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Low interest rates are encouraging companies to take on a level of debt that risks becoming a $19tn (£15tn) timebomb in the event of another global recession, the International Monetary Fund has said.

In its half-yearly update on the state of the world’s financial markets, the IMF said that almost 40% of the corporate debt in eight leading countries – the US, China, Japan, Germany, Britain, France, Italy and Spain – would be impossible to service if there was a downturn half as serious as that of a decade ago…

Officials at the Washington-based organisation fear that the buildup of debt makes the global financial system highly vulnerable…

Tobias Adrian and Fabio Natalucci, two senior IMF officials responsible for the global financial stability report, said: “A sharp, sudden tightening in financial conditions could unmask these vulnerabilities and put pressures on asset price valuations.””

https://www.theguardian.com/business/2019/oct/16/global-economy-faces-19tn-corporate-debt-timebomb-warns-imf


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“U.S. retail sales fell for the first time in seven months in September, suggesting that manufacturing-led weakness could be spreading to the broader economy, keeping the door open for the Federal Reserve to cut interest rates again later this month…

“Signs of cracks in the economy’s main pillar of support, ahead of the holiday season, could further stoke financial market fears of a sharper slowdown in economic growth.”

https://uk.reuters.com/article/uk-usa-economy/weak-u-s-retail-sales-cast-shadow-over-slowing-economy-idUKKBN1WV1Q3


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“World trade volume, which has fallen over the past year, clearly points to the universal nature of current global downturn and the result has been a disinflationary pricing of goods…

“The global over indebtedness has clearly restrained growth, and therefore has had a profound disinflationary impact on every major economic sector of the world.”

https://moneymaven.io/mishtalk/economics/world-dollar-liquidity-crashes-as-does-marginal-utility-of-debt-gOT1rgXjhE25TeUfgI4bvQ/


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“More than two-thirds of U.S. households say they are preparing for a possible recession.

“Some 69% of participants in a recent poll said they were taking steps to shore up their finances ahead of a possible downturn, including 44% who said they were spending less money. Some 10%, including 13% of college graduates, are looking for a better or more stable job.”

https://www.marketwatch.com/story/two-thirds-of-households-preparing-for-recession-even-as-us-economy-continues-to-grow-2019-10-16


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“Since the beginning of the trade war between China and the U.S., most economists have warned that rising protectionism would trigger an economic slowdown.

“A few years into this conflict, the evidence suggests that a deceleration is indeed taking place.”

https://www.bloomberg.com/opinion/articles/2019-10-16/how-the-u-s-china-trade-war-could-hit-the-financial-system?srnd=opinion


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“The leader of one of Hong Kong’s largest pro-democracy groups has been taken to hospital after being attacked. Photographs on social media showed Jimmy Sham of the Civil Human Rights Front lying in the street, covered in blood…

“Mass protests in support of greater democracy in the territory, which began in June, show no sign of abating.”

https://www.bbc.co.uk/news/world-asia-china-50073583


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“The slump in demand for petroleum products in India – world’s third largest consumer after US and China – has aggravated in September, with the country’s oil import bill tumbling by over 18 percent yoy…

“…economists and industry experts are seeing the falling demand for petro products as symptomatic of the deepening of the slowdown in India’s economic growth in the recent months.”

https://www.arabianbusiness.com/politics-economics/430612-demand-slump-lower-brent-price-pushes-indias-oil-import-bill-down-by-18


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“Norway’s krone hit the weakest on record against the euro, surpassing the previous record set during the 2008 financial crisis.

“The krone touched 10.1641 per euro at 2:45 p.m. in Oslo, according to Bloomberg data, amid pressure from global tensions and weakening oil prices.”

https://www.bloomberg.com/news/articles/2019-10-16/norway-s-krone-hits-weakest-on-record-amid-trade-turmoil


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“Protests over Brexit have taken place at almost 40 locations along the Irish border. The demonstrations were organised by the Border Communities Against Brexit group….

“They were held as the future of a Brexit deal between the EU and the UK government hangs in the balance, with talks ongoing.”

https://www.bbc.co.uk/news/uk-northern-ireland-50075893


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“Germany could use emergency measures to counter any market panic from a hard Brexit, an official with direct knowledge of the matter said, such as banning bets on falling share prices, a step last used in the financial crisis…

“…the preparations underscore the continent’s heightened state of alert, with negotiations to secure Britain’s orderly departure from the European Union hanging in the balance.”

https://uk.reuters.com/article/us-britain-eu-germany-markets/germany-eyes-emergency-measures-for-brexit-market-panic-source-idUKKBN1WV19P


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“Street violence escalated in Barcelona late on Wednesday, as protesters set cars on fire and threw acid at police officers

“…in a third night of unrest following the imprisonment this week of nine pro-independence leaders for their roles in the failed 2017 push for regional independence.”

https://www.theguardian.com/world/2019/oct/16/third-night-of-violence-in-barcelona-follows-pro-independence-rally


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“Companies in the European Union sharply reduced the amount of money they raised on debt markets last year, an industry report said on Wednesday, in a sign the bloc could be heading toward a recession as firms hold off investment.”

https://www.hellenicshippingnews.com/fall-in-eu-firms-debt-issuance-fuels-recession-fears/


“Amid a mixed set of company results on Wednesday, a Refinitiv survey suggests the Q3 earnings season will see Europe’s corporates slip deeper into recession.”

https://uk.reuters.com/video/2019/10/16/europes-corporate-recession-set-to-deepe?videoId=613447889


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“Lots of investors chafe at the idea of buying negative-yield bonds. Few are as repelled by the prospect as William Eigen.

“The JPMorgan Asset Management fund manager says he’d retire before buying sub-zero securities, even as some of his peers profit from the trade amid mounting fears of a global recession. He predicts negative-yielding bonds will eventually lead to “devastating” losses…”

https://www.bloomberg.com/news/articles/2019-10-16/jpmorgan-veteran-refuses-to-buy-insane-negative-yield-bonds


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“The trend of zero interest rates is “perverse” and can “poison” the business environment, said Yuwa Hedrick-Wong, a visiting scholar at the Lee Kuan Yew School of Public Policy.

“Low interest rates hurt lenders’ profits as they narrow the margin that banks can earn. In a negative interest rate environment, lowering rates deeper into negative territory essentially means that lenders are paying more to the central bank to keep their excess funds overnight.”

https://www.cnbc.com/2019/10/17/central-banks-cutting-interest-rates-to-zero-or-negative-bad-for-economy.html


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“India’s Finance Minister warned about a repeat of the 2008 financial crisis in the face of a global economic slowdown, saying that governments had yet to find a coordinated “planned” response.

“Speaking to Yahoo Finance in New York, Minister Nirmala Sitharaman called for a broader understanding of “the intensity of the problem,” adding that “everything, every way” would be at risk if world leaders failed to respond.”

https://finance.yahoo.com/news/no-global-collective-response-to-global-slowdown-unlike-2008-indian-finance-minister-142620342.html


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“The world economy has not been in a more precarious situation in over a decade. Growth is faltering everywhere, with the Eurozone flirting with recession, while central banks have returned to monetary easing after just one year of global tightening.

“It is imperative to appreciate the exceptionality of the situation. Never before has the world gone into recession with interest rates so low and with the balance sheets of central banks so massive. This time truly is ”different”…

“No one dares to look at the facts – or if they do, they dismiss them. Denial is a powerful force.

“The fact is that monetary policy is running on empty, at least in the Eurozone, and governments can provide only limited fiscal stimulus. We’ve reached the end. There’s nothing left to do than prepare for the crisis and wait. And to be very afraid.”

https://reaction.life/towards-the-coming-economic-crisis/


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