“The R-word, recession, is stalking the land. This is not a British thing, or a European or American one – or a Chinese or Indian threat. It is a global one…
“So what do we know? Well, on Tuesday, the IMF produces its next World Economic Outlook, its twice-a-year overview of what is happening to the world economy and its forecasts for the coming year. It is most likely to cut its previous projection for 2019 from 3.2 per cent to below 3 per cent, the slowest growth since 2009.
“I have two main worries. One is the impact of the ultra-easy money policies of the past few years. The other is a more general lack of confidence about the future across the developed world.
“An awful lot has been written about the first: the limits of monetary policy to stimulate economies, the damage done by zero (or negative) interest rates, the impact on wealth inequality, and so on. I’m not sure there is much to add on this, except to note opposition to the European Central Bank’s latest bout of QE, and its policy of negative interest rates, is mounting even within the ECB staff.
“Put crudely, if Germany is going into recession when interest rates are already negative, what makes anyone think that making them even more negative is going to help? The problem is lack of overall demand, not the cost of credit.
“So the widespread view that monetary policy cannot help much either to forestall a recession, or to help us out of it, makes sense.”
“While some analysts are eager to write off [US] manufacturing weakness as inconsequential… “there’s a reason why indices of leading economic indicators rely on manufacturing. It’s because there’s a multiplier effect from the sector that filters through to others,” Liz Ann Sonders chief investment strategist at Charles Schwab told MarketWatch.
“That manufacturing weakness has also coincided with falling business investment is also a concern. “Manufacturing weakness often tips over into the consumer side,” she said.
“There are signs that this might already be under way, she warned…”
“ProPetro Holding Corp (PUMP.N) this month cut about 150 workers, people familiar with the matter said on Monday, the latest sign of growing trouble in the oilfield services sector as U.S. shale producers reduce drilling.
“The job cuts reflect slowing shale activity due to weak prices for oil and gas, and producers exhausting their spending budgets for the year, one of the people said.”
“Freight shipments and expenditures declined on a year-over-year basis again in September according to the latest Cass Freight Index Report. According to the report, shipments declined 3.4% in September, the tenth straight month of year-over-year declines…
“With the continuation of the declines in the shipments index, Broughton said “we see a growing risk that GDP will go negative by year’s end.”
“…the Fed is being forced to again add liquidity while markets are at near-record highs and unemployment at fifty years lows is very problematic.
“A prolonged contraction in the flow of new credit in any economy or a contraction in business investment is a key factor that often leads to a recession. Much of the problem the Fed faces is that low-interest rates have not created the financial environment they had hoped it would.”
“Economic collapse, government repression, violence and U.S. sanctions are making life unbearable for ever more Venezuelans.
“Now, echoing anti-migrant rhetoric used worldwide, politicians and officials in neighboring countries have begun to portray Venezuelan migrants as a national security threat.”
“The slump in Turkey’s lira in the wake of the Turkish military advance into Syria has made it October’s worst performing major currency, a move that looks even starker considering most emerging market currencies have powered ahead…
“U.S. President Donald Trump warned on Sunday that “big sanctions on Turkey are coming” having already threatened to “obliterate” its NATO ally’s economy if Ankara’s attack on the Kurdish-led forces in northeastern Syria went too far.”
“India might have thought the worst of a bad loans crisis was past, but a severe cash crunch in the real estate industry could augur fresh strife for its banks.
“A slump in the residential property market is leaving many builders struggling to repay loans to shadow lenders – housing finance firms outside the regular banking sector that account for over half of the loans to developers.”
“The Hong Kong Monetary Authority (HKMA) has cut the amount of cash that banks must keep as reserves, releasing an extra HK$200-300 billion ($25.50-38.24 billion) into the broader economy which has been hit by months-long protests and the Sino-U.S. trade war…
““Economic indicators and other relevant evidence have signaled that the economic environment in Hong Kong has deteriorated significantly since June 2019,” HKMA chief executive Eddie Yue said in the statement.”
“China’s factory deflation deepened in September due to slowing output growth and falling raw material prices, adding to signs that China’s domestic slowdown is an increasing drag on the struggling world economy.
“The producer price index fell 1.2% from a year earlier, as forecast by economists in a Bloomberg survey. Surging pork prices [spiking 69% yoy in Sept] drove consumer inflation higher, cutting into household spending power.”
“Benchmark Dalian iron ore and coke futures slumped more than 2% in late trade on Monday following growing concerns about demand for the steelmaking raw materials, amid China’s renewed efforts to curb pollution by restricting steel mills operations.
“Adding to the worries, industry data released on Monday showed auto sales in China fell for a 15th consecutive month in September.”
“China’s biggest refiner plans to reduce operations from next month after a surge in the cost of shipping crude eroded margins, according to people with knowledge of the matter.
“Freight rates have skyrocketed since the US announced sanctions on Chinese shipowners in late-September, triggering a flight from vessels owned by affected companies and a bidding war for alternative tankers.”
“The spectacular surge in the cost of chartering oil tankers is rippling through the crude market, as fears that shipments will be constrained begin to weigh on gauges of market strength.
“The nearest WTI contract is trading at a discount to the following month — a bearish market structure known as contango — while its Brent equivalent also slumped last week. The move reflected concerns that the usual shipments of key grades of crude from the North Sea, Russia, West Africa and the U.S. will be crimped, leaving an excess of oil with nowhere to go, traders said.”
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