to growing public anger against Mnangagwa’s government, which seems to be at its wits-end about solving the economic meltdown.”
“Federal Reserve officials trying to shore up their arsenal to defend the economy in the next U.S. recession received a warning about one approach they have been considering.
“Plans to hold more short-term bonds to prepare for a downturn could create risks of its own, Fed staff told policymakers, according to minutes from the Fed’s April 30-May 1 meeting that were released on Wednesday.”
“If the grounds for another financial crisis are brewing, it doesn’t take a lot of investigation to determine where they might lie.
“The epicentre of the last financial crisis was the implosion of junk bonds – the bundles of securitised sub-prime mortgages labelled as collateralised debt obligations, or CDOs.
“If there were to be another crisis, it wouldn’t be at all surprising if it started with a meltdown of junk bonds again – this time bundles of securitised sub-prime loans labelled as collateralised loan obligations, or CLOs.”
“Based on working with banks and bank regulators for three decades, what keeps me up at night now? 19 consecutive quarters of rising household debt! American households now hold mortgage, auto loan, student, and credit card debt of $13.7 trillion which is $1 trillion above the 2008 peak.
“This level of indebtedness is the equivalent of about 68% GDP as opposed to an equivalent of 86% in 2008. Yet, we are so indebted at every level, that is, municipal, national level, corporate, commercial real estate, and at a household level. The more money banks lend especially at this late stage in the credit cycle, the more they increase their operational risk exposure. They let go of their underwriting standards, and they ignore controls.”