Weekly Commentary:
Just the Facts
January 25, 2019
by Doug Noland
full column here:
My edited version follows:
For the week ending
January 25, 2019:
S&P500 slipped 0.2% (up 6.3% y-t-d)
Dow Industrials added 0.1% (up 6.0%)
Dow Utilities increased 0.7% (up 0.6%)
Dow Transports slipped 0.9% (up 8.2%)
S&P 400 Midcaps (up 9.4%)
and Small cap Russell 2000 (up 10.0%)
were little changed for the week
Nasdaq100 was about unchanged (up 7.2%)
Biotechs declined 0.6% (up 15.4%).
With bullion jumping $21,
the HUI gold stock index
surged 5.2% (down 1.2%).
Japan's Nikkei 225 increased 0.5% (up 3.8% y-t-d)
France's CAC40 gained 1.0% (up 4.1% y-t-d)
German DAX increased 0.7% (up 6.8%).
Spain's IBEX 35 rose 1.3% (up 7.6%).
Italy's FTSE MIB added 0.5% (up 8.1%)
Brazil's Bovespa gained 1.6% (up 11.1%)
Mexico's Bolsa fell 1.4% (up 4.8%)
South Korea's Kospi jumped 2.5% (up 6.7%).
India's Sensex declined 1.0% (down 0.1%).
China's Shanghai added 0.2% (up 4.3%).
Turkey's Istanbul National 100 surged 3.4% (up 11.5%).
Russia's MICEX gained 1.0% (up 5.9%).
Dow Industrials added 0.1% (up 6.0%)
Dow Utilities increased 0.7% (up 0.6%)
Dow Transports slipped 0.9% (up 8.2%)
S&P 400 Midcaps (up 9.4%)
and Small cap Russell 2000 (up 10.0%)
were little changed for the week
Nasdaq100 was about unchanged (up 7.2%)
Biotechs declined 0.6% (up 15.4%).
With bullion jumping $21,
the HUI gold stock index
surged 5.2% (down 1.2%).
Japan's Nikkei 225 increased 0.5% (up 3.8% y-t-d)
France's CAC40 gained 1.0% (up 4.1% y-t-d)
German DAX increased 0.7% (up 6.8%).
Spain's IBEX 35 rose 1.3% (up 7.6%).
Italy's FTSE MIB added 0.5% (up 8.1%)
Brazil's Bovespa gained 1.6% (up 11.1%)
Mexico's Bolsa fell 1.4% (up 4.8%)
South Korea's Kospi jumped 2.5% (up 6.7%).
India's Sensex declined 1.0% (down 0.1%).
China's Shanghai added 0.2% (up 4.3%).
Turkey's Istanbul National 100 surged 3.4% (up 11.5%).
Russia's MICEX gained 1.0% (up 5.9%).
Ten-year US Treasury yields
fell three bps to 2.76% (up 7bps).
Long bond yields
declined three bps to 3.07% (up 5bps).
Benchmark Fannie Mae MBS yields
dipped one basis point to 3.56% (up 5bps).
fell three bps to 2.76% (up 7bps).
Long bond yields
declined three bps to 3.07% (up 5bps).
Benchmark Fannie Mae MBS yields
dipped one basis point to 3.56% (up 5bps).
Freddie Mac 30-year fixed mortgage rates
were unchanged at 4.45% (up 30bps y-o-y).
Fifteen-year rates were unchanged at 3.88% (up 26bps).
Five-year hybrid ARM rates
increased three bps to 3.90% (up 38bps).
Jumbo mortgage 30-yr fixed rates
up six bps to a six-week high 4.48% (up 19bps).
were unchanged at 4.45% (up 30bps y-o-y).
Fifteen-year rates were unchanged at 3.88% (up 26bps).
Five-year hybrid ARM rates
increased three bps to 3.90% (up 38bps).
Jumbo mortgage 30-yr fixed rates
up six bps to a six-week high 4.48% (up 19bps).
Over the past year,
Fed Credit
contracted 8.9%.
Fed Credit
contracted 8.9%.
M2 (narrow) "money" supply
gained 4.9%, over the past year.
gained 4.9%, over the past year.
Currency Watch:
The U.S. dollar index declined 0.6% to 95.794 (down 0.4% y-t-d).
Commodities Watch:
Goldman Sachs Commodities Index
declined 0.8% (up 9.4% y-t-d).
Spot Gold rose 1.7% to $1,303 (up 1.6%).
Silver jumped 1.9% to $15.699 (up 1.0%).
Crude slipped 11 cents to $53.69 (up 18%).
Gasoline dropped 4.4% (up 7%)
Natural Gas sank 8.7% (up 8%).
Copper added 0.4% (up 4%).
Wheat increased 0.4% (up 3%).
Corn declined 0.4% (up 1%).
declined 0.8% (up 9.4% y-t-d).
Spot Gold rose 1.7% to $1,303 (up 1.6%).
Silver jumped 1.9% to $15.699 (up 1.0%).
Crude slipped 11 cents to $53.69 (up 18%).
Gasoline dropped 4.4% (up 7%)
Natural Gas sank 8.7% (up 8%).
Copper added 0.4% (up 4%).
Wheat increased 0.4% (up 3%).
Corn declined 0.4% (up 1%).
Trump Administration Watch:
January 25 – Reuters (Steve Holland and Richard Cowan):
“President Donald Trump agreed under mounting pressure on Friday to end a 35-day-old partial U.S. government shutdown without getting the $5.7 billion he had demanded from Congress for a border wall, handing a political victory to Democrats. The three-week spending deal reached with congressional leaders, quickly passed by the Republican-led Senate and the Democratic-controlled House of Representatives without opposition and signed by Trump, paves the way for tough talks with lawmakers about how to address security along the U.S.-Mexican border.”
“President Donald Trump agreed under mounting pressure on Friday to end a 35-day-old partial U.S. government shutdown without getting the $5.7 billion he had demanded from Congress for a border wall, handing a political victory to Democrats. The three-week spending deal reached with congressional leaders, quickly passed by the Republican-led Senate and the Democratic-controlled House of Representatives without opposition and signed by Trump, paves the way for tough talks with lawmakers about how to address security along the U.S.-Mexican border.”
January 22 – Reuters (Jeff Mason):
“As much as U.S. President Donald Trump wants to boost markets through a trade pact with China, he will not soften his position that Beijing must make real structural reforms, including how it handles intellectual property, to reach a deal, advisers say. Offering to buy more American goods is unlikely by itself to overcome an issue that has bedeviled talks between the two countries. Those talks are set to continue when Chinese Vice Premier Liu He visits Washington at the end of January. The United States accuses China of stealing intellectual property and forcing American companies to share technology when they do business in China. Beijing denies the accusations.”
“As much as U.S. President Donald Trump wants to boost markets through a trade pact with China, he will not soften his position that Beijing must make real structural reforms, including how it handles intellectual property, to reach a deal, advisers say. Offering to buy more American goods is unlikely by itself to overcome an issue that has bedeviled talks between the two countries. Those talks are set to continue when Chinese Vice Premier Liu He visits Washington at the end of January. The United States accuses China of stealing intellectual property and forcing American companies to share technology when they do business in China. Beijing denies the accusations.”
January 24 – CNBC (Berkeley Lovelace Jr.):
“Commerce Secretary Wilbur Ross said Thursday the U.S. is still ‘miles and miles’ from a trade deal with China. ‘Frankly, that shouldn’t be too surprising,’ Ross said… The U.S. and China have ‘lots and lots of issues,’ he continued, and the Trump administration will need to create ‘structural reforms’ and ‘penalties’ in order to resume normal trade relations with Beijing. ‘We would like to make a deal but it has to be a deal that will work for both parties,’ he said. ‘We’re miles and miles from getting a resolution.’ Ross listed the sticking points, starting with what he calls America’s ‘intolerably big trade deficit’ with China. That deficit ballooned to $323.3 billion in 2018… It’s the worst imbalance on record dating to 2006.”
“Commerce Secretary Wilbur Ross said Thursday the U.S. is still ‘miles and miles’ from a trade deal with China. ‘Frankly, that shouldn’t be too surprising,’ Ross said… The U.S. and China have ‘lots and lots of issues,’ he continued, and the Trump administration will need to create ‘structural reforms’ and ‘penalties’ in order to resume normal trade relations with Beijing. ‘We would like to make a deal but it has to be a deal that will work for both parties,’ he said. ‘We’re miles and miles from getting a resolution.’ Ross listed the sticking points, starting with what he calls America’s ‘intolerably big trade deficit’ with China. That deficit ballooned to $323.3 billion in 2018… It’s the worst imbalance on record dating to 2006.”
January 23 – CNBC (Tucker Higgins):
“President Donald Trump’s outside advisor on China said… that he didn’t expect a breakthrough in trade talks in the ‘near term.’ Michael Pillsbury, director of the Center for Chinese Strategy at the Hudson Institute and a noted China hawk with the ear of the president, suggested that he expected a planned meeting between U.S. and Chinese negotiators scheduled for the end of the month to conclude without a trade deal. ‘Over the last 45 years, a lot of American presidents have negotiated with China,’ Pillsbury said… ‘And there are some patterns to what has gone on. One of them is that the Chinese prefer to make a last-minute deal, to get the best deal they can. So I am not among those who think there is going to be a breakthrough in the next few days.’”
“President Donald Trump’s outside advisor on China said… that he didn’t expect a breakthrough in trade talks in the ‘near term.’ Michael Pillsbury, director of the Center for Chinese Strategy at the Hudson Institute and a noted China hawk with the ear of the president, suggested that he expected a planned meeting between U.S. and Chinese negotiators scheduled for the end of the month to conclude without a trade deal. ‘Over the last 45 years, a lot of American presidents have negotiated with China,’ Pillsbury said… ‘And there are some patterns to what has gone on. One of them is that the Chinese prefer to make a last-minute deal, to get the best deal they can. So I am not among those who think there is going to be a breakthrough in the next few days.’”
January 24 – Bloomberg (Victoria Guida and Katy O’Donnell):
“The White House will announce a plan by next month to end government control of Fannie Mae and Freddie Mac in a bid to resolve a long debate over the fate of the two companies that dominate the mortgage market, a top regulator said. Joseph Otting, acting director of the Federal Housing Finance Agency, told employees last week that the administration would not wait on Congress, where attempts to overhaul the housing finance system have repeatedly faltered in the years since Fannie and Freddie were rescued during the financial crisis, according to a recording of his remarks obtained by Politico. ‘In the next two to four weeks you’re going to be able to see some communication that comes out of the White House and Treasury that really sets a direction for what the future of housing will be in the U.S. and what the FHFA’s part of that will be,’ Otting said…”
“The White House will announce a plan by next month to end government control of Fannie Mae and Freddie Mac in a bid to resolve a long debate over the fate of the two companies that dominate the mortgage market, a top regulator said. Joseph Otting, acting director of the Federal Housing Finance Agency, told employees last week that the administration would not wait on Congress, where attempts to overhaul the housing finance system have repeatedly faltered in the years since Fannie and Freddie were rescued during the financial crisis, according to a recording of his remarks obtained by Politico. ‘In the next two to four weeks you’re going to be able to see some communication that comes out of the White House and Treasury that really sets a direction for what the future of housing will be in the U.S. and what the FHFA’s part of that will be,’ Otting said…”
January 21 – Reuters (Sijia Jiang, Michael Martina, Christian Shepherd and Rishika Chatterjee):
“The United States will proceed with the formal extradition from Canada of Huawei executive Meng Wanzhou, Canada’s ambassador to the United States told the Globe and Mail, as Beijing vowed to respond to Washington’s actions.”
“The United States will proceed with the formal extradition from Canada of Huawei executive Meng Wanzhou, Canada’s ambassador to the United States told the Globe and Mail, as Beijing vowed to respond to Washington’s actions.”
U.S. Bubble Watch:
January 23 – CNBC (Annie Nova):
“Hundreds of thousands of people are living without a paycheck amid the longest government shutdown in history. As a result, federal employees and contractors are digging into their retirement savings, filing for unemployment, picking up other jobs and unable to meet their rent or mortgage payments. Most people would be in the same bind if they missed even one pay period. Just 40% of Americans are able to cover an unexpected $1,000 expense, such as an emergency room visit or car repair, with their savings, according to a survey from… Bankrate.”
“Hundreds of thousands of people are living without a paycheck amid the longest government shutdown in history. As a result, federal employees and contractors are digging into their retirement savings, filing for unemployment, picking up other jobs and unable to meet their rent or mortgage payments. Most people would be in the same bind if they missed even one pay period. Just 40% of Americans are able to cover an unexpected $1,000 expense, such as an emergency room visit or car repair, with their savings, according to a survey from… Bankrate.”
January 24 – Reuters (Richard Leong):
“J.P. Morgan economists reduced their outlook for U.S. economic growth in the first quarter to 1.75% from 2.00% as the partial U.S. government shutdown has stretched to a second month for the longest one ever, they said… ‘That estimate solely accounts for the reduction in government sector output and does not incorporate any potential spillover effects into private economic activity. Fortunately, so far those spillovers look contained,’ the banks’ economists wrote…”
“J.P. Morgan economists reduced their outlook for U.S. economic growth in the first quarter to 1.75% from 2.00% as the partial U.S. government shutdown has stretched to a second month for the longest one ever, they said… ‘That estimate solely accounts for the reduction in government sector output and does not incorporate any potential spillover effects into private economic activity. Fortunately, so far those spillovers look contained,’ the banks’ economists wrote…”
January 22 – CNBC (Diana Olick):
“Real estate brokers are trying to figure out why sales of existing homes plunged in December. The 6.4% monthly move was unusually large, regardless of direction. The tally from the National Association of Realtors generally moves in the very low single digits month to month. In fact, the shift was one of the largest that didn’t involve some sort of change in government policy, like the homebuyer tax credit. ‘The latest decline is harder to explain. Perhaps it is the decline in consumer confidence that’s been occurring in the latter half of 2018,’ said Lawrence Yun, chief economist for the Realtors. ‘The latest numbers do not reflect the lower, current mortgage rates compared to the November figures, so it’s really harder to explain.’”
“Real estate brokers are trying to figure out why sales of existing homes plunged in December. The 6.4% monthly move was unusually large, regardless of direction. The tally from the National Association of Realtors generally moves in the very low single digits month to month. In fact, the shift was one of the largest that didn’t involve some sort of change in government policy, like the homebuyer tax credit. ‘The latest decline is harder to explain. Perhaps it is the decline in consumer confidence that’s been occurring in the latter half of 2018,’ said Lawrence Yun, chief economist for the Realtors. ‘The latest numbers do not reflect the lower, current mortgage rates compared to the November figures, so it’s really harder to explain.’”
January 22 – Wall Street Journal (Rob Copeland):
“Messaging startup Hustle projected the picture of Silicon Valley largess. The company spent millions of dollars raised from investors such as Alphabet Inc. on expensive new hires, on-tap kombucha, arcade games and a six-figure salary for its pedigreed chief executive. So it came as a shock to many employees earlier this month when co-founder and CEO Roddy Lindsay sent them an early-morning email announcing mass layoffs. Before the week was done, even the espresso machine was ripped out of the kitchen at Hustle’s San Francisco headquarters. Hustle is hardly the first startup to spend lavishly in an era of technology riches. What is new these days: The bill is coming due.”
“Messaging startup Hustle projected the picture of Silicon Valley largess. The company spent millions of dollars raised from investors such as Alphabet Inc. on expensive new hires, on-tap kombucha, arcade games and a six-figure salary for its pedigreed chief executive. So it came as a shock to many employees earlier this month when co-founder and CEO Roddy Lindsay sent them an early-morning email announcing mass layoffs. Before the week was done, even the espresso machine was ripped out of the kitchen at Hustle’s San Francisco headquarters. Hustle is hardly the first startup to spend lavishly in an era of technology riches. What is new these days: The bill is coming due.”
China Watch:
January 20 – CNBC (Huileng Tan):
“China… announced that its official economic growth came in at 6.6% in 2018 — the slowest pace since 1990. That announcement was highly anticipated by many around the world amid Beijing’s ongoing trade dispute with the U.S., its largest trading partner. Economists polled by Reuters had predicted full-year GDP to come in at that pace, which was down from a revised 6.8% in 2017. Fourth quarter GDP growth was 6.4%, matching expectations.”
“China… announced that its official economic growth came in at 6.6% in 2018 — the slowest pace since 1990. That announcement was highly anticipated by many around the world amid Beijing’s ongoing trade dispute with the U.S., its largest trading partner. Economists polled by Reuters had predicted full-year GDP to come in at that pace, which was down from a revised 6.8% in 2017. Fourth quarter GDP growth was 6.4%, matching expectations.”
January 20 – Reuters (Yawen Chen, Stella Qiu and Ryan Woo):
“Growth in property investment in China cooled to the second slowest pace in 2018 in December, adding to signs of a further slackening in the real estate market in a blow to a key driver of economic growth. Real estate investment, which mainly focuses on the residential sector but includes commercial and office space, rose 8.2% in December from a year earlier, down from 9.3% in
“Growth in property investment in China cooled to the second slowest pace in 2018 in December, adding to signs of a further slackening in the real estate market in a blow to a key driver of economic growth. Real estate investment, which mainly focuses on the residential sector but includes commercial and office space, rose 8.2% in December from a year earlier, down from 9.3% in
January 21 – Bloomberg:
“President Xi Jinping stressed the need to maintain political stability in an unusual meeting of China’s top leaders -- a fresh sign the ruling party is growing concerned about the social implications of the slowing economy. Xi told a ‘seminar’ of top provincial leaders and ministers in Beijing… that the Communist Party needed greater efforts ‘to prevent and resolve major risks,’… He said areas of concern facing the leadership ranged from politics and ideology to the economy, environment and external situation. ‘The party is facing long-term and complex tests in terms of maintaining long-term rule, reform and opening-up, a market-driven economy, and within the external environment,’ Xi said… ‘The party is facing sharp and serious dangers of a slackness in spirit, lack of ability, distance from the people, and being passive and corrupt. This is an overall judgment based on the actual situation.’”
“President Xi Jinping stressed the need to maintain political stability in an unusual meeting of China’s top leaders -- a fresh sign the ruling party is growing concerned about the social implications of the slowing economy. Xi told a ‘seminar’ of top provincial leaders and ministers in Beijing… that the Communist Party needed greater efforts ‘to prevent and resolve major risks,’… He said areas of concern facing the leadership ranged from politics and ideology to the economy, environment and external situation. ‘The party is facing long-term and complex tests in terms of maintaining long-term rule, reform and opening-up, a market-driven economy, and within the external environment,’ Xi said… ‘The party is facing sharp and serious dangers of a slackness in spirit, lack of ability, distance from the people, and being passive and corrupt. This is an overall judgment based on the actual situation.’”
January 20 – CNBC (Edward White):
“Defaults on Chinese corporate bonds rose to a record high last year, in a fresh sign of wobbles hitting the country’s financial markets as economic growth slows. Forty five Chinese corporates defaulted on 117 bonds with a principal amount of Rmb110.5bn ($16.3bn), according to Fitch… Both the number of issuers and principal value were all-time peaks. ‘The vast majority of onshore defaults were by non-[state-owned enterprises], which accounted for 86.7% of defaults by issuer count and 90% by principal amount,’ said Jenny Huang and Shuncheng Zhang, analysts at Fitch, also noting signs that ‘investor risk appetite has deteriorated on the surge in onshore defaults’.”
“Defaults on Chinese corporate bonds rose to a record high last year, in a fresh sign of wobbles hitting the country’s financial markets as economic growth slows. Forty five Chinese corporates defaulted on 117 bonds with a principal amount of Rmb110.5bn ($16.3bn), according to Fitch… Both the number of issuers and principal value were all-time peaks. ‘The vast majority of onshore defaults were by non-[state-owned enterprises], which accounted for 86.7% of defaults by issuer count and 90% by principal amount,’ said Jenny Huang and Shuncheng Zhang, analysts at Fitch, also noting signs that ‘investor risk appetite has deteriorated on the surge in onshore defaults’.”
January 25 – CNBC (Evelyn Cheng):
“Chinese authorities face an ever-growing list of challenges — be it an ongoing trade fight with the U.S. or headwinds in domestic demand — and it appears they don’t have many tools left to spur the economy amid a slowdown. The real estate market in China has traditionally played a major role in its economic development, household wealth and public sentiment and was used by Beijing to stimulate growth during previous downturns… But along with a Chinese penchant for investing in houses, persistent expectations of government support sent prices and the household debt burden soaring… Junheng Li, founder of China-focused equity research firm JL Warren Capital, estimates 61% of Chinese urban households live in homes less than 10 years old… ‘(Some) simple math shows that continuously building new homes to stimulate investments and meanwhile create the false impression of wealth effect coming with home price appreciation is about to hit the wall,’ she said… ‘Chinese policy makers are fully aware and highly alert not to send the wrong signal to the home buyers that home prices will continue to hike.’”
“Chinese authorities face an ever-growing list of challenges — be it an ongoing trade fight with the U.S. or headwinds in domestic demand — and it appears they don’t have many tools left to spur the economy amid a slowdown. The real estate market in China has traditionally played a major role in its economic development, household wealth and public sentiment and was used by Beijing to stimulate growth during previous downturns… But along with a Chinese penchant for investing in houses, persistent expectations of government support sent prices and the household debt burden soaring… Junheng Li, founder of China-focused equity research firm JL Warren Capital, estimates 61% of Chinese urban households live in homes less than 10 years old… ‘(Some) simple math shows that continuously building new homes to stimulate investments and meanwhile create the false impression of wealth effect coming with home price appreciation is about to hit the wall,’ she said… ‘Chinese policy makers are fully aware and highly alert not to send the wrong signal to the home buyers that home prices will continue to hike.’”
Emerging Markets Watch:
January 21 – Bloomberg (Aline Oyamada and Yakob Peterseil):
“The longest weekly rally in emerging-market stocks in a year encouraged record inflows into at least one exchange-traded fund in the past two weeks. Investors piled more than $2 billion into the iShares Core MSCI Emerging Markets ETF, the second largest emerging-market ETF, in the two weeks through Jan. 18.”
“The longest weekly rally in emerging-market stocks in a year encouraged record inflows into at least one exchange-traded fund in the past two weeks. Investors piled more than $2 billion into the iShares Core MSCI Emerging Markets ETF, the second largest emerging-market ETF, in the two weeks through Jan. 18.”
Global Bubble Watch:
January 23 – Financial Times (Gideon Rachman):
“What is going to happen in the US-China trade war? Second, what is going to happen with Brexit? There are considerable similarities between these two questions. In both cases, the only sensible answer is some variant of: ‘I don’t know’. In both cases, there is a strong possibility of a bad ‘no deal’ outcome that could create turmoil in the world economy. And, in both cases, the answer will be revealed in March. The Trump administration has set a deadline of March 2 for the US to reach a new trade deal with China. Without an agreement, the US has pledged to raise its import tariffs on $200bn worth of Chinese goods to 25%, from the current 10% level. The deadline for Britain to leave the EU is March 29. Without a deal, the default position is that there will be a ‘no deal Brexit’ — in which Britain will crash out of the EU, leading to the immediate imposition of tariffs, the lapse of existing legal agreements and a surge in red-tape and regulations.”
“What is going to happen in the US-China trade war? Second, what is going to happen with Brexit? There are considerable similarities between these two questions. In both cases, the only sensible answer is some variant of: ‘I don’t know’. In both cases, there is a strong possibility of a bad ‘no deal’ outcome that could create turmoil in the world economy. And, in both cases, the answer will be revealed in March. The Trump administration has set a deadline of March 2 for the US to reach a new trade deal with China. Without an agreement, the US has pledged to raise its import tariffs on $200bn worth of Chinese goods to 25%, from the current 10% level. The deadline for Britain to leave the EU is March 29. Without a deal, the default position is that there will be a ‘no deal Brexit’ — in which Britain will crash out of the EU, leading to the immediate imposition of tariffs, the lapse of existing legal agreements and a surge in red-tape and regulations.”
January 21 – Reuters (Leika Kihara and Silvia Aloisi):
“The International Monetary Fund trimmed its global growth forecasts… and a survey showed increasing pessimism among business chiefs as trade tensions and uncertainty loomed over the world’s biggest annual gathering of the rich and powerful.”
“The International Monetary Fund trimmed its global growth forecasts… and a survey showed increasing pessimism among business chiefs as trade tensions and uncertainty loomed over the world’s biggest annual gathering of the rich and powerful.”
January 22 – CNBC (Jeff Cox):
“Governments are continuing to run up huge debt levels, with emerging countries helping push the total global IOU to 80% of gross domestic product. The worldwide tab through 2018 is now up to $66 trillion as measured in U.S. currency terms, about double where it was in 2007, just as the financial crisis was beginning to unfold, according to Fitch Ratings’ new Global Government Debt Chart Book… ‘Government debt levels are high, leaving many countries poorly positioned for financial tightening as global interest rates begin to move higher,’ James McCormack, Fitch’s global head of sovereign ratings, said…”
“Governments are continuing to run up huge debt levels, with emerging countries helping push the total global IOU to 80% of gross domestic product. The worldwide tab through 2018 is now up to $66 trillion as measured in U.S. currency terms, about double where it was in 2007, just as the financial crisis was beginning to unfold, according to Fitch Ratings’ new Global Government Debt Chart Book… ‘Government debt levels are high, leaving many countries poorly positioned for financial tightening as global interest rates begin to move higher,’ James McCormack, Fitch’s global head of sovereign ratings, said…”
January 21 – Reuters (Marc Jones):
“Credit ratings in the developing world look set to grind lower again this year as the world economy slows, with Latin America likely to be the center of the action… The year is already off to a gloomy start, with S&P Global warning last week that nearly a third of big bond issuers in emerging markets now have an unsustainable amount of debt. Ratings matter for sovereign borrowers because the more highly rated they are, the lower their funding costs tend to be. Fitch Ratings thinks there will be more downgrades than upgrades again this year and Moody’s… still has close to twice as many countries on downgrade warnings, at 19, than the 11 it sees as candidates for an upgrade.”
“Credit ratings in the developing world look set to grind lower again this year as the world economy slows, with Latin America likely to be the center of the action… The year is already off to a gloomy start, with S&P Global warning last week that nearly a third of big bond issuers in emerging markets now have an unsustainable amount of debt. Ratings matter for sovereign borrowers because the more highly rated they are, the lower their funding costs tend to be. Fitch Ratings thinks there will be more downgrades than upgrades again this year and Moody’s… still has close to twice as many countries on downgrade warnings, at 19, than the 11 it sees as candidates for an upgrade.”
January 20 – Reuters (Tom Miles):
“Global foreign direct investment (FDI) fell 19% last year to an estimated $1.2 trillion, largely caused by U.S. President Donald Trump’s tax reforms, the United Nations trade and development agency UNCTAD said…”
“Global foreign direct investment (FDI) fell 19% last year to an estimated $1.2 trillion, largely caused by U.S. President Donald Trump’s tax reforms, the United Nations trade and development agency UNCTAD said…”
January 23 – Bloomberg (Cathy Chan and Crystal Tse):
“First came a sweeping government crackdown and a surge in defaults and failures at thousands of China’s peer-to-peer lenders. Now, in another troubling sign for the industry, some of the biggest investment banks have stopped taking them public. Wall Street firms including Goldman Sachs… and Citigroup Inc. walked away from U.S. initial public offerings of Chinese P2P lenders in recent months, people with knowledge of the matter said.”
“First came a sweeping government crackdown and a surge in defaults and failures at thousands of China’s peer-to-peer lenders. Now, in another troubling sign for the industry, some of the biggest investment banks have stopped taking them public. Wall Street firms including Goldman Sachs… and Citigroup Inc. walked away from U.S. initial public offerings of Chinese P2P lenders in recent months, people with knowledge of the matter said.”
Europe Watch:
January 23 – Wall Street Journal (Stephen Fidler):
“Europe seems stuck, its economic recovery running out of steam and its politics shaken by the growing strength of nationalist politicians in many European countries. The continent is still in shock from the effects of the financial crisis that started more than a decade ago. In its wake, it has left ‘polarization, reactionary populism and inequality,’ Spain’s new Prime Minister Pedro Sánchez told the World Economic Forum… As a result, politics is in a funk in many countries. Brexit, France’s street protests, and a reaction in Italy and countries of Eastern Europe against the policy prescriptions of the European Union and increased immigration have clouded the path forward, while also threatening to undermine the recovery. Many business and financial leaders prefer to seek action elsewhere.”
“Europe seems stuck, its economic recovery running out of steam and its politics shaken by the growing strength of nationalist politicians in many European countries. The continent is still in shock from the effects of the financial crisis that started more than a decade ago. In its wake, it has left ‘polarization, reactionary populism and inequality,’ Spain’s new Prime Minister Pedro Sánchez told the World Economic Forum… As a result, politics is in a funk in many countries. Brexit, France’s street protests, and a reaction in Italy and countries of Eastern Europe against the policy prescriptions of the European Union and increased immigration have clouded the path forward, while also threatening to undermine the recovery. Many business and financial leaders prefer to seek action elsewhere.”
January 24 – Bloomberg (Fergal O’Brien):
“Germany’s industrial slump worsened at the start of 2019, dragging the euro-area economy into its worst performance in more than five years. IHS Markit’s monthly index showed manufacturing in Germany shrank for the first time in four years. In the euro area it barely grew, and a broader measure of activity dropped to the weakest since 2013.”
“Germany’s industrial slump worsened at the start of 2019, dragging the euro-area economy into its worst performance in more than five years. IHS Markit’s monthly index showed manufacturing in Germany shrank for the first time in four years. In the euro area it barely grew, and a broader measure of activity dropped to the weakest since 2013.”
January 22 – Financial Times (Valentina Romei):
“Italian banks became more cautious about lending in the last quarter of 2018, tightening credit standards as well as terms and conditions on their loans, according to the European Central Bank’s latest bank lending survey. This is the second successive quarter of tightening in the Italian banking sector, ‘partly because they are charging higher interest margins on riskier loans’, said Jack Allen, an economist at Capital Economics.”
“Italian banks became more cautious about lending in the last quarter of 2018, tightening credit standards as well as terms and conditions on their loans, according to the European Central Bank’s latest bank lending survey. This is the second successive quarter of tightening in the Italian banking sector, ‘partly because they are charging higher interest margins on riskier loans’, said Jack Allen, an economist at Capital Economics.”
Brexit Watch:
January 22 – Reuters (Guy Faulconbridge and William James):
“An attempt by British lawmakers to prevent a no-deal Brexit was gaining momentum on Wednesday after the opposition Labour Party said it was likely to throw its parliamentary weight behind that. The United Kingdom, facing the deepest political crisis since World War Two, is due to leave the European Union at 2300 GMT on March 29 but has no approved deal on how the divorce will take place.”
“An attempt by British lawmakers to prevent a no-deal Brexit was gaining momentum on Wednesday after the opposition Labour Party said it was likely to throw its parliamentary weight behind that. The United Kingdom, facing the deepest political crisis since World War Two, is due to leave the European Union at 2300 GMT on March 29 but has no approved deal on how the divorce will take place.”
Japan Watch:
January 20 – Reuters (Tetsushi Kajimoto):
“Confidence among Japanese manufacturers dropped for a third straight month in January to a two-year low, a Reuters monthly poll showed, as worries over the health of the global economy and trade tensions take a toll on the corporate sector.”
“Confidence among Japanese manufacturers dropped for a third straight month in January to a two-year low, a Reuters monthly poll showed, as worries over the health of the global economy and trade tensions take a toll on the corporate sector.”
January 22 – Associated Press (Yuri Kageyama):
“Japan’s exports fell 3.8% in December from a year earlier, hit by slowing demand in China, as the trade balance shifted back into deficit for the year… For the year, imports outpaced the rise in exports, leaving a trade deficit for the first time in three years…”
“Japan’s exports fell 3.8% in December from a year earlier, hit by slowing demand in China, as the trade balance shifted back into deficit for the year… For the year, imports outpaced the rise in exports, leaving a trade deficit for the first time in three years…”
Fixed-Income Bubble Watch:
January 23 – CNBC (Jim Christie):
“California power company PG&E Corp, which expects to soon file for bankruptcy, said… it would cost between $75 billion and $150 billion to fully comply with a judge’s order to inspect its power grid and remove or trim trees that could fall into power lines and trigger wildfires.”
“California power company PG&E Corp, which expects to soon file for bankruptcy, said… it would cost between $75 billion and $150 billion to fully comply with a judge’s order to inspect its power grid and remove or trim trees that could fall into power lines and trigger wildfires.”
Geopolitical Watch:
January 25 – CNBC (Sam Meredith):
“Liberal billionaire George Soros… warned that the U.S. and China, the world’s two largest economies, are locked in a ‘cold war that could soon turn into a hot one.’
His comments come at a time when investors are increasingly concerned about a serious economic downturn, with a long-running U.S.-China trade war souring business and consumer sentiment. Referencing Trump’s decision to label China as a ‘strategic’ competitor in late 2017, Soros said this approach was ‘too simplistic.’ ‘An effective policy towards China can’t be reduced to a slogan. It needs to be far more sophisticated, detailed and practical; and it must include an American economic response to the Belt and Road Initiative,’ he said.”
“Liberal billionaire George Soros… warned that the U.S. and China, the world’s two largest economies, are locked in a ‘cold war that could soon turn into a hot one.’
His comments come at a time when investors are increasingly concerned about a serious economic downturn, with a long-running U.S.-China trade war souring business and consumer sentiment. Referencing Trump’s decision to label China as a ‘strategic’ competitor in late 2017, Soros said this approach was ‘too simplistic.’ ‘An effective policy towards China can’t be reduced to a slogan. It needs to be far more sophisticated, detailed and practical; and it must include an American economic response to the Belt and Road Initiative,’ he said.”
January 23 – Reuters (Andrew Osborn and Robin Emmott):
“Russia accused the United States on Thursday of trying to usurp power in Venezuela and warned against military intervention, putting it at odds with Washington and the EU which backed protests against one of Moscow’s closest allies. Venezuelan opposition leader Juan Guaido declared himself interim leader on Wednesday, winning the support of Washington and parts of Latin America. That prompted socialist President Nicolas Maduro… to sever diplomatic ties with the United States. The prospect of Maduro being ousted is a geopolitical and economic headache for Moscow which, alongside China, has become a creditor of last resort for Caracas”
“Russia accused the United States on Thursday of trying to usurp power in Venezuela and warned against military intervention, putting it at odds with Washington and the EU which backed protests against one of Moscow’s closest allies. Venezuelan opposition leader Juan Guaido declared himself interim leader on Wednesday, winning the support of Washington and parts of Latin America. That prompted socialist President Nicolas Maduro… to sever diplomatic ties with the United States. The prospect of Maduro being ousted is a geopolitical and economic headache for Moscow which, alongside China, has become a creditor of last resort for Caracas”
January 25 – Reuters (Robin Emmott and Vladimir Soldatkin):
“NATO and Russia failed on Friday to resolve a dispute over a new Russian missile that Western allies say is a threat to Europe, bringing closer Washington’s withdrawal from a landmark arms control treaty… Without a breakthrough, the United States is set to start the six-month process of pulling out of the 1987 Intermediate-range Nuclear Forces Treaty (INF), having notified it would do so in early December and accusing Moscow of breaching it.”
“NATO and Russia failed on Friday to resolve a dispute over a new Russian missile that Western allies say is a threat to Europe, bringing closer Washington’s withdrawal from a landmark arms control treaty… Without a breakthrough, the United States is set to start the six-month process of pulling out of the 1987 Intermediate-range Nuclear Forces Treaty (INF), having notified it would do so in early December and accusing Moscow of breaching it.”
January 21 – Reuters (Angus McDowall and Dan Williams):
“Israel struck in Syria early on Monday, the latest salvo in its increasingly open assault on Iran’s presence there, shaking the night sky over Damascus with an hour of loud explosions in a second consecutive night of military action.”
“Israel struck in Syria early on Monday, the latest salvo in its increasingly open assault on Iran’s presence there, shaking the night sky over Damascus with an hour of loud explosions in a second consecutive night of military action.”
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