Saturday, May 25, 2019
Weekly Commentary:
The Ignore Them,
Then Panic Dynamic
by Doug Noland
Full column here:
My summary
of the portions
that interest me
For the Week
ending
May 24, 2019:
GLOBAL STOCKS
S&P500 fell 1.2% (up 12.7% y-t-d)
Dow Indutrials declined 0.7% (up 9.7%)
Dow Utilities advanced 1.6% (up 13.3%)
Dow Transports dropped 3.4% (up 10.5%)
S&P 400 Midcaps fell 1.4% (up 12.0%)
Small cap Russell 2000 lost 1.4% (up 12.3%)
Nasdaq100 dropped 2.7% (up 15.3%)
Biotechs increased 0.4% (up 6.8%).
Though gold bullion rallied $7,
the HUI gold stock index declined 0.9%
(down 7.2%).
U.K.'s FTSE equities index slumped 1.0% (up 8.2% y-t-d).
Japan's Nikkei dipped 0.6% (up 5.5% y-t-d).
France's CAC40 fell 2.2% (up 12.4%)
German DAX lost 1.9% (up 13.8%).
Spain's IBEX 35 declined 1.1% (up 7.4%).
Italy's FTSE MIB sank 3.5% (up 11.2%).
Brazil's Bovespa index rallied 4.0% (up 2.9%)
Mexico's Bolsa dropped 1.9% (up 2.3%)
South Korea's Kospi declined 0.5% (up 0.2%).
India's Sensex surged 4.0% (up 9.3%).
China's Shanghai fell 1.0% (up 14.4%).
Turkey's Istanbul National 100 declined 0.8% (down 5.7%).
Russia's MICEX gained 1.6% (up 10.5%).
France's CAC40 fell 2.2% (up 12.4%)
German DAX lost 1.9% (up 13.8%).
Spain's IBEX 35 declined 1.1% (up 7.4%).
Italy's FTSE MIB sank 3.5% (up 11.2%).
Brazil's Bovespa index rallied 4.0% (up 2.9%)
Mexico's Bolsa dropped 1.9% (up 2.3%)
South Korea's Kospi declined 0.5% (up 0.2%).
India's Sensex surged 4.0% (up 9.3%).
China's Shanghai fell 1.0% (up 14.4%).
Turkey's Istanbul National 100 declined 0.8% (down 5.7%).
Russia's MICEX gained 1.6% (up 10.5%).
US BONDS
Ten-year Treasury yields
dropped seven bps to 2.32% (down 36bps).
dropped seven bps to 2.32% (down 36bps).
Long bond yields
fell seven bps to 2.75% (down 26bps).
fell seven bps to 2.75% (down 26bps).
Benchmark Fannie Mae MBS yields
dropped six bps to 3.10% (down 40bps).
dropped six bps to 3.10% (down 40bps).
US MORTGAGES
Freddie Mac 30-year fixed mortgage rates
slipped a basis point to 4.06% (down 60bps y-o-y).
slipped a basis point to 4.06% (down 60bps y-o-y).
Fifteen-year rates
declined two bps to 3.51% (down 64bps).
declined two bps to 3.51% (down 64bps).
Five-year hybrid ARM rates
gained two bps to 3.68% (down 19bps).
gained two bps to 3.68% (down 19bps).
Jumbo mortgage 30-yr fixed rates
up five bps to 4.21% (down 42bps).
up five bps to 4.21% (down 42bps).
FEDERAL RESERVE BANK
Federal Reserve Credit
over the past year, Fed Credit
contracted 11.0%.
M2 (narrow) "money" supply
increased 4.0%, over the past year.
Currency Watch:
The U.S. dollar index slipped 0.4% to 97.603 (up 1.5% y-t-d).
Commodities Watch:
Bloomberg Commodities Index
declined 1.3% this week (up 2.2% y-t-d).
declined 1.3% this week (up 2.2% y-t-d).
Spot Gold recovered 0.6% to $1,285 (up 0.2%).
Silver gained 1.1% to $14.545 (down 6.4%).
WTI crude sank $4.13 to $58.63 (up 29%).
Gasoline dropped 5.0% (up 47%),
Natural Gas fell 1.3% (down 12%).
Copper lost 1.4% (up 3%).
Wheat surged 5.3% (down 3%).
Corn jumped 5.5% (up 8%).
Market Instability Watch:
May 22 – Financial Times (Joe Rennison and Colby Smith):
“It was an unnerving piece of data for investors last week, buried halfway down an esoteric spreadsheet released by the US government that tracks how many Treasuries foreign investors buy and sell. China, the largest foreign creditor to the US government with total Treasury holdings in excess of $1.2tn, sold $20bn of securities with a maturity exceeding one year in March… The sales amounted to China’s largest retreat from the market in more than two years.”
“It was an unnerving piece of data for investors last week, buried halfway down an esoteric spreadsheet released by the US government that tracks how many Treasuries foreign investors buy and sell. China, the largest foreign creditor to the US government with total Treasury holdings in excess of $1.2tn, sold $20bn of securities with a maturity exceeding one year in March… The sales amounted to China’s largest retreat from the market in more than two years.”
May 20 – Financial Times (Karen Ward):
“The last time Washington and Beijing locked horns, global equities sold off by about one-fifth. This time, markets have shrugged off the blustery tweets from President Donald Trump, responding to threats of escalation with a somewhat bizarre aplomb. The 10% tariff currently being charged on $200bn of goods entering the US has been increased to 25%. The remaining $300bn or so of goods that China imports to the US may also face tariffs. These are numbers that will start to have a notable impact on activity in both China and the US. So why are markets so sanguine? In part it may be seen as rhetorical sabre-rattling, consistent with the narrative Mr Trump set out in his book The Art of the Deal. More likely the market is taking solace in the fact that the Federal Reserve is showing willingness this time round to pick up the pieces.”
“The last time Washington and Beijing locked horns, global equities sold off by about one-fifth. This time, markets have shrugged off the blustery tweets from President Donald Trump, responding to threats of escalation with a somewhat bizarre aplomb. The 10% tariff currently being charged on $200bn of goods entering the US has been increased to 25%. The remaining $300bn or so of goods that China imports to the US may also face tariffs. These are numbers that will start to have a notable impact on activity in both China and the US. So why are markets so sanguine? In part it may be seen as rhetorical sabre-rattling, consistent with the narrative Mr Trump set out in his book The Art of the Deal. More likely the market is taking solace in the fact that the Federal Reserve is showing willingness this time round to pick up the pieces.”
May 22 – Bloomberg (Enda Curran and Chris Anstey):
“After months of predicting a trade deal between the world’s two largest economies, economists at some of the biggest financial institutions are growing increasingly pessimistic. Goldman Sachs…, Nomura… and JPMorgan… are among those that have rewritten their forecasts as U.S. President Donald Trump threatens to impose a 25% tariffs on around $300 billion of additional Chinese imports. Analysts at Nomura have made that hike in duties -- which would mean practically all of China’s exports to the U.S. are hit by tariff hikes -- their baseline forecast. They see it as a 65% probability before year-end, and most likely to come in the third quarter. ‘The U.S.-China relationship has moved further off track over the past two weeks after a period of what appeared, on the surface, to be steady progress towards reaching an admittedly narrow agreement,’ Nomura economists wrote… ‘We do not think the two sides will be able to get back to where they seemed to be in late April.’”
“After months of predicting a trade deal between the world’s two largest economies, economists at some of the biggest financial institutions are growing increasingly pessimistic. Goldman Sachs…, Nomura… and JPMorgan… are among those that have rewritten their forecasts as U.S. President Donald Trump threatens to impose a 25% tariffs on around $300 billion of additional Chinese imports. Analysts at Nomura have made that hike in duties -- which would mean practically all of China’s exports to the U.S. are hit by tariff hikes -- their baseline forecast. They see it as a 65% probability before year-end, and most likely to come in the third quarter. ‘The U.S.-China relationship has moved further off track over the past two weeks after a period of what appeared, on the surface, to be steady progress towards reaching an admittedly narrow agreement,’ Nomura economists wrote… ‘We do not think the two sides will be able to get back to where they seemed to be in late April.’”
Trump Administration Watch:
May 19 – Reuters (David Lawder and Nandita Bose):
“U.S. President Donald Trump said his tariffs on Chinese goods are causing companies to move production out of China to Vietnam and other countries in Asia, and added that any agreement with China cannot be a ‘50-50’ deal. In an interview with Fox News…, Trump said that the United States and China ‘had a very strong deal, we had a good deal, and they changed it. And I said that’s OK, we’re going to tariff their products.’”
“U.S. President Donald Trump said his tariffs on Chinese goods are causing companies to move production out of China to Vietnam and other countries in Asia, and added that any agreement with China cannot be a ‘50-50’ deal. In an interview with Fox News…, Trump said that the United States and China ‘had a very strong deal, we had a good deal, and they changed it. And I said that’s OK, we’re going to tariff their products.’”
May 22 – CNBC (Yun Li):
“Treasury Secretary Steven Mnuchin said a resumption of trade talks with China is not on the calendar yet… ‘I’m still hopeful that we can get back to the table. The two presidents will most likely see each other at the end of June,’ Mnuchin said... The two leaders are set to meet at the G-20 summit in Japan next month.”
“Treasury Secretary Steven Mnuchin said a resumption of trade talks with China is not on the calendar yet… ‘I’m still hopeful that we can get back to the table. The two presidents will most likely see each other at the end of June,’ Mnuchin said... The two leaders are set to meet at the G-20 summit in Japan next month.”
May 22 – Reuters (Jason Lange and Michael Martina):
“The United States is at least a month from enacting its proposed tariffs on $300 billion in Chinese imports as it studies the impact on American consumers, U.S. Treasury Secretary Steven Mnuchin said… Washington this month hiked existing tariffs on $200 billion in Chinese goods to 25% from 10%, prompting Beijing to retaliate with its own levies on U.S. imports, as talks to end a 10-month trade war between the world’s two largest economies stalled.”
“The United States is at least a month from enacting its proposed tariffs on $300 billion in Chinese imports as it studies the impact on American consumers, U.S. Treasury Secretary Steven Mnuchin said… Washington this month hiked existing tariffs on $200 billion in Chinese goods to 25% from 10%, prompting Beijing to retaliate with its own levies on U.S. imports, as talks to end a 10-month trade war between the world’s two largest economies stalled.”
May 20 – NPR (Bobby Allyn and Matthew S. Schwartz):
“Days after blacklisting Chinese technology company Huawei from buying American-made products, the Trump administration is now easing up. On Monday, the U.S. Commerce Department restored the… tech giant's ability to maintain its network, which means the company can buy equipment and complete software updates to support those who use Huawei smartphones, according to a 90-day temporary general license issued by federal officials.”
“Days after blacklisting Chinese technology company Huawei from buying American-made products, the Trump administration is now easing up. On Monday, the U.S. Commerce Department restored the… tech giant's ability to maintain its network, which means the company can buy equipment and complete software updates to support those who use Huawei smartphones, according to a 90-day temporary general license issued by federal officials.”
May 23 – Axios (Steve LeVine):
“Short of a highly improbable climbdown by China, President Trump, confronting a strong re-election challenge from Democrats, is likely to maintain an aggressive public posture toward Beijing at least through the 2020 campaign cycle, experts tell Axios. The big picture: Standing tall against China is one of the very few issues with strong bipartisan popularity across the country, which will make Trump hesitant to let it go, especially given the strong economy. For China's Xi Jinping, too, there is much greater political safety in not caving to Trump. ‘Whether or not we get a deal on trade, the U.S.-China relationship is heading towards greater confrontation,’ says Ian Bremmer, president of the Eurasia Group.”
“Short of a highly improbable climbdown by China, President Trump, confronting a strong re-election challenge from Democrats, is likely to maintain an aggressive public posture toward Beijing at least through the 2020 campaign cycle, experts tell Axios. The big picture: Standing tall against China is one of the very few issues with strong bipartisan popularity across the country, which will make Trump hesitant to let it go, especially given the strong economy. For China's Xi Jinping, too, there is much greater political safety in not caving to Trump. ‘Whether or not we get a deal on trade, the U.S.-China relationship is heading towards greater confrontation,’ says Ian Bremmer, president of the Eurasia Group.”
May 21 – Bloomberg (Jenny Leonard and Nick Wadhams):
“The U.S. is considering cutting off the flow of vital American technology to five Chinese companies including Megvii, widening a dragnet beyond Huawei to include world leaders in video surveillance as it seeks to challenge China’s treatment of minority Uighurs in the country’s west. The U.S. is deliberating whether to add Megvii, Zhejiang Dahua Technology Co., Hangzhou Hikvision Digital Technology Co. and two others to a blacklist that bars them from U.S. components or software…”
“The U.S. is considering cutting off the flow of vital American technology to five Chinese companies including Megvii, widening a dragnet beyond Huawei to include world leaders in video surveillance as it seeks to challenge China’s treatment of minority Uighurs in the country’s west. The U.S. is deliberating whether to add Megvii, Zhejiang Dahua Technology Co., Hangzhou Hikvision Digital Technology Co. and two others to a blacklist that bars them from U.S. components or software…”
May 22 – Wall Street Journal (Rebecca Ballhaus and Michael C. Bender): “President Trump said he wouldn’t work with Democrats while investigations of him continue and abruptly ended a meeting with the party’s leaders…, casting fresh doubt on a divided Washington’s ability to complete big-ticket legislation in the next 18 months. The morning began with House Speaker Nancy Pelosi (D., Calif.) accusing the Republican president of engaging in a ‘coverup’ as she fended off a rising chorus of Democrats calling for Mr. Trump’s impeachment. Soon after, Mr. Trump stormed out of a planned meeting on infrastructure at the White House with Mrs. Pelosi and Sen. Chuck Schumer (D., N.Y.) after telling them that the talks were off. At a hastily called news conference moments later in the Rose Garden, Mr. Trump said he wouldn’t work with Congress ‘under these circumstances.’”
May 23 – The Hill (Juliegrace Brufke and Niv Elis):
“The odds of congressional negotiators reaching a deal to lift budget caps and raise the debt ceiling ahead of their Memorial Day recess appear to be growing increasingly grim despite top lawmakers' earlier optimism. ‘The first meeting went pretty well the second meeting not as well,’ House Minority Leader Kevin McCarthy (R-Calif.) said… ‘I think it will take a little more time.’ Disagreements over nondefense discretionary spending remain a key sticking point between parties, with Republicans arguing Democrats are requesting ‘obscene’ levels of spending.”
“The odds of congressional negotiators reaching a deal to lift budget caps and raise the debt ceiling ahead of their Memorial Day recess appear to be growing increasingly grim despite top lawmakers' earlier optimism. ‘The first meeting went pretty well the second meeting not as well,’ House Minority Leader Kevin McCarthy (R-Calif.) said… ‘I think it will take a little more time.’ Disagreements over nondefense discretionary spending remain a key sticking point between parties, with Republicans arguing Democrats are requesting ‘obscene’ levels of spending.”
May 19 – Financial Times (Kiran Stacey and Demetri Sevastopulo):
“US intelligence chiefs have held a series of classified briefings with American companies and other groups to warn them of the dangers of doing business in China, a further sign of Washington’s increasingly hawkish stance towards trade between the two countries. Dan Coats, the director of national intelligence, has given several briefings alongside colleagues from the FBI and the National Counterintelligence and Security Center to large technology companies, venture capitalists and educational institutions.”
“US intelligence chiefs have held a series of classified briefings with American companies and other groups to warn them of the dangers of doing business in China, a further sign of Washington’s increasingly hawkish stance towards trade between the two countries. Dan Coats, the director of national intelligence, has given several briefings alongside colleagues from the FBI and the National Counterintelligence and Security Center to large technology companies, venture capitalists and educational institutions.”
May 20 – New York Times (Li Yuan):
“China has spent nearly two decades building a digital wall between itself and the rest of the world, a one-way barrier designed to keep out foreign companies like Facebook and Google while allowing Chinese rivals to leave home and expand across the world. Now President Trump is sealing up that wall from the other side. Google said on Monday that it would limit the software services it provides to Huawei, the telecommunications giant, after a White House order last week restricted the Chinese company’s access to American technology. Google’s software powers Huawei’s smartphones, and its apps come preloaded on the devices Huawei sells around the world. Depending on how the White House’s order is carried out, that could come to a stop.”
“China has spent nearly two decades building a digital wall between itself and the rest of the world, a one-way barrier designed to keep out foreign companies like Facebook and Google while allowing Chinese rivals to leave home and expand across the world. Now President Trump is sealing up that wall from the other side. Google said on Monday that it would limit the software services it provides to Huawei, the telecommunications giant, after a White House order last week restricted the Chinese company’s access to American technology. Google’s software powers Huawei’s smartphones, and its apps come preloaded on the devices Huawei sells around the world. Depending on how the White House’s order is carried out, that could come to a stop.”
May 22 – Wall Street Journal (Gregg Ip):
“After two years of treating adversaries and allies alike as trade villains, President Trump pivoted last week. With China edging away from commitments to change its ways, Mr. Trump sharply ratcheted up tariffs and banned U.S. companies from doing business with Huawei Technologies Co. Separately, he lifted tariffs on metal imports from Canada and Mexico while delaying for six months tariffs on autos from the European Union and Japan. Meanwhile, U.S., European and Japanese trade officials are to meet this week on joint efforts to curb Chinese subsidies. But before heralding a united front, let’s remember how Mr. Trump got here: not by working with allies, but by stiff-arming them. His confrontation with China today remains a largely unilateral affair, using American laws and leverage to address American grievances and priorities.”
“After two years of treating adversaries and allies alike as trade villains, President Trump pivoted last week. With China edging away from commitments to change its ways, Mr. Trump sharply ratcheted up tariffs and banned U.S. companies from doing business with Huawei Technologies Co. Separately, he lifted tariffs on metal imports from Canada and Mexico while delaying for six months tariffs on autos from the European Union and Japan. Meanwhile, U.S., European and Japanese trade officials are to meet this week on joint efforts to curb Chinese subsidies. But before heralding a united front, let’s remember how Mr. Trump got here: not by working with allies, but by stiff-arming them. His confrontation with China today remains a largely unilateral affair, using American laws and leverage to address American grievances and priorities.”
May 21 – CNBC (Evelyn Cheng):
“U.S. President Donald Trump’s latest tariff increase — and Beijing’s plans to counter them — are hitting U.S. companies in China. Nearly three-fourths, or 74.9%, of almost 250 respondents to a survey held from May 16 to May 20 said the increases in American and Chinese tariffs are having a negative impact on their business, according to… the American Chamber of Commerce in Shanghai and the Beijing-based American Chamber of Commerce in China.”
“U.S. President Donald Trump’s latest tariff increase — and Beijing’s plans to counter them — are hitting U.S. companies in China. Nearly three-fourths, or 74.9%, of almost 250 respondents to a survey held from May 16 to May 20 said the increases in American and Chinese tariffs are having a negative impact on their business, according to… the American Chamber of Commerce in Shanghai and the Beijing-based American Chamber of Commerce in China.”
May 20 – Bloomberg (Editorial Board):
“Last week, the Commerce Department placed Huawei and nearly 70 of its affiliates on an ‘Entity List,’ which means that U.S. suppliers may now need a license to do business with them. Both Huawei’s mobile phones and its network equipment rely on American components, including advanced semiconductors. If the ban is applied stringently, it could drive one of China’s most high-profile companies — employing more than 180,000 people — out of business. That would be a serious mistake.”
“Last week, the Commerce Department placed Huawei and nearly 70 of its affiliates on an ‘Entity List,’ which means that U.S. suppliers may now need a license to do business with them. Both Huawei’s mobile phones and its network equipment rely on American components, including advanced semiconductors. If the ban is applied stringently, it could drive one of China’s most high-profile companies — employing more than 180,000 people — out of business. That would be a serious mistake.”
U.S. Bubble Watch:
May 21 – Reuters (Lucia Mutikani):
“U.S. home sales fell for a second straight month in April, weighed down by a chronic shortage of more affordable houses, the latest sign the economy was slowing after a temporary boost from exports and an inventory overhang in the first quarter… ‘A mismatch between strengthening entry level demand and scarce entry level supply is likely playing a role in the underwhelming sales pace,’ said Charlie Dougherty, an economist at Wells Fargo…”
“U.S. home sales fell for a second straight month in April, weighed down by a chronic shortage of more affordable houses, the latest sign the economy was slowing after a temporary boost from exports and an inventory overhang in the first quarter… ‘A mismatch between strengthening entry level demand and scarce entry level supply is likely playing a role in the underwhelming sales pace,’ said Charlie Dougherty, an economist at Wells Fargo…”
May 19 – Wall Street Journal (Amrith Ramkumar and Theo Francis):
“Spending on factories, equipment and other capital goods slowed in the first quarter among a broad cross-section of large, U.S.-listed firms, bolstering investor concerns that a key driver of economic growth is fading. Capital spending rose 3% from a year earlier in the first quarter at 356 S&P 500 companies…, according to an analysis by The Wall Street Journal of data supplied by Calcbench… That is down from a 20% rise in the year-ago period for the same companies… Executives at several companies said lingering trade tensions with China were making them and their customers cautious…”
“Spending on factories, equipment and other capital goods slowed in the first quarter among a broad cross-section of large, U.S.-listed firms, bolstering investor concerns that a key driver of economic growth is fading. Capital spending rose 3% from a year earlier in the first quarter at 356 S&P 500 companies…, according to an analysis by The Wall Street Journal of data supplied by Calcbench… That is down from a 20% rise in the year-ago period for the same companies… Executives at several companies said lingering trade tensions with China were making them and their customers cautious…”
May 20 – Financial Times (Robert Armstrong):
“The quality of big US banks’ commercial lending portfolios is deteriorating for the first time in nearly three years, leaving investors to wonder whether there is worse to come should the ebullient economy slow. Non-performing loans at the 10 largest commercial lenders rose 20%, or $1.6bn, in the first quarter… That reversed a steady improvement in credit quality dating back to 2016, when a wave of borrowers fell into default after oil prices crashed. The level of sour loans remains historically low relative to banks’ balance sheets.”
“The quality of big US banks’ commercial lending portfolios is deteriorating for the first time in nearly three years, leaving investors to wonder whether there is worse to come should the ebullient economy slow. Non-performing loans at the 10 largest commercial lenders rose 20%, or $1.6bn, in the first quarter… That reversed a steady improvement in credit quality dating back to 2016, when a wave of borrowers fell into default after oil prices crashed. The level of sour loans remains historically low relative to banks’ balance sheets.”
May 23 – CNBC (Eric Rosenbaum):
“An unexpected expense of $400 can force more than one-third of American adults into a difficult financial situation. That’s according to the just-released ‘Report on the Economic Well-being of U.S. Households for 2018,’ a study that Fed has been conducting since 2013. The Fed survey finds that many families have experienced substantial gains since 2013, but the decade-long economic expansion and the low unemployment has done ‘little to narrow the persistent economic disparities by race, education, and geography.’”
“An unexpected expense of $400 can force more than one-third of American adults into a difficult financial situation. That’s according to the just-released ‘Report on the Economic Well-being of U.S. Households for 2018,’ a study that Fed has been conducting since 2013. The Fed survey finds that many families have experienced substantial gains since 2013, but the decade-long economic expansion and the low unemployment has done ‘little to narrow the persistent economic disparities by race, education, and geography.’”
May 20 – Gallup (Mohamed Younis):
“Americans today are more closely divided than they were earlier in the last century when asked whether some form of socialism would be a good or bad thing for the country. While 51% of U.S. adults say socialism would be a bad thing for the country, 43% believe it would be a good thing. Those results contrast with a 1942 Roper/Fortune survey that found 40% describing socialism as a bad thing, 25% a good thing and 34% not having an opinion.”
“Americans today are more closely divided than they were earlier in the last century when asked whether some form of socialism would be a good or bad thing for the country. While 51% of U.S. adults say socialism would be a bad thing for the country, 43% believe it would be a good thing. Those results contrast with a 1942 Roper/Fortune survey that found 40% describing socialism as a bad thing, 25% a good thing and 34% not having an opinion.”
China Watch:
May 20 – Reuters (Natalia Drozdiak, Jonathan Stearns, and Nikos Chrysoloras): “China could retaliate against the U.S. after President Donald Trump blacklisted Huawei Technologies Co., the Chinese ambassador to the European Union said. Trump upped the ante in his trade dispute with China last week, announcing moves to curb Huawei’s business that are starting to have ramifications for other companies around the world. ‘This is wrong behavior, so there will be a necessary response,’ Zhang Ming, China’s envoy to the EU, said… ‘Chinese companies’ legitimate rights and interests are being undermined, so the Chinese government will not sit idly by.’”
May 22 – Bloomberg:
“China’s grip on the world’s rare earths market is in focus once again amid speculation the dominant producer could choke off supplies as the trade war escalates. But they’re not the only strategic minerals to watch if China’s relations with the U.S. deteriorate. President Donald Trump’s blitz on China’s flagship maker of telecoms hardware, and the possibility that more tech companies could be targeted, has raised fears that Beijing’s retaliation may embroil multiple industries using critical commodities. Rare earths have drawn most attention after President Xi Jinping made a point of visiting a plant this week. China has used them before as a political weapon, notably after a maritime dispute with Japan in 2010.
The potential for a trade-based cold war also highlights the emerging industries where China is ahead in securing supply chains. That includes batteries for electric vehicles and mass storage, which rely on cobalt, lithium and a cluster of other materials that were niche but are now only growing in significance.”
“China’s grip on the world’s rare earths market is in focus once again amid speculation the dominant producer could choke off supplies as the trade war escalates. But they’re not the only strategic minerals to watch if China’s relations with the U.S. deteriorate. President Donald Trump’s blitz on China’s flagship maker of telecoms hardware, and the possibility that more tech companies could be targeted, has raised fears that Beijing’s retaliation may embroil multiple industries using critical commodities. Rare earths have drawn most attention after President Xi Jinping made a point of visiting a plant this week. China has used them before as a political weapon, notably after a maritime dispute with Japan in 2010.
The potential for a trade-based cold war also highlights the emerging industries where China is ahead in securing supply chains. That includes batteries for electric vehicles and mass storage, which rely on cobalt, lithium and a cluster of other materials that were niche but are now only growing in significance.”
May 20 – Financial Times (Editorial Board):
“Huawei is under siege. Google is restricting parts of its Android operating system to the Chinese telecoms tech giant. US chipmakers are poised to suspend supplies too. The US move to put the Chinese telecoms flagship on its so-called Entity List — requiring American companies to obtain a government licence to sell to it — is a pivotal moment for the global technology industry. It represents an opening salvo in an emerging new US-China cold war. It is also a serious miscalculation.”
“Huawei is under siege. Google is restricting parts of its Android operating system to the Chinese telecoms tech giant. US chipmakers are poised to suspend supplies too. The US move to put the Chinese telecoms flagship on its so-called Entity List — requiring American companies to obtain a government licence to sell to it — is a pivotal moment for the global technology industry. It represents an opening salvo in an emerging new US-China cold war. It is also a serious miscalculation.”
May 19 – Reuters (Josh Horwitz):
“Chinese state media… criticized the United States for its complaints about intellectual property theft, calling them a ‘political tool’ intended to suppress China’s economic development… An op-ed article in the People’s Daily targeted the Section 301 report Washington issued in March 2018, saying the authors fabricated the claim that China stole hundreds of billions of dollars worth of intellectual property from the U.S.”
“Chinese state media… criticized the United States for its complaints about intellectual property theft, calling them a ‘political tool’ intended to suppress China’s economic development… An op-ed article in the People’s Daily targeted the Section 301 report Washington issued in March 2018, saying the authors fabricated the claim that China stole hundreds of billions of dollars worth of intellectual property from the U.S.”
May 22 – Bloomberg (Jason Gale):
“China’s attempts to control African swine fever have been insufficient to stem further spread of the disease, with the deadly pig contagion now endemic in two regions, a United Nations group said. The virus that causes the disease is entrenched among pig populations in the autonomous regions of Tibet and Xinjiang Uygur… Diseases that are endemic, or generally present, are more difficult to stamp out by quarantining and culling diseased and vulnerable livestock. About 20% of China’s pig inventories may have been culled in the first few months of 2019 amid fears of African swine fever spreading more rapidly… China’s pig production will drop by 134 million head, or 20%, in 2019, the U.S. Department of Agriculture said…”
“China’s attempts to control African swine fever have been insufficient to stem further spread of the disease, with the deadly pig contagion now endemic in two regions, a United Nations group said. The virus that causes the disease is entrenched among pig populations in the autonomous regions of Tibet and Xinjiang Uygur… Diseases that are endemic, or generally present, are more difficult to stamp out by quarantining and culling diseased and vulnerable livestock. About 20% of China’s pig inventories may have been culled in the first few months of 2019 amid fears of African swine fever spreading more rapidly… China’s pig production will drop by 134 million head, or 20%, in 2019, the U.S. Department of Agriculture said…”
May 22 – CNBC (Arjun Kharpal):
“Huawei could have its own operating system for smartphones and laptops ready for use in China by fall this year, the head of the company’s consumer division told CNBC. Still, he stressed that would only happen if the company were completely stopped from using Google’s and Microsoft’s software.”
“Huawei could have its own operating system for smartphones and laptops ready for use in China by fall this year, the head of the company’s consumer division told CNBC. Still, he stressed that would only happen if the company were completely stopped from using Google’s and Microsoft’s software.”
Brexit Watch:
May 24 – Bloomberg (Tim Ross and Fergal O'Brien):
“As Prime Minister Theresa May finally succumbed to the pressure to step down as leader of the Conservative Party, she had a message to whoever succeeds her: you will have to compromise. It’s a lesson she learned the hard way… Her entire three-year time in office was consumed by the seemingly impossible task of executing a 2016 referendum decision to leave the European Union. ‘To succeed, he or she will have to find consensus in Parliament where I have not,’ she told television cameras… ‘Such a consensus can only be reached if those on all sides of the debate are willing to compromise.’ Compromise, she said, is ‘not a dirty word.’ Hours after May said she was resigning, a top contender for her job was already making his Brexit pitch and was choosing to keep the no-deal option that markets fear on the table. ‘The way to get a good deal is to prepare for a no-deal situation,’ former Foreign Secretary Boris Johnson told a conference… ‘To get things done you need to be prepared to walk away.’”
“As Prime Minister Theresa May finally succumbed to the pressure to step down as leader of the Conservative Party, she had a message to whoever succeeds her: you will have to compromise. It’s a lesson she learned the hard way… Her entire three-year time in office was consumed by the seemingly impossible task of executing a 2016 referendum decision to leave the European Union. ‘To succeed, he or she will have to find consensus in Parliament where I have not,’ she told television cameras… ‘Such a consensus can only be reached if those on all sides of the debate are willing to compromise.’ Compromise, she said, is ‘not a dirty word.’ Hours after May said she was resigning, a top contender for her job was already making his Brexit pitch and was choosing to keep the no-deal option that markets fear on the table. ‘The way to get a good deal is to prepare for a no-deal situation,’ former Foreign Secretary Boris Johnson told a conference… ‘To get things done you need to be prepared to walk away.’”
Europe Watch:
May 23 – Bloomberg (Fergal O'Brien and Carolynn Look):
“German business confidence fell to the weakest in more than four years as the escalation of global trade tensions weighed heavily on the outlook. Along with a survey showing manufacturing still contracting and new orders falling, it’s a reminder of the shaky situation Europe’s largest economy is in. Its car industry is in upheaval and industrial giants such as Thyssenkrupp AG are seeing earnings plunge. The drop in the Ifo index was bigger than forecast and took the closely watched gauge to its lowest since November 2014.”
“German business confidence fell to the weakest in more than four years as the escalation of global trade tensions weighed heavily on the outlook. Along with a survey showing manufacturing still contracting and new orders falling, it’s a reminder of the shaky situation Europe’s largest economy is in. Its car industry is in upheaval and industrial giants such as Thyssenkrupp AG are seeing earnings plunge. The drop in the Ifo index was bigger than forecast and took the closely watched gauge to its lowest since November 2014.”
May 22 – Wall Street Journal (Valentina Pop in Brussels and Giovanni Legorano): “As the U.K. stumbles on its way out of the European Union, a potentially greater disruption for the bloc is crystallizing: Other EU-skeptic movements want to stay in the EU and fight it from within. This week’s elections to the European Parliament are expected to confirm such parties’ rising strength inside EU institutions, heralding an age in which Europe’s political establishment must find ways to cohabit with unruly rebels. ‘The extremists are in Brussels and have governed Europe for 20 years,’ Matteo Salvini, head of Italy’s far-right League party, told a large crowd…, pledging a different EU: ‘We want to construct a future without the bureaucrats who only look to the past,’ he said.”
Japan Watch:
May 19 – Reuters (Tetsushi Kajimoto and Leika Kihara):
“Japan’s economy grew at an annualised rate of 2.1%...,
accelerating slightly from the previous quarter’s growth
backed by net export gains.”
“Japan’s economy grew at an annualised rate of 2.1%...,
accelerating slightly from the previous quarter’s growth
backed by net export gains.”
May 23 – Reuters (Stanley White):
“Japanese manufacturing activity swung back into contraction in May as export orders fell at the fastest pace in four months, highlighting why policy makers and investors remain anxious about the growing economic impact of a bruising Sino-U.S. trade war. The Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonally adjusted 49.6 in May from a final 50.2 in the previous month.”
“Japanese manufacturing activity swung back into contraction in May as export orders fell at the fastest pace in four months, highlighting why policy makers and investors remain anxious about the growing economic impact of a bruising Sino-U.S. trade war. The Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonally adjusted 49.6 in May from a final 50.2 in the previous month.”
May 21 – Reuters (Leika Kihara):
“A sales tax hike scheduled for October could derail Japan’s economic recovery, a central bank board member said…, noting more monetary stimulus would be needed if a slowdown hampered the bank’s efforts to boost prices. Yutaka Harada, a pro-stimulus member of the Bank of Japan’s board, warned the country’s economy was already hurt by sluggish exports and output, and that the tax increase would compound the slowdown.”
“A sales tax hike scheduled for October could derail Japan’s economic recovery, a central bank board member said…, noting more monetary stimulus would be needed if a slowdown hampered the bank’s efforts to boost prices. Yutaka Harada, a pro-stimulus member of the Bank of Japan’s board, warned the country’s economy was already hurt by sluggish exports and output, and that the tax increase would compound the slowdown.”
Emerging Markets Watch:
May 22 – Reuters (Alasdair Pal and Mayank Bhardwaj):
“Indian Prime Minister Narendra Modi scored a dramatic election victory…, putting his Hindu nationalist party on course to increase its majority on a mandate of business-friendly policies and a tough stand on national security. His re-election reinforces a global trend of right-wing populists sweeping to victory, from the United States to Brazil and Italy, often after adopting harsh positions on protectionism, immigration and defense.”
“Indian Prime Minister Narendra Modi scored a dramatic election victory…, putting his Hindu nationalist party on course to increase its majority on a mandate of business-friendly policies and a tough stand on national security. His re-election reinforces a global trend of right-wing populists sweeping to victory, from the United States to Brazil and Italy, often after adopting harsh positions on protectionism, immigration and defense.”
Global Bubble Watch:
May 21 – Reuters (Guy Faulconbridge and Maytaal Angel):
“British Steel, the country’s second largest steel producer, is on the brink of collapse unless the government agrees to provide an emergency 30 million pound ($38 million) loan… British Steel said negotiations had not concluded and it continues to work with all parties to secure the future of the business.”
“British Steel, the country’s second largest steel producer, is on the brink of collapse unless the government agrees to provide an emergency 30 million pound ($38 million) loan… British Steel said negotiations had not concluded and it continues to work with all parties to secure the future of the business.”
Fixed-Income Bubble Watch:
May 21 – Bloomberg (Adam Tempkin):
“Debt graders are giving high ratings to riskier and riskier bonds from online lenders, Fitch… warned in a report that swipes at rival firms like Kroll Bond Rating Agency. Bonds backed by loans from startups like Avant, Prosper Marketplace and LendingClub Corp. have weaker safeguards for investors than they did two years ago, but are still earning ratings in the A tier or higher, Fitch said. If the economy sours and borrowers default in greater numbers, the notes could be subject to downgrades.”
“Debt graders are giving high ratings to riskier and riskier bonds from online lenders, Fitch… warned in a report that swipes at rival firms like Kroll Bond Rating Agency. Bonds backed by loans from startups like Avant, Prosper Marketplace and LendingClub Corp. have weaker safeguards for investors than they did two years ago, but are still earning ratings in the A tier or higher, Fitch said. If the economy sours and borrowers default in greater numbers, the notes could be subject to downgrades.”
Geopolitical Watch:
May 22 – Reuters (Idrees Ali):
“Taiwan is one of a growing number of flashpoints in the U.S.-China relationship, which also include a bitter trade war, U.S. sanctions and China’s increasingly muscular military posture in the South China Sea, where the United States also conducts freedom-of-navigation patrols. The voyage will be viewed by self-ruled Taiwan as a sign of support from the Trump administration amid growing friction between Taipei and Beijing, which views the island as a breakaway province.”
“Taiwan is one of a growing number of flashpoints in the U.S.-China relationship, which also include a bitter trade war, U.S. sanctions and China’s increasingly muscular military posture in the South China Sea, where the United States also conducts freedom-of-navigation patrols. The voyage will be viewed by self-ruled Taiwan as a sign of support from the Trump administration amid growing friction between Taipei and Beijing, which views the island as a breakaway province.”
May 20 – CNBC (Tom DiChristopher and Patti Domm):
“Iran is ramping up its uranium output, a provocative step that threatens to further inflame simmering tensions with the United States and deepen regional conflict following a series of dangerous escalations in the Middle East. Iranian production of low-enriched uranium has recently increased fourfold, putting the nation on a path to exceed limits on nuclear materials set out in a 2015 agreement with world powers…”
“Iran is ramping up its uranium output, a provocative step that threatens to further inflame simmering tensions with the United States and deepen regional conflict following a series of dangerous escalations in the Middle East. Iranian production of low-enriched uranium has recently increased fourfold, putting the nation on a path to exceed limits on nuclear materials set out in a 2015 agreement with world powers…”
May 22 – Reuters (Babak Dehghanpisheh):
“Iran’s youth will witness the demise of Israel and American civilization, Iran’s Supreme Leader Ayatollah Ali Khamenei said… ‘You young people should be assured that you will witness the demise of the enemies of humanity, meaning the degenerate American civilization, and the demise of Israel,’ Khamenei said in a meeting with students.”
“Iran’s youth will witness the demise of Israel and American civilization, Iran’s Supreme Leader Ayatollah Ali Khamenei said… ‘You young people should be assured that you will witness the demise of the enemies of humanity, meaning the degenerate American civilization, and the demise of Israel,’ Khamenei said in a meeting with students.”
May 21 – Reuters (Michelle Nichols):
“North Korea stepped up its campaign… for the United States to return a seized cargo ship belonging to Pyongyang, warning Washington that it had violated its sovereignty in a move that could affect ‘future developments’ between the countries.”
“North Korea stepped up its campaign… for the United States to return a seized cargo ship belonging to Pyongyang, warning Washington that it had violated its sovereignty in a move that could affect ‘future developments’ between the countries.”
May 22 – Reuters (Susan Heavey):
“U.S. fighter jets intercepted several Russian bombers in international airspace off the coast of Alaska…, in the fourth and fifth such incursions this year, U.S. military officials said…”
“U.S. fighter jets intercepted several Russian bombers in international airspace off the coast of Alaska…, in the fourth and fifth such incursions this year, U.S. military officials said…”
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