Saturday, June 8, 2019
Weekly Commentary:
Horde of Jumbo Bazookas
by Doug Noland
full article is here:
The portion of
the Noland article
that interests me
is below:
( an edited, easy to read version of the article )
For the week
ending
June 7, 2019:
GLOBAL STOCKS
S&P500 surged 4.4% (up 14.6% y-t-d)
Dow Industrials jumped 4.7% (up 11.4%)
Dow Utilities rose 2.9% (up 13.5%)
Dow Transports surged 4.1% (up 10.6%)
S&P 400 Midcaps jumped 4.5% (up 13.8%)
Small cap Russell 2000 rose 3.4% (up 12.3%).
Nasdaq100 rallied 4.1% (up 17.2%)
Biotechs jumped 3.9% (up 7.4%).
With gold bullion surging $35,
the HUI gold stock index
jumped 7.6% (up 5.2%).
U.K.'s FTSE rallied 2.4% (up 9.0% y-t-d).
Japan's Nikkei increased 1.4% (up 4.3% y-t-d).
France's CAC40 rallied 3.0% (up 13.4%).
German DAX recovered 2.7% (up 14.1%).
Spain's IBEX 35 rose 2.6% (up 8.2%).
Italy's FTSE MIB rallied 2.8% (up 11.1%)
Brazil's Bovespa increased 0.8% (up 7.5%)
Mexico's Bolsa gained 1.3% (up 4.0%).
South Korea's Kospi rose 1.5% (up 1.5%).
India's Sensex slipped 0.2% (up 9.8%).
China's Shanghai dropped 2.4% (up 13.4%).
Turkey's Istanbul National 100 surged 3.6% (up 2.8%).
Russia's MICEX jumped 2.4% (up 15.2%).
U.S. BONDS:
Ten-year Treasury yields
declined four bps to 2.08%
(down 60bps).
declined four bps to 2.08%
(down 60bps).
Treasury long bond yields
were little changed at 2.57%
(down 44bps)
were little changed at 2.57%
(down 44bps)
Fannie Mae MBS yields
dropped 10 bps to 2.76%
(down 74bps).
dropped 10 bps to 2.76%
(down 74bps).
U.S. MORTGAGES:
Freddie Mac 30-year
fixed mortgage rates
sank 17 bps to 3.82%
(down 72bps y-o-y).
fixed mortgage rates
sank 17 bps to 3.82%
(down 72bps y-o-y).
Fifteen-year rates
fell 18 bps to 3.28%
(down 73bps).
fell 18 bps to 3.28%
(down 73bps).
Five-year hybrid ARM rates
declined eight bps to 3.52%
(down 22bps)
declined eight bps to 3.52%
(down 22bps)
Jumbo mortgage
30-yr fixed rates
down four bps to 4.15%
(down 48bps).
30-yr fixed rates
down four bps to 4.15%
(down 48bps).
FEDERAL
RESERVE
BANK:
RESERVE
BANK:
Over the past year,
Fed Credit
contracted 11.0%.
M2 (narrow) "money"
rose 4.2%, over the
past year.
Currency Watch:
The U.S. dollar index
declined 1.2% to 96.544
(up 0.4% y-t-d).
declined 1.2% to 96.544
(up 0.4% y-t-d).
Commodities Watch:
Bloomberg Commodities Index
declined 0.7% this week
(up 0.2% y-t-d).
(up 0.2% y-t-d).
Spot Gold surged 2.7% to $1,341 (up 4.5%).
Silver recovered 3.2% to $15.031 (down 3.3%).
WTI crude gained 49 cents to $53.99 (up 19%).
Gasoline fell 1.8% (up 31%)
Natural Gas dropped 4.8% (down 21%).
Copper declined 0.5% (unchanged).
Wheat increased 0.3% (unchanged).
Corn dropped 2.6% (up 11%).
Market Instability Watch:
June 5 – Bloomberg (Liz McCormick):
“The steepening U.S. yield curve shows bond traders have concluded that the case for Federal Reserve rate cuts is only strengthening, even as top policy makers signal they’re not yet ready to act. Futures reflected more than 70 bps of easing in 2019 at one point Wednesday… Bets on steepening -- historically the darling trade during easing cycles -- are building amid signs of weakness in U.S. manufacturing and the labor market, with the trade war only threatening to intensify. Add tepid inflation to the mix, and investors see the basis for the Fed’s first rate cut since 2008.”
“The steepening U.S. yield curve shows bond traders have concluded that the case for Federal Reserve rate cuts is only strengthening, even as top policy makers signal they’re not yet ready to act. Futures reflected more than 70 bps of easing in 2019 at one point Wednesday… Bets on steepening -- historically the darling trade during easing cycles -- are building amid signs of weakness in U.S. manufacturing and the labor market, with the trade war only threatening to intensify. Add tepid inflation to the mix, and investors see the basis for the Fed’s first rate cut since 2008.”
June 3 – Bloomberg (Phil Kuntz):
“The value of the world’s negative-yielding bonds jumped the most in more than three weeks on Friday, and now makes up more than a fifth of the investment-grade market. Bonds yielding less than zero had a market value of $11.3 trillion as of last week’s close, the highest since just after the record $12.2 trillion stockpile in June 2016. Those securities now comprise 21.1% of the Bloomberg Barclays Global Aggregate Index, which includes government, corporate and securitized debt.”
“The value of the world’s negative-yielding bonds jumped the most in more than three weeks on Friday, and now makes up more than a fifth of the investment-grade market. Bonds yielding less than zero had a market value of $11.3 trillion as of last week’s close, the highest since just after the record $12.2 trillion stockpile in June 2016. Those securities now comprise 21.1% of the Bloomberg Barclays Global Aggregate Index, which includes government, corporate and securitized debt.”
Trump Administration Watch:
June 7 – Reuters (Roberta Rampton and Diego Oré):
“The United States and Mexico struck a deal on Friday to avert a tariff war, with Mexico agreeing to rapidly expand a controversial asylum program and deploy security forces to stem the flow of illegal Central American migrants…’The Tariffs scheduled to be implemented by the U.S. on Monday, against Mexico, are hereby indefinitely suspended,’ Trump said in a tweet on Friday evening.”
“The United States and Mexico struck a deal on Friday to avert a tariff war, with Mexico agreeing to rapidly expand a controversial asylum program and deploy security forces to stem the flow of illegal Central American migrants…’The Tariffs scheduled to be implemented by the U.S. on Monday, against Mexico, are hereby indefinitely suspended,’ Trump said in a tweet on Friday evening.”
June 1 – Bloomberg (Ros Krasny):
“Self-professed ‘Tariff Man’ President Donald Trump on Saturday defended his decisions to impose or raise levies against imports from Mexico and China, respectively, saying ‘companies are moving to the U.S.’ to avoid paying the levies, and that ‘TARIFF is a beautiful word indeed!’”
“Self-professed ‘Tariff Man’ President Donald Trump on Saturday defended his decisions to impose or raise levies against imports from Mexico and China, respectively, saying ‘companies are moving to the U.S.’ to avoid paying the levies, and that ‘TARIFF is a beautiful word indeed!’”
May 31 – Reuters (David Lawder, Stella Qiu and Se Young Lee):
“The United States began collecting higher, 25% tariffs on many Chinese goods arriving in U.S. seaports on Saturday morning in an intensification of the trade war between the world’s two largest economies and drawing retaliation from Beijing.”
“The United States began collecting higher, 25% tariffs on many Chinese goods arriving in U.S. seaports on Saturday morning in an intensification of the trade war between the world’s two largest economies and drawing retaliation from Beijing.”
June 5 – Reuters (Mike Stone and Patricia Zengerle):
“The United States is pursuing the sale of more than $2 billion worth of tanks and weapons to Taiwan, four people familiar with the negotiations said, in a move likely to anger China as a trade war between the world’s two biggest economies escalates. The potential sale included 108 General Dynamics Corp M1A2 Abrams tanks worth around $2 billion as well as anti-tank and anti-aircraft munitions, three of the sources said. Taiwan has been interested in refreshing its existing U.S.-made battle tank inventory which includes M60 Patton tanks. The United States is a main arms supplier to Taiwan, which China deems its own and has never renounced the use of force to bring the self-ruled island under its control.”
“The United States is pursuing the sale of more than $2 billion worth of tanks and weapons to Taiwan, four people familiar with the negotiations said, in a move likely to anger China as a trade war between the world’s two biggest economies escalates. The potential sale included 108 General Dynamics Corp M1A2 Abrams tanks worth around $2 billion as well as anti-tank and anti-aircraft munitions, three of the sources said. Taiwan has been interested in refreshing its existing U.S.-made battle tank inventory which includes M60 Patton tanks. The United States is a main arms supplier to Taiwan, which China deems its own and has never renounced the use of force to bring the self-ruled island under its control.”
June 4 – Bloomberg:
“The U.S. and China are heading for a stand-off over critical minerals used in everything from washing machines to military hardware. The U.S. Commerce Department… promised ‘unprecedented action’ to ensure that the U.S. won’t be cut off from supplies rare earths, a group of 17 obscure but vital elements whose production is dominated by China. The Department’s release of a report outlining steps to ensure supply came hours after the Asian nation’s top state economic planning body said it’s studying proposals to establish export controls on the materials.”
“The U.S. and China are heading for a stand-off over critical minerals used in everything from washing machines to military hardware. The U.S. Commerce Department… promised ‘unprecedented action’ to ensure that the U.S. won’t be cut off from supplies rare earths, a group of 17 obscure but vital elements whose production is dominated by China. The Department’s release of a report outlining steps to ensure supply came hours after the Asian nation’s top state economic planning body said it’s studying proposals to establish export controls on the materials.”
June 5 – Financial Times (Henry Sanderson):
“The US Commerce Department has warned that any halt to China’s rare earth exports would cause ‘significant shocks’ to US and foreign supply chains. The commerce department said the US was ‘heavily dependent’ on foreign sources of the minerals, which made the country vulnerable to actions by foreign governments. The department said the US should streamline the permitting process for domestic mining and boost efforts to recycle critical minerals as part of a strategy to boost domestic production.”
“The US Commerce Department has warned that any halt to China’s rare earth exports would cause ‘significant shocks’ to US and foreign supply chains. The commerce department said the US was ‘heavily dependent’ on foreign sources of the minerals, which made the country vulnerable to actions by foreign governments. The department said the US should streamline the permitting process for domestic mining and boost efforts to recycle critical minerals as part of a strategy to boost domestic production.”
June 3 – Wall Street Journal (Brent Kendall and John D. McKinnon):
“Federal antitrust enforcers and lawmakers are poised to scrutinize the nation’s largest technology companies for potential anticompetitive practices, bringing a new regulatory focus to the vast markets for digital services and a new level of concern for investors. After years when the government took a broadly laissez-faire attitude toward the regulation of Silicon Valley, antitrust officials at the Justice Department and Federal Trade Commission are choosing lanes with a view to studying the practices of at least four of the world’s largest and highest-profile tech companies. Under a series of arrangements between the two agencies, the Justice Department now has authority over any potential antitrust investigation into Alphabet Inc.’s Google and Apple Inc., while the FTC has oversight of Facebook Inc. and Amazon.com Inc. Google and Facebook appear to be closest to being in the agencies’ investigative crosshairs…”
“Federal antitrust enforcers and lawmakers are poised to scrutinize the nation’s largest technology companies for potential anticompetitive practices, bringing a new regulatory focus to the vast markets for digital services and a new level of concern for investors. After years when the government took a broadly laissez-faire attitude toward the regulation of Silicon Valley, antitrust officials at the Justice Department and Federal Trade Commission are choosing lanes with a view to studying the practices of at least four of the world’s largest and highest-profile tech companies. Under a series of arrangements between the two agencies, the Justice Department now has authority over any potential antitrust investigation into Alphabet Inc.’s Google and Apple Inc., while the FTC has oversight of Facebook Inc. and Amazon.com Inc. Google and Facebook appear to be closest to being in the agencies’ investigative crosshairs…”
May 31 – Bloomberg (Justin Sink and Jenny Leonard):
“President Donald Trump opened another potential front in his trade war on Friday, terminating India’s designation as a developing nation and thereby eliminating an exception that allowed the country to export nearly 2,000 products to the U.S. duty-free. ‘I have determined that India has not assured the United States that India will provide equitable and reasonable access to its markets,’ Trump said in a proclamation. ‘Accordingly, it is appropriate to terminate India’s designation as a beneficiary developing country effective June 5, 2019.’”
“President Donald Trump opened another potential front in his trade war on Friday, terminating India’s designation as a developing nation and thereby eliminating an exception that allowed the country to export nearly 2,000 products to the U.S. duty-free. ‘I have determined that India has not assured the United States that India will provide equitable and reasonable access to its markets,’ Trump said in a proclamation. ‘Accordingly, it is appropriate to terminate India’s designation as a beneficiary developing country effective June 5, 2019.’”
June 5 – Reuters (Ernest Scheyder and Zandi Shabalala):
“The U.S. Department of Defense has held talks with Malawi’s Mkango Resources Ltd and other rare earth miners across the globe about their supplies of strategic minerals, part of a plan to find diversified reserves outside of China, a department official said…”
“The U.S. Department of Defense has held talks with Malawi’s Mkango Resources Ltd and other rare earth miners across the globe about their supplies of strategic minerals, part of a plan to find diversified reserves outside of China, a department official said…”
U.S. Bubble Watch:
June 7 – Bloomberg (Reade Pickert and Jeff Kearns):
“U.S. employers added the fewest workers in three months and wage gains cooled, suggesting broader economic weakness and boosting expectations for a Federal Reserve interest-rate cut as President Donald Trump’s trade policies weigh on growth. Nonfarm payrolls rose 75,000 in May after a downwardly revised 224,000 advance the prior month… The increase missed all estimates in Bloomberg’s survey calling for 175,000. The jobless rate held at a 49-year low of 3.6% while average hourly earnings climbed 3.1% from a year earlier, less than projected.”
“U.S. employers added the fewest workers in three months and wage gains cooled, suggesting broader economic weakness and boosting expectations for a Federal Reserve interest-rate cut as President Donald Trump’s trade policies weigh on growth. Nonfarm payrolls rose 75,000 in May after a downwardly revised 224,000 advance the prior month… The increase missed all estimates in Bloomberg’s survey calling for 175,000. The jobless rate held at a 49-year low of 3.6% while average hourly earnings climbed 3.1% from a year earlier, less than projected.”
June 6 – Reuters (Lucia Mutikani):
“The U.S. trade deficit unexpectedly narrowed in April as imports and exports tumbled, leading economists to warn that the Trump administration’s ‘America First’ agenda was curbing trade between the United States and the rest of the world… The U.S. trade deficit fell 2.1% to $50.8 billion in April… The politically sensitive goods trade deficit with China surged 29.7% to $26.9 billion. The gap with Mexico fell 14.1% to $8.2 billion in April.”
“The U.S. trade deficit unexpectedly narrowed in April as imports and exports tumbled, leading economists to warn that the Trump administration’s ‘America First’ agenda was curbing trade between the United States and the rest of the world… The U.S. trade deficit fell 2.1% to $50.8 billion in April… The politically sensitive goods trade deficit with China surged 29.7% to $26.9 billion. The gap with Mexico fell 14.1% to $8.2 billion in April.”
June 3 – Reuters (Dan Burns and Jason Lange):
“Growth in U.S. manufacturing activity slowed in May to its weakest pace in over two years as factory managers raised concerns about a trade war between the United States and China… The Institute for Supply Management said its U.S. Manufacturing Purchasing Managers Index declined to 52.1 from 52.8 in April, hitting the lowest level since October 2016.”
“Growth in U.S. manufacturing activity slowed in May to its weakest pace in over two years as factory managers raised concerns about a trade war between the United States and China… The Institute for Supply Management said its U.S. Manufacturing Purchasing Managers Index declined to 52.1 from 52.8 in April, hitting the lowest level since October 2016.”
May 31 – MarketWatch (Mark DeCambre):
“Deutsche Bank’s Torsten Sløk says that the distribution of household wealth in America has become even more disproportionate over the past decade, with the richest 10% of U.S. households representing 70% of all U.S. wealth in 2018, compared with 60% in 1989, according to a recent study by… the Federal Reserve. The study finds that the share of wealth among the richest 1% increased to 32% from 23% over the same period.”
“Deutsche Bank’s Torsten Sløk says that the distribution of household wealth in America has become even more disproportionate over the past decade, with the richest 10% of U.S. households representing 70% of all U.S. wealth in 2018, compared with 60% in 1989, according to a recent study by… the Federal Reserve. The study finds that the share of wealth among the richest 1% increased to 32% from 23% over the same period.”
June 3 – CNBC (Diana Olick):
“The average rate on the popular 30-year fixed has fallen from a recent high of 4.23% on May 21 to 3.94% now… There are now about 5.9 million borrowers who could see their rates drop by at least 75 basis points by refinancing their mortgages. That is an increase of 2 million in just the past month, according to Black Knight, a mortgage software and analytics company.”
“The average rate on the popular 30-year fixed has fallen from a recent high of 4.23% on May 21 to 3.94% now… There are now about 5.9 million borrowers who could see their rates drop by at least 75 basis points by refinancing their mortgages. That is an increase of 2 million in just the past month, according to Black Knight, a mortgage software and analytics company.”
June 6 – CNBC (Phil LeBeau):
“The average amount borrowed to buy a new vehicle hit a record $32,187 in the first quarter. The average used-vehicle loan also hit a record, $20,137. ‘We have not seen a slowdown in loan demand. In fact, volume for new and used loans is up from previous years,’ said Melinda Zabritski, senior director of automotive financial solutions for Experian… The average monthly payment for a new vehicle continued to climb to a new high of $554 and to a record $391 for used vehicles…”
“The average amount borrowed to buy a new vehicle hit a record $32,187 in the first quarter. The average used-vehicle loan also hit a record, $20,137. ‘We have not seen a slowdown in loan demand. In fact, volume for new and used loans is up from previous years,’ said Melinda Zabritski, senior director of automotive financial solutions for Experian… The average monthly payment for a new vehicle continued to climb to a new high of $554 and to a record $391 for used vehicles…”
China Watch:
June 2 – Bloomberg:
“Bank of Jinzhou Co. said its auditors resigned, sending some of its debt securities plunging and reigniting investor concerns about the riskiness of China’s smaller lenders. Ernst & Young Hua Ming LLP and Ernst & Young said in a resignation letter to the bank that there are indications that some loans to institutional customers weren’t used in ways consistent with the purposes stated in documents… There are almost 4,000 small city and rural banks in China and these typically have ‘more vulnerable funding and liquidity profiles, larger shadow-financing activities and lower loss-absorption capacity’ than larger commercial banks, according to Fitch Ratings. Bank of Jinzhou was set up in 1997 in Liaoning province in northeastern China. It has total assets of $113 billion and total deposits of $53 billion…”
“Bank of Jinzhou Co. said its auditors resigned, sending some of its debt securities plunging and reigniting investor concerns about the riskiness of China’s smaller lenders. Ernst & Young Hua Ming LLP and Ernst & Young said in a resignation letter to the bank that there are indications that some loans to institutional customers weren’t used in ways consistent with the purposes stated in documents… There are almost 4,000 small city and rural banks in China and these typically have ‘more vulnerable funding and liquidity profiles, larger shadow-financing activities and lower loss-absorption capacity’ than larger commercial banks, according to Fitch Ratings. Bank of Jinzhou was set up in 1997 in Liaoning province in northeastern China. It has total assets of $113 billion and total deposits of $53 billion…”
June 4 – Financial Times (Don Weinland):
“China’s stock market was hit by the biggest outflow of foreign capital on record in April and May as the trade war with the US and concerns over the stability of the renminbi darkened investors’ view of the country. A total of about $12bn left the market during April and May, according to data from CEIC and Morgan Stanley, the largest exodus since the launch five years ago of a ‘stock connect’ programme that provides global investors with access to Chinese shares, via Hong Kong.”
“China’s stock market was hit by the biggest outflow of foreign capital on record in April and May as the trade war with the US and concerns over the stability of the renminbi darkened investors’ view of the country. A total of about $12bn left the market during April and May, according to data from CEIC and Morgan Stanley, the largest exodus since the launch five years ago of a ‘stock connect’ programme that provides global investors with access to Chinese shares, via Hong Kong.”
June 5 – Financial Times (Don Weinland and Archie Zhang):
“A $647bn blind spot in financial reporting by China’s city and rural commercial banks is fuelling investor concerns that more of the country’s lenders face government intervention or collapse in the wake of the state takeover of Baoshang Bank. Baoshang was one of 19 banks with a combined Rmb4.47tn ($647bn) in assets that have yet to publish 2018 financial results, according to… Barclays. The delays are a potential sign of a build-up in non-performing loans and leave investors blind to how many of those assets may have turned into bad debt, as was the case with Baoshang, analysts said.”
“A $647bn blind spot in financial reporting by China’s city and rural commercial banks is fuelling investor concerns that more of the country’s lenders face government intervention or collapse in the wake of the state takeover of Baoshang Bank. Baoshang was one of 19 banks with a combined Rmb4.47tn ($647bn) in assets that have yet to publish 2018 financial results, according to… Barclays. The delays are a potential sign of a build-up in non-performing loans and leave investors blind to how many of those assets may have turned into bad debt, as was the case with Baoshang, analysts said.”
June 2 – Associated Press (Christopher Bodeen):
“China fired back at the U.S. Sunday over the two nations’ trade dispute, issuing a report that blamed the conflict on the Trump administration but refrained from escalating the trade war. The report… said China won’t back down on ‘major issues of principle,’ but offered no sense of whether or how the world’s second largest economy might retaliate against U.S. tariffs on goods manufactured in China. The report said China has kept its word throughout 11 rounds of talks and will honor its commitments if a trade agreement is reached. It accused the U.S. of backtracking three times over the course of the talks by introducing new tariffs and other conditions beyond what was agreed on. ‘But the more the U.S. government is offered, the more it wants,’ it said, accusing America’s negotiators of ‘resorting to intimidation and coercion.’”
“China fired back at the U.S. Sunday over the two nations’ trade dispute, issuing a report that blamed the conflict on the Trump administration but refrained from escalating the trade war. The report… said China won’t back down on ‘major issues of principle,’ but offered no sense of whether or how the world’s second largest economy might retaliate against U.S. tariffs on goods manufactured in China. The report said China has kept its word throughout 11 rounds of talks and will honor its commitments if a trade agreement is reached. It accused the U.S. of backtracking three times over the course of the talks by introducing new tariffs and other conditions beyond what was agreed on. ‘But the more the U.S. government is offered, the more it wants,’ it said, accusing America’s negotiators of ‘resorting to intimidation and coercion.’”
June 6 – Associated Press (Ken Moritsugu):
“China’s Commerce Ministry will release a list of ‘unreliable’ foreign companies in the near future, a spokesman said… The decision to create the list… is widely seen as a response to a U.S. decision to put Huawei Technologies on a blacklist for alleged theft of intellectual property and evasion of Iran sanctions. Chinese Commerce Ministry spokesman Gao Feng told reporters at a weekly briefing that the process of drawing up the list was underway. He said no particular company or industry is being targeted.”
“China’s Commerce Ministry will release a list of ‘unreliable’ foreign companies in the near future, a spokesman said… The decision to create the list… is widely seen as a response to a U.S. decision to put Huawei Technologies on a blacklist for alleged theft of intellectual property and evasion of Iran sanctions. Chinese Commerce Ministry spokesman Gao Feng told reporters at a weekly briefing that the process of drawing up the list was underway. He said no particular company or industry is being targeted.”
June 3 – Financial Times (Lucy Hornby and Archie Zhang):
“China has warned its students and scholars that they face growing difficulties in visiting the US, as the escalating trade war between the world’s two largest economies spills into the broader bilateral relationship. ‘Visa issuances for Chinese students studying in the United States have been restricted. The visa review period has been extended, the validity period has been shortened, and the refusal rate has increased,’ the Chinese education ministry said… ‘This has affected the Chinese students in the United States normally or successfully completing their studies in the United States.’”
“China has warned its students and scholars that they face growing difficulties in visiting the US, as the escalating trade war between the world’s two largest economies spills into the broader bilateral relationship. ‘Visa issuances for Chinese students studying in the United States have been restricted. The visa review period has been extended, the validity period has been shortened, and the refusal rate has increased,’ the Chinese education ministry said… ‘This has affected the Chinese students in the United States normally or successfully completing their studies in the United States.’”
June 1 – Bloomberg (Tony Czuczka):
“China targeted FedEx Corp. in its escalating trade war with the U.S., giving a hint of the kind of foreign companies it may blacklist as ‘unreliable.’
As details of China’s criteria trickled out, the investigation into FedEx’s ‘wrongful delivery of packages’ was framed by the state news agency as a warning by Beijing after the Trump administration imposed a ban on business with telecom giant Huawei Technologies Co.”
“China targeted FedEx Corp. in its escalating trade war with the U.S., giving a hint of the kind of foreign companies it may blacklist as ‘unreliable.’
As details of China’s criteria trickled out, the investigation into FedEx’s ‘wrongful delivery of packages’ was framed by the state news agency as a warning by Beijing after the Trump administration imposed a ban on business with telecom giant Huawei Technologies Co.”
June 2 – Reuters (Yawen Chen and Ryan Woo):
“China’s factory activity expanded at a steady but modest pace in May, a private survey showed, but analysts say front-loading of exports by firms to the United States to avoid higher tariffs masked underlying weakness in the economy… Monday’s Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) also showed only modest expansion at 50.2, unchanged from April…”
“China’s factory activity expanded at a steady but modest pace in May, a private survey showed, but analysts say front-loading of exports by firms to the United States to avoid higher tariffs masked underlying weakness in the economy… Monday’s Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) also showed only modest expansion at 50.2, unchanged from April…”
June 4 – Bloomberg:
“As big as its world-leading car market is, China has decided that 486 aspiring electric-vehicle companies are too many. The country is considering rules to raise the barrier to entry for electric-vehicle makers and nurture fewer but more competitive players, according to people familiar with the matter. Specifically, China plans to clamp down on EV startups who farm out their manufacturing, the people said, asking not to be named as the rules are still being drafted.”
“As big as its world-leading car market is, China has decided that 486 aspiring electric-vehicle companies are too many. The country is considering rules to raise the barrier to entry for electric-vehicle makers and nurture fewer but more competitive players, according to people familiar with the matter. Specifically, China plans to clamp down on EV startups who farm out their manufacturing, the people said, asking not to be named as the rules are still being drafted.”
June 5 – Bloomberg (Jason Gale, Hannah Dormido and Adrian Leung):
“The deadly pig virus that jumped from Africa to Europe is now ravaging China’s $128 billion pork industry and spreading to other Asian countries, an unprecedented disaster that has prompted Beijing to slaughter millions of pigs. But stopping African swine fever isn’t so easy. The virus that causes the hemorrhagic disease is highly virulent and tenacious, and spreads in multiple ways. There’s no safe and effective vaccine to prevent infection, nor anything to treat it. The widespread presence in China means it’s now being amplified across a country with 440 million pigs—half the planet’s total—with vast trading networks, permeable land borders and farms with little or no ability to stop animal diseases.”
“The deadly pig virus that jumped from Africa to Europe is now ravaging China’s $128 billion pork industry and spreading to other Asian countries, an unprecedented disaster that has prompted Beijing to slaughter millions of pigs. But stopping African swine fever isn’t so easy. The virus that causes the hemorrhagic disease is highly virulent and tenacious, and spreads in multiple ways. There’s no safe and effective vaccine to prevent infection, nor anything to treat it. The widespread presence in China means it’s now being amplified across a country with 440 million pigs—half the planet’s total—with vast trading networks, permeable land borders and farms with little or no ability to stop animal diseases.”
Europe Watch:
June 5 – Financial Times (Editorial Board):
“Italy is the only large EU country where the eurozone crisis never truly ended. Its economy is burdened with extremely high public debt, chronically low growth and too much fragility in the banking sector. Its traditional political classes have lost so much public trust that the government fell last year into the hands of an unholy alliance of anti-immigrant, rightwing nationalists and inexperienced anti-establishment populists. Each wing of the government, the League and the Five Star Movement, is hostile to the EU’s economic and fiscal orthodoxies. This combination of long-term vulnerability of the public finances and short-term government defiance of Brussels explains why the European Commission on Wednesday set in motion a disciplinary procedure against Italy. For the first time, a government risks being put in the EU’s dock on account of excessive public debt. In principle, such procedures can result in fines worth billions of euros.”
“Italy is the only large EU country where the eurozone crisis never truly ended. Its economy is burdened with extremely high public debt, chronically low growth and too much fragility in the banking sector. Its traditional political classes have lost so much public trust that the government fell last year into the hands of an unholy alliance of anti-immigrant, rightwing nationalists and inexperienced anti-establishment populists. Each wing of the government, the League and the Five Star Movement, is hostile to the EU’s economic and fiscal orthodoxies. This combination of long-term vulnerability of the public finances and short-term government defiance of Brussels explains why the European Commission on Wednesday set in motion a disciplinary procedure against Italy. For the first time, a government risks being put in the EU’s dock on account of excessive public debt. In principle, such procedures can result in fines worth billions of euros.”
Japan Watch:
June 2 – Financial Times (Robin Harding):
“Japan’s finance minister has said it is impossible to tackle trade imbalances one country at a time and that Donald Trump’s tariff war with China and Mexico may just shift the US deficit to different countries. In an interview with the Financial Times, Taro Aso said next weekend’s G20 finance ministers’ meeting in Fukuoka, which he is hosting, will be a chance to switch the discussion to a global level.”
“Japan’s finance minister has said it is impossible to tackle trade imbalances one country at a time and that Donald Trump’s tariff war with China and Mexico may just shift the US deficit to different countries. In an interview with the Financial Times, Taro Aso said next weekend’s G20 finance ministers’ meeting in Fukuoka, which he is hosting, will be a chance to switch the discussion to a global level.”
Emerging Markets Watch:
June 5 – Reuters (Stefanie Eschenbacher):
“In a double blow for Mexico, credit ratings agency Fitch downgraded the nation’s sovereign debt rating on Wednesday, citing risks posed by heavily indebted oil company Pemex and trade tensions, while Moody’s lowered its outlook to negative. Cutting Mexico’s rating to BBB, nearing junk status, Fitch said the financial woes of state oil company Pemex were taking a toll on the nation’s prospects. Fitch said mounting trade tensions influenced its view…”
“In a double blow for Mexico, credit ratings agency Fitch downgraded the nation’s sovereign debt rating on Wednesday, citing risks posed by heavily indebted oil company Pemex and trade tensions, while Moody’s lowered its outlook to negative. Cutting Mexico’s rating to BBB, nearing junk status, Fitch said the financial woes of state oil company Pemex were taking a toll on the nation’s prospects. Fitch said mounting trade tensions influenced its view…”
Global Bubble Watch:
June 4 – Bloomberg (Michael Heath):
“Australia’s economy expanded at the slowest pace in almost a decade as a prolonged housing downturn weighed on consumer spending… Gross domestic product advanced 0.4% in the first three months of the year from the prior quarter… The economy grew just 1.8% from a year earlier, the weakest reading since the global financial crisis, as households boosted their savings and cut spending in a classic response to wealth erosion.”
“Australia’s economy expanded at the slowest pace in almost a decade as a prolonged housing downturn weighed on consumer spending… Gross domestic product advanced 0.4% in the first three months of the year from the prior quarter… The economy grew just 1.8% from a year earlier, the weakest reading since the global financial crisis, as households boosted their savings and cut spending in a classic response to wealth erosion.”
Geopolitical Watch:
June 5 – Financial Times (Henry Foy and Christian Shepherd):
“Vladimir Putin hailed Xi Jinping as his ‘dear friend’ at the start of a three-day visit by the Chinese president designed to strengthen a new-found alliance that has been forged in the face of pressure on both countries by the US. Mr Xi arrived in Russia… as one of the Russian president’s closest foreign allies. His visit will include the signing of new trade deals and investment pledges, alongside expected joint rhetorical sallies against what they see as US over-reach. With both Moscow and Beijing under fire from the US — whether through sanctions or President Donald Trump’s trade war — Mr
“Vladimir Putin hailed Xi Jinping as his ‘dear friend’ at the start of a three-day visit by the Chinese president designed to strengthen a new-found alliance that has been forged in the face of pressure on both countries by the US. Mr Xi arrived in Russia… as one of the Russian president’s closest foreign allies. His visit will include the signing of new trade deals and investment pledges, alongside expected joint rhetorical sallies against what they see as US over-reach. With both Moscow and Beijing under fire from the US — whether through sanctions or President Donald Trump’s trade war — Mr
June 5 – Bloomberg (Stepan Kravchenko and Henry Meyer):
“Chinese President Xi Jinping touted a new level of relations with Vladimir Putin as he embarked on a three-day visit to Russia that highlights a deepening partnership between the two countries as both face growing tensions with the U.S. ‘Step by step, we’ve been able to bring our relations to the highest level in history,’ Xi said… The countries’ position ‘on key world problems are close,’ the Russian leader said, referring to the Chinese leader as his ‘dear friend.’”
“Chinese President Xi Jinping touted a new level of relations with Vladimir Putin as he embarked on a three-day visit to Russia that highlights a deepening partnership between the two countries as both face growing tensions with the U.S. ‘Step by step, we’ve been able to bring our relations to the highest level in history,’ Xi said… The countries’ position ‘on key world problems are close,’ the Russian leader said, referring to the Chinese leader as his ‘dear friend.’”
June 7 – Reuters (Andrey Ostroukh and Katya Golubkova):
“Aggressive U.S. tactics such as a campaign against Chinese telecoms firm Huawei will lead to trade wars - and possibly real wars - Russian President Vladimir Putin said on Friday, in a show of solidarity with China alongside its leader Xi Jinping.
In some of his strongest words on the subject, Putin accused Washington of “unbridled economic egoism”, singling out U.S. efforts to thwart a Russian gas pipeline to Europe and a U.S. campaign to persuade countries to bar Huawei, the world’s biggest telecoms equipment maker, from supplying network gear… ‘States which previously promoted free trade with honest and open competition have started speaking the language of trade wars and sanctions, of open economic raiding using arm-twisting and scare tactics, of eliminating competitors using so-called non-market methods,’ said Putin.”
“Aggressive U.S. tactics such as a campaign against Chinese telecoms firm Huawei will lead to trade wars - and possibly real wars - Russian President Vladimir Putin said on Friday, in a show of solidarity with China alongside its leader Xi Jinping.
In some of his strongest words on the subject, Putin accused Washington of “unbridled economic egoism”, singling out U.S. efforts to thwart a Russian gas pipeline to Europe and a U.S. campaign to persuade countries to bar Huawei, the world’s biggest telecoms equipment maker, from supplying network gear… ‘States which previously promoted free trade with honest and open competition have started speaking the language of trade wars and sanctions, of open economic raiding using arm-twisting and scare tactics, of eliminating competitors using so-called non-market methods,’ said Putin.”
June 7 – Reuters (Andrew Osborn and Tim Kelly):
“Russia and the United States blamed each other for a near collision between their warships in the East China Sea on Friday with both countries accusing one another of dangerous and unprofessional behavior.
Russia’s Pacific Fleet said that the USS Chancellorsville, a guided-missile cruiser, had come within just 50 meters (165 feet) of the Russian destroyer Admiral Vinogradov which had been forced to take emergency action to avoid a collision, Russian news agencies reported.”
“Russia and the United States blamed each other for a near collision between their warships in the East China Sea on Friday with both countries accusing one another of dangerous and unprofessional behavior.
Russia’s Pacific Fleet said that the USS Chancellorsville, a guided-missile cruiser, had come within just 50 meters (165 feet) of the Russian destroyer Admiral Vinogradov which had been forced to take emergency action to avoid a collision, Russian news agencies reported.”
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