Saturday, June 2, 2018
Weekly Commentary:
Italian Drama
by Doug Noland
full column here:
My summary is below:
For the week
ending June 1, 2018:
STOCKS:
S&P500 increased 0.5% (up 2.3% y-t-d),
Dow Industrials declined 0.5% (down 0.3%)
Dow Utilities slipped 0.6% (down 5.5%)
Dow Transports were little changed (up 2.7%)
S&P 400 Midcaps added 0.6% (up 3.0%)
Small cap Russell 2000 jumped 1.3% (up 7.3%)
Nasdaq100 advanced 1.8% (up 10.7%)
Biotechs surged 3.0% (up 14.2%).
With gold bullion down $8,
the HUI gold stock index dipped 0.6%
(down 6.8%)
U.K.'s FTSE declined 0.4% (up 0.2%).
Japan's Nikkei 225 dropped 1.2% (down 2.6% y-t-d)
France's CAC40 fell 1.4% (up 2.9%)
German DAX lost 1.7% (down 1.5%).
Spain's IBEX 35 sank 2.0% (down 4.1%).
Italy's FTSE MIB dropped 1.3% (up 1.2%)
Brazil's Bovespa fell 2.1% (up 1.1%)
Mexico's Bolsa slipped 0.2% (down 8.8%)
South Korea's Kospi declined 0.9% (down 1.2%)
India’s Sensex gained 0.9% (up 3.4%)
China’s Shanghai dropped 2.1% (down 7.0%)
Turkey's Istanbul National 100 sank 3.9% (down 14.0%)
Russia's MICEX declined 0.5% (up 8.8%).
BONDS & MORTGAGES:
US Ten-year Treasury yields declined three bps to 2.90% (up 50bps).
Long bond yields fell four bps to 3.05% (up 31bps).
Benchmark Fannie Mae MBS yields dipped two bps to 3.62% (up 62bps).
Freddie Mac 30-year fixed mortgage rates
dropped 10 bps to 4.56% (up 62bps y-o-y).
Fifteen-year rates fell nine bps to 4.06% (up 87bps).
dropped 10 bps to 4.56% (up 62bps y-o-y).
Fifteen-year rates fell nine bps to 4.06% (up 87bps).
Five-year hybrid ARM rates declined seven bps to 3.80% (up 69bps).
Jumbo mortgage 30-yr fixed rates down 14 bps to 4.56% (up 54bps).
M2 (narrow) "money" supply expanded $14.8bn last week
to a record $14.013 TN.
M2 gained $490bn,
or 3.6%, over the past year.
Currency Watch:
The U.S. dollar index was little changed at 94.156 (up 2.2% y-t-d).
Commodities Watch:
Goldman Sachs Commodities Index dropped 2.9% (up 7.8% y-t-d).
Spot Gold slipped 0.6% to $1,294 (down 0.7%).
Silver dipped 0.5% to $16.441 (down 4.1%).
Crude fell $1.69 to $65.81 (up 9%).
Gasoline declined 1.2% (up 19%)
Natural Gas gained 1.1% (unchanged)
Copper increased 0.7% (down 6%).
Wheat dropped 3.6% (up 23%).
Corn sank 3.6% (up 12%).
Market Dislocation Watch:
May 29 - Reuters (Dhara Ranasinghe and Abhinav Ramnarayan):
"A deepening political crisis in Italy, the euro zone's third biggest economy, fuelled a selloff in Italian assets and the euro on Tuesday that was reminiscent of the euro zone debt crisis of 2010-12. Short-term Italian bond yields suffered the biggest one-day jump since 1992, while Italian and wider euro zone banking stocks saw their worst day since August 2016."
"A deepening political crisis in Italy, the euro zone's third biggest economy, fuelled a selloff in Italian assets and the euro on Tuesday that was reminiscent of the euro zone debt crisis of 2010-12. Short-term Italian bond yields suffered the biggest one-day jump since 1992, while Italian and wider euro zone banking stocks saw their worst day since August 2016."
May 29 - Financial Times (Kate Allen and Miles Johnson):
"The scale of the moves in Italian debt has stunned some. Italy's two-year government bond price has plunged over the past three trading days, sending its yield soaring from 0.27% to as high as 2.72% on Tuesday. The 10-year bond yield has jumped from 2.4% to a high of 3.39% over the same period."
"The scale of the moves in Italian debt has stunned some. Italy's two-year government bond price has plunged over the past three trading days, sending its yield soaring from 0.27% to as high as 2.72% on Tuesday. The 10-year bond yield has jumped from 2.4% to a high of 3.39% over the same period."
June 1 - Bloomberg (Sridhar Natarajan, Yalman Onaran and Sonali Basak):
"Deutsche Bank AG just ended a roller-coaster week. June doesn't look any less harrowing. Shares of Europe's largest investment bank are trading near a record low, as short sellers pile on and credit derivative traders once again signal doubts about the firm's health. It's part of a painful pattern for the bank and its investors: Another spate of bad headlines keeps outweighing the good."
"Deutsche Bank AG just ended a roller-coaster week. June doesn't look any less harrowing. Shares of Europe's largest investment bank are trading near a record low, as short sellers pile on and credit derivative traders once again signal doubts about the firm's health. It's part of a painful pattern for the bank and its investors: Another spate of bad headlines keeps outweighing the good."
Trump Administration Watch:
May 30 - New York Times (Mark Landler and Ana Swanson):
"President Trump ... reversed course on Tuesday and declared that the United States would impose tariffs and other punitive measures on China. Barely a week after Treasury Secretary Steven Mnuchin said that the trade war was 'on hold' and that tariffs would be suspended as negotiations continued, the White House issued a statement saying the United States would move ahead with its plan to impose 25% tariffs on $50 billion worth of imported Chinese goods within the next month. Mr. Trump's reversal was yet another twist in a long-running ideological battle in the West Wing between economic nationalists, who channel Mr. Trump's protectionist instincts, and more mainstream advisers like Mr. Mnuchin, who worry that tariffs and investment restrictions will hurt the stock market and hobble long-term growth."
"President Trump ... reversed course on Tuesday and declared that the United States would impose tariffs and other punitive measures on China. Barely a week after Treasury Secretary Steven Mnuchin said that the trade war was 'on hold' and that tariffs would be suspended as negotiations continued, the White House issued a statement saying the United States would move ahead with its plan to impose 25% tariffs on $50 billion worth of imported Chinese goods within the next month. Mr. Trump's reversal was yet another twist in a long-running ideological battle in the West Wing between economic nationalists, who channel Mr. Trump's protectionist instincts, and more mainstream advisers like Mr. Mnuchin, who worry that tariffs and investment restrictions will hurt the stock market and hobble long-term growth."
May 30 - Bloomberg (Jenny Leonard and Rich Miller):
"White House trade adviser Peter Navarro criticized Treasury Secretary Steven Mnuchin for declaring the U.S.-China trade war was on hold, calling the remarks an 'unfortunate sound bite' and acknowledging there's a dispute that needs to be resolved. 'What we're having with China is a trade dispute, plain and simple,' Navarro said… 'We lost the trade war long ago' with deals such as Nafta and China's entry into the World Trade Organization, he said. The remarks from Navarro, a hard-liner on President Donald Trump's trade team, come just days before U.S. Commerce Secretary Wilbur Ross is scheduled to meet with his counterparts in Beijing to discuss ways to reduce the U.S. trade deficit with China."
"White House trade adviser Peter Navarro criticized Treasury Secretary Steven Mnuchin for declaring the U.S.-China trade war was on hold, calling the remarks an 'unfortunate sound bite' and acknowledging there's a dispute that needs to be resolved. 'What we're having with China is a trade dispute, plain and simple,' Navarro said… 'We lost the trade war long ago' with deals such as Nafta and China's entry into the World Trade Organization, he said. The remarks from Navarro, a hard-liner on President Donald Trump's trade team, come just days before U.S. Commerce Secretary Wilbur Ross is scheduled to meet with his counterparts in Beijing to discuss ways to reduce the U.S. trade deficit with China."
May 29 - Wall Street Journal (William Mauldin and Lingling Wei):
"The Trump administration sent a sudden, harsh message to its Chinese counterparts, saying the U.S. was moving forward with its threat to apply tariffs on Chinese imports and other actions to restrict Beijing from accessing sensitive U.S. technology. Tuesday's move surprised many observers after the White House had for days trumpeted the outlines of a deal in which any trade war with China would be put on hold while negotiators-led on the U.S. side by Treasury Secretary Steven Mnuchin -worked on a deal that would have China reduce its $375 billion annual trade advantage by buying more U.S. goods."
"The Trump administration sent a sudden, harsh message to its Chinese counterparts, saying the U.S. was moving forward with its threat to apply tariffs on Chinese imports and other actions to restrict Beijing from accessing sensitive U.S. technology. Tuesday's move surprised many observers after the White House had for days trumpeted the outlines of a deal in which any trade war with China would be put on hold while negotiators-led on the U.S. side by Treasury Secretary Steven Mnuchin -worked on a deal that would have China reduce its $375 billion annual trade advantage by buying more U.S. goods."
May 28 - Reuters (Tom Miles):
"Chinese and U.S. envoys sparred at the World Trade Organization… over U.S. President Donald Trump's claims that China steals American ideas, the subject of two lawsuits and a White House plan to slap huge punitive tariffs on Chinese goods. U.S. Ambassador Dennis Shea said 'forced technology transfer' was often an unwritten rule for companies trying to access China's burgeoning marketplace… China's licensing and administrative rules forced foreign firms to share technology if they wanted to do business, while government officials could exploit vague investment rules to impose technology transfer requirements, he said. 'This is not the rule of law. In fact, it is China's laws themselves that enable this coercion,' Shea told the WTO's dispute settlement body…"
"Chinese and U.S. envoys sparred at the World Trade Organization… over U.S. President Donald Trump's claims that China steals American ideas, the subject of two lawsuits and a White House plan to slap huge punitive tariffs on Chinese goods. U.S. Ambassador Dennis Shea said 'forced technology transfer' was often an unwritten rule for companies trying to access China's burgeoning marketplace… China's licensing and administrative rules forced foreign firms to share technology if they wanted to do business, while government officials could exploit vague investment rules to impose technology transfer requirements, he said. 'This is not the rule of law. In fact, it is China's laws themselves that enable this coercion,' Shea told the WTO's dispute settlement body…"
May 31 - Reuters (Michael Nienaber):
"German Chancellor Angela Merkel said… that the European Union would give a 'smart, determined and jointly agreed' response if the United States decides to impose tariffs on European steel and aluminum imports. 'We don't know the decision yet but if tariffs were to be imposed, then we have a clear stance within the European Union,' Merkel said…"
"German Chancellor Angela Merkel said… that the European Union would give a 'smart, determined and jointly agreed' response if the United States decides to impose tariffs on European steel and aluminum imports. 'We don't know the decision yet but if tariffs were to be imposed, then we have a clear stance within the European Union,' Merkel said…"
May 30 - Bloomberg (Bryce Baschuk):
"President Donald Trump's unilateral tariff measures are necessary to fix a broken global trade system and the U.S., like other nations, should focus on its own interests, according to Commerce Secretary Wilbur Ross. 'Every country's primary obligation is to protect its own citizens and their livelihood,' Ross said at an Organisation for Economic Cooperation and Development conference… 'Maybe that's a populist saying but it's one we feel very strongly about.'"
"President Donald Trump's unilateral tariff measures are necessary to fix a broken global trade system and the U.S., like other nations, should focus on its own interests, according to Commerce Secretary Wilbur Ross. 'Every country's primary obligation is to protect its own citizens and their livelihood,' Ross said at an Organisation for Economic Cooperation and Development conference… 'Maybe that's a populist saying but it's one we feel very strongly about.'"
Emerging Markets Bubble Watch:
May 29 - Bloomberg (Mac Margolis):
"After a week of anger and protests, Brazilian truck drivers agreed late Sunday to ease their strike. That's the good news. For more than a week, the truckers had all but staggered this country of 208 million people, jamming the highways with semis and strangling commerce from the grain silos to cargo ports. What's less heartening are the terms of the shaky truce, including cheaper fuel and a tax break for cargo transport workers, which emboldened a powerful pressure group at the expense of Brazilian taxpayers, may well encourage other aggrieved groups to do the same, and did nothing to address the fiscal disarray and ailing infrastructure sapping the region's biggest economy."
"After a week of anger and protests, Brazilian truck drivers agreed late Sunday to ease their strike. That's the good news. For more than a week, the truckers had all but staggered this country of 208 million people, jamming the highways with semis and strangling commerce from the grain silos to cargo ports. What's less heartening are the terms of the shaky truce, including cheaper fuel and a tax break for cargo transport workers, which emboldened a powerful pressure group at the expense of Brazilian taxpayers, may well encourage other aggrieved groups to do the same, and did nothing to address the fiscal disarray and ailing infrastructure sapping the region's biggest economy."
U.S. Bubble Watch:
May 25 - Reuters (Noel Randewich):
"S&P 500 companies have returned a record $1 trillion to shareholders over the past year, helped by a recent surge in dividends and stock buybacks following sweeping corporate tax cuts introduced by Republicans… In the 12 months through March, S&P 500 companies paid out $428 billion in dividends and bought up $573 billion of their own shares, according to S&P Dow Jones Indices analyst Howard Silverblatt. That compares to combined dividends and buybacks worth $939 billion during the year through March 2017…"
"S&P 500 companies have returned a record $1 trillion to shareholders over the past year, helped by a recent surge in dividends and stock buybacks following sweeping corporate tax cuts introduced by Republicans… In the 12 months through March, S&P 500 companies paid out $428 billion in dividends and bought up $573 billion of their own shares, according to S&P Dow Jones Indices analyst Howard Silverblatt. That compares to combined dividends and buybacks worth $939 billion during the year through March 2017…"
May 29 - CNBC (Diana Olick):
"Home values have been rising for six straight years, and the gains have been accelerating for the past two years... 'The continuing run-up in home prices above the pace of income growth is simply not sustainable,' wrote Lawrence Yun, chief economist for the National Association of Realtors… 'From the cyclical low point in home prices six years ago, a typical home price has increased by 48% while the average wage rate has grown by only 14%.'"
"Home values have been rising for six straight years, and the gains have been accelerating for the past two years... 'The continuing run-up in home prices above the pace of income growth is simply not sustainable,' wrote Lawrence Yun, chief economist for the National Association of Realtors… 'From the cyclical low point in home prices six years ago, a typical home price has increased by 48% while the average wage rate has grown by only 14%.'"
May 28 - CNBC (Jaden Urbi):
"Retailers are facing a shipping squeeze, and the trucking industry just can't keep up. According to the American Trucking Associations, there's a shortage of roughly 50,000 truck drivers across the country. And it's hitting both businesses and consumers in the wallet. Companies are complaining about how the driver shortage is impacting their business. Meanwhile, the cost of convenient shipping is starting to catch up with consumers. Amazon recently hiked its Prime membership to $119 a year from $99 a year. The retail giant said one of the reasons for the price jump was increased shipping costs."
"Retailers are facing a shipping squeeze, and the trucking industry just can't keep up. According to the American Trucking Associations, there's a shortage of roughly 50,000 truck drivers across the country. And it's hitting both businesses and consumers in the wallet. Companies are complaining about how the driver shortage is impacting their business. Meanwhile, the cost of convenient shipping is starting to catch up with consumers. Amazon recently hiked its Prime membership to $119 a year from $99 a year. The retail giant said one of the reasons for the price jump was increased shipping costs."
May 25 - CNN Money (Matt Egan):
"Get ready for sticker shock at the gas station if you're one of the estimated 36 million Americans hitting the roads this Memorial Day weekend. Gone are the days of $2-a-gallon gasoline. A spike in crude oil prices has lifted the national average price of gas by 31% over the past year to an average of $2.97 a gallon… Prices at the pump haven't been this high heading into the biggest driving holiday of the year since 2014, when crude was sitting in triple-digit territory."
"Get ready for sticker shock at the gas station if you're one of the estimated 36 million Americans hitting the roads this Memorial Day weekend. Gone are the days of $2-a-gallon gasoline. A spike in crude oil prices has lifted the national average price of gas by 31% over the past year to an average of $2.97 a gallon… Prices at the pump haven't been this high heading into the biggest driving holiday of the year since 2014, when crude was sitting in triple-digit territory."
May 31 - CNBC (Phil LeBeau): "There was a time when new car and truck buyers pushed hard to keep their monthly payment under $500. Those days are quickly fading away. In the first quarter of this year, the average monthly loan payment for a new vehicle climbed $15 compared with last year, hitting an all-time high of $523, according to Experian. The credit analysis company's review of new and open auto loans for the first three months of this year found buyers of new cars, trucks and SUVs borrowed an average of $31,453 - also a record high."
May 30 - Bloomberg (Lucy Meakin, Rich Miller and Catherine Bosley):
"A staggering number of American homeowners remain under water on their mortgages a decade after the housing bubble burst. Almost 4.5 million households -- or 9.1% -- owed more than their homes are worth in the fourth quarter of 2017, according to data firm Zillow, with an estimated 713,000 owing at least twice as much as their property's value. While the percentage is declining, families in communities with stagnant property values are 'trapped in their homes with no easy options to regain equity other than waiting,' said Aaron Terrazas, a senior economist at Zillow."
"A staggering number of American homeowners remain under water on their mortgages a decade after the housing bubble burst. Almost 4.5 million households -- or 9.1% -- owed more than their homes are worth in the fourth quarter of 2017, according to data firm Zillow, with an estimated 713,000 owing at least twice as much as their property's value. While the percentage is declining, families in communities with stagnant property values are 'trapped in their homes with no easy options to regain equity other than waiting,' said Aaron Terrazas, a senior economist at Zillow."
China Watch:
May 28 - Bloomberg:
"Strains are spreading in China's $15 trillion shadow banking industry as investors pull back from the debt-like savings products that helped drive leverage to dangerous levels. Most affected are some $3.8 trillion of so-called trust products, until now the fastest-growing shadow banking segment and a popular way for debt-ridden property developers and local governments to raise funds from millions of ordinary Chinese. In recent weeks, at least two of the products have been forced to delay payments as the market started to freeze up, making it harder to refinance maturing issues with new ones. 'On the one hand you have cash-strapped borrowers scrambling for refinancing; on the other you have cash-rich investors not knowing where to put their money for fear of getting burned,' said James Yang, a sales manager at Shanghai Xiangyi Asset Management Co."
"Strains are spreading in China's $15 trillion shadow banking industry as investors pull back from the debt-like savings products that helped drive leverage to dangerous levels. Most affected are some $3.8 trillion of so-called trust products, until now the fastest-growing shadow banking segment and a popular way for debt-ridden property developers and local governments to raise funds from millions of ordinary Chinese. In recent weeks, at least two of the products have been forced to delay payments as the market started to freeze up, making it harder to refinance maturing issues with new ones. 'On the one hand you have cash-strapped borrowers scrambling for refinancing; on the other you have cash-rich investors not knowing where to put their money for fear of getting burned,' said James Yang, a sales manager at Shanghai Xiangyi Asset Management Co."
May 31 - Reuters (Stella Qiu and Ryan Woo):
"China's vast manufacturing sector grew at the fastest pace in eight months in May, blowing past expectations and easing concerns about an economic slowdown even as risks from trade tensions with the United States and a crackdown on debt point to a bumpy ride ahead. The official Purchasing Managers' Index (PMI) released on Thursday rose to 51.9 in May, from 51.4 in April, and remained well above the 50-point mark that separates growth from contraction for the 22nd straight month."
"China's vast manufacturing sector grew at the fastest pace in eight months in May, blowing past expectations and easing concerns about an economic slowdown even as risks from trade tensions with the United States and a crackdown on debt point to a bumpy ride ahead. The official Purchasing Managers' Index (PMI) released on Thursday rose to 51.9 in May, from 51.4 in April, and remained well above the 50-point mark that separates growth from contraction for the 22nd straight month."
Europe Watch:
May 30 - Financial Times (Robin Wigglesworth):
"For most of the past decade the main job of Doug Rediker, Washington's former top man at the International Monetary Fund, has essentially been to tell US investors to relax about Europe. Now he thinks they might not be nervous enough. Italy's political chaos has reawakened concerns over the country's future in the eurozone, but given its size, the crisis could dwarf that caused by Greece just a few years ago, Mr Rediker worries. 'My own anxiety level has increased significantly,' he admits. 'Italy is too big to save, and too big to fail.' Investors are therefore dusting off their old eurozone crisis playbooks."
"For most of the past decade the main job of Doug Rediker, Washington's former top man at the International Monetary Fund, has essentially been to tell US investors to relax about Europe. Now he thinks they might not be nervous enough. Italy's political chaos has reawakened concerns over the country's future in the eurozone, but given its size, the crisis could dwarf that caused by Greece just a few years ago, Mr Rediker worries. 'My own anxiety level has increased significantly,' he admits. 'Italy is too big to save, and too big to fail.' Investors are therefore dusting off their old eurozone crisis playbooks."
May 31 - Reuters:
"Euro zone inflation jumped by far more than expected in May on higher energy costs, bringing relief to the European Central Bank after market turbulence that has jeopardized its planned exit from a lavish stimulus program. Inflation in the 19 countries sharing the euro rose to 1.9% from 1.2% in April…"
"Euro zone inflation jumped by far more than expected in May on higher energy costs, bringing relief to the European Central Bank after market turbulence that has jeopardized its planned exit from a lavish stimulus program. Inflation in the 19 countries sharing the euro rose to 1.9% from 1.2% in April…"
Geopolitical Watch:
May 30 - Fox News (Lukas Mikelionis):
"Defense Secretary Jim Mattis said… that the U.S. will continue to confront China's increasing militarization of islands in the South China Sea -- despite the U.S. angering Beijing over the weekend by sending two Navy ships to the region. Mattis rebuked China and said the country hasn't abided by its promise to stop militarization of the Spratly Islands, a disputed territory whose ownership is contested by Brunei, Malaysia, the Philippines, Taiwan and Vietnam. Mattis said U.S. ships are maintaining a 'steady drumbeat' of naval operations and will confront 'what we believe is out of step with international law.' 'You'll notice there is only one country that seems to take active steps to rebuff them or state their resentment [to] them, but it's international waters and a lot of nations want to see freedom of navigation,' Mattis told reporters…"
"Defense Secretary Jim Mattis said… that the U.S. will continue to confront China's increasing militarization of islands in the South China Sea -- despite the U.S. angering Beijing over the weekend by sending two Navy ships to the region. Mattis rebuked China and said the country hasn't abided by its promise to stop militarization of the Spratly Islands, a disputed territory whose ownership is contested by Brunei, Malaysia, the Philippines, Taiwan and Vietnam. Mattis said U.S. ships are maintaining a 'steady drumbeat' of naval operations and will confront 'what we believe is out of step with international law.' 'You'll notice there is only one country that seems to take active steps to rebuff them or state their resentment [to] them, but it's international waters and a lot of nations want to see freedom of navigation,' Mattis told reporters…"
May 28 - Wall Street Journal (Benoit Faucon):
"Chinese and Russian state-backed companies are maneuvering to profit from European firms leaving Iran, threatening the Trump administration's bid to raise economic pressure on Tehran. Their efforts show how Iran's business landscape has shifted since the Trump administration withdrew from the nuclear pact... Secretary of State Mike Pompeo has threatened the 'strongest set of sanctions in history' if Iran doesn't rein in its military activities across the Middle East and stop testing long-range missiles. European executives who tried to make inroads in Iran since the Obama administration struck the nuclear deal in 2015 are now concerned Beijing and Moscow will seize an insurmountable advantage in a large, growing market."
"Chinese and Russian state-backed companies are maneuvering to profit from European firms leaving Iran, threatening the Trump administration's bid to raise economic pressure on Tehran. Their efforts show how Iran's business landscape has shifted since the Trump administration withdrew from the nuclear pact... Secretary of State Mike Pompeo has threatened the 'strongest set of sanctions in history' if Iran doesn't rein in its military activities across the Middle East and stop testing long-range missiles. European executives who tried to make inroads in Iran since the Obama administration struck the nuclear deal in 2015 are now concerned Beijing and Moscow will seize an insurmountable advantage in a large, growing market."
May 27 - Wall Street Journal (Chun Han Wong):
"China criticized the U.S. for sending two warships into South China Sea waters that Beijing considers its territory, amid simmering bilateral tensions over trade and North Korea. …China's foreign and defense ministries each expressed 'firm opposition' to what they described as violations of Chinese sovereignty by the guided-missile destroyer USS Higgins and the guided-missile cruiser USS Antietam… 'The Chinese military took immediate action, deploying ships and aircraft to identify the U.S. vessels and issued warnings to drive them away,' Chinese Defense Ministry spokesman Wu Qian said…, which said that the two vessels made 'unauthorized' entry into Chinese waters."
"China criticized the U.S. for sending two warships into South China Sea waters that Beijing considers its territory, amid simmering bilateral tensions over trade and North Korea. …China's foreign and defense ministries each expressed 'firm opposition' to what they described as violations of Chinese sovereignty by the guided-missile destroyer USS Higgins and the guided-missile cruiser USS Antietam… 'The Chinese military took immediate action, deploying ships and aircraft to identify the U.S. vessels and issued warnings to drive them away,' Chinese Defense Ministry spokesman Wu Qian said…, which said that the two vessels made 'unauthorized' entry into Chinese waters."
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