Economy 11th April 2019 Global Economy Enters Synchronised Slowdown

“In all corners of the globe, warning signs are flashing about the state of the economy. The IMF recently downgraded its forecast for global economic growth for the fourth time in nine months. We are now in a “significantly weakened global expansion,” according to IMF chief economist Gita Gopinath.

“Some 70% of the global economy (as measured by GDP) will experience a slowdown this year, the IMF forecasts. That would make it the most extensive synchronized slowdown since 2011.”

https://qz.com/1590499/the-global-economy-has-entered-a-synchronized-slowdown/


“The global economy is highly vulnerable to a debt crisis as dangerous levels of business and government borrowing could crush growth and exacerbate any slump, the International Monetary Fund has warned.

“Record corporate borrowing in the US could turn boom into bust in the world’s largest economy.

“Risky links between banks and governments in the eurozone threaten to restart the sovereign debt crisis. This is a particular risk in Italy where government debt is still rising and its banking sector is weak.

“And China’s government, business and household debts all pose a risk to this engine of global growth.”

https://www.telegraph.co.uk/business/2019/04/10/surging-debts-raise-risk-crisis-undermine-efforts-battle-slowdown/


“Many European countries haven’t recovered yet from the financial crisis of 2007-2008 like Italy, Portugal, Spain, Greece. Lots of uncertainty for a Brexit Deal. UK parliament still has not approved Theresa May proposal and a NO Deal seems closer than ever.

“European Banks for the past three quarters have reported negative numbers , like Deutsche Bank, and the ECB has kept interest rate at minimum without obtaining the expected results.”

https://seekingalpha.com/article/4253749-turmoil-europe-affect-financial-markets-soon


“Italy is one small shock away from a sovereign default of global scale. The International Monetary Fund is not allowed to state this openly but that is the message of its latest Fiscal Monitor.

“The public debt ratio is to ratchet up from 132.1pc of GDP in 2018, to 134.4pc in 2020, and 138.5pc in 2024.

“The final figure is academic…

“Bond vigilantes will take matters into their hands long before then.”

https://www.telegraph.co.uk/business/2019/04/10/imf-fears-italian-debt-spiral-macron-making-even-dangerous/


“Few Greek households would have celebrated the end of the financial bailouts last year, however, with citizens well aware that tough times remain ahead.

“Despite some improvement, unemployment is still far too high (see Fig 1) and the country’s economy remains more than 25 percent smaller than it was when the financial crisis erupted in 2008.”

https://www.worldfinance.com/banking/greeces-banking-woes-continue-despite-exiting-bailout-programme


“The European Central Bank (ECB) held interest rates steady on Wednesday, shortly after the International Monetary Fund (IMF) sharply downgraded its economic growth forecast for the euro zone economy. The ECB has been forced to backtrack on its plans to tighten monetary policy, amid an intensifying climate of economic gloom.”

https://www.cnbc.com/2019/04/10/ecb-interest-rates-draghi-under-pressure-amid-gloomy-economic-outlook.html


“The Fed went on to say “some” officials thought it would be appropriate to raise the target range for the fed funds rate “if the economy evolved as currently expected” with growth above its longer-run trend.

“That contrasted with the January minutes when officials said it wasn’t clear what adjustments to rates would be appropriate this year, but added “several participants would view it as appropriate” to raise interest rates if the economy followed its forecast path.”

https://www.ft.com/content/acb2aa0e-5bba-11e9-939a-341f5ada9d40


“American savers have lost $500 billion to $600 billion in interest payments on bank accounts and money market funds thanks to the Federal Reserve’s post-financial crisis policies, according to Wells Fargo analyst Mike Mayo.

“Mayo included the statistic in a research note about the congressional hearing scheduled for Wednesday called “Holding Megabanks Accountable:

“A Review of Global Systemically Important Banks 10 Years After the Financial Crisis.””

https://www.cnbc.com/2019/04/10/americans-have-lost-500-billion-in-interest-after-financial-crisis.html


“Turkey’s biggest financial pledge in 18 years to bolster its banks may not be the silver bullet needed to pull the Middle East’s largest economy out of recession.

“The government plans to inject fresh capital into state-owned lenders and oversee the formation of two funds to take on some of the sector’s bad loans, Treasury and Finance Minister Berat Albayrak told reporters in Istanbul. To back the effort, the government will issue 28 billion liras ($4.9 billion) of bonds and place them at state banks.”

https://www.bloomberg.com/news/articles/2019-04-10/turkey-plans-to-inject-capital-into-state-banks-albayrak-says


“India is witnessing a listless growth in electricity demand, possibly signaling more slowdown in Asia’s third-largest economy.”

https://www.bloomberg.com/news/articles/2019-04-10/india-s-weak-power-demand-points-to-more-slowdown-pain-ahead


“The middle class is shrinking and its economic power diminishing in the U.S. and other rich countries, a development that threatens political stability and economic growth, according to a report by the Organization for Economic Cooperation and Development.

“At the peak of its powers in 1985, the aggregate income of the middle classes was four times that of the richest group. Three decades later, it had fallen to less than three times.”

https://www.wsj.com/articles/shrinking-middle-class-threatens-global-growth-stability-11554922801


“There are similarities with 2008 that we should not ignore.

“A massive China stimulus inflates risky assets and commodities.

“Poor macro and earnings data is ignored by markets assuming that all will improve in the second half of the year.

“Yield curves invert. 15 economies now have 30-year yields lower than LIBOR overnight rates.

“The figure of negative yield debt rises to $11 trillion.

“Financial repression is at all-time highs while leading indicators point to a growing risk of recession.”

https://www.eurasiareview.com/11042019-central-banks-are-heading-toward-a-stagnant-global-zombie-economy-oped/


“Central banks are running the risk of a severe financial crisis through policies aimed at boosting short-term economic growth, the International Monetary Fund has warned.

“In its half-yearly global financial stability report, the IMF said the removal of the threat of higher interest rates had prompted a rapid recovery in financial markets after last autumn’s turbulence but would lead to a fresh buildup in already high levels of debt.”

https://www.theguardian.com/business/2019/apr/10/short-term-growth-policies-risk-new-financial-crisis-imf-warns


“All is not well in the global economy…a deeper global downturn could result in some dangerous solutions”

https://www.thetimes.co.uk/edition/business/a-deeper-global-downturn-could-result-in-some-dangerous-solutions-9gg7k7mqd


“Financial regulators have done a lot to reform the derivatives markets that helped turn the financial crisis of 2008 into a global disaster. But their work is unfinished — and there’s even a danger that, in one way, they might have made things worse…

“…because [derivatives] enable big wagers with little money down, they can quickly generate losses and cash demands large enough to destabilize the entire financial system.”

https://www.bloomberg.com/opinion/articles/2019-04-10/derivatives-are-still-too-dangerous


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Economy 10th April 2019 IMF Cuts Global Growth Forecast to Lowest Since GFC

“The International Monetary Fund (IMF) on Tuesday cut its global growth forecast to the lowest level since the financial crisis, warning of significant downside risks to the world economy including trade tensions, pockets of political instability, mounting debt levels and increasing inequality.

“The IMF lowered its growth forecast for 2019 to 3.3 percent from the previous level of 3.5 percent in its latest World Economic Outlook (WEO).

“This is the third time in six months that the fund has revised its outlook downward.”

https://www.aljazeera.com/news/2019/04/imf-cuts-global-growth-outlook-lowest-financial-crisis-190409182821062.html


“Britain’s already struggling economy would be pushed into a two-year recession by a no-deal Brexit, the International Monetary Fund has warned.

“Ahead of Theresa May’s plea to EU leaders for a further delay to Britain’s departure, the IMF used a downbeat half-yearly assessment of the global economy to predict that the UK economy could be 3.5% smaller than expected by 2021…”

https://www.theguardian.com/business/2019/apr/09/imf-no-deal-brexit-risks-two-year-recession-uk-economic


“Italy cut its growth forecasts for this year and next on Tuesday while hiking the budget deficit and public debt, underscoring the economic woes faced by the populist ruling coalition.

“Gross domestic product in the euro zone’s third largest economy will increase just 0.2 percent this year, the government said, down from a projection of 1.0 percent it made in December.”

https://uk.reuters.com/article/us-italy-economy-budget/italy-cuts-gdp-growth-forecasts-hikes-deficit-and-debt-idUKKCN1RL2LS


“The European Central Bank, after sharply revising downward its baseline growth projections and seeing no decisive lifting of the downside risks, could be tempted to signal at its Governing Council meeting on Wednesday that it will pursue a further loosening of its monetary policy stance…

“There is increased recognition of the difficult 2019 outlook for the euro zone…”

https://www.bloomberg.com/opinion/articles/2019-04-09/the-ecb-won-t-loosen-its-monetary-policy-stance-here-s-why


“The free fall in the world’s largest car market has shown no signs of easing. Retail sales of sedans, sport utility vehicles, minivans and multipurpose vehicles in China continued their plunge in March, dropping 12 percent to 1.78 million units…”

https://www.bloomberg.com/news/videos/2019-04-10/china-car-market-slump-persists-video


“Shipments of mobile phones to China fell 6 percent in March compared with the same year-earlier month, official figures showed on Wednesday, as slowing economic growth took a toll on the sector. The shipments dropped to 28.4 million units in March from 30.2 million units in March 2018, the China Academy of Information and Communications Technology (CAICT) said…”

https://kfgo.com/news/articles/2019/apr/10/march-mobile-phone-shipments-to-china-fall-6-percent-as-economy-slows/


“Japanese banks have stepped up investments in highly illiquid, securitised loans, mostly in the U.S. market, as it becomes increasingly difficult to earn decent interest income from conventional products like government bonds…

“While the increased exposure brings back memories of similar, complex products made up of subprime mortgages that triggered a global financial crisis a decade ago, banks say they are managing risks carefully.”

https://uk.reuters.com/article/uk-japan-banks-clo/in-hunt-for-yield-japans-banks-snap-up-leveraged-u-s-debt-idUKKCN1RM0QC


“There are worrisome trends developing in the lending market, reporting from the Washington Post and Bloomberg shows.

“”Actions by federal regulators and Republicans in Congress over the past two years have paved the way for banks and other financial companies to issue more than $1 trillion in risky corporate loans, sparking fears that Washington and Wall Street are repeating the mistakes made before the financial crisis.””

https://www.axios.com/debt-market-loans-aa4cd61f-5dd9-46ce-9738-e7078f6eccea.html


“Evidence is piling up that the U.S. is heading for a slowdown. And as I have written to you frequently, that in itself is not as important as what investors as a whole (“the market”) do with that information.

“We could technically avoid a textbook recession, defined as 2 consecutive quarters of negative economic growth), but if the markets react to the rumor and not the news, so to speak, the result to you is the same: generally lower stock prices and a potential shock to the bond market.”

https://www.forbes.com/sites/robisbitts2/2019/04/09/recession-looming-yup/#64cd20ca3b7a


“President Donald Trump will issue two executive orders in the heart of the Texas energy hub on Wednesday seeking to speed gas, coal and oil projects delayed by coastal states as he looks to build support ahead of next year’s election… An environmentalist decried the planned orders. “Trump can try to rewrite regulations in favor of Big Oil, but he can’t stop people power and our movement,” said May Boeve, the head of 350. org.”

https://www.reuters.com/article/us-usa-trump-energy/trump-to-seek-to-stop-states-from-delaying-energy-projects-idUSKCN1RM06V


“More undocumented immigrants and migrants were apprehended along the southern border in March than any month since 2008, according to Customs and Border Protection data released Tuesday.

“CBP officials have been warning about the surge in migrants for weeks and the new numbers come amid a time of turmoil within the agency and Department of Homeland Security, which oversees the border security mission.”

https://edition.cnn.com/2019/04/09/politics/apprehensions-border-highest-decade/index.html


“Venezuela removed eight tonnes of gold from the central bank’s vaults last week, and the cash-strapped socialist state is expected to sell the bullion abroad as it seeks to raise hard currency in the face of U.S. sanctions, a lawmaker and one government source said.”

https://uk.reuters.com/article/uk-venezuela-gold-exclusive/exclusive-venezuela-removes-8-tonnes-of-gold-from-central-bank-sources-idUKKCN1RL24D


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Economy 9th April 2019 Every Major Economy Slowing

“Almost every major rich-world economy is slowing down in a fresh sign that the risk of a global recession is rising.

“The United States, Japan, the eurozone, UK, Canada and Russia are all losing momentum, according to leading indicators compiled by the OECD that seek to predict the path of growth over the next six to nine months.

“Its composite leading indicator points to the worst economic outlook since 2009, when the world faced the depths of the financial crisis.

“At the same time Germany’s exports slowed and confidence in the Japanese economy fell.

“The figures come after a series of other warning signs, including the inversion of the US yield curve that has in the past indicated a recession…”

https://www.telegraph.co.uk/business/2019/04/08/global-recession-watch-major-economies-slow-confidence-drains/


“Global air freight demand hit a three-year low in February, down 4.7 percent from last February, according to data released by the International Air Transport Association (IATA)… “Cargo is in the doldrums with smaller volumes being shipped over the last four months than a year ago. And with order books weakening, consumer confidence deteriorating and trade tensions hanging over the industry, it is difficult to see an early turnaround.””

https://www.freightwaves.com/news/airfreight/global-air-freight-demand-hit-a-three-year-low-in-february


“The drumbeat of warnings about a looming worldwide recession is growing ever louder.

“According to the latest Brookings-Financial Times TIGER indexes, which track the global economic recovery, growth momentum is declining in virtually all of the world’s major economies. And what this portends in the longer term is ominous, especially given the limited macroeconomic policy options for stimulating growth.”

https://www.project-syndicate.org/commentary/global-economy-slowdown-policy-options-by-eswar-prasad-2019-04


“An array of data has pointed to worrying signs of a slowdown in the euro zone with further signs last week that Europe’s largest economy Germany is weakening. And more bad news could be on the way.

“Euro zone industrial production data for February is due Friday and economists polled by Reuters expect it to have declined by 0.6 percent month-on-month.”

https://www.cnbc.com/2019/04/09/europes-economy-appears-to-be-experiencing-a-crisis-of-confidence.html


“Swedish motor vehicle factory orders dropped sharply in February, according to data released on Monday that highlight the slowdown early this year in Europe’s manufacturing sector.

“New orders within the Swedish auto industry fell by 12.7 per cent from January to February, data released by Statistics Sweden show.”

https://www.ft.com/content/26a406ce-59da-11e9-939a-341f5ada9d40


“Gen Haftar, who leads the Libyan National Army (LNA), declared an offensive to take control of Tripoli from Libya’s UN-backed government last week.

“Prime Minister Fayez al-Serraj has accused him of attempting to carry out a coup. At least 2,800 people have so far fled fighting around Tripoli, the UN says. The UN also warns that those who remain risk being cut off from vital services because of the clashes.”

https://www.bbc.co.uk/news/world-africa-47853478


“Soldiers came to the rescue of protesters in Khartoum on Monday when a section of the security forces fired tear gas to break up a three-day rolling sit-in by protesters.

“Starting Saturday (April 6) thousands of protesters have camped outside an area in the capital housing the army headquarters and close to the presidential palace. They are demanding that the army joins their call to force embattled president Omar Al-Bashir out of office.”

https://www.africanews.com/2019/04/08/sudan-protest-hub-africanews-updates/


“The commodity price slump of 2015 cut short a decade of rapid growth for Nigeria, and the bank said growth would take longer to recover as a decline in industrial production and a trade dispute between China and the United States take their toll.

“The bank’s 2019 forecast means economic growth will lag population growth for the fourth year in a row and it will remain stuck below three per cent, which it slipped to in 2015.”

https://punchng.com/nigerias-economy-slipping-says-world-bank/


“Renewed market volatility in Argentina could spark another currency crisis, analysts have told CNBC, as the recession-hit country prepares for presidential elections toward the end of the year.

“The popularity of President Mauricio Macri has taken a substantial hit in recent months, with rampant inflation, austerity measures and rising poverty rates all threatening to derail the pro-market candidate’s re-election campaign.”

https://www.cnbc.com/2019/04/09/argentinas-peso-could-slip-into-crisis-mode-ahead-of-elections.html


“No matter which way you look at it – be it from an historical perspective locally or compared to declines seen offshore during the global financial crisis — there’s now little doubt that the downturn in Australian home prices is getting pretty big.

“It’s now one of the largest on record in Australia, only surpassed by a handful of periods in the late 1800s and the first half of the 20th century.”

https://www.businessinsider.com.au/australia-house-price-falls-economic-impact-2019-4


“If [Japan’s] domestic growth crumbles, Prime Minister Shinzo Abe could postpone yet again a scheduled sales tax hike in October or offer a modest increase in fiscal spending, some analysts say.

“The Bank of Japan, too, may be forced to ramp up monetary support, though many analysts say the central bank is left with few effective tools to prop up growth.”

https://uk.reuters.com/article/japan-economy-recession/rpt-japan-faces-recession-risks-with-dearth-of-ammunition-idUKL3N21Q279


“The Federal Reserve on Monday put forward two proposals to modify regulations put in place after the 2008 financial crisis that the banking industry complained were too restrictive.

“The proposed regulatory changes were approved on a 4-1 vote with Fed board member Lael Brainard opposing the changes.

“She said they “would weaken important safeguards” put in place after the crisis.”

https://eu.detroitnews.com/story/news/nation/2019/04/08/fed-looks-ease-post-financial-crisis-regulations/39317521/


“Four top Federal Reserve officials speaking since the March meeting suggested the central bank could hold more short-term bonds than it does now… But two policymakers also noted a downside: Ditching long-term bonds could tighten financial conditions. To offset that problem the Fed might have to lower interest rates. That would make it more likely that rates would hit zero and then force the Fed to do more quantitative easing later.”

https://uk.reuters.com/article/uk-usa-fed-balancesheet-explainer/explainer-for-feds-trillions-in-bonds-size-isnt-all-that-matters-idUKKCN1RK1VW


“Around the world the banks bought nearly 90 tonnes of gold in January and February, up from 56 tonnes year-on-year, the World Gold Council reported. It is the highest level of growth in the first two months of the year since the financial crisis…

““Despite a decade passing since the global financial crisis, times seem no less certain. Central banks reacted to rising macroeconomic and geopolitical pressures by bolstering their gold reserves,” the council said.”

http://www.cityam.com/275961/central-banks-glimmer-gold-buying-reaches-highs-not-seen


“Russia is buying gold. A lot of gold. Within the span of a decade, the country quadrupled its reserves… Are the Russian authorities preparing for a renewed clash with the United States and are they attempting to reduce their vulnerability to financial sanctions? Or do they fear a homegrown financial crisis?

“…The sheer size of the purchases might reveal bolder motives, with Moscow preparing its first salvo in the coming battle for a monetary reset. What makes the recent moves especially significant is the fact they are being replicated in Beijing.”

https://www.themoscowtimes.com/2019/04/08/russias-new-gold-rush-could-shake-up-the-international-monetary-system-a65131


“Since the last recession, nonfinancial corporate debt has ballooned to more than $9 trillion as of November 2018, which is nearly half of U.S. GDP.

“As you can see below, each recession going back to the mid-1980s coincided with elevated debt-to-GDP levels—most notably the 2007-2008 financial crisis, the 2000 dot-com bubble and the early ’90s slowdown.”

https://www.forbes.com/sites/greatspeculations/2019/04/08/what-ballooning-corporate-debt-means-for-investors/#48e0d6bb636c


“What is really alarming is that there is a high-percentage of covenant lite loans. If the share of covenant-lite loans in 2006 was around 10%, this became 80% in 2018. Another source of worry is that the ratio of debt to EBIDTA has risen, and that means that companies have taken on more debt than they should have…

“It is important to understand that companies have concentrated on financial engineering to boost stock prices by implementing share buyback programs that have been financed by debt. The capital has not been invested in R & D (Research and Development) or in Capex (Capital Expenditure) in order to strengthen the company and make it more resistant to a crisis or recession.

“Capital has been grossly misallocated, and the economy is basically weaker than it should be and therefore more prone to suffer disastrously when there is an economic downturn. What is more is that the share buyback programs have taken place when the market is extremely overvalued and share prices are very high.”

https://seekingalpha.com/article/4253307-corporate-debt-crisis


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

Economy 8th April 2019 Central Banks’ Fear is Palpable

“The fear is palpable. Central bankers and policy strategists gathered at the intimate ‘euro Davos’ on Lake Como are shell-shocked by the collapse of bond yields and recessionary warnings across the world.

“Monetary ammunition is exhausted or running low across the G10 economic universe. The US Federal Reserve has been stripped of key tools needed to fight a financial crisis. It may not be able to rescue the international system as did in 2008.

“The eurozone is sliding into a ‘Japanese’ deflationary quagmire but without Japan’s political cohesion and without a fiscal machinery to step into the breach.”

https://www.telegraph.co.uk/business/2019/04/07/can-worlds-central-banks-rescue-slowing-global-economy-even/


“Disappointing indicators show similar picture in US, China and Europe … The headline readings slipped back significantly at the end of last year and are at their lowest levels for both advanced and emerging economies since 2016, the year of the weakest global economic performance since the financial crisis.”

https://www.ft.com/content/d9bba980-5794-11e9-a3db-1fe89bedc16e


“UK Business confidence has crashed to the lowest point since 2012, and the economy is only growing because firms are stockpiling ahead of Brexit, according to a key sentiment indicator.

“The BDO optimism index… fell faster in March that at any time since the bleakest days in the aftermath of the Lehman Brothers collapse in 2008. The figures suggest that the UK economy could struggle to post any positive growth in 2019, BDO said.”

https://www.theguardian.com/business/2019/apr/08/business-confidence-in-uk-hits-lowest-ebb-since-financial-crisis


“The recovery after the eurozone financial crisis was never that strong. But in the last year or so, the region has been hit by adverse trade winds.

“It matters particularly to Germany, which is Europe’s leading goods exporter and number three globally (after China and the US). There are several factors. China’s economic slowdown has weakened demand for foreign goods and it’s an important market for Germany.”

https://www.bbc.co.uk/news/business-47802235


“A cocktail of negative interest rates, over exposure to sovereign borrowing and expanding debt bubbles has left European banks susceptible to shocks, laying the ground for a fresh credit crunch on the continent, experts have warned. Financial institutions in the EU and the US leveraged loan market are two of the greatest threats to the global credit markets…”

https://www.telegraph.co.uk/business/2019/04/07/weakened-european-banks-vulnerable-another-credit-crunch/


“Turkish companies are struggling to get off the hamster wheel of debt as foreign borrowings run near record highs. The reason: a plunge in the lira that has driven up the cost of their obligations in dollars and euros. Banks are being left to carry the burden amid a surge in demand from some of the country’s industrial giants to restructure their liabilities — on top of a jump in bad loans.

“Lenders are also pulling back on providing new credit as the financial system comes under increasing pressure from the recession and an inflation rate of almost 20 percent.”

https://www.bloomberg.com/news/articles/2019-04-08/turkish-banks-sweat-under-rising-pile-of-debt-restructurings


“Jordan is talking to the World Bank about a $1 billion soft loan as it seeks to cut the cost of its debt repayments and revive an economy strained by more than a million Syrian refugees.”

https://www.bloomberg.com/news/articles/2019-04-07/jordan-seeks-1-billion-world-bank-loan-to-cut-debt-burden


“With [Pakistan’s] inflation at its highest in five-and-a-half years, we are only seeing the beginnings of a period of double-digit inflation.

“The rupee is losing value every other day, adding to this inflation, and will depreciate a great deal more, whether, or especially when, the government gives in to yet another IMF programme.”

https://www.dawn.com/news/1474662/much-worse-to-come


“An economist believes falling Malaysian trade figures are an indication of a looming global recession, and says the federal government should begin making preparations to meet the challenge. Barjoyai Bardai of Universiti Tun Abdul Razak said the dip in Malaysian export and import figures for February were in line with a contraction in global trade…

“Malaysia’s export-oriented industries would be affected by the slowdown in global demand because of the country’s position in the global manufacturing supply chain and as a commodity exporter.”

https://www.freemalaysiatoday.com/category/nation/2019/04/08/fears-of-a-recession-after-fall-in-exports-and-imports/


“The state-run Korea Development Institute on Sunday said Korea is slowly going into recession. The KDI said Sunday that the economy is “in a phase of gradual slowdown” as demand both overseas and at home shrinks.

“Until last October, the institute had said Korea’s economy was improving. According to market researcher CEO Score, investment at 855 subsidiaries of Korea’s top 60 businesses fell 3.1 percent last year to W98.5 trillion (US$1=W1,139).”

http://english.chosun.com/site/data/html_dir/2019/04/08/2019040801409.html


“China’s central auditing authority has sounded the alarm on a surge of dangerous debt at small banks across the nation, elevating the query of whether or not Beijing will proceed to bail out struggling lenders or finally enable some to go bankrupt…

“Many massive banks have introduced NPLs beneath management, however metropolis industrial banks and rural monetary establishments, which make up greater than 26 per cent of China’s whole banking property, have continued to file greater charges of soured loans as financial progress cools.”

https://www.optimal-money.com/china-sounds-alarm-over-bad-loan-surge-at-small-banks/


“Chinese investment in Australia dropped by more than 36 per cent in 2018, to its second lowest level since the global financial crisis of 2008.

“The latest report from KPMG and the University of Sydney Business School found that Chinese firms invested a total of $8.2 billion in Australia last year, down from $13 billion the year before.”

https://www.abc.net.au/news/2019-04-08/chinese-investment-into-australia-drops-sharply/10980082


“In an interview with the Australian Financial Review (AFR), the International Monetary Fund (IMF) Lead Economist expressed his take on the Australian housing market contraction…

““Australia’s housing market contraction is worse than first thought.” …Leaving the economy in what he called a “delicate situation”.”

https://www.fxstreet.com/news/imf-australias-housing-market-contraction-is-worse-than-first-thought-201904080158


“”Your momma!” Brazil’s normally buttoned-down Economy Minister Paulo Guedes snapped, after the lawmaker called him a “Tchutchuca” this week.

“The word, plucked from a racy hit song, broadly refers to an attractive, promiscuous girl. You read that right, grown men (and upper-class lawmakers at that) are calling each other sluts and trading yo’ mamma jokes on the congressional floor. This is not indicative of a political regime that’s going to manage the threat of a recession and potential currency crisis well.”

https://seekingalpha.com/article/4253148-sell-brazil-recession-potential-currency-meltdown-ahead


“…the global outlook is once again darkening. World trade growth is at its weakest since 2009, the protectionism that the London summit eschewed has reared its head, and central banks have responded to faltering growth by scaling down plans to raise interest rates…

“The IMF’s real headache is that the flaws in the global economy exposed by the financial crisis were papered over rather than properly dealt with.

“A decade of cheap money has resulted in a build-up of debt, excessive speculation, asset price growth and a sense that the bubble is about to burst. It’s Groundhog Day, in other words.”

https://www.theguardian.com/business/2019/apr/07/global-growth-fizzles-groundhog-day-for-world-economy


“As the saying goes, “the definition of insanity is doing the same thing over and over and expecting different results.” We are doing exactly that by continuing to lever up the global economy and expecting sustainable economic growth without 2008-style crises.

“With global debt up an incredible $100 trillion since the global financial crisis, anyone who thinks that another crisis is far-fetched is incredibly naive. Unfortunately, I believe that the next one will be even worse simply due to the fact that we have an additional $100 trillion worth of debt to deal with now.”

https://www.investing.com/analysis/what-deleveraging-global-leverage-continues-to-break-records-200404470


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Economy 5th April 2019 Next Financial Crisis Will Be Worse Than 2008

“Still psychologically scarred, few were keen last month to commemorate the 10th anniversary of the Dow’s rock bottom close in March 2009.

“Even so, all month long, calls to heed lessons from the last great recession echoed across the media as ominous signs pointing to another pending financial crisis loom. Last week, the US Department of Commerce revised growth forecasts downward. Growth across major European economies is either slowing or negative. And the Chinese economy, a critical global growth engine, is decelerating…

“After Lehman Brothers collapsed, central banks worldwide simultaneously reduced interest rates. In the months that followed, governments would take recourse to this time-tested monetary tool to combat the recession, using rate cuts to encourage borrowing and spending.

“Such expansionary monetary policies are battle-proven and, in tandem with prudent fiscal policies, they enabled central banks to slowly restore the global economy to health. The hard truth, however, is that governments won’t have this weapon at their disposal this time around.

“In the wake of the 2008 crisis, rates across the world were cut to zero, and the fragile recovery has kept them there. For much of the world, including the US and Europe, very low to near-zero rates mean historically little leeway for lowering.”

https://www.scmp.com/comment/insight-opinion/article/3004677/next-financial-crisis-will-be-worse-2008-crash-heres-what


“Germany’s industrial sector is facing an even deeper crunch as manufacturing orders dried up in February, dashing any hope of a quick recovery for the eurozone economy.

“Exports plunged as the global economic slowdown bit hard, threatening the core of the eurozone’s industrial sector.”

https://www.telegraph.co.uk/business/2019/04/04/global-recession-watch-crunch-germany-manufacturing-enters-freefall/


“New car sales in the UK fell to their lowest level in five years as the biggest selling period of the year — the 19-registration plate change month of March — failed to lift the motor trade.

“Latest industry figures show that 458,000 new cars were registered in March, down 3.4 per cent on the same month last year and the worst level since 2014.”

https://www.thetimes.co.uk/article/car-sales-lowest-for-five-years-as-19-plate-fails-to-tempt-buyers-sfvf7fnzg


“Italy will struggle to escape recession this year amid reports the Government is set to slash growth forecasts to almost zero. The economy will grow by just 0.1pc this year, according to information shown to Bloomberg by officials. That represented a severe cut from earlier predictions of a 1pc expansion.

“Relations between Rome and Brussels have become strained because of the country’s failure to cut the national debt…”

https://www.telegraph.co.uk/business/2019/04/04/italy-set-slash-growth-forecasts-recession-maintains-grip-economy/


“Whoever replaces Algeria’s President Abdelaziz Bouteflika, ousted by weeks of protest, will inherit another crisis-in-the-making: the economy.

“Even before hundreds of thousands of Algerians began their campaign for political change, the government had only a few years worth of foreign currency reserves left. With the OPEC member heading into uncharted territory after Bouteflika resigned on Tuesday, the clock to financial upheaval is now ticking faster.”

https://www.bloomberg.com/news/articles/2019-04-04/algeria-s-economic-doomsday-clock-ticks-faster-after-revolt


“A new report by researchers at Human Rights Watch and the Johns Hopkins Bloomberg School of Public Health said U.N. chief, Secretary-General Antonio Guterres, should officially declare that Venezuela is facing a “complex humanitarian crisis”

“…The U.N. has found itself stuck in the middle of a political struggle that pits Venezuelan President Nicolas Maduro against U.S.-backed opposition leader Juan Guaido, who invoked the constitution to assume an interim presidency in January.”

https://www.reuters.com/article/us-venezuela-health-un/u-n-urged-to-scale-up-aid-as-venezuela-crisis-deepens-idUSKCN1RG2G4


“The Trump administration has finally turned its attention to housing policy. Unfortunately, the president’s Memorandum on Housing Finance Reform, issued last week, is a major disappointment.

“It will keep taxpayers on the hook for more than $7 trillion in mortgage debt. And it is likely to induce another housing-market bust, for which President Trump will take the blame.”

https://www.wsj.com/articles/the-coming-trump-housing-crisis-11554419785


“A growing number of homes in the US and China are teetering on the brink of a price slump that would drag their economies into a recession, the International Monetary Fund has warned.

“Using the latest evidence from global housing markets, the Washington-based organisation said there was a clear increase in the risk of a housing price collapse in both countries after years of ultra-low interest rates and loose lending by financial institutions.”

https://www.theguardian.com/business/2019/apr/04/us-china-risk-house-price-slump-trigger-recession-imf-lending


“Researchers have said nationwide mortgage defaults [Australia] are the highest they have been in almost two decades.

“A spokesperson from peak housing and homelessness body National Shelter, an organisation at the front line of housing stress, said too many Australians have hit rock bottom.”

https://www.abc.net.au/news/2019-04-05/researchers-warn-of-rising-mortgage-stress/10972682


“Today, the 2008 financial crash and subsequent regulatory reforms seem to have sparked a profound behavioural change — not just at UBS, but in most banks. Bank treasurers have become ruthlessly tactical in how they handle their balance sheets.

“The BIS thinks that the quarterly interest rate spikes are partly due to European banks engaging in extensive window dressing in order to make themselves look stronger. Right before quarter-end reporting days, such banks appear to shrink their balance sheets, which boosts their capital ratios. That briefly drives up interest rates.”

https://www.ft.com/content/e0325354-56c7-11e9-91f9-b6515a54c5b1


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

Economy 4th April 2019 Dreadful German Data Adds to Eurozone Fears

“Truly dreadful data out this morning show that German industrial orders fell at their sharpest rate in more than two years in February, hit by a slump in foreign demand with Brexit uncertainty a possible contributory factor.

“Contracts for German goods slumped by fully 4.2 percent, double the rate of decline in January. While monthly industrial order data are highly volatile this will add to concerns that the eurozone’s largest economy has had a weak start to the year and suggest that more bad read-outs are to come.”

https://uk.reuters.com/article/uk-europe-view-thursday/daily-briefing-slump-for-german-orders-adds-to-euro-zone-fears-idUKKCN1RG0NX


“An influential survey pointing to a decline in the service sector has sparked fears that the UK could be heading for a downturn.

“The sector, which accounts for 80% of the UK economy, unexpectedly shrank for the first time in almost three years last month, the survey indicates.

“The purchasing managers’ index from IHS Markit/CIPS fell to 48.9 in March from 51.3 in February, below forecasts.”

https://www.bbc.co.uk/news/business-47800459


“Registrations of new vehicles in Italy fell 9.6 percent in March to 193,662, according to the country’s Ministry of Infrastructure and Transport.

“Although March had one less selling day than a year ago, much of the blame was attributed to a loss in consumer confidence.”

https://europe.autonews.com/sales-market/italy-sales-slump-10-march-consumer-confidence-declines


“Italy’s ruling populists pushed ahead this week with efforts to seize control of the central bank and its gold reserves, stepping up their confrontation with a symbol of the country’s establishment.

“With two laws targeting the Bank of Italy under debate in parliament, the campaign is the latest attack on Italy’s independent institutions by leaders of the governing coalition, which is led by the antiestablishment 5 Star Movement and the nativist League.”

https://www.wsj.com/articles/italys-populists-covet-central-bank-and-its-gold-11554300000


“Distressed assets in Spanish banks have declined sharply over the past five years but they remain above pre-crisis levels, the Bank of Spain says in its annual report on banking supervision.

“The central bank acknowledges banks’ balance sheets are better capitalised, and the level of toxic assets has substantially fallen since 2012–13. “However, its level is still high, above that observed before the crisis,” says governor Pablo Hernández de Cos.”

https://www.centralbanking.com/central-banks/financial-stability/macro-prudential/4126326/bank-of-spain-warns-stressed-assets-remain-above-pre-crisis-levels


“Five years after the European Central Bank broke ground by cutting interest rates below zero, its officials are considering a redesign of the contentious policy…”

https://www.ft.com/content/e095d00e-5556-11e9-a3db-1fe89bedc16e


“If you’re seeking the key to the euro zone’s economic outlook, all roads lead to Rome.

“Italy’s public debt of €2.4 trillion ($2.7 trillion) is significantly bigger than its economy and among the largest in the currency union, making it the most dangerous. This debt mountain threatens the financial stability of Italy and the future of the euro: Any plans to strengthen the single currency must solve the question of who will bear this burden.”

https://www.bloomberg.com/news/articles/2019-04-04/the-euro-s-2-7-trillion-italy-problem


“Washington: US services sector activity hit a more than 19-month low in March and private payrolls grew less than expected, underscoring a loss of momentum in the economy that supports the Federal Reserve’s move to suspend interest rate hikes this year.”

https://economictimes.indiatimes.com/markets/stocks/news/more-signs-of-a-us-slowdown-emerge/articleshow/68714708.cms


“Till now, China has met its GDP growth targets only because soaring debt allowed it to capitalize non-productive activity, i.e. value it at cost rather than its real economic value…

“What’s less-understood even now is that if China begins a serious deleveraging, reported GDP growth rates will fall by a lot more than expected — by more than the amount of non-productive activity that had formerly been capitalized. This is clear from the historical precedents. In every modern case where countries enjoyed similar investment-driven growth “miracles” and then suffered painful adjustments, medium- and long-term GDP growth rates slowed much more than even the most pessimistic projections.”

https://www.bloomberg.com/opinion/articles/2019-04-03/china-s-growth-slowdown-will-be-worse-than-most-expect


“Japanese Finance Minister Taro Aso on Thursday said using government spending as a primary policy tool to boost employment and spur inflation, an idea backed by some U.S. academics, would backfire on the world’s third-biggest economy given its huge debt pile.

“Bank of Japan Governor Haruhiko Kuroda echoed Aso’s view in parliament, saying that the idea was unacceptable because it does not take into account the dangers of running a huge fiscal deficit.”

https://uk.reuters.com/article/us-japan-economy-fiscal/japan-policymakers-shun-modern-monetary-theory-as-dangerous-idUKKCN1RG05Y


“Economists have raised their forecast for Argentina’s 2019 inflation rate to 36 percent from a previous estimate of 31.9 percent, according to the median forecast in the central bank’s monthly poll of analysts released on Wednesday…

“Economic turmoil in Argentina has left nearly a third of the country in poverty, pushed interest rates skyward and sent the peso tumbling in value against the dollar.”

https://uk.reuters.com/article/us-argentina-economy/argentina-2019-inflation-forecast-jumps-to-36-percent-central-bank-poll-idUKKCN1RF2TR


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