Currency wars underway:
“China’s currency the renminbi has fallen to its lowest level against the dollar since the financial crisis, crashing through the seven-per-dollar threshold after an escalation in the US-China trade war.
“By 8.30am UK time the onshore traded renminbi had fallen 1.3 per cent to 7.030 per dollar.
“The drop prompted investors to sell so-called risk assets such as shares in Asian markets and buy up assets considered safe havens.
“Hussein Sayed, chief market strategist at foreign exchange broker FXTM:
““The People’s Bank of China has spent hundreds of billions of dollars over the past couple of years to prevent their currency from breaching this key level, but now that doesn’t seem to be the case.”
““In fact, the currency tool may be very effective as it significantly offsets the impact of US tariffs. If the Chinese currency falls by another eight per cent from the current level, the 10 per cent tariffs paid by US importers will be offset by the renminbi’s weakness.””
“China’s decision to weaken its currency amid an escalating trade war will put Asian central banks on the defensive as they gauge how much monetary-policy easing their economies can withstand.
“The yuan broke through 7 to the dollar on Monday… that pulled down Asian currencies from South Korea to Thailand and worsened a sell-off in stocks.”
“Asian factory activity contracted further in July, fuelling worries that a Sino-US trade war and a slowdown in China could tilt the world towards a global recession, which central banks will have to fight with depleted ammunition.”
“China’s “big four” state-owned lenders, which together control more than $14 trillion of assets, tumbled to record-low valuations on Monday amid mounting concern that Beijing will encourage them to bail out smaller peers.
“Industrial & Commercial Bank of China Ltd., the world’s largest lender by assets, lost $11 billion of market value last week after injecting capital into a troubled regional bank as part of a government-orchestrated rescue.”
“The earliest indicator of Hong Kong’s economy for the second half of 2019 signals that conditions are set to deteriorate in the city as protests disrupt local businesses.
“Hong Kong’s July whole economy purchasing managers’ index plunged to 43.8 in July from 47.9 the previous month, the lowest reading since March 2009…”
“Sales of Japanese cars in South Korea fell sharply last month as a bitter trade row been the two countries provoked a consumer backlash…
“South Koreans have been boycotting Japanese goods after Tokyo tightened export curbs on the country in July. The dispute escalated last week when Japan said it would drop South Korea from its trusted trade partner list.”
“The bond market’s economic canary in the coal mine looks poised to hit Japan.
“The country’s benchmark 10-year yield is on track to fall below its two-year equivalent for the first time since the collapse of the Japanese economic bubble in 1991.
“Known as an inverted yield curve, longer-term yields below shorter ones are unusual in developed markets and often interpreted as a harbinger of recession.”
“Across India dealerships are being pushed out of business and the Indian auto sector is going through its biggest slump in nearly two decades. Passenger vehicle sales fell for eight straight months until June, and in May sales dropped 20.55% – the sharpest recorded fall in 18 years.
“Preliminary data indicates passenger vehicle sales may have plunged as much as 30 percent in July. The slump in India, along with a simultaneous slide in Chinese auto sales, is a blow for automakers…”
“Even before the body of coffee-chain tycoon V.G. Siddhartha was recovered from a river in southern India this week, the financial strains that appear to have led him to take his own life were beginning to emerge.
“A letter purportedly written and signed by Siddhartha and sent to senior management of Coffee Day Enterprises Ltd. laid out in stark words his struggles with a “serious liquidity crunch” that in turn had led to “tremendous pressure” from lenders and an unnamed private-equity investor.”
“As a wave of anti-Syrian sentiment sweeps through Turkey, the 3.6m refugees in the country face an increasingly uncertain future.
“An operation seems to have been under way for the past month to round up Syrians without identity cards, or those who are not registered to live in Istanbul. Across the city, police have been blocking off roads and asking for IDs.
“Hundreds of Syrians are reported to have been detained and sent back to the country they fled…”
“Zimbabwe’s finance minister responded to the country’s worsening economic crisis last week by blacking out inflation statistics for the next six months, boosting the price of the little power that’s available five-fold and admitting what the International Monetary Fund told him in April: the economy will contract for the first time since 2008…
““The wheels are falling off. There is no way out of a Ponzi scheme other than a massive infusion of cash to pay off your creditors.””
“By 2018, 40 percent of sub-Saharan African countries were at high risk of debt distress – double the proportion recorded just five years earlier.
“With a growing share of these debts being owed to China – a country critics have accused of extending unsustainable loans – fears are mounting that a new debt crisis could be just around the corner.”
“Argentina has spent 33% of the time since 1950 in recession, according to a World Bank report released in May.
“In global terms, that is second only to the Democratic Republic of Congo, which endured two major wars, three military coups and numerous regional conflicts over the same period. By comparison, Argentina’s larger neighbor Brazil has seen recession for 12% of that time.”
“Australia service sector fell deeply into contraction in July with a Performance of Service Index score of 43.9, the latest survey from the Australian Industry Group revealed on Monday.
“That’s down sharply from 52.2 in June and it slides well below the boom-or-bust line of 50 that separates expansion from contraction.”
“Schools may have to close, exams could be disrupted and fresh food for pupils’ meals could run short because of panic buying with prices soaring by up to 20%, according to a secret Department for Education analysis of the risks of a no-deal Brexit obtained by the Observer.
“The five-page document – marked “Official Sensitive” and with the instruction “Do Not Circulate” – also raises the possibility of teacher absences caused by travel disruption…”
“The major parts of the yield curve remains inverted and the countdown to recession has begun. Federal Reserve is cutting interest rates to support the stock market and asset prices.
“Leverage loans, junk bonds and BBB debt are about $5.4 trillion today, mortgage debt that crashed the financial by comparison was only $1.5 trillion.”
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