Daily updates on climate change and the global economy.

1st July 2019 Today’s Round-Up of Economic News

“Factory sentiment across Asia became even more frigid in June, signaling a worsening in the region’s growth outlook as U.S.-China trade tensions continue to simmer.

“Waning global demand, particularly in the electronics sector that’s vital to much of the region, continued to weigh on Asia purchasing manager indexes, according to releases Monday. Trade friction between the world’s two biggest economies is straining the outlook despite both countries agreeing over the weekend to resume negotiations.

“June PMIs for Japan, South Korea, Malaysia, and Taiwan fell further below 50, signaling deeper contractions in factory output. South Korea’s index slumped to a four-month low of 47.5, while Taiwan’s reading of 45.5 was the weakest since November 2011, according to IHS Markit data. Both China’s official manufacturing PMI and the Caixin report signaled declining production last month.

” Recent U.S.-China developments — including a pledge by U.S. President Donald Trump, at the weekend’s Group of 20 meetings, to delay any further tariffs — have done little to convince economists that the data will show a turnaround this year. “


“Australia is about to reach its last percentage point of interest-rate ammunition, dragging the country’s economy and markets deeper into the low-yield world that’s already engulfed many of its developed-world peers.

“Yields on the nation’s 10-year government bonds hit an all-time low 1.26% last week…”


“[South African] Institutions and municipalities in financial crisis for the past five years have no recovery plans.

“The management of beleaguered state institutions and local municipalities last week reached new crisis levels after employees at a number of institutions were either not paid on time or not at all.”


“Saudi Arabia’s economic growth more than halved on a quarterly basis to 1.66% in the first quarter of this year, in line with expectations of only a modest pick up as oil production cuts weigh on the world’s top crude exporter…

“On Sunday, Saudi Energy Minister Khalid al-Falih said the cuts would most likely be extended by nine months.”


“Growth in UK manufacturing slowed between April and June, a closely-watched business survey showed on Monday, with key measures the weakest in years.

“Factories’ sales at home and abroad rose but at the slowest pace in seven years, according to the quarterly poll by the British Chambers of Commerce. The outlook is also gloomy…”


“Jeremy Hunt will announce plans for a £20 billion “war chest” for a no deal Brexit which would see dramatic tax cuts designed to turbo-charge the economy.

“The Foreign Secretary will unveil a detailed 10-point plan for leaving without a deal, with a package of financial support which he likens to that offered in the immediate aftermath of the 2008 financial crisis.”


“Signs of weakness in the manufacturing sector have been mounting left and right in recent months, adding to concerns that the decade-long expansion could be running out of steam…

“The US purchasing managers index, which gauges activity based on a survey of firms, dropped this May to its lowest level since President Donald Trump took office. Regional readings have been similarly dismal, with the Empire State manufacturing index posting its largest drop ever this month.”


“Unfortunately, there are an increasing number of signs that are warning that the expansion is soon coming to end and that a recession is not far away.

“Particularly alarming is the fact that the New York Fed’s very accurate recession probability model is warning that the current odds of a recession in the next year are the same as they were in July 2007, which is when the subprime debt crisis kicked into high gear.”


“Currency Warrior; Why Trump is Weaponising the Dollar…

“The dollar’s share of global foreign exchange reserves has slipped in the 10 years since the financial crisis, but at 62 per cent of the total it still dwarfs all rivals… the world is locked into the dollar as the default currency.”


“Global central banks may have to issue their own digital currencies sooner than expected, the general manager of the Bank for International Settlements has said, after Facebook recently unveiled plans to create its own stablecoin.”


“The world’s biggest central banks, having been on a money-printing binge for years, are about to embark on a fresh round, it seems. Yet inflation is nowhere to be seen, which appears to suggest that the money is disappearing into a giant sink hole or new kind of black hole that physicists have yet to identify…

“…the consequences of profligate money-printing will thrust themselves upon world attention probably not far down the road. They are like the unseen but massive roots of a tree that threaten to undermine and topple the house – or global economy – it is supposed to shade.”


“Corporate borrowing poses a danger to the global financial system and could trigger a crisis in the same way US sub-prime mortgages sparked the 2008 banking crash, the organisation that represents the world’s central banks has warned…

“While it was not clear whether or how a crisis might unfold, the $3tn (£2.4tn) market for low-grade corporate debt was already “overheating” and risked provoking a panic that could send market values crashing as happened 11 years ago.”


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

28th June 2019 Today’s Round-Up of Economic News

“Worrying excesses are building up in the world’s $52 trillion nexus of shadow banking and investors risk serious losses when the financial cycle turns, the ratings agency DBRS has warned.

“The hunt for higher yield has led to a surge in leveraged loans, collateralised loan obligations (CLOs), and other arcane high-risk instruments with echoes of the Lehman crisis.

“While banks have been forced to raise their capital buffers and are deemed much safer than in 2008, the hazards have migrated to dark pockets of the vast non-bank sector. This now makes up 62pc of the $97 trillion assets of the financial industry…”


“The global economy is likely heading toward a “significant market downturn,” according to billionaire Paul Singer. “The global financial system is very much toward the risky end of the spectrum,” Singer said during a panel Thursday at the Aspen Ideas Festival.

““Global debt is at an all-time high. Derivatives are at an all-time high.””


“On the backs of central banks around the world tilting, dovish, the value of [Emerging Market corporate] debt surged higher to an eye-watering $12.5tn.”


“Exclusively relying on the stock market as a measure of economic health could cost President Trump dearly in the run up to the 2020 election… The stock market has no track record of predicting economic recessions.

“The same, however, is decidedly not true of the bond market… A clear indication that the U.S. bond market is worried about the possibility of an economic recession is that U.S. long-term interest rates are significantly below short-term interest rates.”


“Donald Trump and Xi Jinping have been urged to reach a trade deal or risk setting the global economy on a downward path as world leaders gathered in Japan for the G20 summit…

“But financial markets fell across Asia on Friday amid growing fears that the talks will fail to break the logjam and see the US president carry out his threat of additional tariffs on Chinese goods.”


“Corn futures headed for the biggest quarterly gain since the end of 2010 after the spring deluge in the U.S. Midwest left planting at the slowest since records dating back to 1980, eroding prospects for production.

“Cotton went in the other direction. The fiber was poised for the steepest quarterly slump since the three months ended September 2014, partly as U.S.-China trade tensions capped demand.”


“China’s factory activity is expected to have pulled back for a second straight month in June, according to a Reuters poll of analysts, as domestic business conditions worsened and the protracted Sino-U.S. trade war hit demand…

“A downbeat reading, along with somber indicators seen in May and April, would suggest economic growth is likely to slow this quarter and increase the prospect of further policy easing in the coming months.”


“Baoshang was a small, seemingly healthy bank that authorities took over in May. A bank run was avoided, but not all of Baoshang’s interbank liabilities were guaranteed. Suddenly people realized they could actually lose money as counterparties. A new kind of fear was injected into the market, triggering a liquidity crisis…

“…the run on smaller banks could spread to the wider financial system. Chu estimates that bad debt could make up as much as 20 to 25% of the sector. Societe Generale called this possibility “the source of under-appreciated risk for the global economy.””


“China’s Shanghai Interbank Offered Rate (SHIBOR) shot up to a record of 13.44 percent last week as deteriorating loans at rural banks forced panicked short-term borrowing…

“The People’s Bank of China flooded the banking system with 50 billion yuan ($7.2 billion) of short-term liquidity to push the overnight rate back to 1 percent.

“However, Diana Choyleva of Enodo Economics warns that financial distress from China’s growth crunch is building in the non-bank sector in what she warns is a “very slow-motion crisis.””


“Russia’s economic prospects are unlikely to improve substantially anytime soon, for a simple reason: Putin’s indifference.

“He is confident that Russians – many of whom depend on the state for their incomes, in the form of pensions and welfare benefits – will not revolt.”


“Slowing capital inflows to Lebanon and weaker deposit growth increase the risk of a debt rescheduling or other steps that may constitute a default despite fiscal consolidation measures in the 2019 draft budget, Moody’s Investors Service said…

“Lebanon’s public debt is 150% of gross domestic product, among the largest in the world.”


“Tunisia’s ageing president, Beji Caid Essebsi, a major figure in the country’s transition to democracy in the wake of the Arab spring, is in critical condition in hospital, officials have said. News of Essebsi’s illness adds to an already dramatic day in Tunis, where two suicide bombers blew themselves up in separate attacks…

“…high unemployment has stoked unrest.”


“South Africa’s economy remains stuck in its longest downward cycle since 1945, adding to the risk that it may fall into its second recession in a year.

“The economy entered the 67th month of a weakening cycle in June, according to the Reserve Bank’s Quarterly Bulletin released Thursday in the capital, Pretoria. That’s after gross domestic product contracted the most in a decade in the three months through March.”


“Brazil’s central bank on Thursday slashed its 2019 economic growth forecast and, assuming constant exchange rates and interest rates, said inflation is likely to be lower than previously expected across its forecast horizon through 2021.”


“Brussels has sounded a warning that Boris Johnson’s familiar use of “false promises, pseudo-patriotism and foreigner-bashing” to win the keys to Downing Street is locking Britain into a no-deal Brexit.

“In a withering attack on the Conservative leadership frontrunner, Guy Verhofstadt dismissed the idea that he could dump Theresa May’s withdrawal agreement, withhold payment of the UK’s £39bn divorce bill and still negotiate a free-trade deal in Brussels as a “myth”. And he said that, years after the referendum, Johnson was “a man who continues to dissemble, exaggerate and disinform”.”


“…finance still heads Europe’s worry list. Italy in particular stands out. Its budget and debt problems all but ensure a return to the multi-stage financial crisis that has plagued Europe off and on since 2010.

“This next round promises to be the most severe. Italy, after all, is ten times the size of Greece, the center of the last phase of the crisis.”


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

26th June 2019 Today’s Round-Up of Economic News

“A toxic trifecta of growing political instability, escalating trade tensions and slowing global growth will confront world leaders at the G20′s annual meeting later this week in Osaka, Japan. That alone would present the group its biggest collective challenge since it first met in November 2008 in the jaws of the last financial crisis.

“However, beyond that the 19 leaders of the world’s largest economies and the European Union gather as history’s tectonic plates shift underneath them.”


“Global trade stumbled in April as the tariff war between the United States and China showed few signs of ending, figures released June 25 showed.

““An array of more timely country data on manufacturing and production reflect the impact of the trade slump and suggest that activity has yet to bottom out and that world trade volumes are on track to decline through the remainder of the second quarter,” Mickey Levy, chief U.S. and Asia economist at Berenberg Capital Markets, said in an e-mail note after the CPB report was released.”


“Intensifying trade war fears and an inventory overhang are weighing on the [US] manufacturing sector. Regional surveys suggest the national ISM manufacturing index will fall below the breakeven 50 level on Monday, which will only heighten fears of recession for the sector.”


“U.S. consumer confidence fell in June to the lowest level since September 2017 as Americans became less upbeat about the economy and labor market amid trade tensions with China and Mexico.

“The Conference Board’s index declined to 121.5, lower than all forecasts in a Bloomberg survey, data from the New York-based group showed Tuesday.”


“The nation’s federal debt is projected to reach “unprecedented levels” over the next 30 years if lawmakers do not change current laws… Currently, the nation’s level of debt is the highest level since shortly after World War II, according to the CBO. The federal debt is projected to equal 78% of the gross domestic product by the end of the year. At the end of 2007, federal debt stood at 35% of GDP.”


“Donald Trump has claimed he has no “exit strategy” if the US goes to war with Iran, the latest sabre-rattling from the US president as tensions between the two countries continues to grow…

“…he also suggested that military conflict between the two countries was a genuine possibility.”


“In the past, the [Chinese] government has told state banks to rescue trust investors.

“But this year, regulators are expected to allow more of such companies to default on bank loans, bonds and credit from the country’s 61.3 trillion yuan ($8.9 trillion) shadow lending business, which includes trusts and wealth management products, say experts.”


“There was a time, when [India’s] state-owned Bharat Sanchar Nigam Limited (BSNL), was among the few telecom operators in India earning profits in excess.

“The operator was earning profits in excess of Rs 10,000 crores per year. Fast forward to 2019 and BSNL is in serious financial trouble – with an excess debt of Rs 13,000 crore. In fact, it’s in such a grave threat that BSNL may soon shut shops.”


“The tide is turning for H2O Asset Management, the London-based investment firm…

“After almost a decade of near-constant inflows, clients last week started to yank money from some of its funds over concerns about illiquid holdings tied to a controversial German businessman. The carnage worsened on Friday, the latest day for which figures are available, with assets in six of its funds down more than 3 billion euros ($3.4 billion) over just three days to less than 19 billion euros.”


“Britain’s next prime minister will take charge of an economy beginning to falter, as Brexit uncertainty and the mounting risk of a no deal scenario serve as a brake on growth, according to a Guardian analysis.

“As the Conservative leadership race reaches an acrimonious finale, the sugar hit for the economy from the stockpiling rush before the original Brexit deadline has run its course, with warning signs emerging that growth will flatline.”


“U.K. retail sales fell at their fastest pace since the financial crisis in the year to June… The volume of goods sold slumped by the most since March 2009, with almost one-in-six stores saying they sold less than the same time a year ago.

“Motor traders reported the fastest sales shrinkage in 7 1/2 years…”


“France’s public auditor on Tuesday warned that the country’s debt level, which is hovering at close to 100 percent, was “worrying” and urged the government to control spending.

“France’s debt-to-GDP ratio is set to reach 98.9 percent this year, bucking the downward trend seen in most other eurozone countries after President Emmanuel Macron loosened the country’s purse strings to try end months of often violent “yellow vest” protests.”


“Italian banks must be ready for when the current economic slowdown translates into a bigger proportion of loans turning sour, a senior Bank of Italy official said on Tuesday. Deputy Governor Luigi Federico Signorini said in the text of a speech that the economic cycle was bound to have an impact on credit quality sooner or later.

““The reduction in the inflows of new soured loans cannot go on indefinitely,” he said, adding banks would not be able to continue to rely on falling loan-loss provisions to drive an improvement in profits.”


“Last week’s stock optimism may be short-lived as investors head into an earnings season that looks set to deliver more bad news than good. The pace of profit downgrades [EU] is exceeding upgrades…

“Sanford C. Bernstein strategists said on Monday that although global earnings recession isn’t their base-case scenario, there’s a “real” possibility of one in Europe amid trade-war and policy uncertainty.”


“Ten months ago, I warned that storm clouds were brewing over the global technology industry. The situation today is much worse.

“Back then, a U.S.-China trade war was more risk than reality, Apple Inc.’s pending iPhone update held promise, and central banks were still in tightening mode. Yet inventories at the end of June 2018 had climbed to the highest since the financial crisis a decade earlier and a sector-wide slowdown was looming.”


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

25th June 2019 Today’s Round-Up of Economic News

“If Earth really is about to stop being habitable, why pay your debts at all? If we’re literally talking about human extinction being inevitable in the next decade or so — and more on that in a minute — we’re free, and there’s no point in doing anything that doesn’t give us raw, hedonistic pleasure…

“So could the presence of climate nihilism prompt some kind of debt crisis that tears apart civilization too soon? Could we tweet our way to an even faster doom?

“…I ran this possibility past Joseph Tainter, an archeologist and anthropologist who specializes in the collapse of societies, and superficially, his worry was somewhat similar to mine. “Everything today runs on credit. My understanding is that in 2008, credit nearly froze up. That would bring on a collapse — ATMs would not dispense cash, stores would not accept checks or cards, stores would not be able to restock shelves,” he told me in an email.”


“More than a decade since the global economic meltdown of 2008 devastated lives across the world, no one who caused the crisis has been held responsible.

“”The 2008 financial crisis displayed what the world now identifies as financial contagion,”

“…says Philip J Baker, the former managing partner of a US-based hedge fund that collapsed during the financial crisis.

“Despite this, “zero Wall Street chief executives have been to prison, even though there is today absolutely no doubt that Wall Street executives and politicians were complicit in creating the crisis,” he says.”


“Despite the currently healthy economic figures, from unemployment to foreclosure rates, under the surface the country still bears bruises from the financial crisis. Some of them may never heal without a targeted treatment plan.

“Here’s what’s still ailing America after ten years on the mend.”


“Since the global financial crisis central banks have slashed rates and pumped trillions into the bond markets, and they still cannot hit their inflation targets.”


“Will the Conservative members preparing to vote for Johnson even care if Brexit ends up leading to the dissolution of the union?

“Last week’s YouGov survey of Tory members revealed just how far the card-carrying zealots will go, revealing the majority were happy to see Scotland and Northern Ireland leave the union as long as Brexit was delivered.”


“A slump in German business confidence deepened in June as trade tensions weighed on manufacturers. U.S.-led protectionist threats have clouded the growth outlook in Europe’s largest economy for months, contributing to a manufacturing slump and boosting fears that domestic demand will be undermined.

“European Central Bank President Mario Draghi last week said he’ll inject fresh monetary stimulus for the euro zone unless the economy improves.”


“Analysts believe that US sanctions could derail a recovery in Turkey and trigger a fresh slide in the lira.

“The currency’s plunge last year was exacerbated by tensions between the two countries spiking after the detention of an American pastor. Reports indicate Trump is mulling how to hit Turkey with sanctions if it does take delivery of the Russian system.”


“As the U.S. piles sanction after sanction on Iran, it’s the average person who feels it the most.

“From a subway performer’s battered leather hat devoid of tips, to a bride-to-be’s empty purse, the lack of cash from the economic pressure facing Iran’s 80 million people can be seen everywhere.”


“Africa is facing another potential debt crisis today, with around 40 percent of low-income countries in the region now in debt distress or at high risk of it, according to an IMF report released a year ago.

““We went through, just in the last 20 years, this big debt forgiveness for a lot of African countries,” said U.S. Assistant Secretary of State for Africa for African Affairs Tibor Nagy, referring to the HIPC programme.

““Now all of a sudden are we going to go through another cycle of that? … I certainly would not be sympathetic, and I don’t think my administration would be sympathetic to that kind of situation.””


“Used car sales in China have also declined amid a contraction in overall car sales, which dropped 3.29% in May, says key industry body China Automobile Dealers Association.”


“Sales of new cars in Australia have fallen for 14 consecutive months, according to the Federal Chamber of Automotive Industries.

“That would normally drive a lift in sales for used car dealer Robert Bakhos but he says this time is different.”


“As property prices crumbled and the sharemarket sagged last year, Australian household wealth plunged by close to $500 billion, according to Fidelity International estimates.

“Indeed, 2018 goes down as the steepest fall in household wealth since 2009, when more than $1 trillion was chalked off the country’s notional chalkboard.”


“The trade coverage of new import-restrictive measures introduced during the period (October 2018 to May 2019) was more than 3.5 times the average since May 2012 at $335.9 billion.

“This is the second highest figure on record, after the $480.9 billion reported in the previous period.

“Together, these two periods represent a dramatic spike in the trade coverage of import-restrictive measures, leading WTO Director-General Roberto Azevêdo to call on G20 economies to work together urgently to ease trade tensions.”


“With growth stalling pretty much globally, the pressure is building on central banks to take appropriate measures. Another thing to consider would be whether central banks have the required policy tools to arrest the slowdown. US interest rates are less than half of what they were before the 2008-2009 crisis…

“So, the key takeaway is, central banks don’t really have the policy tools. And secondly, examples from other countries suggest that low interest rates haven’t really lifted the economies. India and Europe are cases in point.”


“The world is heading back into the labyrinth of lower interest rates. The US Federal Reserve’s patience has finally run out and the global economy is lurching towards a new reckoning on rates, possibly as early as July’s Federal Open Market Committee meeting.

“Despite a near-record US economic expansion, the Fed sees something on the horizon it doesn’t like.”


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

24th June 2019 Today’s Round-Up of Economic News

“Whether it is a result of contagion or trade disputes, there is growing evidence from freight flows that the economy is materially slowing. Our confidence in this outlook is emboldened by the knowledge that since the end of World War II (the period for which we have reliable data) there has never been an economic contraction without there first being a contraction in freight flows…

“There is no official definition of a “global recession”. Some define the term as under 2% growth. Others say under 3.0%. I am willing to split the difference.

“The US recession may not have started yet, but a global recession (under 2.5% growth), likely has.”

[This may seem odd, given that on a national basis recessions mean two consecutive quarters of sub 0 GDP growth, but the global economy as a whole is adaptive to a growth rate of circa 3% and when you dip below this problems tend to become self-amplifying.

Of course GDP is itself a an easily manipulated statistic, offering limited insight into the true health of an economy, ignoring, as it does, changes in asset prices as well as the amount of debt accrued and environmental damage incurred in such growth as is achieved.]


“Factory output is faltering in a number of key economies, darkening the outlook for the global economy and increasing the likelihood that leading central banks will respond with fresh stimulus.

“Global industrial production has been weakening since the start of 2018… Europe has suffered the sharpest downswing, and there is little relief in sight…”


“A steady rise in employment has been one of the eurozone’s big successes over the past six years of economic expansion. But there are signs the region’s job market may be cooling as manufacturers cut back on hiring in response to weaker global demand for their exports.

“That could place the eurozone’s already faltering recovery in peril, since it would lose the support of consumers at home just as it has lost buyers abroad.”


“The [UK] car industry suffered its worst month in more than six and a half years in May as a slump in demand weighed on production, figures show.

“Brexit uncertainty, a global trade war and a crackdown on diesel cars have led to a slowdown, according to the latest purchasing manager’s index for the sector. The PMI reading for May was 43.5, down from 48.9 the previous month. A reading below 50 signals contraction.”


“Italy needs to respect financial targets in order to maintain investor confidence, Bank of Italy Governor Ignazio Visco said at an event in Venice, Ansa news agency reported.

“Italy and the European Union are locked in a tense standoff as the coalition led by Prime Minister Giuseppe Conte seeks to avoid disciplinary action over its mountain of debt.”


“Turkey’s opposition has dealt President Tayyip Erdogan a stinging blow by winning control of Istanbul in a re-run mayoral election, breaking his aura of invincibility and delivering a message from voters unhappy over his policies…

“…economic recession and a financial crisis have eroded [Erdogan’s] support, and Erdogan’s ever-tighter control over government has alarmed some voters.”


“Donald Trump has pledged that Iran’s “absolutely broken” economy will face “major” new sanctions on Monday, as Iran countered it would take further steps to increase its nuclear programme unless Europe does more to shield it from US pressure over the coming fortnight…

“On Sunday, one person was reported dead and seven wounded in a suspected drone attack on a Abha airport in southern Saudi Arabia.”


“China’s monthly industrial output growth in May fell to a 17-year low, while retail sales have also been sluggish. According to Tang, the trade dispute with the United States, along with the ongoing protests in Hong Kong, has put the Chinese regime in hot water, and its most pressing concern is how to keep sustain its economy.

““If the U.S. really takes action to cut off the blood supply [trade], the Chinese Communist Party will not be able to hold much longer,” he said.”


“China has the strength and patience to withstand the trade war, and will fight to the end if the U.S. administration persists with it, China’s state-run People’s Daily said in an editorial Saturday.

“The U.S. must drop all tariffs imposed on China if it wants to negotiate on trade, and only an equal dialogue can resolve the issue and lead to a win-win, the newspaper said.”


“This week the yield (or interest rate) for Australian government two-year and three-year bonds went below 1% for the first time in history.

“Seven months ago the rate the government was borrowing money for two years was 2%. It has taken less than seven months for that to halve…

“That does not happen when things are strong. That doesn’t even happen when things are just OK. It happens when things are bad.”


“The [US] economy’s vital signs are deteriorating. For the week ending June 15th U.S. weekly rail traffic was 527,989 carloads and intermodal units, representing a 5.4% decline versus the same week last year.

“This means businesses are shipping fewer goods and services cross country via railroads. It also connotes business activity is in decline… Rate cuts may not stave off another recession.”


“…it is only a matter of time before the bubbles pop and the economy moves into the downward spiral.”


“The collapse in bond yields since this spring has been stark, swift and global, upending expectations that the world’s economy would be strong enough to support a return to normal monetary policy after years of easy money.

“The drop says investors expect a recession may be looming, and that central banks will have to step in with lower rates to try to forestall it.”


“Eventually, risks to global outlook overshadow world GDP growth, which could linger at 2 percent-2.5 percent or worse. World trade and investment plunges. Migration crises abound. The number of globally displaced, which has exceeded World War 2 figures since the mid-2010s, soars to record highs. A series of new geopolitical conflicts prove harder to contain.

“So where are we today vis-à-vis these scenarios? A simple answer: Moving closer to the edge.”


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

21st June 2019 Today’s Round-Up of Economic News

“Forget Brexit, there’s something far more worrying afoot in Europe: Italy’s debt problem. It’s on course to spark an existential crisis for Europe’s single currency area, the eurozone.

“While the European Union will aim to fix the problem it looks like they’ll be no escape from the coming calamity, experts say.

“”[…] it does seem a matter of ‘when’ rather than ‘if’ – another full-blown sovereign debt panic will happen,” states a recent report from London-based financial firm TS Lombard. The report continues bluntly:

“The bottom line is that as and when a serious new crisis blows up, the Italian government is positioning itself to demonstrate to its voters that it has not sought to leave the Eurozone, but rather that the Eurozone is leaving Italy.

“In other words, Italy’s government is gearing up to inform the European Union it has had enough. Then the ruling parties will tell Italy’s population that the EU is to blame for everything.”


“Maurizio Landini, the secretary general of the CGIL, Italy’s biggest trade union confederation, told an ANSA Forum on Thursday that the nation’s economic plight is getting worse rather than better.

“”We are not emerging from the economic crisis. The situation is deteriorating,” said Landini. The union chief said that Italy has lost 30% to 35% of its productive capacity over the last 10 years.”


“Italy’s populist government’s bid to avoid a European Union disciplinary action looks more daunting than ever, as a new report shows the country’s economic woes are likely to continue.”


“Britain will crash out of the EU on 31 October unless Theresa May’s Brexit deal is ratified or a new prime minister calls a second referendum or general election this summer, the bloc’s leaders have concluded.

“The Irish prime minister, Leo Varadkar, speaking at a summit in Brussels, said that there was now “enormous hostility” among the EU27’s heads of state and government to any further delay to Brexit.”


“France’s economy is having a weaker first half of the year than anticipated amid trade headwinds and the broadening slowdown in the euro area, according statistics agency Insee.”


“The last glimmer of positive yields on German bonds is in danger of being snuffed out. Thirty-year yields turning negative would be a first among major bond markets, with a global rally already having sent all of Germany’s out to 20 years below zero.”


“South Africa’s President Cyril Ramaphosa pledged on Thursday to speed up 230 billion rand ($16.11 billion) of support for ailing power utility Eskom, which he said was too vital to be allowed to fail.

“In his first state of the nation address since leading his party to victory in a May 8 election, Ramaphosa said Eskom’s financial position remains a matter of grave concern.”


“Palestinian officials said the financial blockade on the Palestinian Authority (PA) was intensifying, warning of a possible collapse if the situation remained the same…

“Over the past three months, the financial crisis has deepened in an unprecedented way when the PA refused to receive the money Israel collects on its behalf, after Tel Aviv deducted from it.”


“India’s flagging growth prospects and subdued inflation give room for decisive action through easing of both monetary and fiscal policies, minutes of the latest meeting of the country’s monetary policy makers showed. ‘Growth impulses have clearly weakened…”


“The volume-weighted average rate of China’s benchmark overnight repo for banks fell to 1.10 percent on Friday morning, the lowest level since June 2015.

“Traders attributed the decline in the interbank repo rate to ample cash conditions in the banking system following persistent central bank fund injections via open market operations in recent days to keep liquidity sufficient…”


“The Reserve Bank of Australia says a 5% drop in Chinese growth would depress Australian economic growth by 2.5% over three years, with commodity prices and equity prices taking a hit.

“In its latest bulletin, the central bank modeled how a shock slowdown in the Chinese economy could work its way through to Australia.”


“[Australia’s] Interest rates are heading for unprecedented lows below 1% and the Reserve Bank could even be forced into extraordinary measures such as money printing to stimulate the struggling economy, forecasters believe.

“The governor of the Reserve Bank, Philip Lowe, raised expectations that the cash rate will be cut again next month when he said on Thursday that “the possibility of lower interest rates remains on the table”.”


“The United States and Japan may need to shore up bank oversight to prepare for economic downturns, the head of the Federal Reserve Bank of Boston warned on Friday.

“Eric Rosengren, president of the Boston Fed, said in a speech that policymakers in the two major economies should consider whether regulators need more tools, including requiring banks to hold more capital now, to counteract economic risks.”


“The Bank of Japan kept its ultra-easy monetary policy unchanged Thursday, to underpin the economy amid growing uncertainty over a global economic outlook clouded by the U.S.-China trade war…

“The board voted unanimously to leave its massive asset purchase program unchanged.”


Death of the high street weighs on landlords round the world:

“Britons up and down the country have been deserting the high street in droves. The UK commercial property market has found itself at the centre of the storm affecting high streets and shopping centres.”


“Growth in global wealth ground to a halt in 2018 as major equity market corrections lowered the value of many investors’ assets, according to a report by Boston Consulting Group…

“When the firm adjusted for the rebounding dollar, wealth in 2018 actually declined by 1.6% instead of growing. “For the first time since 2008, we saw wealth growth was negative when you take into account all the factors,” Anna Zakrzewski, global leader of BCG’s wealth-management practice…”


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