31st July Today’s Round-Up of Economic News

“While investors look for clues about the health of the global economy, a research and analytics unit under S&P Global said a “hidden” segment of debtors is flashing early signs of trouble.

“Those borrowers are small companies that are not rated by S&P Global Ratings, according to the agency’s sister division, S&P Global Market Intelligence. A credit rating is an assessment on a government or company’s ability to repay its debt.

“There are many reasons why borrowers choose not to seek a credit rating, including cost savings, infrequent bond issuance and investors’ familiarity with the brand. Well-known companies that have in the past opted against a credit rating include Italian luxury fashion house Prada and German sportswear brand Adidas.

“Generally, though, many entities without an S&P credit rating are small companies that are likely to be the first victims in an economic downturn, said Michelle Cheong, director and global product development lead for credit solutions data at S&P Global Market Intelligence.

“That group is “very much a hidden, under the radar” segment, Cheong told CNBC in a phone call on Monday. That’s because unrated borrowers are much smaller in size collectively: Their total assets have consistently been less than 10% of their rated peers’ over the last five years.

““The unrated entities are like the canary in the mine. They are the ones that usually start to default first — before you see trouble happening among the rated entities — because they are the weaker link,” she added…

“A reason behind that is over-investment in less profitable projects due to the availability of cheap credit in the last few years, she explained.

“Analysts have long warned about the dangers of rising debt fueled by low interest rates globally. The low-rate environment came about after central banks around the world adopted easier monetary policies to stimulate the economy after the financial crisis.”

https://www.cnbc.com/2019/07/31/companies-without-credit-ratings-flag-warnings-for-global-economy-sp.html


“…cutting rates could hasten exactly the outcome that the Fed is trying to avoid. By further driving up the prices of stocks, bonds and real estate, and encouraging risky borrowing, more easy money could set the stage for a collapse in the financial markets.

“And that could be followed by an economic downturn and falling prices – much as in Japan in the 1990s.

“The more expensive these financial assets become, the more precarious the situation, and the more difficult it will be to defuse without setting off a downturn.”

https://www.businesstimes.com.sg/opinion/why-we-should-fear-easy-money


“Economic data in Mexico this week will all but certainly show the nation fell into recession, tipping the scales on market bets for an interest rate cut by the central bank as soon as August. Mexico’s TIIE swap curve has already priced in at least a 25 basis point reduction in three months.

“That suggests that Banxico, as the central bank is known, will start easing either on Aug. 15 or Sept. 26.”

https://www.bloomberg.com/news/articles/2019-07-30/mexican-markets-brace-for-likely-recession-as-august-cut-in-play


“The cumulative decline of the Venezuelan economy since 2013 will reach 65 percent, among the deepest five-year contractions around the world over the last half century, the International Monetary Fund has announced…

“…the Venezuelan decline is historic because it is unprecedented in the hemisphere and also because it is the only one among top global five-year contractions that is unrelated to armed conflicts or natural disasters.”

https://www.batimes.com.ar/news/latin-america/imf-venezuelan-economy-to-contract-by-further-35-this-year.phtml


“Communist-run Cuba on Tuesday imposed sweeping price controls on all state and private businesses as it battles a deepening economic crisis and mounting U.S. sanctions.

“Resolutions published in the official gazette banned all retail and wholesale price increases except for products imported and distributed by the state where already-set profit margins cannot be increased.”

https://www.reuters.com/article/us-cuba-economy/cuba-battling-economic-crisis-imposes-sweeping-price-controls-idUSKCN1UP28Y


““The participants were in agreement that every part of Nigeria is today bedevilled by one form of extremist violence or the other and that these conflicts are increasingly having corrosive effects on the Nigerian state. The causes of the insecurity include poverty arising from the economic crisis in the country and bellicose political activities, environmental scarcity in the far North, and the rising perception of injustice by ethnic and religious groups which are escalated by fake news and hate speeches.””

https://www.thecable.ng/economic-crisis-responsible-for-insecurity-in-nigeria


“South Africa’s unemployment rate jumped to its highest since the global financial crisis more than a decade ago, data showed on Tuesday, piling pressure on a shrinking economy and President Cyril Ramaphosa’s pledge to deliver a turnaround… Job cuts across a host of sectors are set continue into the next few years. On Tuesday, state power firm Eskom reported a more than 20 billion rand annual loss, making mooted staff cuts in the region of 7,000 almost inevitable.”

https://af.reuters.com/article/commoditiesNews/idAFL8N24V2YB


“Zimbabwe’s government said it distributed almost 190,000 metric tons of maize to households in rural and urban areas, marking the first time ever it’s had to distribute food to people in cities.

““There’s increasing hunger in both rural and urban areas,” Sekai Nzenza, the country’s public service, labour and social welfare minister, told reporters on Tuesday.”

https://www.bloomberg.com/news/articles/2019-07-30/zimbabwe-distributes-food-aid-to-people-in-cities-for-first-time


“The political repercussions of a deadly shooting in Lebanon have paralyzed government at a critical moment and risk complicating efforts to enact reforms needed to steer the heavily indebted state away from financial crisis…

“Efforts to mediate a way out of the standoff are deadlocked over which court should hear the case.”

https://uk.reuters.com/article/uk-lebanon-politics/at-vital-moment-lebanon-paralysed-by-political-conflict-idUKKCN1UP1I5


“[Indian] banks, which have been pushing retail credit for more than five years because of a surge in defaults in corporate loans, have built up risks in that segment due to slack underwriting standards.

“There is an uptick in defaults by individuals as their incomes are stagnating and some are losing jobs due to companies shrinking their sizes due to poor profitability and bankruptcies.”

https://economictimes.indiatimes.com/industry/banking/finance/a-major-crisis-may-be-brewing-for-indian-banks/articleshow/70458734.cms


“President Donald Trump early Tuesday said it’s possible the United States would reach “no deal at all” with China, putting significant pressure on talks set to kick off in Shanghai less than a day later.

“”I think China is willing to give up a lot, but that doesn’t mean I’m willing to accept it,” he said before boarding Marine One for a trip to Virginia.”

https://www.businessinsider.com/no-trade-deal-us-china-could-cause-global-economic-slowdown-2019-7?r=US&IR=T


“China’s factory activity shrank for the third month in a row in July, an official survey showed, underlining the growing strains on the world’s second-biggest economy as the Sino-U.S. trade war hits business profits, confidence and investment.”

https://uk.reuters.com/article/us-china-economy-pmi-manufacturing-offic/trade-war-keeps-chinas-factories-in-reverse-gear-for-third-month-idUKKCN1UQ04U


“For the first time, the risk that a large bank could lose all or part of its investment in a smaller financial institution was introduced into the market.

““Baoshang marked a watershed moment for the banking industry,” analysts at advisory firm Trivium China said. “That’s called counterparty risk – something the Chinese financial system hasn’t known much about in recent years.””

https://www.scmp.com/economy/china-economy/article/3020603/chinas-control-over-its-entire-economy-weakened-baoshang-bank


“The ongoing trade dispute between Japan and South Korea has begun to affect businesses across sectors and could potentially even make a dent in the global economy.

“The political disagreement stems from an argument about Japan’s conduct during the second World War, but it’s recently spilled into the economic arena.”

https://www.cnbc.com/2019/07/31/japan-korea-trade-dispute-can-hurt-businesses-and-the-global-economy.html


“A University of Melbourne study released today found that Australians have less to spend now than they did a decade ago, with incomes stagnating.

“Despite the lowest home loan rates in decades, more than a million Australians are estimated to be in mortgage stress. The numbers of those falling behind on loan repayments is now at its highest since the end of the Global Financial Crisis.”

https://www.abc.net.au/news/2019-07-31/mortgage-stress-hitting-australians/11369516


“The pound fell to its lowest level on record against a collection of other top currencies as fears over a no-deal Brexit continued to build.

“Sterling fell to an all-time intraday low on the Bloomberg British Pound Index, which tracks the performance of sterling against a “basket of leading global currencies”. The index has been running since 2004.”

https://www.telegraph.co.uk/business/2019/07/30/pound-hits-record-lows-currency-index-fresh-slump/


“Alec Pillmoor, of RSM, said: “Of greatest concern is the rise in personal insolvencies among young adults [in the UK].

““In this climate of low interest rates and relatively easy access to credit, it is entirely feasible that young people without financial experience or literacy may be more susceptible to the temptations of easy money.””

https://www.telegraph.co.uk/money/consumer-affairs/easy-credit-hard-times-10-fold-rise-young-people-entering-insolvency/


“The automotive industry took a hit in the wake of the 2008 Lehman Brothers crisis. It took about two years to stabilise and saw good sales for 7-8 years after that. Since mid-2018, however, there has been a downturn which is likely to continue in 2019-2020.”

http://www.forbesindia.com/article/leaderboard/auto-slowdown-takes-global-turn/54597/1


“Trade tensions and concerns around growth potential are unlikely to subside anytime soon.

“The slowdown in economic growth in the second quarter of 2019 was significant.

“The historical parallels of similar slowdowns as well as incoming data both point to a prolonged slowdown that is unlikely to reverse course with a 25 bps rate cut.”

https://seekingalpha.com/article/4278957-global-economic-slowdown-unlikely-change-course-july-rate-cut


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

30th July 2019 Today’s Round-Up of Economic News

“The pound headed for its worst run of losses in almost three years after U.K. Prime Minister Boris Johnson raised the stakes over a no-deal Brexit, issuing an ultimatum to the European Union that he won’t start divorce talks unless the withdrawal agreement is re-opened [which the EU has already said is a non-starter].”

https://www.bloomberg.com/news/articles/2019-07-30/pound-heads-for-worst-slump-since-2016-as-johnson-sets-ultimatum


“German consumer morale worsened for the third month in a row heading into August as a global economic downturn, trade disputes and Brexit uncertainty fuel worker fears of losing their jobs and their income, a survey showed on Tuesday…

“…the continued drop in consumer confidence signals that a slump in Germany’s export-dependent manufacturing is now creeping into other sectors of the economy.”

https://www.euronews.com/2019/07/30/german-consumer-morale-drops-as-recession-fears-spread-gfk-says


“Deutsche Bank, once a superstar in Europe, is now a disaster… Deutsche Bank’s struggles have also been amplified by something the 149-year-old lender never imagined, mostly because it had never happened before in modern history: negative interest rates.”

https://edition.cnn.com/2019/07/29/business/deutsche-bank-ecb-negative-rates/index.html


“When ArcelorMittal temporarily laid off around 1,400 Italian workers at its Taranto plant last month, it was just the latest sign that the eurozone’s economic weakness was feeding into the labour market in the bloc’s third-largest economy.”

https://www.ft.com/content/3ffa9a7c-a717-11e9-984c-fac8325aaa04


“U.S. companies are on pace to break another record for share repurchases in 2019, using a combination of cash and debt to push the total to close to $1 trillion.

“For the first time since the financial crisis, companies have given back more to shareholders than they are making in cash net of capital expenditures and interest payments, or free cash flow, according to Goldman Sachs calculations.”

https://www.cnbc.com/2019/07/29/buybacks-companies-increasingly-using-debt-to-repurchase-stocks.html


“According to the Federal Reserve, the number of $100 bills in circulation has roughly doubled since the global financial crisis, despite the rise of cashless options…

“One reason for the sharp surge in demand could be geopolitical instability, the IMF said, as a thirst for cash from other countries tends to increase during unsettled times.”

https://www.ft.com/content/a8de3894-afa7-11e9-8030-530adfa879c2


“A $25 billion stimulus package unveiled by Mexico on Monday should have an immediate impact, Finance Minister Arturo Herrera said, as Latin America’s second-largest economy teeters on the brink of a recession.

“The package comes just days before Mexico’s national statistics agency publishes second-quarter growth figures and amid an discussion over whether the economy has slipped into recession.”

https://kfgo.com/news/articles/2019/jul/29/mexico-will-ready-25-billion-to-boost-infrastructure-investment-finance-minister/922657/?refer-section=national


“Factory activity in China is expected to have contracted for the third month in a row in July, a Reuters poll showed, underlining the intensifying strains on the world’s second-biggest economy from a protracted trade war with the United States…

“Another month of weak manufacturing activity is likely to fuel expectations for Beijing to add to a flurry of support measures put in place over the past year.”

https://www.reuters.com/article/us-china-economy-pmi/as-trade-war-bites-chinas-factories-set-for-third-month-of-shrinking-activity-idUSKCN1UP0AD


“Vehicle sales in China slumped for the twelfth consecutive month in June, with unit sales of passenger cars and commercial vehicles declining by 9.6% in the month, and 12.4% for the first six months of the year…

“China’s deleveraging program has tightened credit for prospective auto buyers, and a slowing economy has hurt consumer sentiment, which is important for sales of big ticket items like autos. China’s economy slowed to 6.2% in the second quarter, its lowest quarterly growth rate in 27 years.”

https://www.forbes.com/sites/jackperkowski/2019/07/29/chinas-car-sales-slump-when-will-it-end/#18b4adb1627b


“With no let-up apparent in global and regional trade tensions, Singapore’s business community has slashed its expectations for the near-term economic outlook.

““Because we are hugely export-dependent, because of the slowing down in the economy, because of tension, because of loss of business confidence — we need to adjust” growth expectations, Ho Meng Kit, chief executive officer of the Singapore Business Federation, said Monday…”

https://www.investing.com/news/economy/singapore-businesses-see-sharp-downturn-in-economy-on-trade-war-1937328


“Japanese subprime loan and savings banks have now secured nearly a 25 percent market share in Korea’s secondary loan business. 

“This raises concerns over possible financial difficulties among Korea’s low-income bracket looking for a quick loan if Tokyo expands its economic retaliation into the financial sector.”

http://www.koreatimes.co.kr/www/biz/2019/07/488_273059.html


“[Japan’s] Factory output suffered its second-largest drop in the last five years in June as trade tensions and a slowdown in the global economy dragged exports lower for a seventh straight month.”

https://www.japantimes.co.jp/news/2019/07/30/business/economy-business/japans-factory-output-slides-pressure-global-slump/#.XT_5LehKjIU


“…while the [Australian stock] market may finally have recovered from the dark days of the 2008 crisis, when almost every day seemed to bring a fresh threat of corporate collapse, its new peak comes amid growing concerns about whether Australia can maintain its record run of 28 years without an economic recession.”

https://www.theguardian.com/australia-news/2019/jul/30/australian-stock-market-hits-record-high-beating-level-set-before-gfc


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

29th July 2019 Today’s Round-Up of Economic News

“Central Banks, from the ECB to the Federal Reserve, are terrified of an economic recession or downturn…

“Given that global debt is 320% of global GDP, a deleveraging cycle will be too large for Central Banks to contain.

“The deleveraging cycle WILL occur, all that Central Banks can do is hope to extend the current cycle long enough that “maybe” economic growth will catch up with the problem and lower the risk.

“The irony is that it is the Central Banks on actions (lowering interest rates to zero and flooding the system with liquidity) which has inflated the debt bubble…

“Never before in human history have we seen so much debt. Government debt, corporate debt, shadow-banking debt, and consumer debt are all at record levels. Not just in the U.S., but all over the world.

“If you are thinking this is a “Goldilocks economy,” “there is no recession in sight,” “Central Banks have this under control,” and that “I am just being bearish,” you would be right.

“But that is also what everyone thought in 2007.”

https://seekingalpha.com/article/4278502-whistling-past-70-trillion-debt-graveyard


“In cutting already low interest rates to bolster a sagging global economy, monetary-policy makers risk fueling asset bubbles that may eventually burst and propping up zombie companies that could keep dragging down growth.

“They’re also encouraging a dangerous buildup in leverage in a world where total debt is already approaching $250 trillion.”

https://businessmirror.com.ph/2019/07/28/central-bankers-playing-a-dangerous-game-with-asset-prices/


“The Federal Open Market Committee (FOMC) of the US Federal Reserve will meet later this week (July 30-31) to take a call on policy interest rates. Financial markets are expecting the Fed to cut interest rates by 25 basis points.

“If it happens, this will be the first cut since the aftermath of the global financial crisis of 2008-2009.”

https://www.business-standard.com/article/international/will-us-fed-cut-rates-for-the-first-time-since-the-global-financial-crisis-119072800811_1.html


The most recent estimates in the Permian are that year-over-year production is growing today at just over half the level of a year ago. Production growth there has been in rapid decline since peaking a year ago.”

https://oilprice.com/Energy/Energy-General/The-Permian-Boom-Is-On-Its-Last-Leg.html#


Applying the same analysis that I did last week to Permian Basin production — which looked at year-over-year production changes — it becomes clear that overall U.S. production growth is declining even faster than Permian Basin production growth.”

https://www.forbes.com/sites/rrapier/2019/07/28/a-new-u-s-oil-production-peak-looks-imminent/#12f28505ad35


“A no-deal Brexit has become a very real prospect, a senior figure in UK Prime Minister Boris Johnson’s government has said.

“Writing in The Times newspaper on Sunday, UK Conservative MP Michael Gove said that the UK is now preparing for a no deal on the assumption that the European Union will not renegotiate former Prime Minister Theresa May’s withdrawal agreement.”

https://edition.cnn.com/2019/07/28/uk/no-deal-brexit-michael-gove-gbr-intl/index.html


“Lack of growth and jobs, and a poor level of consumer confidence, lead to tightening up of family purse strings; and a spiraling crisis of lack of demand, a production slowdown, and more people are out of work.

“With the worsening international scenario and the inability of the [Indian] government to crank up the domestic economy, we seem to be observing the beginning of what could be a long, recessionary cycle.”

http://www.newindianexpress.com/business/2019/jul/28/global-recession-all-signs-point-to-an-impending-bear-hug-2010386.html


“The real estate market in India’s financial hub of Mumbai has been severely hit by the liquidity crisis, making it even more vulnerable than the National Capital Region (NCR), the worst hit in the slowdown so far.

“Mumbai, India’s most valuable real estate market, is grappling with a lack of lenders and is showing deeper signs of distress, reflected in the schemes and discounts offered by developers to push sales…”

https://www.livemint.com/industry/manufacturing/distress-knocks-on-mumbai-s-doors-as-liquidity-crisis-hurts-realty-1564340743301.html


“…many companies to put Hong Kong expansion plans on hold,” 

““The dramatic slowdown in Hong Kong office demand from Chinese firms is due to a number of simultaneous conditions, almost forming a perfect storm.” …”

https://www.ft.com/content/d6cf4120-af49-11e9-8030-530adfa879c2


“…there are some unofficial estimates. Like one from the Institute of International Finance (IIF) last year, which placed China’s debt to GDP at 300%! Worse, the government’s role as both lender and borrower concentrates rather than disperses credit risks. And that creates the potential of a systemic collapse.”

https://www.forbes.com/sites/panosmourdoukoutas/2019/07/27/trade-war-is-hiding-chinas-big-problems/#60d83c8f5bb3


“Profits earned by China’s industrial firms contracted in June after a brief gain the previous month, fuelling concern that a slowdown in manufacturing from a bruising trade war will drag on economic growth…

“Economic growth in the second quarter slowed to a near 30-year low.”

https://www.businesslive.co.za/bd/world/asia/2019-07-28-chinas-industrial-profits-fall-add-to-fears-of-slowdown/


“China’s lottery sales fell for a fifth straight month in June, slumping 40.7 percent year on year, official data showed.

“Lottery sales totaled 34.77 billion yuan (about 5.05 billion U.S. dollars) last month, down from 35.52 billion yuan in May, according to a statement from the Ministry of Finance.”

http://www.xinhuanet.com/english/2019-07/28/c_138264266.htm


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

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

“Global debt is officially $184 trillion, which is 225% of global GDP. This is $86,000 for every person in the world, which is 2.5 times annual income.

“We estimate that official figures are understated by a factor of 2.5, so debt is actually $460 trillion, which is 560% of GDP and $215,000 per person.

“These numbers are astronomical, raising the risk of economic blowback once interest rates and inflation rise, as they eventually will…

“No one knows when the debt spiral will end, but it’s a virtual certainty that it will not end well.”

https://seekingalpha.com/article/4277051-per-capita-world-debt-surged-200000


“It’s hard to wrap your head around just how low U.S. interest and bond yields are—still are—a decade after the Great Recession ended… Where low rates really bite isn’t in current returns but in the future gains investors can reasonably expect. Interest rates set a kind of baseline for the return on all assets. As they fall, bond values rise and stocks often do, too. But once rates have settled at or near rock bottom, there’s less room for that kind of price appreciation.

“All this has sent investors looking under every available rock for more return—even if it means taking more risk. The fear is this could lead to the formation of bubbles and eventually destabilize the financial system.”

https://www.bnnbloomberg.ca/businessweek/a-decade-of-low-interest-rates-is-changing-everything-1.1290927


“Markets are turning up the pressure dial on central banks to boost policy easing. Benchmark bond yields have in unison dived below or close to key interest rates in the world’s biggest economies.

“While this has happened before in the U.S., it’s never been seen before in the euro area. That show investors expect the Federal Reserve and European Central Bank to deliver stimulus soon.”

https://www.bloomberg.com/news/articles/2019-07-24/bond-market-assault-on-central-banks-leaves-no-room-for-error


“With inflation subdued in Latin America and its top economies flirting with recession, central banks are gearing up to join emerging market peers from Asia to Africa in cutting interest rates.

“Brazil is expected to reduce borrowing costs next week for the first time in over a year, after yet another inflation reading surprised economists to the downside. A slowdown in Mexico’s annual consumer price index on Wednesday reinforced the outlook for monetary easing, whether sooner or later, and Peru said it’s considering the same.”

https://www.bloomberg.com/news/articles/2019-07-24/latin-america-central-banks-poised-to-join-global-rate-cut-party


“European Central Bank President Mario Draghi will move back into the spotlight as stock-market investors cheer a shift back toward easier monetary policy by major central banks, with the ECB widely expected on Thursday to at least lay the groundwork for an interest rate cut, and possibly further action, later this year.”

https://www.marketwatch.com/story/its-the-ecbs-turn-to-take-a-step-toward-further-easing-when-it-meets-thursday-2019-07-23


“The Reserve Bank of India is set to cut interest rates in August for the fourth meeting in a row, according to a Reuters poll of economists, a majority of whom said risks to their already-modest growth forecasts were skewed more to the downside.”

https://www.reuters.com/article/us-india-economy-poll/indias-rbi-to-cut-rates-again-in-august-as-doves-prevail-reuters-poll-idUSKCN1UK09N?il=0


“The U.S.-China trade war is threatening to drag export-reliant Singapore into a recession and aggravating underlying risks facing the former tiger economy. Singapore’s economic data have gone from bad to worse this month.

“Exports slumped to their second-worst rate since the global financial crisis, the purchasing managers index slipped into contraction for the first time since 2016, and the economy shrank the most in almost seven years in the second quarter.”

https://www.bloomberg.com/news/articles/2019-07-24/trade-war-spurs-recession-risk-in-former-tiger-economy-singapore


“Caterpillar Inc. shares fell after the heavy-equipment maker projected 2019 earnings at the low end of its forecast amid rising costs, declining sales in Asia and a slowdown in oil and gas spending in the prolific Permian Basin…

“The results from Caterpillar, considered an economic bellwether, come amid a slowdown in manufacturing and simmering trade tensions that helped prompt a cut this week in the International Monetary Fund’s global growth forecast.”

https://www.worldoil.com/news/2019/7/24/market-bellwether-caterpillar-tumbles-amid-permian-slowdown


“Boeing reported a massive second-quarter loss of $2.9 billion on Wednesday — its worst ever — as costs pile up for the aerospace giant while its flagship 737 Max jet remains grounded after two fatal crashes. Shares of Boeing declined 3.1% from its previous close of $373.07, helping to drag down the Dow Jones Industrial Average.”

https://www.cnbc.com/2019/07/24/boeing-earnings-q2-2019.html


“Things are moving clearly and quickly negative. Manufacturing in 2 of the world’s 3 largest economies — China and the eurozone — is contracting (at an unprecedented pace in the eurozone), with the U.S. hanging in positive territory by less than half a percent.

“A global measure of the manufacturing industry from IHS Markit showed its weakest reading in nearly 7 years last month. Emerging markets, responsible for most of the world’s growth, also are beginning to slow notably…”

https://www.axios.com/global-economic-slowdown-us-china-trade-war-d6c7f429-451d-4810-8f9b-758390042f00.html


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

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

“Three of Europe’s largest economies are under threat of recession, which could spell a crisis across Europe.

“Dozens of companies in Germany have turned to “short-time” work — cutting employee hours — a canary in the coal mine of industrial weakness

“Britain could also already be in a recession despite having not left the EU due to the uncertainty caused by Brexit.”

https://markets.businessinsider.com/news/stocks/uk-german-and-italian-economies-all-tanking-at-same-time-2019-7-1028376665


“A double whammy of Brexit uncertainty and a slowdown in global trade has seen order books in Britain’s factories shrink at their fastest pace since the financial crisis, the CBI has said.

“Urging the next prime minister, confirmed on Tuesday as Boris Johnson, to strike a deal with the EU, the employers’ organisation said industrial output also fell in the latest quarter, for the first time since the spring of 2016.”

https://www.theguardian.com/business/2019/jul/23/uk-factories-facing-biggest-slowdown-since-financial-crisis-says-cbi


“Industry in Europe’s largest economy took another battering in July, with a measure of manufacturing dropping to its lowest in seven years. Germany’s factory Purchasing Managers’ Index dropped to 43.1 from 45, below even the most pessimistic forecast in a Bloomberg survey.”

https://www.bloomberg.com/news/articles/2019-07-24/germany-s-factories-go-from-bad-to-worse-as-economy-treads-water


“Deutsche Bank has suffered its biggest quarterly loss since the depths of the financial crisis…”

https://www.ft.com/content/9473bb2c-add6-11e9-8030-530adfa879c2


“Italy’s depositor protection fund on Tuesday kicked off a 900 million euro (£807.9 million) rescue process for troubled bank Carige (CRGI.MI) via the conversion of around 313 million euros of a bond into shares.

“Genoa-based Carige, weakened by decades of mismanagement, risks collapse as a result of bad loans accumulated during Italy’s recession that followed the global financial crisis a decade ago.”

https://uk.reuters.com/article/uk-eurozone-banks-carige/italy-banks-to-rescue-carige-via-depositor-protection-fund-idUKKCN1UI1BA


“Political infighting in Spain could soon lead to another election, which would be its third in three years, raising questions on whether instability has become the new normal for the southern European nation.”

https://www.cnbc.com/2019/07/23/the-new-italy-spain-political-crisis-has-no-clear-end-in-sight.html


“A financial crisis confronting South Africa’s state power utility has become a national debt problem.

“Finance Minister Tito Mboweni Tuesday unveiled a second multi-billion dollar bailout for Eskom Holdings SOC Ltd. within five months, aid that may force the cash-strapped government to increase borrowing and taxes.

“That could in turn trigger a credit-rating downgrade and massive outflow of funds, raise the cost of new debt and stymie efforts to revive the moribund economy.”

https://www.bloomberg.com/news/articles/2019-07-24/south-africa-has-a-sovereign-debt-problem-its-name-is-eskom


“South Africa risks a second recession in consecutive years.”

https://www.bloomberg.com/news/articles/2019-07-23/south-africa-s-economic-growth-prospects-keep-diving


““We are living in historic times,” he says. “In the period since the central banks launched their response to the GFC, we have seen many occasions when good news has been bad news for the markets.

““It’s certainly a concern and a potentially dangerous situation. We are within a few percentage points of an all-time high and the US market is already there at record highs. But there is a lot of concern about where we are at in share markets.””

https://www.theguardian.com/business/2019/jul/24/australias-asx200-nudges-all-time-high-reached-before-global-financial-crisis


“The carmaker Nissan plans to cut more than 10,000 jobs around the world as part of efforts to turn itself around, Japanese media have reported.

“Nissan announced in May it would cut 4,800 jobs from its global workforce of around 139,000 as it grapples with a fall in profits to a near-decade low amid “a difficult business environment”.”

https://www.theguardian.com/business/2019/jul/24/nissan-plans-to-shed-10000-jobs-worldwide-reports-claim


“Mercedes-Benz owner Daimler swung to a €1.2bn loss in the second quarter after the manufacturer was forced to make payments for diesel-related legal issues and to cover the costs of replacing Takata airbags, as it battled a global slump in car demand.”

https://www.cityam.com/daimler-swings-to-loss-as-car-demand-slumps/


“If late reporters are excluded, consumption in the top 15, accounting for 45% of world consumption, fell 2.2% in the three months to May compared with 2018, the fastest decline since the recession of 2008/09.

“Since 2006, consumption growth in the top 15 has been a reliable leading indicator for the top 18 and demand more generally, which is not surprising given the interconnectedness of the global economy.

“Decelerating oil consumption growth since the second and third quarter of 2018 has corresponded closely with the slowdown in global manufacturing activity and freight movements.”

https://uk.reuters.com/article/uk-global-oil-kemp/column-global-oil-consumption-stagnates-leaving-prices-under-pressure-idUKKCN1UJ0JY


“Global economic growth will slow this year to the weakest rate in a decade, the International Monetary Fund has said, blaming Donald Trump’s trade war with China, Brexit uncertainty and geopolitical tensions.”

https://www.independent.co.uk/news/business/news/economy-brexit-trump-trade-war-gdp-imf-forecast-a9017486.html


“Fed, ECB officials all …studying their current strategies and whether they need to be changed to revive inflation as it keeps undershooting their targets.”

https://www.bloomberg.com/news/articles/2019-07-23/missing-their-inflation-goals-central-banks-study-moving-posts


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

22nd July 2019 Today’s Round-Up of Economic News

“Bank of England research shows that the share of corporate debt owed by highly leveraged companies across major advanced economies is now similar to, or higher than, levels  in 2007. The reason that this should worry us is that “cross-country data shows that growth in the corporate debt to GDP ratio is associated with deeper recessions…

“It is now companies which are very indebted, in notional numbers and as a percent equivalent of GDP. Many of these are zombie companies that have been borrowing to pay existing debt, pay dividends, engage in share buy backs, and/or to pay executives bigger bonuses. As we get into an economic downturn, there is a high risk that leveraged companies will default on their obligations and fire employees in an attempt to stay afloat.

“Presently, 80-85% of leveraged loans have lite or no covenants. When companies default, lenders will have very little in protection.”

https://www.forbes.com/sites/mayrarodriguezvalladares/2019/07/21/banks-are-the-largest-holders-worldwide-of-leveraged-loans-and-collateralized-loan-obligations/#6d2fe3903079


“Citi strategists pointed out the earnings recession is likely to continue into 2020. I’ll just note that the stock market behaved the same way in the run-up to the dot-com crash, rising quarter after quarter as earnings fell quarter after quarter.

“Of course, it will be different this time because today’s people are never as stupid as yesterday’s people!”

https://seekingalpha.com/article/4276256-drip-drip-drip-recession


“Britain’s currency sank to a two-year low last week, dipping below $1.24 as fears of a no-deal Brexit grew.

“Long seen as a symbol of Britain’s stability and national pride, the pound has in recent years become a barometer for concerns about the country and its departure from the European Union.”

https://www.nytimes.com/2019/07/22/business/britain-pound-brexit.html


“…given the inevitability of the Iranian reaction against British naval forces too weak to defend British-flagged tankers, the British move looks more like a strategic choice dictated by a lack of other options.

“Confrontation with the EU over Brexit means that Britain has no alternative but to ally itself ever more closely to the US.”

https://www.independent.co.uk/news/world/middle-east/iran-tanker-crisis-brexit-uk-trump-nuclear-deal-us-a9014561.html


“While US national security adviser John Bolton and US secretary of state Mike Pompeo push the region towards maximum tension and Donald Trump makes despicable threats to obliterate Iran

“….the US military has announced its intention to create and lead an anti-Iranian naval coalition in the Persian Gulf.”

https://news.sky.com/story/global-economic-catastrophe-likely-if-us-attacks-iran-11766319


“Germany’s manufacturing industry and exports are suffering from a slowing global economy, the finance ministry said in its monthly report on Monday, warning that weak order numbers suggested the industrial slowdown could be lengthy…

“”Leading indicators as well as shrinking order books point to a lasting period of economic weakness in the industrial sector,” the report said.”

https://wsau.com/news/articles/2019/jul/22/indicators-point-to-sustained-period-of-german-industrial-weakness-ministry/920082/?refer-section=national


“Efforts to clean up Turkey’s bad debt have stalled…

“Interviews with more than a dozen bankers, company executives and advisers show that there has been little progress over the past three months with plans to help lenders to Turkey’s construction, real estate and energy companies that can no longer afford roughly $20 billion of debt.”

https://www.haaretz.com/middle-east-news/turkey/turkey-s-restructuring-stalls-as-government-banks-wrestle-with-bad-debt-1.7544319


“Credit rating agencies for years assigned high ratings to India’s Infrastructure Leasing & Financial Services (IL&FS) and its group companies despite its deteriorating finances…

““Various strategies deployed by the then key officials of IL&FS group and certain favours/gifts provided to rating agency officials suggest the possible reasons for consistent good ratings provided to IL&FS group,” said Grant Thornton in its report that detailed gifts or favours such as smartwatches and tickets to overseas sporting events.”

https://uk.reuters.com/article/uk-india-il-fs-ratings/rating-agencies-knew-of-stress-at-indias-ilfs-but-gave-good-ratings-audit-idUKKCN1UF0IS


“India is attempting to prevent any repeat of last year’s shadow banking crisis after detecting “signs of fragility” in some of the 50 housing finance and other non-bank lenders it is monitoring, according to central bank Governor Shaktikanta Das.

“The Reserve Bank of India is working closely with the country’s lenders to prevent the collapse of another large systemically important non-bank finance company…”

https://www.aljazeera.com/ajimpact/india-monitoring-shadow-banks-signs-weakness-190722062854878.html


“China’s bond market has been eerily quiet lately. Over the past year, investors in China’s U.S. dollar bonds had gotten used to the idea of defaults.

“As early as 2015, the government started allowing some state-owned enterprises to renege on their commitments, a painful but welcome step that helps differentiate healthy firms and troubled ones.”

https://www.bloomberg.com/opinion/articles/2019-07-22/get-ready-for-more-defaults-in-china-s-bond-market


“In response to the escalating economic conflict between South Korea and Japan, financial authorities here are establishing a contingency plan in case Tokyo expands its trade restrictions to the financial sector, officials said Monday.

“The preemptive gesture came out of concern about the apparent dependency of local financial companies on Japanese lenders, which have been offering a low interest rate for years.”

http://www.koreaherald.com/view.php?ud=20190722000705


“New Zealanders could be in line for a cash payout, alongside temporary tax cuts if the economy crashes, according to advice from Treasury…

“It says the “best case” stimulus would focus on tax cuts and stimulus, alongside spending money on building infrastructure, which would also boost the economy.

“It recommends giving money to households, particularly those in need, saying that tax changes or cash transfers (meaning a payment of some kind, possibly a benefit) meet its policy objectives of boosting the economy, but in a way that achieves equity.”

https://www.stuff.co.nz/national/politics/114413517/give-kiwis-helicopter-money-cash-payouts-if-economy-crashes–treasury


“Central banks world-wide are poised to unleash some of the most aggressive monetary stimulus since the financial crisis a decade ago. But the circumstances are different now, with policies aimed more at breathing life into decade-old expansions rather than at averting an economic collapse.

“…It is unclear whether the central bankers’ depleted tools will be adequate.”

https://www.wsj.com/articles/central-banks-are-in-sync-on-need-for-fresh-stimulus-11563714002


“If the world’s factories are any measure, then the global economy is looking rather gloomy… Global manufacturing output is at a three-year low, teetering on contraction. Around 17 central banks are expected to cut rates this quarter to combat the global slowdown. In June, manufacturing output slipped to a three-year low. It is now teetering on contraction [already is contracting according to some metrics].”

https://www.abc.net.au/news/2019-07-21/manufacturing-retreats-threatening-to-take-global-economy-down/11325860


“…a report from S&P Global Ratings released earlier this month is a sobering document. It’s especially notable given that it is coming from a company that rates the quality of debt for corporate America.The U.S. shale explosion has been fueled by debt.

What S&P sees is not encouraging. This year alone, 10 oil and gas companies rated by S&P Global Ratings have seen their debt ratings cut to D or SD. The D stands for default; SD is selective default, a rating that is handed down when a company voluntarily restructures their debt with their creditors.”

https://www.freightwaves.com/news/freightwaves-oil-report-the-debt-burdens-of-the-shale-companies-may-throttle-output-growth


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