Economy 7 Feb 2019 Gloom for World’s Largest Automakers

“Three of the world’s largest automakers added to the industry’s gloom this week by warning that 2019 is looking increasingly bleak, with little hope of an end to a Chinese slowdown or the changing customer tastes that are forcing costly overhauls to their model lines.

“The pessimistic outlook for the year ahead from Toyota, General Motors and Daimler — which together account for one in five vehicles sold globally — was accompanied by reports of dismal results for the year just concluded, with all three announcing a fall in profits…

“…the results were sobering. Daimler, maker of Mercedes-Benz, reported a 28 per cent fall in net profits to €7.6b ($12.2b) in 2018; Toyota said net profit last month fell 81 per cent; and GM reported an 8 per cent drop in the fourth quarter.

“More worryingly, all three also said they saw little sign of relief ahead.”

“PMIs… track most major economies and work by polling the people who sit in the center of a company’s supply chain and make decisions about whether to order more supplies, or change inventories or prices to meet shifting demand for a company’s products.

These are the people that see the demand pressure first and have to respond to it,” said Tim Fiore, the chief procurement officer for Ryder System Inc., a truck leasing and fleet-management company, who also oversees the PMI survey produced by the Institute for Supply Management. “They’re tied into production and have to respond when new orders come in.”

“Over the past year, purchasing managers sounded an early and persistent warning: The health of the global economy, especially its manufacturing sector, was sputtering.”

“ArcelorMittal [the world’s top steelmaker] said it expects a drop in Chinese steel demand and weakness in the U.S. and Europe, reinforcing concerns that dark clouds are gathering over the global economy.

“The steel industry faces macro-economic risks and persistent oversupply, ArcelorMittal said in a statement. Smaller steelmakers around the world have recently raised the alarm on a darkening outlook, with Salzgitter AG earlier this week pointing to “gloomier sentiment and numerous economic and political uncertainties.””

“The slump across the construction industry has become more deeply entrenched, with activity in the key residential sector experiencing its sharpest decline in more than six years…

“The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (PCI) found that, while there was broad-based weakness across all construction sectors, the contraction in residential activity continued to accelerate last month as demand dried up and prices fell.”

“German industrial output unexpectedly fell in December for the fourth consecutive month, data showed on Thursday, sending another signal that growth in Europe’s biggest economy is weakening.

“Data from the Federal Statistics Office showed industrial output was down by 0.4 percent, confounding a Reuters forecast for an increase of 0.7 percent.”

“The UK financial watchdog has asked for daily updates from property funds after anxious investors withdrew hundreds of millions of pounds amid Brexit uncertainty, stoking fears of another liquidity crunch.

“Retail investors withdrew £315m from property funds in December, according to Morningstar.”

“The effects of U.S. trade unknowns, lower oil prices and weaker housing and consumer spending are behind the recent deceleration in economic growth, a Bank of Canada deputy governor said in a speech Wednesday. To help the economy get through this “temporary” soft patch, Timothy Lane is expecting the lower Canadian dollar to provide support.”

“The financial crisis of 2008-2009, the worst since the Great Depression, was hard on all Americans. But arguably no group felt its sting more than African-Americans, who were already the most economically and financially vulnerable segment of the population going into it.

“Even today, a decade since the Great Recession hit, blacks still haven’t fully recovered and remain in a precarious financial condition. What’s worse, Wall Street and policy makers are beginning to worry another downturn may be on the horizon.”

“Peter Boockvar at Bleakley Financial Group is …warning that the adoption of a negative interest-rate policy by the central bank would have dire consequences for markets.

““NIRP in the U.S. would blow up the money-market industry, the source of $3 trillion of funding for a variety of short-term debt,” wrote Boockvar, the firm’s chief investment officer, in a Feb. 5 note to clients. “How exactly would a tax on capital lead to faster growth?””

“Activists suspect Nicolás Maduro has tasked Faes with pacifying the city’s barrios in bid to snuff out protest in areas once considered the cradle of Chavismo…

““They want to silence the barrios because we are the most affected [by the crisis],” she added. “They want to silence the barrios – but it’s impossible because people have had enough.””

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Economy 6 Feb 2019 Germany Drifting Towards Recession

“Deutsche Bank expects the German economy to contract this quarter after recent business surveys pointed to souring moods at companies and their worsening expectations for new orders.

““The start of the German economy into 2019 has been a major disappointment so far,” Deutsche Bank economists including Sebastian Becker wrote in a report on Tuesday. “The development of several key cyclical indicators is telling us that the German economy is drifting towards recession right now.”

“The warning from Germany’s biggest bank comes just days after Bundesbank President Jens Weidmann said economic weakness carried into 2019 and will result in significantly lower growth than predicted just a few weeks ago. The government in Berlin also recently cut its 2019 outlook almost in half and IHS Markit’s January survey showed manufacturing in Germany shrank for the first time in four years.”

“A manufacturing and export-led slump in Italy’s economy spilled into services at the start of the year, aggravating an already fragile economic situation in the euro area.

“Business activity among Italian services providers shrank in January and forced companies to reduce headcount for the first time in more than two years, a Purchasing Managers’ Index showed on Tuesday.”

“The UK’s services firms saw activity almost flatline in January as firms reported mounting Brexit fears from clients. The Purchasing Managers’ Index came in at 50.1, the weakest since the aftermath of the 2016 Brexit vote and only just above the 50 mark that separates growth from contraction.

“Combined with weak recent surveys from construction and manufacturing, analysts said the the UK economy likely stalled in early 2019.”

“As if the bad loan crisis at Indian banks wasn’t alarming enough, there is a ticking time bomb that can spark another crisis for the industry.

“Loans worth Rs3.5 lakh crore ($48.88 billion) have not been recognised by banks in India as non-performing assets (NPAs) and they run the risk of turning sour, India Ratings, a part of the global ratings agency Fitch, said in a report on Feb. 05.”

“Prayers for a sudden return to dovish monetary policies have been answered, and now investors are living with the aftermath: a world awash with $8.6 trillion in negative-yielding debt. That’s one reason money managers are wading once more into the fringes of fixed-income markets across the globe.

“Consider the action over the past week: Serial defaulter Ecuador managed to sell $1 billion in new bonds even as the government is in talks for International Monetary Fund financing. Crisis-prone Greece received blockbuster orders for its 2.5 billion-euro ($2.9 billion) sale. And the decidedly frontier republic of Uzbekistan, encouraged by risk-on markets, is meeting investors for a debut international offering.”

“A funny thing happens when you depend on borrowing from the future (debt) to fund growth today: the new debt no longer boosts growth, as the returns on additional debt are increasingly marginal.

“This leads to what I term debt exhaustion: lenders can no longer find creditworthy borrowers, borrowers either don’t want more debt or can’t afford more debt, and the cost and risk of the additional debt far outweigh the meager gains.”

“What we know for sure is that the global financial system continues to expand, with global debt pushing $200tn. Better financial regulation may have helped contain the corresponding growth in risk, but it is not necessarily shrinking.

“For example, although big banks do seem to have less risk “on the books”, regulators must work hard to monitor risky debt that has migrated to the shadow financial system and can inflate quite quickly, as we learned the hard way in 2008.”

“The global economy continued to slow in early 2019, according to the latest JPMorgan-IHS Markit Purchasing Managers Composite Output Index. “Growth in manufacturing new orders slumped to near-stagnation, while new work at service providers rose at the weakest pace since September 2016,” IHS Marhit said.

“New export orders also contracted for a second consecutive month, driven by weakening demand and continued trade tensions between the United State and China.”

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Economy 5 Feb 2019 UN Warns of Trade War’s Massive Implications

“A UN trade official has warned a US plan to raise tariffs on Chinese goods next month would have “massive” implications for the global economy.

“The US plans to increase tariffs on Chinese goods if the two sides fail to make progress on a trade deal by 1 March.

“The comments followed a report by a UN trade agency on the impact of the US-China trade war. It said Asian countries are likely to suffer most from protectionism.

“The US and China are locked in a damaging trade dispute that has seen both sides levy tariffs on billions of dollars worth of one another’s goods.

“In December, both countries agreed to hold off on new tariffs for 90 days to allow for talks.

“The US and China have a deadline of 1 March to strike a deal, or the US has said it will increase tariff rates on $200bn (£152bn) worth of Chinese goods from 10% to 25%.

“The UN Conference on Trade and Development (Unctad) has warned that there will be huge costs if the trade war escalates.

“”The implications are going to be massive,” Pamela Coke-Hamilton, Unctad’s head of international trade, said at a news conference.

“”The implications for the entire international trading system will be significantly negative.””

“A peculiar complacency has settled on the world over America’s hardening confrontation with China.

“The world’s two greatest powers are punishing each other with harsh sanctions as they renegotiate their relationship in talks that broke up last week with the barest of a beginning of an agreement.”

““For U.S. soy producers, if the trade war ends tomorrow, we will likely not get back to where we were before the trade war started,” Mark Albertson, director of strategic market development at the Illinois Soybean Association, told the South China Morning Post (SCMP).

““It’s not just alarming, it’s terrifying.””

“Factory orders in the U.S. fell more sharply than expected in November, adding to a litany of reports showing a slowdown in growth in the industrial segment of the economy toward the end of 2018.

“A key measure of business investment also declined. Orders dropped 0.6% in November.”

“A one-year slide in Canadian consumer confidence showed little sign of improving in January…

“…with sentiment levels hovering at depressed levels amid turmoil in financial markets and signs the nation’s economy has hit a soft patch.”

“The Reserve Bank [of Australia] has kept interest rates on hold despite mounting evidence the economy is cooling rapidly and consumers are shutting up shop. Consumers tightened their spending in December with shops reporting their biggest fall in sales in a year. Souring consumer sentiment points to further economic weakness as the impact of falling house prices bite…”

“Growth in the [UK] construction sector softened to its lowest level in 10 months in January, with experts predicting the industry could slip into recession soon if the UK leaves the EU without a deal.

“The purchasing managers’ index (PMI), a measure of business activity and confidence, slipped to 50.6 in January, just above the 50 mark that divides growth from contraction”

“Eurozone investor confidence has sunk to a four-year low as Brexit uncertainty and Germany’s continued slowdown added to the bloc’s woes. The Sentix Index, which monitors investor sentiment across the single currency bloc, fell to -3.7 for February, following a survey of more than 1,000 investors. Although the latest figures avoided a recession, Sentix said the growth seemed to be “weakening dangerously quickly and strongly.””

“With fixed exchange rates and some of the world’s worst debt and balance-of-payment ratios, Lebanon’s newly-formed government knows it needs to act fast to avoid sinking into a full-blown economic crisis.

“Lebanon’s 150 percent debt-to-GDP level and its near 25 percent current account gap are its most worrying statistics. Moody’s estimates the interest bill from its debt alone absorbs roughly half of all government revenues and represents about one-third of total government spending.”

“Turkish sales of cars and light commercial vehicles slid an annual 59 percent in January, reflecting the depth of an economic downturn that began in the third quarter of last year.

“Sales fell to 14,373 units from 35,076 units in January 2018, according to figures published by the Automotive Distributors Association (ODD) on Monday. The decline followed a decrease of 43 percent in December.”

“The UK, France, Germany, Spain and other European countries have officially recognised opposition leader Juan Guaidó as interim president of Venezuela.

“It comes after President Nicolás Maduro defiantly rejected a deadline they set for Sunday to call fresh elections. Mr Guaidó declared himself interim leader last month and won US backing.”

“”With [Venezeula’s] refineries in precarious condition and without access to imported refined productions, PDVSA will have to ration fuel sold in the local markets,” said Ivan Freites, a PDVSA union leader.

“Amid the political crisis, fuel inventories are at critical levels… According to the PDVSA technical report seen by S&P Global Platts, gasoline inventories have been exhausted while levels of diesel and LPG are enough to last only two days on average.”

“The problem is that even if the Fed were to respond to a burst bubble by lowering rates, it wouldn’t fix the bursting bubble. A little mitigation, maybe, but not a fix. That’s because the price of borrowing on margin is only one factor…

“The Fed cannot cure a bursting bubble once the crowd is in the grip of panic. But can the Fed prevent a bursting bubble? Well, no, not unless it started some form of QE that involved buying equities. Don’t laugh—they do it in Japan. But the conventional method, injecting more cash, into a bursting bubble is the same thing as injecting more germs into a diseased body.”

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Economy 4 Feb 2019 Two Vicious Traps for the Global Economy

“Forget about China’s so-called “debt trap diplomacy” – it’s a mere mousetrap compared to the jaws of two more vicious traps that are waiting to close on the global economy. One is the generalised (public and private sector) debt trap and the other is the more insidious “QE (quantitative easing) trap”.

“Both have been masked by the high-profile threat of trade and economic wars between the world’s two biggest economies – the United States and China. For all the hundreds or even thousands of headlines that trade wars have grabbed, the QE and debt traps have been lucky to get even a handful.

“But things are about to change, and growing awareness of this fact meant that “Davos Man” was a more worried man this year as the world’s wealthiest tried to drown their fears in champagne at the Swiss resort. The spectre of an impending debt crisis was invoked far more frequently than in past years…

“The debt and QE “traps” are intimately connected. Waves of quantitative monetary easing in the US, Japan and Europe may have saved the world from systemic financial collapse and economic depression after 2008, but the historically low interest rates they engendered has led to universal over-borrowing.

“There was no master plan to deal with this problem. Policymakers were too panicked as US and other mega banks lurched on the brink of collapse and the engines of the global economy began to flame out. They flew on a “wing and prayer”, hoping that growth,or even inflation, would somehow take care of things.

“It hasn’t and now the lack of an exit strategy from unconventional monetary policy or monetary excess is catching up with the world. The Fed has tried exiting by stealth but has been forced to back track as Wall Street slumped, while Japan is so far sunk in QE as to have no obvious way out.

“Meanwhile, the vice is tightening.”

“Millennials who entered the job market during the financial crisis are still suffering “scarring” effects on their earnings as they enter their mid-30s, making it even harder for them to cope with the economic pressures of having a family, a leading thinktank has warned.

“Their pay has suffered by far the biggest squeeze of any age group since the 2008 crash…”

“Greece’s decade-long economic crisis has taken a heavy toll: Hundreds of thousands of jobs were lost, incomes were slashed and taxes were raised. Hopes for the future were dashed.

“For Anna, 68, the crisis had particularly devastating consequences. Her husband, a retired bus driver, killed himself in a park two years ago at age 66 after a series of pension cuts deepened his despair.”

“Last week’s data showing a drop in Italian GDP in Q4 of last year confirmed what many observers had already suspected:

“Italy is in recession. Or rather, in another recession, for this follows similar phases in 2008, 2011 and 2012.

“Where is this going to end?”

“Macron’s handling of the wave of discontent demonstrated by the Yellow Vest movement has been particularly ill-received by the French and badly damaged his popularity ratings.

“Although the 40-year-old centre-right leader has managed to recover some support after backpedaling on the proposed fuel tax hike and launching a national debate on the grievances fuelling the Yellow Vest movement (the so-called “great national debate”), the support for Macron has plummeted from 47 percent to just 27.7 percent in the past 12 months.”

“Demonstrators in yellow vests are taking to the streets of Argentina in growing numbers, banging pots and pans in a distinctively South American brand of the French protest movement.

“Tens of thousands of Argentines have taken part in marches over the past month alone, sparked by rising discontent with the government over its handling of an economic crisis.”

“Turkish inflation rate inched up in January as skyrocketing food prices offset the impact from tax breaks on utilities and key goods.

“Consumer prices rose 20.4 percent in January from a year earlier, compared with an increase of 20.3 percent in December, Turkstat said on Monday.”

“China’s much-feared economic slowdown is bound to have a particularly graver impact on Korea whose small, open and export-reliant economy is far more vulnerable to external shocks, according to a noted U.S.-based economist…

“He stressed that Korea should brace for a “hard hit” given that China’s sketchy economic statistics makes it hard for Korea to make a data-backed response strategies.”

“Australian building approvals suffered the biggest annual back-to-back drop in almost a decade as a housing slump deepens. Building permits fell 22.5 percent in December from a year earlier after plunging 33.5 percent in November, Australian Bureau of Statistics data showed in Sydney Monday. That’s the worst two-month result since January-February 2009, during the depths of the global financial crisis.”

“The challenge today, Gave said, “is that part of the massive growth we’ve seen in the U.S. corporate bond market has really taken place in the BBB space. And so, if you start seeing an economic downturn (and the usual type of downgrades that occur in a downturn), then all of a sudden you have investment grade that becomes non-investment grade.”

“Gave worries this could send shock waves through the financial markets since U.S. corporate debt is widely held by pension funds, investment banks, and large institutions all around the globe.”

“The global credit impulse is falling again, mainly in developed-market economies and due largely to the normalisation of monetary policy.

“The message from the slower credit impulse is that growth and domestic demand are headed for a slowdown, unless the world’s largest economies launch a massive co-ordinated intervention in 2019.”

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Economy 1 Feb 2019 Italy Officially in Recession

“The Italian economy shrank by 0.2% during the quarter for the three months to December of 2018, following a 0.1% contraction in the previous period. This was slightly more than market expectations of a 0.1% decrease. It marked the second consecutive quarter of contraction so throwing the country into recession.

“Just to be clear; a recession is defined by economists as gross domestic product (GDP) falling for two consecutive quarters…

“Brexit is an issue for the wider EU, not just the Eurozone, however, one cannot overlook the fact that Italian economy has become a mounting reason of concern over the past few months. Just look at the movement of the 10-year spread of Italian government bonds over the German equivalent.

“This morning the spread is +242.3 basis points or 2.423%. The rolling 12-month average is just +217 basis points. The market is expressing its concern in the spread of Italian debt over the Eurozone benchmark.

“The EU Commission knows that with a debt to GDP ratio of 131.8%, Italy has the second largest debt burden in relative terms…second only to Greece. However, the Italian economy is eight times as large as that of Greece and given the Eurozone is still haunted by the memory of the debt crisis that required bailouts for several countries it has insisted that the Italian government rein back on its spending plans. To be blunt, Italy could not be bailed out. It is so large; a crisis would cripple the Eurozone…”

[Actually it would crippled the global economy. The Italian economy is the eighth largest in the world by nominal GDP and has the world’s third largest sovereign bond market].

“Nearly one in three British businesses are planning to relocate some of their operations abroad or have already shifted them to cope with a hard Brexit, according to a leading lobby group.

“The Institute of Directors (IoD) warned that 29% of firms in a survey of 1,200 members believed Brexit posed a significant risk to their operations in the UK and had either moved part of their businesses abroad already or were planning to do so.”

“Fears of a Eurozone slowdown have mounted after the economy stagnated at the end of 2018, growing just 0.2 per cent between the third and fourth quarters.”

“Instead of having goods delivered to their homes, consumers in China gain mianzi [face/kudos] by having shopping delivered to their offices, so their colleagues can see.

““Receiving the purchase at one’s office address may enhance one’s face and thus result in a positive emotional response, which compulsive buyers crave and strive to achieve,” the authors write.”

“The danger occurs because lower oil demand growth [from a weakening economy] in China comes just when independent refining capacity there is rising. The capacity growth has been financed primarily by debt, most likely supplied by China’s alternative lenders.

“As demand slows, these refiners will turn to international markets, dumping products in Singapore, the Americas, or Europe to earn hard cash. In doing so, they could plunge the global refining industry into a serious recession and drive crude prices down sharply.”

“Home prices in Hong Kong fell 2.4 per cent in December, practically wiping out virtually all of last year’s gains, according to government data released on Thursday.

“Last month’s decline means house prices have slipped 9.2 per cent since they reached a peak in July. Some small flats have lost up to 20 per cent of their value because of falling property prices, causing the negative equity trend to reappear.”

“Property prices in Sydney and Melbourne dropped sharply again in January as the decline in the once-booming housing market continues to gather pace.

“Prices in the Melbourne market fell by a huge 1.6% in the first month of the year, eclipsing even Sydney’s 1.3% fall, researcher CoreLogic said on Friday in its regular monthly release.”

“Factory activity shrank across much of Asia in January, falling to the weakest in years in several countries and adding to worries that trade tariffs and cooling demand in China pose an increasing threat to global growth.

“The weak Purchasing Managers Index (PMI) readings reinforce expectations that central banks in Asia will put any further interest rate hikes on hold this year.”

“The political and economic crisis requires Zimbabweans to have frank dialogue among themselves. Sadly, no amount of brutality by the state or noise on the streets by the opposition can resolve this crisis.

“As powerful and appealing as they are, the rhetoric of pan-Africanism, anti-imperialism, sanctions and boycotts will not bring stability and prosperity to Zimbabwe.”

“Iran, squeezed by punishing American sanctions, is confronting its most severe economic challenge in 40 years, President Hassan Rouhani said on Wednesday…

“Ordinary Iranians are feeling the pinch. There have been sporadic protests by laborers, retirees, truck drivers and teachers that have occasionally led to clashes with security forces. In a year, the national currency, the rial, has lost 70 percent of its value compared to the dollar. Inflation is over 35 percent.”

“Venezuela’s economic ruin poses a health threat to the Americas and potentially beyond, as diseases like measles and diphtheria re-emerge and spread to neighbouring countries, academics have warned.

“The country’s meltdown has been so profound its health system resembles that of a war-shattered state and people are no longer vaccinated for common infectious diseases.”

“Greg Ip of the Wall Street Journal thinks the Fed is signaling not a pause, but a complete halt in interest rate rises. And he has a theory about why the Fed has suddenly decided to end monetary tightening:

“”In the last six weeks Mr. Powell does seem to have shifted his views on inflation risk. He seems to have concluded that the lowest unemployment in 50 years isn’t going to push inflation back above 2% anytime soon, and that would be a prerequisite to tightening again.

“”If real rates above 0.5% are a threat to both economic growth and 2% inflation, then that suggests the economy is fundamentally more fragile than in the past.

“And he goes on to argue that the economic fragility that renders higher interest rates unsustainable is not confined to the U.S., but is a global phenomenon. Something has fundamentally changed since the 2008 financial crisis.”

“New research now shows that when central banks push rates below zero, it can have bad effects on the economy.

“”[…] we showed that a negative policy rate was at best irrelevant, but could potentially be contractionary due to a negative effect on bank profits,” states the paper titled: “Negative Nominal Interest Rates and the Bank Lending Channel,” by researchers at Harvard University, Brown University, and Norges Bank. The authors include Lawrence Summers, former U.S. Secretary of the Treasury and one-time president of Harvard.”

“For almost 40 years, we’ve lived in an era of low rates and easy money. It let governments and businesses worldwide run up piles of debt.

“Global debt could easily reach $500 trillion in a few years. And yet everyone acts like that is normal and can continue.

“Just like subprime mortgage debt triggered the last recession, corporate debt will trigger the next one. This will start a liquidity crisis and create havoc in all sorts of “unrelated” markets.”

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Economy 31 Jan 2019 China’s Woes Are Spreading

“China’s weakening economy is roiling export markets in the rest of Asia — and there’s more pain to come.

“From Hong Kong to Japan, exports data for December showed a marked downturn as supply-chain disruptions triggered by US-China tensions and a cyclical slowdown in the world economy, led by China, hit the trade-reliant region.

“More bad news is in store for January: Bloomberg Economics’ early indicator shows China’s economy slowed further this month, while Thursday’s purchasing managers index is set to show another decline in factory output.

“Nikkei PMIs for seven of the region’s economies are due Friday, with four of them already in contraction or less than half a point from contraction. A separate business survey on Wednesday showed South Korea manufacturers’ confidence for February at the most depressed level since the global financial crisis a decade ago.

“Hong Kong’s worse-than-expected plunge in exports was telling for its broadly subdued demand from the rest of Asia, especially mainland China. Trade-dependent Singapore posted its biggest fall in exports in more than two years, while in Indonesia, the biggest economy in Southeast Asia, the drop in shipments was the worst since mid-2017.

“South Korea and Taiwan had a pair of ugly exports reports last week, and Japan followed with the second decline in four months. January data for Vietnam, where trade accounts for twice the nation’s gross domestic product, showed a 1.3% contraction in exports from a year ago, the worst performance in five years.”

“Singapore businesses have turned bearish about prospects, two government surveys showed

“…sentiment is weakest in the electronics industry amid a turn in the business cycle and concerns about the continuing trade war between the U.S. and China.”

“South Korea’s industrial output extended weakening in December to reflect the downtrend in the chip segment with indicators for present and future economic activities in the longest slump since the oil crisis of the early 1970s…

“…raising alarm about a recession in the making.”

“Samsung Electronics, the world’s biggest smartphone and memory chip maker, reported a slump in fourth-quarter net profits on Thursday, January 31, blaming a drop in demand for its key products. Net profits in the October-December period were 8.46 trillion won ($7.6 billion), it said, down 31% year-on-year… the picture is changing, with chip prices falling as global supply increases and demand weakens.”

“China has gone from a boon to world growth to a source of fragility. The policy response, driven mainly by Beijing and the Federal Reserve, is likely to be equally global in nature. The Fed took a big step on this front Wednesday, scrapping a preference to hike interest rates, citing global economic and financial conditions and waning price pressures. The principal worry is China and the weakness and deflationary pressures it’s exporting. China isn’t mentioned directly in the Federal Open Market Committee’s statement but it’s there in all but name.”

“The Federal Reserve may wind down its gradual asset-shedding operation sooner than thought, leaving the U.S. central bank with a bigger balance sheet than earlier anticipated, Fed Chairman Jerome Powell said Wednesday… late last year, prominent investors took to blaming the Fed’s balance sheet runoff for market volatility. President Donald Trump took up the drumbeat against the programme in December, tweeting at the Fed to “stop with the 50 B’s” – a reference to the $50 billion monthly cap.”

“Pending-home sales [in the US] slid 2.2% in December to a reading of 99, and were 9.8% lower compared to a year ago, marking the 12th straight month of annual declines, the National Association of Realtors said Wednesday. That’s the lowest reading since April 2014.”

“Billionaire apartment developer Harry Triguboff has warned this year could be worse than 2018 for Sydney and Melbourne’s already battered housing markets.

“The Meriton founder called for easing of taxes to coax foreign buyers back into the market and for young people to be able to access their superannuation to buy a home. “It may be as bad as last year, it may be worse,” he told The Australian. “Australia is completely dependent on the Chinese (buyers). (The slowdown) must affect the broader economy.””

“Concern about Brexit’s impact on the U.K. economy is growing, with consumer worries near crisis-era levels, investment falling and the property market suffering. Nationwide Building Society said Thursday that house-price growth ground close to a halt as values rose just 0.1 percent in January from a year earlier.”

“British car production fell by 9 percent last year, the biggest drop since the 2008-9 recession, and investment slumped by nearly half due to fears about Brexit, an industry body said on Thursday.”

“The average cost for British lenders of issuing secured debt has leapt to its highest since just after the 2016 EU referendum, JPMorgan data shows, as investors fret that political turmoil could tip the economy into recession.”

“German retail sales plummeted by 4.3pc on the month in December, the fastest rate in 11 years, data released by the state statistics office on Thursday showed, sending a worrying signal about household spending in Europe’s biggest economy.

“The fall in real terms was far weaker than a Reuters consensus forecast for a 0.6pc drop.”

German economic growth is set to weaken to the slowest pace in six years in 2019, held back by a deteriorating environment for global commerce hobbled by worries about trade disputes and Brexit.”

“Italian Premier Giuseppe Conte said the economy probably shrank in the fourth quarter, plunging Italy into a recession that would put pressure on the populist government’s spending plans.

“At an event in Milan, Conte said: “I expect a further contraction of gross domestic product.””

“Hedge funds haven’t been chasing the January rebound in U.S. equities on the heels of their worst year since 2011. According to Macro Risk Advisors, these big-money managers are acting much more like it’s the aftermath of the 2008 financial crisis than the relatively low-volatility environment that’s dominated for most of the past five years.”

“A surge in gold purchases by central banks to the highest since 1967 helped push global demand for the metal up 4 percent last year, the World Gold Council (WGC) said on Thursday…

“Driving the increase were central banks which bought 651.5 tonnes – 74 percent more than in 2017 and the second highest annual total on record – as countries including China and Poland

joined Russia, Turkey and Kazakhstan in adding to their reserves, the WGC said.”

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