Daily updates on climate change and the global economy.

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.

8th August 2019 Today’s Round-Up of Economic News

“The global economy is probably in recession, with most cyclical indicators showing business activity is flat or falling. Recessions become obvious only once they are well established given the lagging nature of most economic data…

“Policymakers are reluctant to announce a recession for fear of harming consumer and business confidence and worsening the downturn (“Business cycles: theory, history, indicators and forecasting”, Zarnowitz, 1992).

“But almost all the main economic and industrial indicators that provide a reliable guide to the business cycle confirm the economy has already slowed severely… By most measures, the global economy is in the midst of the deepest slowdown since 2015, and in many cases since 2009.”

https://www.reuters.com/article/global-economy-kemp/column-global-economy-is-probably-in-recession-kemp-idUSL8N2535R7


“The escalating trade war between the U.S. and China is nudging the world economy toward its first recession in a decade with investors demanding politicians and central bankers act fast to change course.”

https://www.bloomberg.com/news/articles/2019-08-07/world-economy-edges-closer-to-a-recession-as-trade-fears-spread


“Inflated Bond Ratings Helped Spur the Financial Crisis. They’re Back. Credit-grading firms are giving out increasingly optimistic appraisals as they fight for market share in booming debt-securities markets.”

https://www.wsj.com/articles/inflated-bond-ratings-helped-spur-the-financial-crisis-theyre-back-11565194951


“Venezuela’s banana and plantain crops face potential infestation of a fungus already effecting neighbouring Colombia, an agronomists association said on Wednesday, potentially devastating one of Venezuela’s main foods amid rising hunger.

“A hyperinflationary economic collapse has left millions of the OPEC member’s citizens unable to obtain enough calories and has pushed diets towards starchy staples that grow readily in its tropical climate.”

https://www.euronews.com/2019/08/07/amid-rising-hunger-venezuela-plantain-crops-threatened-by-fungus-agronomists


“Saudi Arabia has phoned other oil producers to discuss possible policy responses as oil prices fell to a seven-month low, a Saudi official said. The kingdom won’t tolerate a continued slide in prices and is considering all options, the official said, asking not to be identified discussing private talks. He didn’t say what measures were being discussed.”

https://www.bloomberg.com/news/articles/2019-08-07/saudis-are-discussing-options-to-halt-oil-slide-with-producers


“Norway’s krone hit its lowest level since the 2008 financial crisis as global trade tensions drive down the price of oil, threatening large parts of the Norwegian economy.”

https://www.bloomberg.com/news/articles/2019-08-07/norway-s-krone-hits-crisis-low-as-oil-slump-wipes-out-value


“For Europe’s lenders, the hits keep on coming.

“Banks in Germany, Italy and the Netherlands warned Wednesday that making money and improving their operations are becoming more challenging as already-low interest rates look set to tick lower. Shares of Commerzbank AG, UniCredit SpA and ABN Amro Bank NV fell sharply as they struck a gloomy tone.”

https://www.wsj.com/articles/europes-banks-warn-about-prospects-11565195627


“UK house prices dropped by more than expected in July with consumers becoming increasingly cautious as Brexit looms.

“The Royal Institution of Chartered Surveyors (Rics) said prices continued to fall last month as the property market showed signs of flatlining amid the rising risks to the economy from a no-deal Brexit.”

https://www.theguardian.com/business/2019/aug/08/house-prices-fall-unexpectedly-pre-brexit-caution-bites


“India’s central bank outlined two measures on Wednesday aimed at easing liquidity pressures on crisis-hit shadow banks, but industry insiders say the moves, while positive, are unlikely to lead to any substantive improvements in the troubled sector.”

https://economictimes.indiatimes.com/industry/banking/finance/rbi-moves-unlikely-to-ease-pain-for-indias-struggling-shadow-banks/articleshow/70575811.cms


“China’s central bank set the daily midpoint for the yuan at its weakest level since 2008 early Thursday.

“The People’s Bank of China set the yuan’s CNYUSD, +0.2188% reference point at 7.0039 against one U.S. dollar, according to Dow Jones Newswires. The bank allows the yuan to fluctuate up to 2% higher or lower than that level.”

https://www.marketwatch.com/story/china-sets-yuans-midpoint-at-weakest-level-since-2008-2019-08-07


“The last time interest rates moved this rapidly and dramatically, Donald Trump had just been elected president, and the world saw the promise of faster economic growth and a long-anticipated pickup in price inflation.

“Interest rates, back in November, 2016 snapped higher in the six days after Trump won the election.

“Now, it’s the mirror opposite. Global rates, fueled by the actions of concerned central banks, are sinking rapidly.”

https://www.cnbc.com/2019/08/07/the-trump-economy-once-drove-interest-rates-rapidly-higher-now-theyre-collapsing.html


“Central banks in New Zealand, Thailand, and India moved to slash interest rates this week in an effort to bolster growth as fears of a global recession rise. The shift toward lower rates follows the escalation of the trade spat between the US and China that roiled global markets earlier this week.”

https://markets.businessinsider.com/news/stocks/central-banks-shift-to-ease-monetary-policy-on-recession-fears-2019-8-1028427425


“Raoul Pal, the former GLG global macro hedge-fund co-manager, who was among the few investors that predicted and profited amid the 2008-09 mortgage meltdown, told MarketWatch in a Wednesday interview that the current set up has led him to a grim forecast for the economy and markets.

““The conclusion has to be that this is the most fragile point in global financial markets since the eurozone crisis in 2012, and potentially the start of the Great Recession in 2008,” he said.”

https://www.marketwatch.com/story/global-macro-trader-who-nailed-the-2008-crisis-says-next-3-months-mark-edge-of-the-cliff-for-marketsand-were-there-right-now-2019-08-07


“The global bond market is sounding the alarm that things won’t be able to carry on much longer before a recession strikes.

“Germany’s yield curve is now at its flattest since the financial crisis — and yields across the world are slumping to fresh lows — in a cacophony of signs that investors are growing increasingly pessimistic about the outlook for the world economy. Central banks from New Zealand to India have responded by surprising markets with their efforts to boost stimulus.”

https://www.bloomberg.com/news/articles/2019-08-07/germany-s-yield-curve-flashes-stark-warning-on-global-economy


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

7th August 2019 Today’s Round-Up of Economic News

“Investors are pricing in a 100% chance the Fed cuts rates at its next meeting in September after Monday’s market carnage, joining central banks around the globe that are providing more stimulus to their respective economies…

“Initially seen as a cautionary pause, the world’s central banks have clearly returned to a path of lower interest rates that has not been seen since the global financial crisis.

“More than half of the world’s central banks are expected to cut interest rates in the third quarter, while 0% of central banks are expected to raise rates in the third or fourth quarters, data compiled by Goldman Sachs shows.”

https://www.axios.com/central-banks-interest-rate-cuts-financial-crisis-2d373344-91ca-4c69-a525-017afe96e17d.html


“After the Dow shed almost 1,000 points on Monday, stock market futures point to a slight recovery on Wall Street this morning. Tuesday’s bounce, however, is tainted by the Treasury’s recession indicator which plunged to a level not seen since before the 2008 financial crisis. As the trade war between China and the US escalates, the recession alarm is screaming.”

https://www.ccn.com/market-news/dow-recovers-recession-alarm-hits-crisis-levels/2019/08/06/


“Investors shouldn’t take much solace from Tuesday morning’s rebound, says Nomura.

“The firm is warning the next sell-off could resemble a crisis-level plunge like the one that followed Lehman Brothers’ collapse.”

https://www.cnbc.com/2019/08/06/nomura-a-second-market-sell-off-could-be-lehman-like.html


“The escalating trade war between the U.S. and China is potentially creating “the most dangerous financial moment” since the global crash at the end of the last decade, former Treasury Secretary Larry Summers said.”

https://www.cnbc.com/2019/08/06/larry-summer-tweets-on-china-us-trade-currency-war.html


“To most people, Aug. 9, 2007, was an ordinary enough summer day. The stock market fell about 3 percent, sufficiently notable to lead the major newspapers, but hardly anything that would generate panic in the streets.

“Yet to many people who work in economic policy or financial markets, that day was the beginning of what would eventually be called the global financial crisis… Monday felt eerily similar…”

https://www.nytimes.com/2019/08/06/upshot/china-us-trade-war-currency-markets.html


“The world knows that China’s GDP growth rate has recently fallen (although some are more worried about it than others). But what the world may not know is that while the U.S. capital markets have steadily grown for the past decade (see chart below), the Chinese markets have been essentially flat.”

https://fortune.com/2019/08/06/causes-us-china-trade-war/


“Investor anxiety is visible just about everywhere in Hong Kong’s markets as recession warnings and escalating protests strain sentiment to breaking point.

“While most of the world recovered Tuesday from a yuan-induced meltdown, Hong Kong saw the biggest spike in interbank rates in more than a decade, the longest stretch of equity declines since 1984 and the wildest stock swings in four years.”

https://www.bloomberg.com/news/articles/2019-08-06/hong-kong-assets-turn-toxic-as-trade-war-protests-cloud-outlook


“Slumping sales of cars and motorcycles are triggering massive job cuts in the auto sector in India, with many companies forced to shut down factories for days and axe shifts, multiple sources said…

“The downturn – regarded by industry executives as the worst suffered by the Indian auto industry – is posing a big challenge for the government of Prime Minister Narendra Modi as it begins its second term at a time when India’s jobless numbers are climbing.”

https://www.aljazeera.com/ajimpact/indian-auto-crisis-fallout-roughly-465000-people-lose-jobs-190806184942332.html


“A key measure of Japan’s economy fell to a level not seen since the wake of the financial crisis, adding to concerns about the economy ahead of an October sales-tax hike.

“The leading coincident index dropped to 93.3 in June, the lowest since February 2010, the Cabinet Office said Tuesday.”

https://www.bloomberg.com/news/articles/2019-08-06/key-gauge-of-japan-s-economy-falls-to-lowest-since-early-2010


“The recessionary conditions in construction have deepened, with the industry experiencing the sharpest decline in activity in six years…

“The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (PCI) fell by 3.9 points to 39.1 in July — readings below 50 indicate a contraction in activity…”

https://www.abc.net.au/news/2019-08-07/construction-recession-deepens-sharpest-decline-in-activity/11392052


“More than five million people in Zimbabwe – about a third of the population – need food aid, with many coming close to starving, the UN says.

“The World Food Programme (WFP) has launched a $331m (£270m) appeal as the country battles the effects of drought, a cyclone and an economic crisis. David Beasley, head of the WFP, said many were “in crisis emergency mode… marching towards starvation”.”

https://www.bbc.co.uk/news/world-africa-49259678


“South Africa’s public finances are in a perilous state. There are four main reasons for this. First, economic growth is low or non-existent. Second, tax revenue collection is repeatedly below forecasts.

“Third, debt levels have risen rapidly and are now at their highest levels in the post-apartheid era. Fourth, the poor performance of state-owned enterprises is necessitating large-scale government support.”

https://www.theafricareport.com/16002/south-africa-is-running-out-of-time-to-fix-its-finances/


“The data highlighting the structural weaknesses of the Nigerian economy are depressingly familiar – despite decades of attempts to diversify, Nigeria remains dependent on oil for 90% of its export earnings…

“Nigeria’s biggest economic problem, though – and the issue that requires real political acceptance from Buhari’s new government – is the country’s growing public debt.”

https://www.forbes.com/sites/ikebrannon/2019/08/06/nigerias-deceptively-large-external-debt-could-threaten-its-economy/#25cf2c822491


“Crisis-struck Argentine currency, which shed more than 102.50 percent last year and roughly 18 percent so far this year, tumbled 1.8 percent further on Monday, the 5th of August 2019, to 45.49 per US dollar in context of a swath of uncertainties circulating around the Latin American country’s presidential election alongside a flurry of intensified slowdown concerns.”

https://www.financial-world.org/news/news/currencies/2820/argentine-peso-pummeled-18-percent-on-election-global-slowdown-bubbles/


“Russia’s economy may face a technical recession as early as this year due to the hard-line fiscal and monetary policy, according to a research note released by the Stolypin Growth Economic Institute, whose Supervisory Board is headed by business ombudsman Boris Titov.”

https://www.hellenicshippingnews.com/economic-recession-in-russia-possible-in-2019-say-experts/


“German industrial output fell more than expected in June, driven by weaker production of intermediate and capital goods, data showed on Wednesday, adding to signs that Europe’s biggest economy contracted in the second quarter.

“Industrial output dropped by 1.5% on the month – a far steeper decline than the 0.4% fall that had been forecast, figures released by the Statistics Office showed.”

https://www.euronews.com/2019/08/07/scary-german-output-figures-propel-recession-fears


“A disorderly no-deal Brexit would block British police from accessing European data on serious criminals, damaging safety and security from October 31, the country’s head of counter-terrorism said.

“Neil Basu told the Guardian newspaper that were Britain to leave the European Union without a deal, police would lose access to data through the Schengen Information System, passenger name records and the ability to use European arrest warrants.”

https://uk.reuters.com/article/uk-britain-eu-security/no-deal-brexit-puts-uk-security-at-threat-senior-police-officer-idUKKCN1UX0M5


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