Daily updates on climate change and the global economy.

19th August 2019 Today’s Round-Up of Economic News

“Every year the Federal Reserve Bank of Kansas City hosts a symposium in the Grand Teton resort of Jackson Hole. Some years, guests have little to do but chew the fat and listen to distinguished speakers explain points of economic importance. Sometimes, though, the conclave in Wyoming takes place with a crisis looming. One such year was 2008. This year is shaping up to be another…

“…as things stand the question is whether the global economy is heading for a slowdown or a recession.

“On average, there has been one serious downturn per decade since the early 1970s. One is due.”

https://www.theguardian.com/business/2019/aug/17/global-markets-worried-good-reason-be-so-bond-values


“The weirdness in financial markets at the moment seems boundless.

“In the past two weeks the proliferation of negative-yielding bonds has erupted — 30 per cent of the global, tradeable bond universe is being sold with a guaranteed loss attached to the coupon.”

https://www.abc.net.au/news/2019-08-18/a-third-of-global-bonds-17-trillion-dollars-have-negative-yields/11420860


“Donald Trump and his chief trade advisers insisted on Sunday the US is not facing a recession which markets appear to fear and which could prove costly at the polls next year.

““I don’t see a recession,” Trump said, preparing to fly to Washington. “We’re doing tremendously well. Our consumers are tremendously rich. They’re loaded up with money. Walmart is through the roof. We’re not going to have a recession – the world is in a recession right now.””

https://www.theguardian.com/business/2019/aug/18/us-economy-2020-trump-advisers-navarro-kudlow-recession


“Investors are anticipating a fresh wave of stimulus measures to tackle flagging growth, as the White House said it was considering a new round of tax cuts to boost the economy.”

https://www.ft.com/content/c0c136f8-c1c4-11e9-a8e9-296ca66511c9


“The problem is, central bank policy isn’t what’s holding back the global economy, and more monetary stimulus won’t help, according to Peter Boockvar, chief investment officer at Bleakley Advisory Group. “The Fed doesn’t have the cure for what ails us, just as the [European Central Bank] and the [Bank of Japan] don’t at this point,” he told me.

“Cheap borrowing really isn’t the problem.

“”There’s no business investment that’s being held back because of where rates are,” Boockvar said.”

https://edition.cnn.com/2019/08/18/investing/stocks-week-ahead/index.html


““Leverage in Europe is low and it could stay that way — even though many companies are able to issue debt with negative or record-low yields,” said Mahesh Bhimalingam, a credit strategist at Bloomberg Intelligence.

““It’s hard to see the appeal of loading up on debt to make an investment when the potential return on that investment looks highly uncertain, given the outlook in Europe.””

https://finance.yahoo.com/news/negative-yields-drug-europe-just-040100522.html


“The failure of Germany and France to amend rules related to the treatment of some over-the-counter derivatives contracts ahead of the UK’s exit from the European Union could cause unnecessary stress to the European financial system, according to Mark Carney, governor of the Bank of England.

“Carney calls on European lawmakers to address the matter before October 31.”

https://www.centralbanking.com/central-banks/financial-stability/fmi/4357021/carney-warns-germany-and-france-of-brexit-derivatives-cliff-edge


“Germany’s pain has been central to bond market convulsions around the world. Very disappointing data on German economic growth has acted as the most direct catalyst for the buying of long-dated U.S. Treasuries that briefly caused an inversion of the U.S. yield curve, with the 10-year yields falling below two-year yields for the first time in 12 years…

“A further problem for Germany, which can become a vicious circle, is its banking system.”

https://www.bloomberg.com/news/newsletters/2019-08-19/germany-s-bond-market-is-a-problem-for-the-world?srnd=styt


“Finance Minister Olaf Scholz suggested Germany could muster 50 billion euros ($55 billion) of extra spending in an economic crisis, putting a number on a possible fiscal stimulus for the first time.”

https://www.bloomberg.com/news/articles/2019-08-18/germany-says-it-could-spend-extra-55-billion-if-crisis-hits


“Thailand’s economy grew at the slowest pace in almost five years in the second quarter as exports and tourism were buffeted by U.S.-China trade tensions and a strong local currency.”

https://www.bloomberg.com/news/articles/2019-08-19/thailand-2q-gdp-growth-weakest-since-2014-on-trade-war-baht


“South Korea’s household debt extended by deposit banks and non-banking savings institutions increased 15.40 trillion won (US$12.73 billion) in the second quarter of this year from a year earlier.

“The balance of household debt is estimated at more than 1,467.30 trillion won (US$1.21 trillion) as of the end of June.”

http://www.businesskorea.co.kr/news/articleView.html?idxno=35027


“Japanese exports fell for an eighth straight month in July, weighed down by shipments of auto parts and semiconductors, as slowing economic growth and trade battles raise fears of a global recession.”

https://www.bloomberg.com/news/articles/2019-08-18/japan-exports-decline-again-as-global-economic-outlook-darkens


“Despite outrage from the banks, president Cyril Ramaphosa signed the Credit Amendment Bill this week.

“While the details of how it will be implemented still need to be finalised, it is estimated that some 9.5 million South Africans may have their debts written off completely.”

https://www.businessinsider.co.za/how-to-write-off-debt-2019-8


“Macri, a millionaire businessman, is paying a heavy price for failing to deliver [for Argentina] on his emphatic promise of zero inflation and zero poverty when he took office in December 2015. Inflation hit 54% over the last 12 months, twice the rate when he took office.

Foreign debt has also more than doubled, after a loss of investor confidence in emerging markets forced Macri to seek a $57.1bn rescue package from the IMF last September, the largest loan it has ever handed out.”

https://www.theguardian.com/world/2019/aug/18/cristina-kirchner-fiery-ex-president-returns-crisis-argentina


“Before the 2010s, it was common for one in every five economies to be growing at 7 percent or more annually. Now, among the world’s 200 economies, just eight, or one in 25, are on track to grow 7 percent this year. Most of those are small economies in Africa.”

https://www.nytimes.com/2019/08/17/opinion/sunday/global-recession.html


“The trade wars and a breakdown in international economic diplomacy cause businesses around the world to pull back.

“This leads to further tumbles in markets and job losses, prompting American consumers to become more cautious.

“High corporate debt loads create a wave of bankruptcies. And central bank policy proves impotent, combined with fiscal policy that is nonexistent.”

https://www.nytimes.com/2019/08/17/upshot/how-the-recession-of-2020-could-happen.html


Read the previous ‘Economic’ thread here and visit my Patreon page here.

16th August 2019 Today’s Round-Up of Economic News

“…there is room for markets to make new highs in the next few months. In fact, one can imagine several scenarios on how these new highs could come about

“Central banks could embark on emergency interest rate cuts and reintroduce quantitative easing programs to force more cash into equities again. A sudden end to a trade war, with an attempt to save face by both sides, could certainly spark a sustained global relief rally that may end up averting or delaying a recession.

“Indeed, the Trump administration, eager to avoid a recession ahead of the 2020 election, may find itself in a position to end the trade war sooner rather than later. But the administration is still faced with several historic miscalculations of its own making. The massive tax cuts of 2017 have produced little in the form of growth other than a temporary sugar high. Growth is slowing. Long gone are the promises of 4% GDP growth. In fact, growth is looking to drop below 2% in lieu of a trade deal. The only thing that has been growing are deficits, which are on pace to hit $1 trillion this year already.

“All of these are signs that the risk of a global recession is a clear and present danger.

“This is a very tricky environment for investors to navigate through. History suggests there is time to take advantage of future rallies to prepare for the next recession and raise cash before a major market downturn does unfold. But global economic data suggests a global recession may come a lot sooner than anyone anticipated.

“And this reveals an uncomfortable truth: We’ve never faced a recession with so much debt and so little Fed ammunition available and with negative rates still in effect in many countries. There’s no playbook for this. Historic data may be of little predictive use.

“A sudden end to the trade deal may be imperative — without it we don’t have much time before the next recession begins.”

https://edition.cnn.com/2019/08/15/perspectives/global-recession-bond-yield-inversion/index.html


“There are weeks when the markets lead the fretting, and others when the numbers dictate. And then there are weeks — like this one — when markets, data and politics all point to a darker global outlook.”

https://www.bloomberg.com/news/articles/2019-08-15/nobody-likes-these-curves-as-global-economy-bends-out-of-shape


“Stock markets have taken fright over a number of warning signs from key economies, the latest this week being the inversion of the US bond yield curve and news of a contraction in the German economy. Here is a guide to [a few of] the trouble spots in the global economy that are rattling investors.”

https://www.theguardian.com/business/2019/aug/16/warning-signs-for-global-economy-the-countries-spooking-investors


“The worry I have is not so much the vagaries of the stock market, but rather the perception of the future direction of the stock market and its impact on hiring…

“When the CEO and upper management believe that the economy will slow down, they will hit the brakes. This entails laying off employees, instituting a hiring freeze and—through attrition—when people leave, they won’t be replaced. When enough companies do this, it becomes a self-fulfilling, downward spiral.”

https://www.forbes.com/sites/jackkelly/2019/08/15/how-the-wall-street-stock-market-plummet-of-800-points-could-dramatically-hurt-the-job-market/#1528a99520ab


“Truckers have for months been sounding the alarm about a “bloodbath” in their $800 billion industry… Trucking is often looked at as a leading indicator of where the rest of the economy is headed.

“As 71% of America’s freight is moved on trucks, companies foreseeing needing fewer trucks is typically an omen of an economic downturn: If manufacturers are producing less and people are buying less, there’s less of a need to move goods.”

https://www.businessinsider.com/trucking-truckers-bloodbath-signals-recession-inverted-yield-2019-8?r=US&IR=T


“Mexico’s central bank on Thursday cut its key lending rate for the first time since June 2014, citing slowing inflation and increasing slack in the economy, and fueling expectations that further monetary policy easing could be on the way.”

https://uk.reuters.com/article/us-mexico-economy-rates-cut/mexicos-central-bank-cuts-rates-for-first-time-in-5-years-as-economy-sputters-idUKKCN1V526I


“Argentina’s historic market collapse has sparked fears that South America’s second-largest country is on track for yet another default. A stunning result in primary polls over the weekend set off a shockwave in financial markets, with the country’s stock market tumbling 48% in dollar terms on Monday.”

https://www.cnbc.com/2019/08/15/argentina-stock-market-crash-ramps-up-fears-of-another-debt-default.html


“Real estates classifieds company Domain Holdings Australia Ltd on Friday posted a 29.3% fall in annual underlying profit, hurt by the sharpest property downturn in a generation.”

https://uk.reuters.com/article/domain-holdings-results/australias-domain-posts-29-3-slump-in-annual-profit-idUKL4N25B4LZ


“New Zealand’s manufacturing activity contracted in July for the first time since 2012, a survey showed on Friday, as new orders and employment conditions worsened.

“The Bank of New Zealand-Business NZ’s seasonally adjusted Performance of Manufacturing Index (PMI) was 48.2, down 2.9 points from June’s downwardly revised 51.1.”

https://www.businesstimes.com.sg/government-economy/new-zealand-manufacturing-activity-shrinks-for-first-time-in-7-years


“Britain’s banks have warned the government that they will have just hours to turn around their systems if the UK crashes out of the European Union without a deal.”

https://www.thetimes.co.uk/article/banks-will-have-just-hours-to-carry-out-brexit-changeover-rz6d0gnfg


“Government bond yields in the euro area hovered near record lows on Friday, reflecting heightened expectations for European Central Bank easing soon and concern about global recession risks…

“ECB policymaker Olli Rehn on Thursday flagged the need for a significant easing package in September, sending yields across the bloc to new lows.”

https://www.reuters.com/article/eurozone-bonds/euro-zone-bond-yields-linger-around-record-lows-on-recession-risks-idUSL8N25C0ZZ


“German lenders are in a uniquely dangerous position compared to their European counterparts, according to Ronit Ghose, global head of banks research at Citi. The European banking sector has been struggling with profitability ever since the financial crisis… The Stoxx Europe banks has fallen 45% over the past 10 years. This in comparison to the U.S.-focused KBE bank ETF, that tracks banks stateside, has added 86%.”

https://www.cnbc.com/2019/08/15/citi-german-banks-are-in-a-worse-position-than-the-rest-of-europe.html


“Negative interest rates, toppling bond yields, greater regulation and rising recession signals have wiped out most of the value of European banks, with their shares now at meltdown prices approaching the days of the Berlin Wall…

“That means the banks are worth now what they were when Greece, Ireland and Portugal needed bailouts, Cyprus ordered its banks to seize some deposits and Spain’s banks were saved from collapse only by a government rescue.”

https://uk.reuters.com/article/uk-eurozone-banks/euro-zone-bank-share-meltdown-brings-prices-to-brink-of-1980s-idUKKCN1V517U


“In the increasingly topsy-turvy world of bonds, Japan’s notoriously low yields are starting to look high for some investors.

“While the Asian market is historically identified with poor yields and subdued trading thanks to decades of ultra-easy monetary policy, that perception is now being upended as a frenzied global debt rally squeezes returns elsewhere.”

https://www.bloomberg.com/news/articles/2019-08-15/in-a-bond-market-gone-bonkers-japan-is-the-new-high-yielder


““Negative yielding debt has quickly become a new normal, which is a staggering place to find ourselves,” said David Absolon, investment director at Heartwood Investment Management, the UK asset management arm of Sweden’s Handelsbanken.”

https://expertinvestoreurope.com/tacking-the-plague-of-negative-yielding-debt/


“Two decades ago, well over half of the global bond market boasted yields of at least 5 per cent, according to ICE Data Indices. The post-crisis splurge of central bank bond buying and rate cuts lowered this to under 16 per cent a decade ago, but investors could still find plenty of higher yielding debt. Today, a mere 3 per cent of the global bond market yields more than 5 per cent — the lowest share on record.

“Indeed, truly high-yielding debt is now almost an endangered species. Bonds with yields of more than 10 per cent amount to just 0.4 per cent of the global fixed income universe, according to ICE.”

https://www.ft.com/content/34c4944c-bab2-11e9-8a88-aa6628ac896c


“In a recession, manufacturers have to be careful about the impact of slowing down payments to key suppliers.

“If you slow down how fast you pay them, their financial integrity may be impacted.

“Many global supply chains rely on Chinese suppliers and contract manufacturers. China’s industrial output slumped 4.8% in July, for its’ weakest reading in 17 years. Paying small suppliers more slowly in at risk economies could tip them out of business.”

https://www.forbes.com/sites/stevebanker/2019/08/15/how-will-the-looming-recession-impact-global-supply-chains/#4bd6f78be12b


Read the previous ‘Economic’ thread here and visit my Patreon page here.

15th August 2019 Today’s Round-Up of Economic News

I have been keeping tabs pretty much daily on the global economy’s health since oil prices crashed in 2014 and I have to say there has never been as much cause for alarm as there is right now.

I am seeing burgeoning risk and a growing multitude of vulnerabilities.

We have to hope that the trade war is swiftly resolved and the Fed cuts aggressively this autumn or we are in trouble. We may be in trouble regardless:

“Another day, another round of bad news highlighting the risk that the global economy is headed for a serious downturn.

“China reported the weakest growth in industrial output since 2002. Germany’s economy shrank as exports slumped, and euro-area production plunged the most in more than three years as the overall expansion cooled. US and UK bond markets sent their biggest recession warnings since the global financial crisis.”

https://www.bloomberg.com/news/articles/2019-08-14/recession-warnings-pile-up-for-the-battered-global-economy


“Stocks plunged on Wednesday after the bond market threw up one of its last remaining warning flags on the economy…

“The Dow Jones Industrial Average closed down 801 points at 25,479, a loss of 3%, in the largest one-day point drop since October 2018…”

https://www.dailymail.co.uk/news/article-7356699/Warnings-economic-crisis-Treasury-yields-invert-time-Great-Recession.html


“London house prices have been on the slide longer than during the slump that followed the financial crisis, after a 16th consecutive month of falls was revealed today.

“The latest 2.7 per cent drop in the year to June also means that average prices in the capital are now below where they stood on the day of the Brexit referendum.”

https://www.standard.co.uk/news/london/house-prices-on-slide-longer-than-after-2008-financial-crash-a4213066.html


“According to a new report commissioned by the supporters of second [Brexit] poll, more than half of UK farms could go out of business if Britain crashes out of the EU on 31 October…

“To coincide with the report and launch of the Farmers for a People’s Vote group, campaigners are taking a small flock of sheep past the Cabinet Office where no-deal planning is taking place.”

https://www.theguardian.com/politics/2019/aug/15/half-of-uk-farms-could-fail-after-no-deal-brexit-report-warns


“Deutsche Bank’s recently announced restructuring meant to correct its decadelong financial woes could ultimately make matters worse. Indeed, it could become even more of a threat to taxpayers, the financial system and the global economy…

“Reducing capital to increase short-term returns for shareholders is grossly irresponsible. Deutsche Bank is essentially diverting its critical loss-absorbing capital buffer — that would otherwise be available as a source of strength to weather an economic downturn — to placate its angry shareholders.”

https://www.americanbanker.com/opinion/deutsche-bank-shows-it-learned-nothing-from-the-2008-crisis


“Most governments around the world owe a fortune. But the Italian debt pile would make most others blush. Italy owes $2.3 trillion (€2.06 trillion) in public debt. That’s around 133% of its GDP — a massive ratio that puts it in the top five in the world.

“While the majority of that stock of borrowing is weighing down banks in Rome and Milan, European banks are severely exposed in the event of anything going wrong.”

https://www.dw.com/en/debt-and-doom-loops-the-eurozones-italian-nightmare/a-50019077


“Argentina’s main problem is that it’s a stick in a doom loop. The central bank ought to print money in order to maintain a reasonable deficit. However, due to the very bad economic situation in the country, the deficit keeps growing…

“This means that you need to print more and more money to maintain “stability.” Of course, that’s only possible up to a certain point when investors lose faith, trust, and patience.”

https://seekingalpha.com/article/4285583-argentina-emerging-markets-apocalypse-now


“Though only a small city-state, events in Hong Kong should rouse Americans because of the threat to democracy there, and also the considerable risk of international financial and economic contagion.

“American investors should pay greater attention to the implications of what is happening halfway around the world.”

https://www.marketwatch.com/story/how-the-hong-kong-crisis-could-trigger-a-wider-financial-meltdown-2019-08-14


“The jobless rate in Chinese cities returned in July to its highest level since regular reporting on the data began, as employers turned cautious.

“Other key economic readings for the month, including factory production, consumption and property investment, came in much lower than expected.”

https://www.wsj.com/articles/chinas-economy-weakens-on-several-fronts-as-trade-war-rages-11565770210


“As China moves toward a more market-based approach to determining the cost of money in its economy, one metric suggests corporate debt is going in the opposite direction.

“Some 17% of company bonds in the first half were sold at yields at least 50 basis points below rates in the secondary market, according to data from China Chengxin International Credit Rating Co. That’s a jump from 9.9% in the second half of 2018.”

https://www.bloomberg.com/news/articles/2019-08-14/chinese-new-bond-yield-gap-hides-debt-risks-as-defaults-climb


“President Donald Trump defended his trade wars and attacked the Federal Reserve on Wednesday: “We are winning, big time, against China. Companies & jobs are fleeing.

“Prices to us have not gone up, and in some cases, have come down,” the president wrote on Twitter. “China is not our problem, though Hong Kong is not helping. Our problem is with the Fed. Raised too much & too fast. Now too slow to cut….”

https://markets.businessinsider.com/news/stocks/trump-lashes-out-at-federal-reserve-crazy-inverted-yield-curve-2019-8-1028447405


“For Americans accustomed to paying 4 or 5 percent mortgage rates, let alone the double-digit figures consumers endured in the early 1980s, the new loan from Denmark’s Jyske Bank might seem inconceivable.

“The Danish lender last week started offering home buyers 10-year mortgages at an interest rate of -0.5 percent. That means borrowers over a decade will pay back a little less than the amount borrowed, not including one-time fees.”

https://www.dailyherald.com/business/20190814/banks-are-paying-people-to-borrow-money-thats-alarming-news-for-the-global-economy


“The recession alarm bell ringing in U.S. government bond markets sent investors rushing once more to haven assets, pushing the world’s stockpile of negative-yielding bonds to another record.

“The market value of the Bloomberg Barclays Global Negative Yielding Debt Index closed at $16 trillion Wednesday after the key U.S. 2-year and 10-year yield curve inverted for the first time 2007 — a move often considered a harbinger of an economic downturn.”

https://www.bloomberg.com/news/articles/2019-08-15/negative-yielding-debt-hits-record-16-trillion-on-curve-fright


“The combination of a slew of data suggesting a slowdown in global growth amid the U.S.-China trade war and persistently high levels of oil in U.S. storage has punctured recent optimism in crude markets, stoking expectations leading oil producers may take further steps to support prices.”

https://uk.reuters.com/article/global-oil/oil-prices-extend-losses-as-recession-fears-inventories-mount-idUKL4N25B062


“Five big economies are at risk of recession. It won’t take much to push them over the edge… Germany, Britain, Italy, Brazil and Mexico each rank among the world’s largest 20 economies.

“Singapore and Hong Kong, which are smaller but still serve as vital hubs for finance and trade, are also suffering.”

https://edition.cnn.com/2019/08/14/economy/recession-risk-economies/index.html


“During the global financial crisis, I regularly called a close friend in NYC to comment on then-daily economic events that were shocking. Bear Stearns went bankrupt; Lehman went bankrupt; the economy shed 600,000 jobs per month. While the build-up to the crisis was amazingly slow, once the bottom dropped, it dropped hard.

“That event stands in stark contrast to the last 12 to 18 months when there’s been a continual grinding lower in the global economic data, primarily centered in the manufacturing sector.”

https://seekingalpha.com/article/4285439-global-economic-picture-getting-darker


“…events this month signal that the problems facing the world economy are more complex and intractable than the immediate reaction to President Trump’s trade war de-escalation might suggest. A tactical retreat here and there won’t solve the deeper problems hanging over the world economy.

“Once chaos has been unleashed into the global economic system, it can be hard to reel back in.”

https://www.nytimes.com/2019/08/14/upshot/global-economic-trouble-is-brewing-and-the-trade-war-is-only-part-of-it.html


“When assumptions about how the world works are shattered, a global downturn is often the result. The world learned in the early 1970s that the era of cheap oil was over, in the early 1980s that countries could default, and a decade ago that American mortgages and global banks aren’t safe.

“Today, a similar rethink of globalization is under way. From Washington to Buenos Aires, nations’ mutually reinforcing commitment to open markets is disintegrating.”

https://www.wsj.com/articles/as-global-order-crumbles-risks-of-recession-grow-11565784000


“What should worry risk managers is that we are in unchartered territory. According to Sven Henrich, founder and lead market strategist for NorthmanTrader…

““We’ve never faced a recession with so much debt and so little Fed ammunition available.” I agree with him that “With negative rates still in effect in many places, there’s no playbook for this. Historical data will be of little use.””

https://www.forbes.com/sites/mayrarodriguezvalladares/2019/08/14/rising-global-recession-odds-signal-more-credit-and-market-risks-for-financial-institutions/#3e7bdf4b75df


Read the previous ‘Economic’ thread here and visit my Patreon page here.

 

14th August 2019 Today’s Round-Up of Economic News

“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.”

https://markets.businessinsider.com/news/stocks/argentina-on-brink-of-financial-crisis-market-rout-election-surprise-2019-8-1028443209


“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.””

https://uk.reuters.com/article/us-argentina-markets-cds/argentina-default-concerns-grow-after-market-crash-idUKKCN1V31BI


“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.”

https://seekingalpha.com/article/4285039-italian-debt-crisis-like-greece-steroids


“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.”

https://www.cityam.com/german-economy-shrinks-in-second-quarter-as-exports-slump/


“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.”

https://www.theguardian.com/politics/ng-interactive/2019/aug/13/how-a-no-deal-brexit-threatens-your-weekly-food-shop


“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.”

https://www.cnbc.com/2019/08/13/european-banks-could-break-down-to-financial-crisis-lows.html


“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].

https://www.marketwatch.com/story/americans-now-have-more-mortgage-debt-than-ever-before-2019-08-13?mod=hp_realestate


“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.”

https://wolfstreet.com/2019/08/13/auto-loan-subprime-delinquencies-at-2009-level-biggest-12-month-surge-since-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.”

https://www.scmp.com/news/hong-kong/article/3022681/china-rejects-requests-american-warships-visit-hong-kong-us-navy


“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.”

https://www.bloomberg.com/news/articles/2019-08-14/china-expected-to-roll-over-maturing-debt-amid-economic-slowdown?srnd=economics-vp


“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…”

https://www.freshplaza.com/article/9132952/worry-grows-about-china-s-falling-currency-and-rising-dollar-debt/


“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…”

https://www.cityam.com/chinese-industrial-output-slows-to-17-year-low/


“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.”

https://marketrealist.com/2019/08/chinas-car-sales-slowdown-fears/


“[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.”

https://edition.cnn.com/2019/08/13/business/india-car-sales-slump/index.html


“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.”

https://uk.reuters.com/article/uk-global-autos-kemp/column-global-motor-manufacturing-slump-hits-oil-demand-idUKKCN1V319Z


“[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.”

https://www.smh.com.au/business/the-economy/retail-sales-drop-to-levels-not-seen-since-the-1991-recession-20190813-p52gn3.html


“[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.”

https://www.theguardian.com/business/2019/aug/14/the-no-growth-future-has-australias-economy-finally-run-out-of-luck


“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.”

https://gulfnews.com/business/recession-fear-spooks-global-markets-amid-stretched-valuations-1.65791250


““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…”

https://www.cnbc.com/2019/08/13/investors-flock-into-bonds-as-recession-fears-rise.html


Read the previous ‘Economic’ thread here and visit my Patreon page here.

 

13th August 2019 Today’s Round-Up of Economic News

Our political, economic and financial dramas are becoming increasingly intertwined and volatile now:

“Hundreds of pro-democracy protesters have staged a new rally at Hong Kong’s airport, a day after a massive demonstration triggered a shutdown at the busy international travel hub.

“Only a handful of protesters stayed through the night, and flights resumed at the airport early in the morning. But by Tuesday afternoon, several hundred demonstrators had returned, responding to a call for a new rally.

“The unprecedented cancellation of all flights on Monday followed the fourth consecutive day of protests at the airport and amid increasingly threatening statements from Beijing. A Chinese official said “terrorism” was emerging in the city, while in Hong Kong authorities demonstrated water cannon for use in crowd control…

“On Tuesday the territory’s leader Carrie Lam warned that violence will push Hong Kong “down a path of no return”.”

https://www.theguardian.com/world/2019/aug/13/hong-kong-airport-reopens-as-trudeau-urges-china-to-address-serious-concerns


“Hong Kong could be the black swan that no one saw as the tripwire for the global economy that could then rock stock markets.

“I know there’ll be smart Alec critics who one day will ask why ‘experts’ like me didn’t see this coming but Hong Kong and the likelihood of their citizens trying to bully China wasn’t on my list of logical issues that could kill financial markets’ confidence.”

https://www.switzer.com.au/the-experts/peter-switzer-expert/big-black-swan-trouble-in-little-china/


“Chinese monetary data for July was weak across the board, suggesting that Beijing’s efforts to galvanise new lending are not having the intended effect…

“The slump raises questions over the need for additional credit easing.”

https://www.scmp.com/economy/china-economy/article/3022486/chinas-bank-lending-weakened-july-suggesting-beijings


“This year, those looking around in August for ill omens for the global economy are spoilt for choice…

“All debt crises need a trigger to set them off, and this [the devaluation of the Yuan] might just be it, since a devaluing currency makes it more expensive to pay back debts denominated in foreign currencies. And when your debts are as big as China’s, that’s potentially a very big deal.”

https://www.theguardian.com/business/2019/aug/12/could-devaluation-of-china-yuan-trigger-the-next-financial-crisis


“Singapore’s economy has been tipped to enter recession in the third quarter of 2019 as the fallout from the US-China trade war continues to rock the Southeast Asian nation after second quarter growth was confirmed at minus 3.3 per cent…

“[It was] the worst reported quarterly growth for seven years.”

https://www.scmp.com/economy/global-economy/article/3022526/singapore-economy-tipped-recession-us-china-trade-war-slams


“Last month, Tokyo tightened guidelines on exports to South Korea of three materials crucial to making chips and display panels, an apparent protest against a decision last year requiring Japanese firms to compensate South Koreans forced into labour during Japan’s 1910-45 occupation of the Korean peninsula.

“Japan believes the issue of compensation was settled under a 1965 treaty.”

https://www.scmp.com/economy/global-economy/article/3022432/japanese-firms-fear-escalation-south-korean-trade-spat-beer


“India’s auto slowdown entered its ninth month in July as passenger vehicle sales fell 31 percent year-on-year to 200,790 units, data from industry body Society of Indian Automobile Manufacturers showed Tuesday.

“Domestic car sales were down 35.95 percent at 122,956 units as against 191,979 units in July 2018, according to the SIAM data.”

https://www.bloombergquint.com/business/india-auto-slowdown-enters-ninth-month-as-passenger-vehicle-sales-decline-31-in-july


“Indian investors are awaiting stimulus measures from the government as a gloomy economic outlook adds to mounting credit market woes and raises fears defaults will spread.

“The government is planning measures to boost the economy and may announce some steps…”

https://www.thehindubusinessline.com/economy/as-default-risks-rise-investors-eye-stimulus-to-prop-up-economy/article29040821.ece


“At the end of October, Jammu and Kashmir will cease to be a state of India. Last week, India’s parliament approved by a large majority the decision by the federal government to split the state into two union territories – Jammu and Kashmir, and Ladakh. Union territories have much less autonomy from the federal government than states do, and are essentially subject to Delhi’s direct rule…”

“The outlook is grim.”

https://www.bbc.co.uk/news/world-asia-india-49316350


“An estimated 50,000 protesters took to the streets of Moscow on Saturday, Aug. 10, in one of the largest protests in Russia since 2012. They rallied against the barring of opposition candidates from local elections next month and police crackdowns at recent rallies. 256 were detained in a march after the demonstration.”

https://www.themoscowtimes.com/2019/08/12/record-protests-rock-moscow-a66825


“Yevgeny Dubinin had never been to a political protest before. But he was so angry Moscow authorities had refused to register opposition candidates in the city council election that he couldn’t sit at home.

““They’re taking away people’s right to vote, telling them whom to vote for,” the 44-year-old business manager said on his way to a late-July demonstration on the capital’s main street, Tverskaya, that had been denied a permit by authorities.”

https://www.bloomberg.com/news/articles/2019-08-13/as-putin-s-popularity-and-the-economy-dip-protests-pop-up-across-russia


“America would “enthusiastically” support a no-deal Brexit, U.S. National Security Adviser John Bolton said on Monday during a visit to London.

““If that’s the decision of the British government, we will support it enthusiastically, and that’s what I’m trying to convey,” Bolton told reporters on the first day of his two-day visit to the British capital, according to the Guardian. “We’re with you, we’re with you.”

https://www.politico.eu/article/trump-envoy-us-would-enthusiastically-back-no-deal-brexit/


“Argentine President Mauricio Macri vowed on Monday to win a second term despite a surprisingly strong performance by the opposition in the primary election that set off a shockwave through markets, crashing the peso currency and sending stocks and bonds tumbling…

“The peso closed 15% weaker at 53.5 per U.S. dollar after plunging some 30% to a record low earlier in the day.”

https://in.reuters.com/article/us-argentina-election/argentine-peso-crashes-after-macri-gets-thumped-in-primary-election-idINKCN1V209J?il=0


“Brazil likely fell into recession in the second quarter according to a key gauge of economic activity that comes as policy makers grapple with high unemployment and weak investments as well as a global slowdown.

“The country’s economy activity index, which is a proxy for gross domestic product, fell 0.13% in the April-June period…”

https://www.bloomberg.com/news/articles/2019-08-12/brazil-economic-activity-gauge-flashes-recession-as-woes-mount


“As Wall Street economists up the odds for a recession in the coming year, the bond market is sending its own scary warning about an economic downturn.

“Various parts of the yield curve have been inverted, but the traditionally watched 2-year to 10-year spread looks set to invert any day now, with the curve at its flattest level since 2007.”

https://www.cnbc.com/2019/08/12/bond-market-close-to-sending-biggest-recession-signal-yet.html


“Economies globally are showing signs of acute weakness and the next stage could be a worldwide recession, if Morgan Stanley is to be believed, in nine months from now.

“Escalation in trade tension between the two largest economies — US and China — is the chief factor nudging the world economy towards a recession.”

https://www.ndtv.com/business/global-economy-world-economy-seen-entering-recession-in-3-quarter-morgan-stanley-2084073


Read the previous ‘Economic’ thread here and visit my Patreon page here.

12th August 2019 Today’s Round-Up of Economic News

“Debt markets are flashing recession warning signs as sovereign bond yields slide at their fastest pace in years and the value of those in negative territory climbs to record highs.

“The benchmark US 10-year Treasury yield – the return on American government debt – is already on course for its biggest annual slide in eight years after last week’s surge in trade tensions between the US and China.

“The yields on UK gilts and German bunds are also dropping faster than at any time since 2014, dragged down by expectations of interest rate cuts by central banks to prop up growth and by investors seeking safety from market volatility.”

https://www.telegraph.co.uk/business/2019/08/12/slide-bond-yields-deepens-fears-worldwide-recession/


“Investors have flocked to fixed income mutual funds at the fastest rate since the financial crisis, piling in almost $500bn in the first half of 2019 during trade war tensions, recessionary fears and market volatility.”

https://www.ft.com/content/16c1fdaa-b094-3fe6-af7a-eb9883440974


“…the virtuous cycle of easy monetary policy and no inflation in the aftermath of the financial crisis has sucked money into bond funds at an incredible place. As trillions of dollars of cash have been created out of thin air by central banks, a large hoard of bond market holdings via low cost, passive indexed bond funds and ETFs has been the preferred way for both retail funds and many institutional investors to obtain exposure…

“The risk is that this virtuous cycle turns into a vicious cycle…”

https://www.forbes.com/sites/vineerbhansali/2019/08/09/who-in-the-world-is-buying-all-these-low-and-negative-yielding-bonds/#7259b5287772


“The economic outlook has deteriorated in all parts of the world over the summer due to an escalating trade dispute between the United States and China, a survey showed on Monday.”

https://www.reuters.com/article/us-world-economy-ifo/global-economic-outlook-darkens-amid-escalating-trade-dispute-ifo-idUSKCN1V20HR


“Germany, Europe’s industrial backbone, is stuttering. The unemployment rate has risen for the second time in three months. The UK economy contracted for the first time since 2012, as output fell 0.2% in April to June. Italy’s debt crisis is only being made worse by political uncertainty…

“What’s more, the European Central Bank looks like it’s out of bullets to fire the economy up.”

https://markets.businessinsider.com/news/stocks/germany-italy-uk-are-headed-for-recession-and-ecb-is-out-of-tools-2019-8-1028435638


“…an ultra-nationalist right-wing government in Italy… might just make a push to abandon the euro zone.

“The fear has arisen after the country’s prime minister, anti-immigrant xenophobe Matteo Salvini (sometimes referred to as Italy’s own Trump) called for snap elections in the parliamentary democracy, as early as October.”

https://www.forbes.com/sites/pedrodacosta/2019/08/11/theres-a-new-systemic-threat-to-the-world-economy/#6a4839a77095


“The passing of President Beji Caid Essebsi leaves a huge political void in Tunisia’s fraught politics.

“His death comes not only against the backdrop of an escalating economic crisis but also in the wake of an intensifying political struggle at the very heart of Tunisia’s emerging democratic institutions…

“Tunisia’s conflicts could quickly seep into its two immediate neighbors. Islamic State-linked forces in Algeria, which in past years have struck across the frontier, might be emboldened to renew such attacks at the border or in Tunis itself.”

https://lobelog.com/tunisias-fragile-democracy-after-essebsi/


“A massive economic crisis is on its way [Turkey].

“Ankara has shown through a series of decisions, including the pruning of staff with international connections from the central bank and the change of administration in Turkey’s Financial Crimes Investigations Board, that it will face the coming whirlwind with a centralist and authoritarian mindset by employing nationalism and by withdrawing itself from the international community.”

https://ahvalnews.com/turkish-politics/its-system-deadlock-turkey-facing-darker-days-ahead


“…the apparent tranquillity of this poor suburb of Zimbabwe’s capital hides a rude reality of misery and despair.

“The smoke rising into the evening sky is a clue. Power cuts now stretch from dawn to long after dusk. Gas is too expensive so families cook on firewood, gathering around braziers as the sun goes down and an almost total darkness comes.”

https://www.theguardian.com/world/2019/aug/10/zimbabwe-emmerson-mnangagwa-battle-to-survive


“Keep a close eye on more data on the health of the Chinese economy this week after deflation reappeared in the country’s huge industrial sector for the first time in three years…

“The re-appearance of deflation in China in July after being dormant since 2016 is a new worry.”

https://www.sharecafe.com.au/2019/08/12/chinas-producer-prices-prices-drop-into-deflation/


“The recent yuan softening and monetary policy easing by regional central banks are the latest moves stoking fears of an emerging currency war, with Thailand positioned in the middle of the crossfire.”

https://www.bangkokpost.com/business/1728643/fanning-the-flames-of-fear


“Hong Kong businesses have been caught in a political crossfire as both protesters and government supporters take the fight to local companies that fail to see the current crisis the way they do.

“The trend of linking businesses to alleged political affiliations has escalated online.”

https://www.scmp.com/news/hong-kong/politics/article/3022287/hong-kong-businesses-caught-crossfire-protest-crisis-new


“…the lull that has gripped Singapore’s property market since its red-hot streak in the early 2010s could drag out further, buffeted by rising supply, a slow-moving rental market and a grim economic growth outlook.”

https://www.scmp.com/week-asia/economics/article/3022220/hype-smoke-and-hot-air-clouding-singapore-real-estate


“Australia’s property downturn has been one of the steepest on record – and it is starting to have serious ripple effects across the entire economy.

“Despite stable price rises last month, property values across the country have plunged since their peak about two years ago.”

https://www.straitstimes.com/asia/australianz/housing-slump-starts-to-ripple-through-australian-economy


“A spiraling trade row between Japan and South Korea is being driven more by emotion than economic factors, analysts say, with leaders of the U.S. allies risking their security ties for domestic political considerations, to Washington’s consternation.

“Seoul and Tokyo — both of them democracies and market economies — this month removed each other from their lists of favored trading partners.”

https://japantoday.com/category/politics/emotion-driving-s.-korea-japan-trade-row-analysts


“Global investment banks are shedding tens of thousands of jobs as falling interest rates, weak trading volumes and the march of automation create a brutal summer for the sector.”

https://www.ft.com/content/7341d4f4-bad6-11e9-8a88-aa6628ac896c


“In its closely-watched monthly oil report, the IEA said there was “growing evidence of an economic slowdown” with many large economies reporting weak gross domestic product growth in the first half of the year. From January to May, oil demand rose by 520,000 bpd, marking the lowest rise in that period since the financial crisis in 2008.

““The situation is becoming even more uncertain,” the IEA said…”

https://financialtribune.com/articles/energy/99347/iea-oil-demand-growth-at-lowest-since-2008


“After a decade of extraordinary monetary policies, central banks had started a long, slow march back to normality. They hadn’t got very far before turning back again…

“Are we in for a nasty reckoning? Loose money is raising the risks. As well as encouraging spendthrift governments, businesses have also binged on debt…”

https://moneyweek.com/512668/central-banks-turn-on-the-money-hose/


“Growing evidence of a severe global recession is sure to provoke more aggressive monetary policies from central banks. They had hoped to have the leeway to cut interest rates significantly after normalising them. That hasn’t happened.

“Consequently, as the recession intensifies, central banks will see no alternative to deeper negative nominal rates to keep their governments and banks afloat through a combination of eliminating borrowing costs and inflating bond prices.”

https://seekingalpha.com/article/4284595-deeply-negative-nominal-rates-way


Central banks around the world are likely to loosen further, keeping sovereign yields very low. But we doubt that will bring about a clear economic improvement as quickly as investors hope.

“With that in mind, we think that corporate earnings will fall well short of expectations later in 2019, hitting equities and corporate bonds.”

https://www.livemint.com/market/mark-to-market/in-an-event-of-a-global-recession-monetary-easing-won-t-be-of-much-help-1565585112967.html


Read the previous ‘Economic’ thread here and visit my Patreon page here.