“Argentina is teetering on the brink of a financial crisis after its current leader, President Mauricio Macri, was defeated by a left-wing opponent in the country’s primary elections over the weekend by a greater than expected margin.
“The stunning loss sent Argentine markets reeling. The S&P Merval Index plummeted 48% Monday, the second-largest single-day drop in any global stock market since 1950, according to Bloomberg.
“The Argentine peso also declined, losing 15% of its value against the US dollar Monday and falling further Tuesday to a new low.
“Investors fear that if Macri doesn’t win a second term in October, the opposing team of left-leaning Alberto Fernández and his running mate — the former leader Cristina Fernández de Kirchner — will undo the progress Macri has made to regain the trust of investors in Argentina and abroad.”
“Concerns about Argentina adding to its long list of sovereign defaults swirled on Tuesday, as investors continued to digest the heavy defeat of pro-reform President Mauricio Macri in the country’s primary elections at the weekend…
“Bank of America Merrill Lynch’s Claudio Irigoyen, said in a note, “I think the economy will sink even more, contracting 2% this year with inflation going to 50%. And likely next year… the probability of default will jump to 50% at least.””
“Matteo Salvini, Italy’s deputy prime minister, could not have chosen a worse moment for both the Italian and the European economies to trigger an Italian political crisis.
“Global economic policymakers and investors would be ignoring Italy’s deteriorating political situation at their peril since an Italian economic crisis has the potential to have large spillover effects to the rest of the global economy.”
“Germany’s economy shrank in the second quarter of the year as weak global demand caused exports from the former powerhouse of Europe to drop off, official data showed today…
“Early signs for the third quarter look ominous. Manufacturing business surveys for July were all gloomy, as was the ZEW [investor sentiment] survey for August, published yesterday.”
“With Boris Johnson claiming he will take Britain out of the EU by 31 October “do or die”, the UK’s reliance on EU food is a major risk.
“In the event of a no-deal Brexit, the UK would be obliged under World Trade Organization rules to impose average food import tariffs of 22% and conduct product inspections, leading to delays and shortening the shelf-life of products.”
“European banks are facing a make-or-break moment.
“Fears of slowing economic growth, negative rates, and geopolitical uncertainty in Italy and the U.K. have ravaged the Stoxx Europe banks index, pulling it down to a support level touched in 2011 and in 2016. It had not broken below that support since the financial crisis lows.”
“Low mortgage rates have helped push U.S. mortgage debt to the highest level ever. In the second quarter of 2019, Americans’ mortgage balances totaled $9.4 trillion, $162 billion more than the previous quarter, according to data released Tuesday by the Federal Reserve Bank of New York.
“This surpassed the previous peak of $9.3 trillion in mortgage debt recorded back in the third quarter of 2008.” [don’t think this is adjusted for inflation though].
“Serious auto-loan delinquencies – 90 days or more past due – in the second quarter, 2019, jumped 47 basis points year-over-year to 4.64% of all outstanding auto loans and leases, according to New York Fed data released today.
“This is about the same delinquency rate as in Q3 2009, just months after GM and Chrysler had filed for bankruptcy. The 47-basis-point jump in the delinquency rate was the largest year-over-year jump since Q1 2010.”
“China has denied requests for two US Navy ships to visit Hong Kong, the Pacific Fleet said on Tuesday, after the two countries engaged in a war of words over the city’s pro-democracy protests…
“Beijing has increasingly pitched the anti-government protests as funded by the West, but has provided little evidence.”
“China’s central bank will likely roll over maturing debt to ease liquidity in the financial system as the economy slows amid the trade dispute with the U.S.”
“The Chinese government had put plans in place to reduce the high levels of debt in the country’s economy this year, but the negative economic effects of the trade war have put those plans on the back burner and companies are again levering up, in large part with dollar-denominated debt.
“As the yuan weakens, debts held in dollars get more expensive. That could pose a major problem for China…”
“China’s industrial output slowed to a 17-year low in July as the signs mount that the trade war with the US is beginning to take a toll on the world’s second-largest economy. The 4.8 per cent year-on-year growth in factory output was the weakest since February 2002 and far below economists’ expectations of a 5.8 per cent rise…”
“China is the world’s largest automotive market. Therefore, any negative sentiment in China’s car sales echoes around the globe. Last year was the first time in more than two decades that China’s car sales fell YoY (year-over-year). This year hasn’t been any different. Auto sales have now contracted for 13 consecutive months…
“Perhaps even more concerning is that NEV (new-energy vehicle) sales, among the rare bright spots in China’s auto demand, fell in July.”
“[India’s] sales of passenger vehicles plunged 31% in July, according to figures released by the Society of Indian Automobile Manufacturers (SIAM) on Tuesday. It’s the ninth straight month of declines and the sharpest one-month drop in more than 18 years, SIAM Director General Vishnu Mathur told CNN Business.
“”This is a very deep sort of a slump that is impacting every segment of the industry,” Mathur said.”
“Global motor vehicle output declined last year by 1%, the first annual decrease since 2009 and only the third fall in 20 years, according to data from the International Organization of Motor Vehicle Manufacturers (OICA).
“But output is on course to drop much faster in 2019… Motor manufacturing is one largest and most networked of all global value chains, making it central to the global economy.”
“[Australia’s] “retail recession” is getting deeper and is now worse than anything faced by the sector during the global financial crisis, a key survey of the nation’s businesses has revealed as the Reserve Bank grows confident its interest rate cuts are flowing through to borrowers.”
“[Australian] wages are stagnant. Wealth is falling. House prices are down. Consumers aren’t spending. Businesses aren’t investing. Interest rates are at record lows and may be heading for zero.
“The federal government and Reserve Bank seem locked in an arm wrestle over whether fiscal or monetary policy should be used to generate more stimulus.”
“Recession fears are spreading among investors at a time when valuations across major assets are looking dangerously stretched following years of monetary stimulus, the latest Bank of America Corp. survey shows.
“About a third of asset managers polled believe a global recession is likely in the next 12 months, the highest probability since 2011 — when Europe was engulfed by a sovereign-debt crisis.”
““Investors are the most bullish on rates since 2008 as trade war concerns send recession risk to an 8-year high,” Michael Hartnett, chief investment strategist, said in a statement…
“Even amid $15.9 trillion worth of negative-yielding bonds globally, investors continue to flock to the space…”