Daily updates on climate change and the global economy.

Economy 20 Nov 2018 Trade War to Boomerang on US

“Beyond the United States, the world’s leading economies appear to be faltering. World No. 2 China recently showed a slowdown in consumer spending and in lending, while No. 3 Japan and No. 4 Germany both contracted in the third quarter. What does this mean for U.S. policy?

….China and the world’s other major economies are most likely to react to economic slowdown with stimulus of one form or another. To the extent that stimulus is monetary, this will mean lower interest rates and, in turn, pressure for currency depreciation against the dollar.

“This currency pressure will also come from global investors redirecting their funds from their own slowing economies to the relatively booming economy in the United States. That, too, will push up the dollar…

“These pressures to swing investment toward the United States and allow currencies to depreciate against the dollar will cause a particular problem for the Trump administration, which has treated trade deficits as the star it uses to navigate its trade policy…

“That problem is likely to be exacerbated as major global economies slow in absolute terms, and especially relative to the United States. U.S. trade deficits will grow and the Trump administration will become even more convinced that the country is being cheated.

“The U.S. trade deficit in goods and services in 2018 through September did, in fact, increase 10.1 percent over the same period in 2017. U.S. exports grew, but imports grew slightly faster in percentage terms.

“This occurred, of course, as the Trump administration ratcheted up U.S. tariff and quota protection against much of the world in a misguided attempt to “correct” trade deficits. The disconnect between policies and results further illustrates the fact that trade deficits reflect macroeconomic factors such as economic growth, rather than imbalanced trade policies.

“The final policy concern about slowing global economies is that economic torpor could prove contagious. While the Trump administration has tended to view China predominantly in the context of the bilateral relationship, China’s economic boom and voracious demand for natural resources as inputs propped up growth in countries such as Australia and Brazil.

“Slowing economic giants can pull their partner countries down with them, and global economic slowdowns are rarely beneficial for U.S. growth. Downturns can be even more problematic if they expose deep-seated problems in critical countries, such as excessive debt.”

https://thehill.com/opinion/finance/417379-global-economic-slowdown-will-expose-trumps-trade-ignorance


“The escalating US-China trade war and Brexit have exposed the extent and complexity of global supply chains and ultimately the dangers of acting unilaterally, Fukunari Kimura, chief economist at the Economic Research Institute for ASEAN and East Asia, told an audience in Dublin on Monday. He said the international division of labour with products being produced across multiple jurisdictions would make the economic consequences of a trade war more severe than in the past.”

https://www.irishtimes.com/business/economy/us-china-trade-war-and-brexit-expose-complexity-of-global-trade-1.3703315


“The extra interest that investors demand to buy Irish Government debt over German bonds has widened to a 5½-month high as worries over the economic impact of a possible messy Brexit hurt demand… “A no-deal Brexit could have an adverse impact on Ireland’s economic picture, which would impact risk assets and have some effect on government bonds as well,” said Commerzbank rates strategist Rainer Guntermann.”

https://www.irishtimes.com/business/markets/brexit-fears-hit-demand-for-irish-government-debt-1.3702811


“In a report published this morning, HIS Markit research has concluded that UK business confidence is at its lowest levels since the inception of their business survey in 2009, “October data from the IHS Markit Business Outlook survey signal that UK private sector companies have become less confident about the year-ahead growth outlook”.”

https://www.exchangerates.org.uk/news/23608/uk-business-optimism-hits-lowest-point-since-records-began-is-brexit-to-blame.html


“Italy’s banking association (ABI) on Monday warned that the country’s economy would suffer if the sovereign borrowing costs remained at the high level recorded in latest months due to political uncertainty…

“The higher the spread, the lower the market confidence, and the more Italy would have to pay to borrow money.”

http://www.xinhuanet.com/english/2018-11/20/c_137618077.htm


“Although the exposure of European banks to Greece has been dramatically reduced, the continent really can’t afford another crisis in the country.

“It’s already struggling to contain Italy’s budget deficit and faces the impact of Brexit, while leaders in France and Germany are having a rough time at home.”

https://www.bloombergquint.com/business/another-greek-tragedy-could-play-badly-for-europe-taking-stock#gs.vxGcDuU


“Reuters interviews with dozens of business owners across Iran show that hundreds of companies have suspended production and thousands of workers are being laid off because of a hostile business climate, caused mainly by the new US sanctions… The Iranian rial has fallen to record lows; economic activity has slowed dramatically since US President Donald Trump pulled out from the big powers’ nuclear deal with Tehran in May.”

https://www.businesstimes.com.sg/government-economy/iranian-jobs-go-as-us-sanctions-start-to-bite


“Moves by Chinese companies to guarantee each others’ debt have left the world’s third-largest bond market prone to contagion risks — making it all the tougher for officials to follow through on initiatives to sustain credit flows…

“…now that China is going through a record run of debt defaults, the links pose the risk of a daisy chain of distress. Price moves are reflecting that.”

https://www.hellenicshippingnews.com/chinas-chain-of-debt-guarantees-looms-as-systemic-danger/


“South Korea’s manufacturing capacity utilization was 74.3% in the third quarter of this year, the lowest since the Asian Financial Crisis of 1998. In addition, its capital expenditure fell 19% from a year earlier in September, which is close to the decrement recorded during the 2008 global financial crisis. Besides, the number of unemployed persons topped one million for nine months in a row until that month, which was the largest since 1999.”

http://www.businesskorea.co.kr/news/articleView.html?idxno=26704


“The scandal erupting at Nissan, following the arrest of its chairman Carlos Ghosn over allegations of financial misconduct, is far from the first crisis to hit Japan Inc. The allegations against Mr Ghosn – the boss of the Renault-Nissan-Mitsubishi strategic alliance – could have a seismic effect on the global car industry. But Japan has, in recent years, dealt with a number of high-profile corporate scandals.”

As an aside, look at how Ghosn’s character is writ large on his face – the very embodiment of malevolent greed!

https://www.bbc.co.uk/news/business-46267868


“Michael Bloomberg´s record $1.8 billion donation for financial aid to Johns Hopkins University highlights the problem of student debt in America, which can still be a burden even years after graduation. According to the Department of Education, 42.2 million Americans were repaying a federal student loan at the end of June 2018 for a total sum of nearly $1.5 trillion, the largest volume of debt after home loans.”

https://www.geo.tv/latest/219077-student-loan-debt-still-crippling-burden-for-millions-of-americans


“A growing homogeneity in business models and strategies among U.S. large banks may worsen overall risk in the financial system, warned Kevin Stiroh, the head of supervision at New York Federal Reserve… ” If all firms are effectively the same, they could become ‘systemic as a herd’ and susceptible to the same shocks in a way that leaves the aggregate provision of financial services more volatile…””

https://www.reuters.com/article/bc-finreg-banking-increasing-systemic-ri/increasing-similarity-in-banking-raises-concern-for-systemic-risk-u-s-fed-official-warns-idUSKCN1NO1LH


““Buying the dip has not worked in 2018 for the first time since 2002,” Morgan Stanley equity strategist Michael Wilson said in a note to clients Monday. “Such market behavior is rare and in the past has coincided with official bear markets (20 percent declines), recessions, or both.”

“The strategy worked even during 2008 and 2009, the height of the Financial Crisis, Morgan Stanley said. But a key factor makes this cycle different, according to Wilson: Quantitative easing is turning to quantitative tightening. The Fed is now reducing its balance sheet while the European Central Banks and Bank of Japan taper their own quantitative easing programs.”

https://www.cnbc.com/2018/11/19/this-chart-is-proof-buy-the-dip-is-dead.html


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

Economy 19 Nov 2018 Financial Markets Shrink by $5 trillion

“Financial markets are headed for an unusually bad year, with the overall global bond and equity universe shrinking by a cumulative $5tn since the start of 2018 — the biggest contraction of capital markets since the financial crisis.

“Parallel declines in both bonds and equities are rare, as stocks tend to do better when growth is robust and fixed income thrives more in subdued or poor economic conditions. In 2008 the global equity market shrank by more than $18tn, even as the bond market was buoyed by investors desperate for the relative safety it offers. 

“But 2018 is starting to look like an inflection point for the post-crisis market era, as central banks have started paring back monetary stimulus. The Federal Reserve has led the charge, lifting even three-month Treasury yields to a 10-year high of 2.37 per cent this week. That has left almost every major asset class nursing losses in 2018…”

https://www.ft.com/content/343736c0-e9b0-11e8-a34c-663b3f553b35


“Signs of stress are mounting in the corporate-bond market, where rising interest rates and lackluster demand for new debt have investors questioning whether a long run of favorable borrowing conditions for U.S. companies is ending or merely hitting a rough patch. The amount of extra yield, or spread, that investors demand to hold investment-grade U.S. corporate bonds instead of benchmark U.S. Treasurys in recent days reached its highest level in nearly two years, while spreads on junk-rated bonds hit a 19-month high.”

https://www.wsj.com/articles/debt-market-slowdown-troubles-investors-1542568103


“While the American economy is posting strong growth indicators and the lowest unemployment rates since the late 1960s, those improvements have yet to be felt among the nation’s working class, which is shouldering the highest debt load in American history. Last quarter, American household debt reached $13.5 trillion, shattering the previous high from 2008– just before the recession– by more than $800 billion…”

https://www.inquisitr.com/5167133/u-s-household-debt-hit-record-high-13-5-trillion-last-quarter/


“Asia-Pacific leaders failed to agree on a communique at a summit in Papua New Guinea on Sunday for the first time in their history as deep divisions between the United States and China over trade and investment stymied cooperation.”

“These two countries [China and the US] were pushing each other so much that the chair couldn’t see an option to bridge them,” said the diplomat, speaking on condition of anonymity.”

https://www.cnbc.com/2018/11/19/trade-war-apec-fails-to-reach-consensus-as-us-china-divide-deepens.html


“More Chinese companies could default on their debts issued in U.S. dollars, experts warn. They say that the rising cost of borrowing and a weakening Chinese yuan could see more firms fail to meet upcoming payments.

“Tai Hui, chief market strategist for Asia Pacific at J.P. Morgan Asset Management in Hong Kong, stressed that he currently sees no systemic risks, but noted that financial strains often begin in one area before spreading. “I think the government needs to be very mindful of some of these potential links,” he said, adding that the property sector should be foremost in mind.”

https://www.cnbc.com/2018/11/19/china-corporate-bonds-experts-warn-of-more-defaults.html


“China has fired an apparent trade warning shot at Australia by targeting one of its key grain exports in the wake of the weekend’s heated APEC meeting at which tensions between Beijing and Washington deepened, setting the stage for a showdown at the upcoming G20 summit. Beijing announced on Monday it would investigate Australia’s $1.8 billion barley exports to China under “anti-dumping” rules that forbid selling at artificially low prices.”

https://www.smh.com.au/politics/federal/australian-agriculture-exports-targeted-as-global-trade-tensions-deepen-20181119-p50h0v.html


“President Moon Jae-in of South Korea on Sunday called on the International Monetary Fund to step up efforts to fend off growing instability in global financial markets, his office said. In a meeting with IMF Director Christine Lagarde in Papua New Guinea, Moon expressed concerns that capital outflows from emerging economies and lack of global liquidity may trigger a worldwide financial crisis.”

http://www.koreaherald.com/view.php?ud=20181118000103


“… borrowing by governments and corporate entities on Wall Street reached US$6.8 trillion in 2017. Global total debt hit US$247 trillion in the first quarter of 2018. These are unprecedented numbers and the associated risks are high. An important financial barometer is the Damocles Index. The Index has called to attention the risk of exchange rate crises for Argentina, Egypt, Pakistan, South Africa, Sri Lanka, Turkey and Ukraine. Apart from South Africa, the other six countries are already in or facing a currency crisis and seeking assistance from the IMF.”

http://www.eastasiaforum.org/2018/11/17/is-an-asean-currency-crisis-looming/


“Turkish economic activity is slowing rapidly following a currency crisis that peaked in August. The lira has lost about one third of its value this year, pushing up inflation to 25.2 percent, the highest level since 2003, and bringing a surge in interest rates on loans and credit cards.”

https://ahvalnews.com/turkey-retail-industry/turkish-retail-sales-drop-most-global-financial-crisis


“Argentina’s economic crisis and runaway inflation has eroded most people’s purchasing-power to the point where they can’t make ends meet at the end of the month, let alone afford a lunchtime snack in Roberto’s shop.

“Even for those who have a declared, tax-paying job in a country with a massive black economy, it’s difficult to make wages last until the end of the month.”

http://www.batimes.com.ar/news/argentina/pessimism-on-the-streets-as-argentines-feel-the-pinch.phtml


“Theresa May has played down hopes of changing Britain’s draft withdrawal deal in a move that will concern Brexiteer cabinet ministers demanding it be rewritten…

“Ms May’s focus will ring alarm bells with Brexiteers who want key elements of the withdrawal agreement rewritten, including a number of ministers in her cabinet.”

https://www.independent.co.uk/news/uk/politics/theresa-may-brexit-deal-renegotiate-cabinet-ministers-plan-leave-eu-a8639581.html


“Germany needs a package of tax cuts and other measures to shore up economic growth in the long term, Economy Minister Peter Altmaier said in an interview published on Sunday, days after the country posted its first economic contraction since 2015.”

https://www.cnbc.com/2018/11/17/reuters-america-german-minister-looks-to-tax-cuts-as-economy-contracts.html


“Spanish government debt rose by almost €12 billion in September to around €1.18 trillion, a record high according to data from the country’s central bank. The Bank of Spain said the national debt was now equivalent to 98 per cent of Spain’s GDP. The September increase means that Spain’s debt has risen month-on-month twice consecutively. The €1.2 trillion figure also tops the previous record of €1.16 trillion set in June.”

https://www.euroweeklynews.com/2018/11/17/public-debt-skyrockets-to-record-levels-in-spain/#.W_KDnej7TIU


Subscription only (and I’m maxed out); headline looks good though:

https://www.ft.com/content/2193b74a-ccb0-11e8-8d0b-a6539b949662


“No wonder the rise in oil prices has started to reverse. A slowdown in China followed by the US deprives the global economy of its two biggest engines. If the world economy is akin to an airliner, those two engines are not just necessary for lift-off – they are needed to keep the plane in the air.”

https://www.theguardian.com/business/2018/nov/18/oil-price-tumbling-warning-turbulent-times-world-economy


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

Economy 16 Nov 2018 What if There’s No Brexit Deal?

“As Prime Minister Theresa May tries to force through her Brexit deal, a spectre looming in the background is growing ever larger — what if there is no deal? Life after March 29, 2019 would suddenly become a lot more complicated in Britain with everything from flying to food becoming affected…

“The cost of food will skyrocket, shortages will be common and an immediate consequence is likely to be fresh fruit and vegetables destined for Britain rotting at EU borders as import-export controls are thrown into confusion. “The biggest single challenge will be in a no-deal scenario and what happens with fresh food,” food giant Tesco chief executive Dave Lewis told Britain’s Independent newspaper last month. Dominic Raab, Brexit Secretary until quitting Thursday, has already suggested grocers should start stockpiling goods…

“A study commissioned by Barclays bank said food and drink entering the U.K. from the EU would be subject to a new average tariff of 27 per cent. Reuters reported that among the highest levies would be frozen beef (300 per cent tariff) and orange juice (180 per cent tariff)…

“On Thursday, police said they feared a no-deal Brexit would lead to violence, widespread disruption, panic-buying because of rationing, and other dangers for which they were not prepared. In an interview with Sky News, Simon Kempton, the operational policing lead for the Police Federation of England and Wales, said “…where people can’t feed themselves, potentially, where people can’t get their insulin, potentially, it’s a real concern that those protests might escalate into disorder.” He added, “This is 2018, it’s the year people dialled (emergency services) because KFC ran out of chicken. If that can happen, imagine what will happen if we start to see food or medical supply shortages.”

“Chief of the Defence Staff General Sir Nick Carter said the military was “thinking hard” about what a no-deal scenario would entail, especially if ports and roads were blocked. The military makes “sensible contingency plans for all sorts of eventualities” he told the BBC, adding, “we stand ready to help in any way we can.””

https://www.leducrep.com/news/riots-death-and-recession-brexits-nightmare-scenario/wcm/85f4824f-a2c3-4909-b70a-98e9f1b1087e?video_autoplay=true


“A government in crisis. A Brexit process in free-fall. A Prime Minister (as at the time of writing) hanging on by her fingernails… [a no-deal scenario would mean] food and medicine shortages, endless border queues for people and vehicles, a sharp drop in the pound and in the UK’s credit rating, export chaos, substantial job losses, a house price collapse and food price inflation. National security and public safety are just as much at risk…”

https://www.forbes.com/sites/zakdoffman/2018/11/15/brexit-chaos-why-it-is-a-major-terrorism-and-security-risk/#3be078a32b2e


“Retail sales fell in October, adding to the gloom on the British high street as official figures showed that shoppers kept a tight rein on spending amid growing Brexit uncertainty. 

“Sales volumes dropped by 0.5% from September, in contrast to forecasts in a Reuters poll of economists for a rise of 0.2%.”

https://www.theguardian.com/business/2018/nov/15/retail-sales-shoppers-brexit


“The take up of new rental tenancies across prime central London decreased by no less than 12.7 per cent in the third quarter of this year compared to the same period of 2017.

“Even worse, the figure is 22.1 per cent down on the five-year average for the third quarters of each year.”

https://www.lettingagenttoday.co.uk/breaking-news/2018/11/big-slump-in-take-up-of-prime-central-london-lets-admits-agency?source=newsticker


“Many firms are keeping much of their operations in China, which offers a giant domestic market and advantages that businesses struggle to find elsewhere.

“But those that are moving aren’t flocking to the United States…

Instead, they’re looking to transfer work to other Asian countries.”

https://edition.cnn.com/2018/11/16/business/trade-war-us-tariffs/index.html


“Massive domestic debt has long been a headache for Beijing, but it is China’s growing external US dollar leverage that is being underestimated and it could possibly trigger a major financial crisis…

“China’s US$3 trillion dollar debt makes it especially vulnerable because of tightening US dollar liquidity, a weakening yuan and the ongoing US-China trade war…”

https://www.scmp.com/economy/china-economy/article/2173461/china-underestimating-its-us3-trillion-dollar-debt-and-could


“The sugar rush that President Donald Trump’s tax cuts and fiscal stimulus injected into the U.S. economy poses a quandary for the Federal Reserve and its chairman, Jerome Powell, in their campaign to raise interest rates: where and when to stop? …overtightening could backfire as the economic benefits from Trump’s policies wear thin, perhaps exacerbating the surging market volatility that reared its head in October.”

https://www.reuters.com/article/us-investment-summit-fed/the-economic-sugar-rush-and-the-fed-a-rate-hike-quandary-idUSKCN1NL0ID


“[Elizabeth Warren] said Thursday that she thinks the Federal Reserve and its fellow watchdogs of the financial system are overlooking a dangerous buildup of loans going to companies that are already deeply in debt.

“The so-called leveraged loans helped undermine the financial system before and are building up again, now totaling $1.1 trillion.”

https://www.cnbc.com/2018/11/15/elizabeth-warren-says-fed-is-making-the-same-mistakes-as-before-the-crisis.html


“The buildup of risky debt in corporate credit markets has caught the attention of the Bank of England and the US Federal Reserve. It’s also been highlighted by global fund managers in the latest industry survey by Bank of America Merril Lynch. Now the International Monetary Fund (IMF) added to the clamour, warning that an unwinding of the market in so-called “leveraged loans” — credit from non-bank lenders to risky or highly-indebted companies — could have untold consequences for the global economy.”

https://www.businessinsider.com.au/corporate-bond-risk-leveraged-loans-imf-2018-11


“One of the top bankers in the euro zone has described bitcoin as “the evil spawn of the financial crisis” …Speaking a day after International Monetary Fund managing director Christine Lagarde urged central banks to look into issuing digital currencies, Mr Cœuré outlined the experiments that monetary authorities have been doing around the world on crypto tokens and distributed-ledger technologies.”

https://www.irishtimes.com/business/markets/bitcoin-is-evil-spawn-of-financial-crisis-says-ecb-banker-1.3699183


“The International Energy Agency said on Wednesday that while US demand for oil has been “very robust,” demand in Europe and developed Asian countries “continues to be relatively weak.” The IEA also warned of a “slowdown” in demand in developing nations such as India, Brazil and Argentina caused by high oil prices, weak currencies and deteriorating economic activity.

“”The outlook for the global economy has deteriorated,” the IEA wrote.”

https://edition.cnn.com/2018/11/15/business/oil-prices-economy/index.html


“These developments suggest the synchronised growth that the global economy has enjoyed in recent years is likely to be replaced by a generalised slowdown… The message of weakening demand on the oil front was reinforced by the falling price of copper. The base metal is often referred to as “Dr Copper” on its presumed ability to forecast the peaks and troughs of business cycles since it is used in different areas of the economy such as homes, factories and electricity generation.”

https://www.businesstimes.com.sg/energy-commodities/commodities-are-sending-a-distressing-signal


“…the Baltic Dry Index has dropped over 10% since Monday with Bloomberg reporting a fall to just above 1,000 points “despite only modest expansion in fleet capacity, the usual culprit when rates collapse. This time, it’s about waning growth in Chinese demand.””

http://www.mining.com/sinking-shipping-gauge-spells-trouble-iron-ore-coal-price/


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

Economy 15 Nov 2018 Global Economy Ailing

“The world’s third- and fourth-largest economies are shrinking.

“The European Union is battling with the UK and Italy over Brexit and a deficit-boosting budget, respectively. Traders are reeling from a plummet in oil prices that sent shockwaves through the stock market.”

https://qz.com/1463327/the-global-economy-is-looking-shaky-heres-whats-happening-today/


“Brexit Secretary Dominic Raab has resigned saying he “cannot in good conscience support” the UK’s draft Brexit agreement with the EU. Theresa May announced on Wednesday evening that she had secured the backing of her cabinet for the agreement, after a five hour meeting. But several ministers were understood to have spoken against it. And there are suggestions of moves among Conservative backbenchers to force a no-confidence vote in her.”

https://www.bbc.co.uk/news/uk-politics-46219495


“Italian bond yields hit three-week highs and the country’s stocks slumped after Rome defied the European Commission over its controversial budget plan.

“The Italian government intensified its standoff with the EU last night by refusing to change its deficit target of 2.4 per cent of GDP and its growth forecast of 1.5 per cent.”

http://www.cityam.com/269089/italian-bond-yields-rise-sharply-and-stocks-fall-after-rome


“New car registrations in Europe slumped 7.4 percent in October on falling demand in Germany, France, Italy and Spain…

“…as registrations of Audi, Nissan and VW branded vehicles saw sharp declines, monthly auto industry data showed.”

https://uk.reuters.com/article/us-europe-vehicleregistrations/european-passenger-car-sales-slump-7-4-percent-in-october-idUKKCN1NK0LN


“Vulnerabilities in the German financial system are building up and risks to growth have increased substantially, the country’s central bank said on Wednesday, warning that banks may have insufficient buffers…

“The risks to future economic activity are today skewed to the downside,” Bundesbank Vice President Claudia Buch said as the bank presented a regular stability report.”

https://uk.reuters.com/article/uk-germany-economy-bundesbank/german-central-bank-warns-of-risks-to-growth-and-banks-idUKKCN1NJ18X


“Iran has executed the so-called “Sultan of Coins” and his accomplice for hoarding gold coins and other hard currency, signalling zero tolerance as it tries to shore up its currency in the face of an economic crisis.

“State TV reported that Vahid Mazloumin and his accomplice, Mohammad Ismail Ghasemi, were hanged early on Wednesday (local time).”

https://www.abc.net.au/news/2018-11-15/iran-executes-sultan-of-coins-convicted-of-hoarding/10499818


“Indian developer rupee bond sales have slumped to the lowest in almost four years as investors become more cautious about default risks after the shock from non-payments by Infrastructure & Leasing Financial Services Ltd…

“Dwindling sales may make it harder for developers to repay $4.9 billion of debt that comes due in 2019.”

https://www.bloomberg.com/news/articles/2018-11-14/india-property-bond-sales-stall-as-il-fs-fuels-default-concerns


“There are early signs that China’s central government is preparing for economic growth to slip to as low as 6 per cent next year, even as it seek to counter the blow from US President Donald Trump’s trade tariffs with a drip-feed of fiscal stimulus.”

https://www.afr.com/news/world/asia/chinas-growth-seen-slipping-to-6-per-cent-as-trade-war-kicks-in-20181115-h17xck


“Hong Kong housing prices could fall 25 percent next year if the trade war between the United States and China worsens, real-estate and investment management company JLL has warned. The forecast is the latest bearish call for what is traditionally one of the world’s most expensive real-estate markets.”

https://www.cnbc.com/2018/11/15/hong-kong-housing-prices-could-fall-25-percent-on-trade-war-jll.html


“A potent combination of nervous buyers, cautious lenders and retreating investors has turned Australia’s once booming housing market to dust. With the downturn now in its second year, the question for home-owners, house-hunters and property investors is how much further there is to go.

“Prices in Sydney, the epicenter of the preceding boom, are falling at an annualized pace of about 8 percent.”

https://www.bloomberg.com/news/articles/2018-11-14/this-is-what-s-killing-australia-s-property-boom


“Emerging market debt rose by $1 trillion to more than $71 trillion in the second quarter, with China accounting for more than 80 percent of that increase, the Institute of International Finance (IIF) said in a report on Wednesday.

“The latest numbers from China pointed to a continued issuance boom in the world’s second-largest economy, wrote IIF executive managing director Hung Tran.”

https://uk.reuters.com/article/us-global-markets-debt-iif/emerging-economies-see-debt-rise-1-trillion-in-second-quarter-face-record-redemptions-iif-idUKKCN1NJ2IT


“Maersk, the world’s biggest container shipper, said the effect of trade tensions could reduce global container trade between 0.5 and 2 percent during 2019 and 2020.

“It said volume growth in container shipping, excluding those from Hamburg Sud, was lower than expected and unexpectedly fell by 1.9 percent from the previous quarter.”

https://www.cnbc.com/2018/11/14/maersk-earnings-q3-2018.html


“Oil prices rallied Wednesday amid reports OPEC is weighing a steep production cut, but a key U.S. supply report Thursday could dampen hopes for a rebound.

“OPEC and its partners are discussing a proposal to slash output by 1.4 million barrels per day, sources told Reuters, ahead of the oil group’s meeting next month.”

https://www.investors.com/news/oil-prices-opec-production-cut-eia-data/


“Fifteen percent (15%) of Americans – including roughly two in 10 millennials (19%) – say they’re still paying off debt from the 2017 holiday season, which could put a damper on spending in 2018. Majorities of Americans indicate that they’re planning to spend less and hoping to use credit cards less that they did during last year’s holiday season (58% each), and the ghosts of spending past can have an exaggerated effect on future spending plans.”

https://today.yougov.com/topics/consumer/articles-reports/2018/11/14/americans-holiday-debt-credit


Read yesterday’s ‘Economy’ thread here and visit my Patreon page here.

Economy 14 Nov 2018 Japan’s QE Bigger Than GDP

“An epic bond-buying spree by Japan’s central bank means it’s now sitting on assets worth more than the country’s entire economy.

“Data released by the Bank of Japan on Tuesday show that its total holdings stand at 553.6 trillion yen ($4.9 trillion) following years of money printing aimed at jump starting the country’s stagnant economy. That’s bigger than Japan’s annual gross domestic product at the end of the second quarter — and more than five times the size of Apple’s (APPL) market value.

“The years of heavy stimulus have warped parts of Japan’s financial markets and left the central bank with dwindling options to juice growth if a new crisis hits…”

https://edition.cnn.com/2018/11/13/economy/bank-of-japan-economy/index.html


“Japanese regulators are starting to look into underwriting practices in the nation’s corporate bond market, where banks routinely say deals are successful even in cases when they are under-subscribed. The move suggests that the potential damage to some investors in Japan’s ¥76tn ($669bn) company note market is getting too big for the government to ignore. Bloomberg reported last month that underwriters in Japan failed to fully sell at least 29% of corporate debt offerings in September…”

https://www.gulf-times.com/story/612796/Japan-to-probe-debt-market-s-secret-as-more-bonds-


“Japan’s economy shrank more than expected in the third quarter, hit by natural disasters and a decline in exports, a worrying sign that trade protectionism is starting to take its toll on overseas demand… The contraction in the world’s third-largest economy adds to growing signs of weakness globally, with China and Europe losing momentum. Data released later in the day showed Germany’s economy also contracted in the third quarter on weak foreign trade.”

https://www.reuters.com/article/us-japan-economy-gdp/japans-economy-contracts-in-third-quarter-as-natural-disasters-trade-woes-bite-idUSKCN1NI2ZR?il=0


“China delivered a mixed economic report card for October on Wednesday as softening retail sales pointed to a consumption slowdown… the latest readings reinforced consensus views that the world’s second-largest economy will continue to cool in the next few quarters. Facing the weakest economic growth since the global financial crisis, Chinese policymakers are fast-tracking big road and rail projects, pushing banks to increase lending, and cutting taxes to ease strains on businesses.”

https://www.reuters.com/article/us-china-economy-activity/weaker-retail-sales-loom-over-chinas-economy-despite-some-bright-spots-idUSKCN1NJ06W


“Businesses… are seeing sluggish sales this festive season in part because India’s shadow lending industry, which accounted for nearly 4 out of every 10 consumer loans in the last three years, has grown more more cautious about extending new credit amid a funding crunch of its own.”

https://economictimes.indiatimes.com/industry/banking/finance/banking/cash-starved-lenders-shackle-consumers-in-fastest-growing-nation/articleshow/66614832.cms


“The economic crisis gripping the Iranian Regime is drawing increasingly a growing protest by people from all walks of life.

“Today, following calls for a nationwide strike by the Coordinating Council of Teachers Union (CCTU), large numbers of teachers joined the strike in more than 100 education centers in 54 major cities…”

https://tsarizm.com/news/2018/11/13/iran-nationwide-teacher-strike-amid-deep-growing-economic-crisis/


“Lebanon is heading towards a serious financial crisis due to the government’s debt maturities in the near term, which must be paid in US dollars, with a growing budget deficit that nearly amounts to 11 percent of the GDP. The government also needs to earmark amounts for investment spending to cure the deteriorating infrastructure, especially in the areas of air transport, electricity, waste management, water and roads…”

https://aawsat.com/english/home/article/1460866/lebanon-faces-public-debt-funding-crisis


“A decade after the start of the financial crisis, supervisors are still trying to make the banking sector more robust and avoid a repeat of the meltdown that started on trading floors and brought low the whole euro zone economy.

“ECB Vice President Luis De Guindos said after results of the Europe-wide stress test were published on Nov. 2 that the job was not done.”

https://www.reuters.com/article/us-eurozone-banks-ecb/euro-zones-investment-banking-trio-faces-11-billion-euro-question-as-ecb-raises-bar-idUSKCN1NI1LQ


“Spain may be the EU’s poster child for economic recovery, but impressive growth rates have failed to make a dent in the number of people struggling to make ends meet despite having jobs, the “working poor”.

“A combination of low wages and reliance on temporary contracts is keeping millions of workers stuck below the poverty line – nearly one in six, according to labour ministry figures.”

https://www.channelnewsasia.com/news/world/-working-poor–abound-in-spain-despite-economic-recovery-10928956


“Italy’s populist government defied the European Commission Tuesday by sticking to its big-spending budget plan, risking financial sanctions in a high-stakes standoff with Brussels.

“Despite pressure from the European Commission, which rejected Rome’s budget outright last month in a first for the EU, Italian Deputy Prime Minister Luigi Di Maio vowed to stand firm on the country’s anti-austerity plans.”

https://www.france24.com/en/20181114-italy-refuses-back-down-budget-standoff-with-eu


“The Federal Reserve needs to take note of the economic forces already weighing on the U.S. economy before it plans more rate hikes for 2019, CNBC’s Jim Cramer argued after yet another wild trading session on Wall Street. “It’s important to recognize that the most important inputs … for future inflation are already going lower, not higher. It’d be crazy to ignore that,” he said Tuesday.”

https://www.cnbc.com/2018/11/13/cramer-it-would-be-crazy-for-fed-to-ignore-these-slowdown-signals.html


“Rising levels of corporate debt are well and truly on the radar of global fund managers, and that doesn’t bode well for global stocks. US corporate debt levels have now risen to a record-high 46% of GDP, according to the latest Bank of America survey of global fund managers. The past decade has seen a sharp rise in corporate debt issuance, as investors hunt for yield in a low interest rate environment.”

http://uk.businessinsider.com/swelling-corporate-debt-piles-are-now-global-fund-managers-major-concern-2018-11


“International Monetary Fund head Christine Lagarde said central banks around the world should consider issuing digital currency.

“Speaking in Singapore, Ms Lagarde said this could make digital currency transactions safer. Non-cash payments have increased over the years, raising challenges for governments and central banks.”

https://www.bbc.co.uk/news/business-46203869


“”China’s economy is under considerable strain from deleveraging, and we expect growth to take another leg down in Q1 2019… We are also not optimistic for a quick end to US-Sino trade frictions…

“Across many EM economies, financial conditions have tightened and will likely continue to do so, as the Fed continues hiking rates and as aggregate QE of the G4 central banks switches to QT…”

https://www.fxstreet.com/news/a-global-economic-slowdown-is-upon-us-nomura-201811131630


“U.S. West Texas Intermediate (WTI) crude oil futures were at $55.52 per barrel at 0732 GMT, down 17 cents, or 0.3 percent, from their last settlement. International benchmark Brent crude oil futures LCOc1 were down 9 cents at $65.38 per barrel. Crude oil has lost over a quarter of its value since early October in what has become one of the biggest declines since a price collapse in 2014.”

https://www.reuters.com/article/us-global-oil/oil-extends-slide-from-7-percent-slump-the-day-before-as-outlook-darkens-idUSKCN1NJ02U


“…the credit bubble that [China has] engineered will cause the coming recession to be a lot worse than it otherwise would have been, drawing parallels to the 1930s Great Depression in the U.S…

“I think that what we will see in China, soon, will be the equivalent of what we saw in 2008.”

https://www.marketwatch.com/story/chinas-coming-recession-has-pushed-oil-below-60-2018-11-13


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

Economy 13 Nov 2018 Worsening Polarisation

“A worldwide economic slowdown will add fuel to the rise of populism and anti-globalisation movements in 2019, according to credit ratings agency Moody’s.

“The agency has offered a bleak outlook for next year up to 2020. It expects softening economic growth, higher borrowing costs, and an uptick in market volatility.

“This negative prediction is largely due to increased domestic and geopolitical tensions. These presented the single greatest threat to credit markets.

“As income inequality worsens, particularly in the US it could “ratchet up political polarisation”. This would make sudden policies changes more likely, and fuel market volatility.”

https://www.telegraph.co.uk/business/2018/11/13/slowdown-world-economy-fuel-political-polarisation-moodys-says/


“UK debt could rise to £6.7 trillion by 2023, from £5.1 trillion in 2017, according to new research.

“The UK’s debt as a percentage of gross domestic product (GDP) is predicted to rise to nearly 260 per cent of GDP, a level not seen since the financial crisis.”

http://www.cityam.com/268990/uk-debt-soar-financial-crisis-levels-over-next-five-years


“More than a third of U.K.’s small- and medium-sized businesses see the pound dropping at least 10 percent after Brexit, but almost none of them are preparing for it. Almost one in five SMEs believe the pound could reach parity with the euro or fall even lower for the first time in history, according to a report by payments firm WorldFirst released on Tuesday. However, as many as 95 percent of those companies don’t have a currency strategy to deal with a possible increase in supplier costs and reduced margins, the report said.”

https://www.bloomberg.com/news/articles/2018-11-13/u-k-small-firms-not-prepared-for-big-pound-slump-after-brexit


“Germany is expected to report a report an outright contraction in Q3.

“If realized, the news could weigh on the Euro regardless of the low expectations… Consecutive disappointments in industrial output, unimpressive consumption, sliding purchasing managers’ indices, and even a squeeze in the trade balance surplus resulted in very low expectations.”

https://www.fxstreet.com/analysis/german-gdp-preview-outright-contraction-could-send-the-euro-even-lower-regardless-of-expectations-201811121539


“Italy’s budget crisis is raising broader concerns about the sustainability of its public debt and risks spreading turbulence to others, European Central Bank Vice President Luis de Guindos said on Monday. With Rome locked in a fight with the European Commission over its plans to raise spending, the ECB has made it clear that it will not step in to bring down Italy’s borrowing costs as the rise in yield was the result of the government’s breach of EU rules.”

https://uk.reuters.com/article/uk-ecb-policy-deguindos/italys-budget-tussle-raises-debt-concerns-ecbs-de-guindos-idUKKCN1NH121


“A slump in sales of cars and light commercial vehicles in Turkey deepened last month as an economic downturn slashed demand. Sales of cars dived 76.2 percent annually in October to 16,809 units, according to a report by the Automotive Manufacturers Association (OSD) published on Monday. The decline, the seventh-straight month that sales have fallen, followed a 68 percent drop in September a decrease of 51 percent in August.”

https://ahvalnews.com/turkey-car-industry/turkish-slump-car-sales-deepens-economic-downturn-bites


“Iron ore spot markets fell across the board on Monday, weighed down by continue weakness in Chinese steel prices.

“Concerns about Chinese demand over winter, as well as a major producer announcing price cuts for December…

“…were cited as catalysts behind the weakness in steel markets.”

https://www.businessinsider.com.au/iron-ore-prices-china-steel-demand-hebei-2018-11


“Japan’s central bank has become the first among Group of Seven nations to own assets collectively worth more than the country’s entire economy, following a half-decade spending spree designed to accelerate weak price growth.

“The 553.6 trillion yen ($4.87 trillion) of yen assets the Bank of Japan holds are worth more than five times the world’s most valuable company Apple Inc. and 25 times the market capitalization of Japan’s most valuable company Toyota Motor Corp.”

http://www.asahi.com/ajw/articles/AJ201811130026.html


“In the worst of five cases assembled by UBS analyst Jonathan Mott, Australia’s 27-year economic expansion ends, unemployment climbs and the central bank cuts interest rates to zero, according to a Nov. 12 research report.

“He currently forecasts conditions as reflecting the third scenario — a housing correction — but warns the risk of a credit crunch “is real and rising.””

https://www.bloomberg.com/news/articles/2018-11-13/australia-house-prices-could-drop-30-in-ubs-recession-scenario


“Many cash machines in the Sudanese capital of Khartoum have run out of banknotes as the government scrambles to prevent economic collapse with a sharp devaluation and emergency austerity measures. Rising demand for cash due to inflation, lack of trust in the banking system and the central bank’s policy of restricting the money supply to protect the Sudanese pound have all contributed to a liquidity crunch…”

https://www.businesslive.co.za/bd/world/africa/2018-11-12-cash-runs-out-in-khartoum-as-sudan-battles-to-halt-economic-crisis


“Zimbabwean banks urged the government to introduce wide-ranging reforms amid signs the country is facing an economic crisis reminiscent of a hyperinflationary spiral a decade ago. Finance Minister Mthuli Ncube is preparing to announce the 2019 budget later this month. He’s juggling a ballooning budget deficit, foreign-exchange shortages that are fueling inflation, and an inability to raise foreign loans because of $5.6 billion of debt arrears.”

https://www.bloomberg.com/news/articles/2018-11-08/banks-fear-hyperinflation-redux-in-plea-for-zimbabwe-reforms


“Mexico’s central bank is expected to raise its benchmark interest rate to a nearly 10-year high on Thursday after a sharp drop in the peso and a shift in forecasts for a weaker currency, a Reuters survey showed on Monday. The Bank of Mexico (Banxico) is expected to raise the overnight interbank rate by 25 basis points to 8.00 percent, according to 22 of 25 specialists, which would be its highest level since August 2008.”

https://www.brecorder.com/2018/11/12/452131/mexico-central-bank-seen-hiking-rate-after-peso-slump/


“Chile will send an Air Force plane to Venezuela later in November to evacuate its citizens due to the growing humanitarian crisis, Chilean Foreign Minister Roberto Ampuero said.”

https://sputniknews.com/latam/201811131069749970-chile-venezuela-air-force-plane-evacuation/


“General Electric Co (GE.N) will sell assets with “urgency” to reduce its high debt, Chief Executive Officer Larry Culp said on Monday, as GE shares tumbled as much as 10 percent and the cost of insuring its debt hit a six-year high… Last month, GE posted a quarterly loss of $22.8 billion, cut its annual dividend to just 4 cents a share and told investors it was facing a deepening federal accounting probe.”

https://www.reuters.com/article/us-ge-debt/general-electric-seeks-urgent-asset-sales-as-bond-fears-rise-idUSKCN1NH1SO


Read yesterday’s ‘Economy’ thread here and visit my Patreon page here.