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Markets are behaving dangerously but central banks have their heads in the sand

“…the Fed is increasingly caught up in a dilemma of its own making because the tide of cheap liquidity its $US120 billion ($155 billion) a month of bond and mortgage purchases has generated is producing some quite peculiar and potentially destabilising outcomes.”

https://www.smh.com.au/business/banking-and-finance/the-world-is-in-a-leverage-trap-it-will-struggle-to-get-out-of-20210428-p57n3j.html


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US House prices soared by 12.0% from a year ago, the biggest increase since February 2006, near the peak of Housing Bubble 1, according to today’s National Case-Shiller Home Price Index for “February,” which reflects the three-month average of sales recorded in public records in December, January, and February…

“Ignored by CPI.”

https://wolfstreet.com/2021/04/27/the-most-splendid-housing-bubbles-in-america-house-price-inflation-ignored-by-cpi-april-update/


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Is The New Zealand Property Market Going Haywire?

Ultra-low interest rates, FOMO-driven mindset, and pandemic-related stimulus are seen to be turbocharging property markets across the globe, including New Zealand…”

https://www.scoop.co.nz/stories/BU2104/S00407/is-the-new-zealand-property-market-going-haywire.htm


Tasmania’s real estate market soaring, north-west prices up almost 30 per cent… There were 144 sales over $1 million, a whopping 162 per cent increase on last year.”

https://www.abc.net.au/news/2021-04-28/tasmanian-real-estate-strongest-growth-since-2002/100098548


A staggering 123% boost in UK house purchases (Q1 2021) was… reported along with a rise in the purchase of second homes, which increased by 17% compared with Q1 last year.”

https://ifamagazine.com/article/findings-showcase-a-whopping-123-uplift-in-house-purchases/


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UK manufacturers’ profitability has dropped to its lowest level for a decade, according to official data that reflect the impact of pandemic-related costs and Brexit friction on the corporate sector…

The average was dragged down by a collapse in the profitability of North Sea oil and gas.”

https://www.ft.com/content/1766c574-cd5e-4d39-9f29-7bb8e86bb08b


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Scottish company insolvencies expected to rise steeply. The number of Scottish companies facing insolvency is expected to rise steeply as government loans have to be paid.

“It comes despite restrictions on the economy being relaxed.”

https://www.bbc.co.uk/news/uk-scotland-scotland-business-56921410


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Europe’s leaders are betting everything on red with reopening gambit.

The vaccine debacle tore EU politicians’ credibility into shreds; to open up only to spark another wave would be the final straw.”

https://www.telegraph.co.uk/business/2021/04/28/europe-leaders-betting-everything-red-reopening-gambit/


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France Demands More From EU on Growth as U.S., China Race Ahead

French Finance Minister Bruno Le Maire urged the European Union to speed up disbursements from its flagship stimulus package after the Finnish government threw a potential wrench into the process of releasing the funds.”

https://www.bloomberg.com/news/articles/2021-04-27/germany-and-france-present-united-front-to-reform-the-eu-economy


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Germany’s domestic secret service placed one of the country’s most radical and violent groups opposed to coronavirus restrictions under surveillance, the Interior Ministry announced in Berlin on Wednesday

“The “Querdenker” group has made international headlines for being repeatedly involved in extremely brutal clashes with police where they attacked not only security forces but also media representatives.”

https://www.aa.com.tr/en/europe/germany-puts-covid-19-protest-group-under-surveillance/2223400


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China labels India, Australia, Japan supply chain plan as ‘artificial’ and ‘unfavourable’ to global economy

“A move by Australia, India and Japan to establish an initiative to “strengthen supply chain resilience” in the region that is viewed as an effort to lessen dependence on China has been criticised by Beijing as an “artificial” programme that could upset the global economy.”

https://www.scmp.com/economy/global-economy/article/3131449/china-labels-india-australia-japan-supply-chain-plan


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China is scrambling for semiconductor supremacy

“Chinese companies, along with others, have long-relied on a globalised value chain, and supplies from other companies. But this reliance has become, in the words of those at its highest levels of government, a “choke point” for the country’s technological ambitions.”

https://www.wired.co.uk/article/china-microchip-autonomy-huawei


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‘We will defend ourselves to the very end’: Taiwan minister’s vow as China ‘prepares final assault’

“China is “preparing for its final military assault” on Taiwan, the island’s foreign minister has told Sky News… Chinese military aircraft have been making almost daily incursions into Taiwan’s air identification defence zone recently, with April being a record month.”

https://news.sky.com/story/we-will-defend-ourselves-to-the-very-end-taiwan-ministers-vow-as-china-prepares-final-assault-12289421


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Credit markets are sounding warnings for other asset classes amid India’s unprecedented surge in Covid-19 cases.

Firms have defaulted on at least 57 billion rupees (S$1 billion) of domestic bonds this year, the most on record for a similar period. Traders expect more.”

https://www.straitstimes.com/business/economy/india-sees-record-corporate-bond-defaults-amid-covid-19-crisis


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Chile’s dockworkers join nationwide protest over pensions policy.

“Chileans struggling with the financial impacts of Covid-19 are holding mass protests aimed at pushing President Sebastian Pinera to allow them to access funds from their privately held pensions for a third time during the pandemic.”

https://splash247.com/chiles-dockworkers-join-nationwide-protest-over-pensions-policy/


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Argentina’s shale industry rattled by social unrest in Patagonia

Roadblocks to Argentina’s vast shale fields in Patagonia are about to enter their fourth week, as health workers on the frontline of the coronavirus pandemic demand higher wages to keep pace with one of the highest inflation rates in the world.”

https://www.batimes.com.ar/news/economy/argentinas-shale-industry-rattled-by-social-unrest-in-patagonia.phtml


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Thousands of Colombians march to protest tax proposals

“Thousands of protesters answered calls from Colombia’s biggest unions to come out on streets around the country on Wednesday in protest against a controversial tax reform proposal.”

https://www.reuters.com/world/americas/thousands-colombians-march-protest-government-tax-proposals-2021-04-28/


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Algeria struggles to feed its people as crisis persists.

Strikes, unemployment, soaring prices and shortages of basic foodstuffs in Algeria, a boiling social situation is now added to a deep economic crisis caused by the fall in oil revenues and aggravated by the coronavirus pandemic.”

https://www.africanews.com/2021/04/28/algeria-struggles-to-feed-its-people-as-crisis-persists/


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Chad protests turn deadly as demonstrators demand civilian rule

At least five people have been killed in Chad as demonstrators took to the streets demanding a return to civilian rule after the military took control following President Idriss Deby’s death last week.”

https://www.aljazeera.com/news/2021/4/27/protests-erupt-in-chads-capital-protesters-demand-civilian-rule


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Nigeria’s Rivers state bans people entering, leaving at night.

Nigeria’s Rivers state will ban people crossing its borders at night due to heightened insecurity, its governor said on Tuesday, as violence and lawlessness surge across the West African country.”

https://www.reuters.com/world/africa/nigerias-rivers-state-bans-people-entering-leaving-night-2021-04-27/


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Mozambique’s economy facing multiple risks as insurgency grows.

“Mozambique’s economy faces multiple challenges, including a growing insurgency against the government and recurring extreme weather events, ratings agency S&P Global said in research report.”

https://www.reuters.com/world/africa/mozambiques-economy-facing-multiple-risks-insurgency-grows-sp-global-2021-04-28/


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Almost 30 million will need aid in Sahel this year as crisis worsens, UN warns.

“A record 29 million people will need humanitarian assistance in the Sahel and the Lake Chad basin in 2021 amid a deepening crisis, a report by the UN office for humanitarian affairs (Unocha) has estimated.”

https://www.theguardian.com/global-development/2021/apr/28/almost-30-million-will-need-aid-in-sahel-this-year-as-crisis-worsens-un-warns


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The Federal Reserve upgraded its view of the US economic recovery, but kept interest rates close to zero and showed no signs of moving to remove support for the economy.

“At the end of a two-day meeting, officials noted the improvement in the economy and offered a brighter picture than they had in March.”

https://www.ft.com/content/296ae4e6-5e4e-44fc-8636-67e2ad38eee4


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Central bankers can no longer dismiss inflation concerns – price rises are everywhere.

China seems alert to the threat but the US Federal Reserve and other major central banks in the West need to show more concern about rising prices.”

https://www.scmp.com/comment/opinion/article/3131100/central-bankers-can-no-longer-dismiss-inflation-concerns-price


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The unlikely ticking time bomb on corporate balance sheets

“Corporate debt is relatively transparent and managed through legally binding contracts…

“The value of many assets, on the other hand, is little more than a collection of best guesses. For none is this more true than goodwill, which Adam Leaver, a professor of accounting and society at the University of Sheffield, describes as “the shadow asset of the corporate debt bubble”.”

https://www.telegraph.co.uk/business/2021/04/28/unlikely-ticking-time-bomb-corporate-balance-sheets/


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A banking crisis is often seen as a self-­fulfilling prophecy: banks fail because too many people, anticipating failure, pull their money out at the same time.

But a newly published paper co-authored by finance professor Emil Verner suggests that banks can suffer losses serious enough to cause economic downturns even when that dramatic panic never happens.”

https://www.technologyreview.com/2021/04/27/1021721/quiet-banking-panics/


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The New York State Department of Financial Services released a report on Tuesday regarding the investigation of the New York’s financial services industry’s response to the supply chain attack of… SolarWinds…

This [SolarWinds] incident confirms that the next great financial crisis could come from a cyberattack,” said Department of Financial Services Superintendent Linda A. Lacewell.”

https://www.news10.com/news/ny-news/next-great-financial-crisis-could-come-from-a-cyber-attack-dfs-report-on-solarwinds-attack/


You can read the previous ‘Economic’ thread here. I’ll be back tomorrow with a “Climate” thread.

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