Saturday, August 17, 2019
Weekly Commentary:
Comeuppance
by Doug Noland
The full column is here:
Portions that
interested me
are shown below.
Ye Editor
For the week ending
August 16, 2019:
GLOBAL STOCKS:
S&P500 declined 1.0% (up 15.2% y-t-d)
Dow Industrials fell 1.5% (up 11.0%)
Dow Utilities added 0.3% (up 15.9%)
Dow Transports fell 2.4% (up 8.7%)
S&P 400 Midcaps lost 1.5% (up 12.6%)
Small cap Russell 2000 slumped 1.3% (up 10.8%).
Nasdaq100 dipped 0.6% (up 20.1%)
Biotechs declined 0.9% (up 8.0%).
While GOLD bullion jumped $21,
the HUI gold stock index fell 2.1% (up 3.9%).
Dow Industrials fell 1.5% (up 11.0%)
Dow Utilities added 0.3% (up 15.9%)
Dow Transports fell 2.4% (up 8.7%)
S&P 400 Midcaps lost 1.5% (up 12.6%)
Small cap Russell 2000 slumped 1.3% (up 10.8%).
Nasdaq100 dipped 0.6% (up 20.1%)
Biotechs declined 0.9% (up 8.0%).
While GOLD bullion jumped $21,
the HUI gold stock index fell 2.1% (up 3.9%).
U.K.'s FTSE dropped 1.9% (up 5.8% y-t-d).
Japan's Nikkei fell 1.3% (up 2.0% y-t-d).
France's CAC40 dipped 0.5% (up 12.1%)
German DAX fell 1.1% (up 9.5%).
Spain's IBEX 35 declined 1.0% (up 1.5%).
Italy's FTSE MIB was little changed (up 10.9%)
Brazil's Bovespa sank 4.0% (up 9.7%)
Mexico's Bolsa dropped 2.7% (down 5.5%)
South Korea's Kospi declined 0.5% (down 5.6%)
India's Sensex slipped 0.6% (up 3.6%)
China's Shanghai rallied 1.8% (up 13.2%)
Turkey's Istanbul National 100 sank 3.7% (up 4.9%)
Russia's MICEX fell 2.4% (up 10.4%).
France's CAC40 dipped 0.5% (up 12.1%)
German DAX fell 1.1% (up 9.5%).
Spain's IBEX 35 declined 1.0% (up 1.5%).
Italy's FTSE MIB was little changed (up 10.9%)
Brazil's Bovespa sank 4.0% (up 9.7%)
Mexico's Bolsa dropped 2.7% (down 5.5%)
South Korea's Kospi declined 0.5% (down 5.6%)
India's Sensex slipped 0.6% (up 3.6%)
China's Shanghai rallied 1.8% (up 13.2%)
Turkey's Istanbul National 100 sank 3.7% (up 4.9%)
Russia's MICEX fell 2.4% (up 10.4%).
U.S. BONDS:
Ten-year Treasury yields
sank 19 bps to 1.56%
(down 113bps).
(down 113bps).
Long bond yields
tumbled 22 bps to 2.04%
(down 98bps).
(down 98bps).
Benchmark Fannie Mae MBS yields
declined six bps to 2.43%
(down 107bps).
(down 107bps).
U.S. MORTGAGES:
Freddie Mac 30-year fixed mortgage rates
were unchanged at 3.60% (down 93bps y-o-y).
were unchanged at 3.60% (down 93bps y-o-y).
Fifteen-year rates
increased two bps to 3.07% (down 94bps).
increased two bps to 3.07% (down 94bps).
Five-year hybrid ARM rates
slipped a basis point to 3.35% (down 52bps).
slipped a basis point to 3.35% (down 52bps).
Jumbo mortgage 30-yr fixed rates
up six bps to 4.06% (down 49bps).
up six bps to 4.06% (down 49bps).
FEDERAL RESERVE BANK:
Federal Reserve Credit
over the past year,
contracted 11.2%.
M2 money supply rose 5.5%
over the past year.
Currency Watch:
The U.S. dollar index
gained 0.7% to 98.203
(up 2.1% y-t-d).
Commodities Watch:
Bloomberg Commodities Index declined 0.8% this week
(down 0.3% y-t-d).
(down 0.3% y-t-d).
Spot Gold jumped 1.4% to $1,513 (up 18%).
Silver gained 1.1% to $17.122 (up 10.2%).
WTI crude increased 37 cents to $54.87 (up 21%).
Gasoline fell 1.0% (up 25%)
Gasoline fell 1.0% (up 25%)
Natural Gas rallied 3.8% (down 25%).
Copper increased 0.2% (down 1%).
Wheat dropped 4.8% (down 5%).
Corn sank 8.9% (up 2%).
Market Instability Watch:
August 11 – Wall Street Journal (Steven Russolillo):
“China earlier this month let the yuan depreciate beyond the key 7-to-the-dollar level for the first time since 2008…By the end of the week, the yuan somewhat stabilized, offering hope the two countries might not be on the brink of a full-blown currency war. But allowing the yuan to breach the fiercely defended level against the dollar revived memories of the Chinese currency’s sharp moves in August 2015, when Beijing shocked global financial markets by unveiling a surprise mini-depreciation.”
“China earlier this month let the yuan depreciate beyond the key 7-to-the-dollar level for the first time since 2008…By the end of the week, the yuan somewhat stabilized, offering hope the two countries might not be on the brink of a full-blown currency war. But allowing the yuan to breach the fiercely defended level against the dollar revived memories of the Chinese currency’s sharp moves in August 2015, when Beijing shocked global financial markets by unveiling a surprise mini-depreciation.”
August 14 – Bloomberg (Cormac Mullen):
“The recession alarm bell ringing in U.S. government bond markets sent investors rushing once more to haven assets, pushing the world’s stockpile of negative-yielding bonds to another record. The market value of the Bloomberg Barclays Global Negative Yielding Debt Index closed at $16 trillion Wednesday after the key U.S. 2-year and 10-year yield curve inverted for the first time 2007 -- a move often considered a harbinger of an economic downturn.”
“The recession alarm bell ringing in U.S. government bond markets sent investors rushing once more to haven assets, pushing the world’s stockpile of negative-yielding bonds to another record. The market value of the Bloomberg Barclays Global Negative Yielding Debt Index closed at $16 trillion Wednesday after the key U.S. 2-year and 10-year yield curve inverted for the first time 2007 -- a move often considered a harbinger of an economic downturn.”
August 14 – Reuters (Gertrude Chavez-Dreyfuss):
“The U.S. Treasury yield curve temporarily inverted on Wednesday for the first time since June 2007 in a sign of investor concern that the world’s biggest economy could be heading for recession. The inversion - where shorter-dated borrowing costs are higher than longer ones - saw U.S. 2-year note yields rise above the benchmark 10-year yield, which fell to 1.574%, the lowest since September 2016.”
“The U.S. Treasury yield curve temporarily inverted on Wednesday for the first time since June 2007 in a sign of investor concern that the world’s biggest economy could be heading for recession. The inversion - where shorter-dated borrowing costs are higher than longer ones - saw U.S. 2-year note yields rise above the benchmark 10-year yield, which fell to 1.574%, the lowest since September 2016.”
August 15 – Bloomberg (Tasos Vossos):
“Plummeting European bond yields have sunk so low they’ve created a distortion with potentially far-reaching effects across the banking and investment industries.
The average yield on European investment-grade corporate bonds -- currently around 0.3% -- is lower than bid-ask spreads which analysts use as a proxy for transaction costs and now stand at 0.44 cents on the euro…”
“Plummeting European bond yields have sunk so low they’ve created a distortion with potentially far-reaching effects across the banking and investment industries.
The average yield on European investment-grade corporate bonds -- currently around 0.3% -- is lower than bid-ask spreads which analysts use as a proxy for transaction costs and now stand at 0.44 cents on the euro…”
Trump Administration Watch:
August 13 – CNBC (Maggie Fitzgerald):
“The United States Trade Representative office said Tuesday that new tariffs on certain consumer items would be delayed until Dec. 15, while other products were being removed from the new China tariff list altogether. It cited health and security factors. The duties had been set to go into effect on Sept. 1, so the announcement eased concerns about the holiday shopping season. The USTR said the delay affects electronics including cellphones, laptops and video game consoles and some clothing products and shoes and ‘certain toys.’”
“The United States Trade Representative office said Tuesday that new tariffs on certain consumer items would be delayed until Dec. 15, while other products were being removed from the new China tariff list altogether. It cited health and security factors. The duties had been set to go into effect on Sept. 1, so the announcement eased concerns about the holiday shopping season. The USTR said the delay affects electronics including cellphones, laptops and video game consoles and some clothing products and shoes and ‘certain toys.’”
August 14 – Reuters (Howard Schneider):
“ As bond markets flashed concern about recession on Wednesday and major stock indices cratered, Trump put the blame squarely on the Fed for continuing to raise rates through the end of last year. Even Trump foe and New York Times economics columnist Paul Krugman dinged the Fed for ‘a clear mistake.’ In raising interest rates four times last year ‘the Federal Reserve acted far too quickly, and now is very, very late,’ in reversing itself and cutting borrowing costs only modestly so far, Trump tweeted. ‘Too bad, so much to gain on the upside!’”
“ As bond markets flashed concern about recession on Wednesday and major stock indices cratered, Trump put the blame squarely on the Fed for continuing to raise rates through the end of last year. Even Trump foe and New York Times economics columnist Paul Krugman dinged the Fed for ‘a clear mistake.’ In raising interest rates four times last year ‘the Federal Reserve acted far too quickly, and now is very, very late,’ in reversing itself and cutting borrowing costs only modestly so far, Trump tweeted. ‘Too bad, so much to gain on the upside!’”
U.S. Bubble Watch:
August 12 – Bloomberg (Sarah McGregor):
“The U.S. fiscal deficit has already exceeded the full-year figure for last year, as spending growth outpaces revenue. The gap grew to $866.8 billion in the first 10 months of the fiscal year, up 27% from the same period a year earlier… That’s wider than last fiscal year’s shortfall of $779 billion -- which was the largest federal deficit since 2012. So far in the fiscal year that began Oct. 1, a revenue increase of 3% hasn’t kept pace with a 8% rise in spending. While still a modest source of income, tariffs imposed by the Trump administration helped almost double customs duties to $57 billion in the period.”
“The U.S. fiscal deficit has already exceeded the full-year figure for last year, as spending growth outpaces revenue. The gap grew to $866.8 billion in the first 10 months of the fiscal year, up 27% from the same period a year earlier… That’s wider than last fiscal year’s shortfall of $779 billion -- which was the largest federal deficit since 2012. So far in the fiscal year that began Oct. 1, a revenue increase of 3% hasn’t kept pace with a 8% rise in spending. While still a modest source of income, tariffs imposed by the Trump administration helped almost double customs duties to $57 billion in the period.”
August 15 – Reuters (Lucia Mutikani):
“U.S. retail sales surged in July as consumers bought a range of goods even as they cut back on motor vehicle purchases, which could help to assuage financial markets’ concerns that the economy was heading into recession. …Retail sales rose 0.7% last month. Data for June was revised slightly down to show retail sales gaining 0.3% instead of increasing 0.4%... Economists… had forecast retail sales would rise 0.3% in July. Compared to July last year, retail sales increased 3.4%. Excluding automobiles, gasoline, building materials and food services, retail sales jumped 1.0% last month after advancing by an unrevised 0.7% in June.”
“U.S. retail sales surged in July as consumers bought a range of goods even as they cut back on motor vehicle purchases, which could help to assuage financial markets’ concerns that the economy was heading into recession. …Retail sales rose 0.7% last month. Data for June was revised slightly down to show retail sales gaining 0.3% instead of increasing 0.4%... Economists… had forecast retail sales would rise 0.3% in July. Compared to July last year, retail sales increased 3.4%. Excluding automobiles, gasoline, building materials and food services, retail sales jumped 1.0% last month after advancing by an unrevised 0.7% in June.”
August 16 – Bloomberg (Ryan Haar):
“U.S. consumer sentiment plummeted to a seven-month low in August on growing concerns about the economy even as the labor market shows few signs of weakening from robust levels. The University of Michigan’s preliminary sentiment index slumped to 92.1 from July’s 98.4, missing all forecasts… The gauge of current conditions decreased to 107.4 while the expectations index dropped to 82.3, bringing both readings to the lowest levels since early this year.”
“U.S. consumer sentiment plummeted to a seven-month low in August on growing concerns about the economy even as the labor market shows few signs of weakening from robust levels. The University of Michigan’s preliminary sentiment index slumped to 92.1 from July’s 98.4, missing all forecasts… The gauge of current conditions decreased to 107.4 while the expectations index dropped to 82.3, bringing both readings to the lowest levels since early this year.”
August 13 – Reuters (Trevor Hunnicutt):
“More people in the United States appear to be struggling to keep up with their credit card and student loan debt, which could put pressure on one of the strongest drivers of economic growth. U.S. credit card balances grew to $868 billion in the second quarter, from $848 billion in the previous three months, and the proportion of those balances seriously past due is on the rise, according to Federal Reserve Bank of New York data… U.S. consumer debt has continued to hit new peaks, rising $192 billion, or 1.4%, to $13.86 trillion in the second quarter. The figure is higher than the previous peak of $12.68 trillion before the 2008 global financial crisis…”
“More people in the United States appear to be struggling to keep up with their credit card and student loan debt, which could put pressure on one of the strongest drivers of economic growth. U.S. credit card balances grew to $868 billion in the second quarter, from $848 billion in the previous three months, and the proportion of those balances seriously past due is on the rise, according to Federal Reserve Bank of New York data… U.S. consumer debt has continued to hit new peaks, rising $192 billion, or 1.4%, to $13.86 trillion in the second quarter. The figure is higher than the previous peak of $12.68 trillion before the 2008 global financial crisis…”
August 14 – Bloomberg (Brian Chappatta):
“The state of Americans’ finances embedded in the Federal Reserve Bank of New York’s latest Quarterly Report on Household Debt and Credit. First, the good news: 95.6% of households were current on their debt payments as of the second quarter, whether that’s mortgages, student or automobile loans or credit card bills. That’s the largest share since the third quarter of 2006, which of course was well before the financial crisis and the start of the last recession… The bad news is that the share of households deemed ‘severely derogatory’ on payments isn’t going away like it was 13 years ago. The category, which the New York Fed defines as ‘any stage of delinquency paired with a repossession, foreclosure, or ‘charge off,’’ is hovering at 2%, the same level it’s been at since the second quarter of 2015. As the bank’s researchers noted in a blog post, severely derogatory balances now make up almost half of all delinquencies, the largest share ever in data going back to 2003.”
“The state of Americans’ finances embedded in the Federal Reserve Bank of New York’s latest Quarterly Report on Household Debt and Credit. First, the good news: 95.6% of households were current on their debt payments as of the second quarter, whether that’s mortgages, student or automobile loans or credit card bills. That’s the largest share since the third quarter of 2006, which of course was well before the financial crisis and the start of the last recession… The bad news is that the share of households deemed ‘severely derogatory’ on payments isn’t going away like it was 13 years ago. The category, which the New York Fed defines as ‘any stage of delinquency paired with a repossession, foreclosure, or ‘charge off,’’ is hovering at 2%, the same level it’s been at since the second quarter of 2015. As the bank’s researchers noted in a blog post, severely derogatory balances now make up almost half of all delinquencies, the largest share ever in data going back to 2003.”
August 13 – Wall Street Journal (Harriet Torry):
“U.S. mortgage debt reached a record in the second quarter, exceeding its 2008 peak as the financial crisis unfolded. Mortgage balances rose by $162 billion in the second quarter to $9.406 trillion, surpassing the high of $9.294 trillion in the third quarter of 2008… Mortgages are the largest component of household debt. Mortgage originations, which include refinancings, increased by $130 billion to $474 billion in the second quarter.”
“U.S. mortgage debt reached a record in the second quarter, exceeding its 2008 peak as the financial crisis unfolded. Mortgage balances rose by $162 billion in the second quarter to $9.406 trillion, surpassing the high of $9.294 trillion in the third quarter of 2008… Mortgages are the largest component of household debt. Mortgage originations, which include refinancings, increased by $130 billion to $474 billion in the second quarter.”
August 15 – Wall Street Journal (Michael Wursthorn):
“Investors counting on a corporate earnings rebound in the second half of the year are risking disappointment. Wall Street analysts have cut their third-quarter profit estimates in recent weeks, painting a bleak picture for investors already grappling with a simmering trade war, pockets of economic weakness and ominous signs from the bond market. Despite this week’s partial reprieve from the Trump administration, the latest round of tariffs on Chinese imports compound the problems already facing many companies and threaten to stifle their profit margins. Especially vulnerable are manufacturers, miners and retailers. At best, earnings across the companies in the S&P 500 will grow 1.5% this year, FactSet projects, far short of estimates for growth of more than 6% that analysts initially forecast in January. Worse, a few analysts predict earnings could end up contracting for 2019 as a whole.”
“Investors counting on a corporate earnings rebound in the second half of the year are risking disappointment. Wall Street analysts have cut their third-quarter profit estimates in recent weeks, painting a bleak picture for investors already grappling with a simmering trade war, pockets of economic weakness and ominous signs from the bond market. Despite this week’s partial reprieve from the Trump administration, the latest round of tariffs on Chinese imports compound the problems already facing many companies and threaten to stifle their profit margins. Especially vulnerable are manufacturers, miners and retailers. At best, earnings across the companies in the S&P 500 will grow 1.5% this year, FactSet projects, far short of estimates for growth of more than 6% that analysts initially forecast in January. Worse, a few analysts predict earnings could end up contracting for 2019 as a whole.”
China Watch:
August 15 – Reuters (Lucia Mutikani):
“China… vowed to counter the latest U.S. tariffs on $300 billion of Chinese goods but called on the United States to meet it halfway on a potential trade deal, as U.S. President Donald Trump said any pact would have to be on America’s terms. The Chinese finance ministry said… that Washington’s tariffs, set to start next month, violated a consensus reached between Trump and Chinese President Xi Jinping at a June summit in Japan to resolve their disputes via negotiation. In a separate statement, China’s foreign ministry spokeswoman, Hua Chunying, said, ‘We hope the U.S. will meet China halfway, and implement the consensus of the two heads of the two countries in Osaka.’”
“China… vowed to counter the latest U.S. tariffs on $300 billion of Chinese goods but called on the United States to meet it halfway on a potential trade deal, as U.S. President Donald Trump said any pact would have to be on America’s terms. The Chinese finance ministry said… that Washington’s tariffs, set to start next month, violated a consensus reached between Trump and Chinese President Xi Jinping at a June summit in Japan to resolve their disputes via negotiation. In a separate statement, China’s foreign ministry spokeswoman, Hua Chunying, said, ‘We hope the U.S. will meet China halfway, and implement the consensus of the two heads of the two countries in Osaka.’”
August 13 – CNBC (Everett Rosenfeld):
“Months of protests, violence and large-scale disruptions in Hong Kong have thrust the city into the global spotlight. According to China, there’s ‘powerful evidence’ that the United States has been involved.
A spokeswoman for China’s Foreign Ministry claimed… recent comments from American lawmakers — including House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Mitch McConnell, R-Ky. — demonstrate that Washington’s real goal is to incite chaos in the city. ‘The U.S. denied on many occasions its involvement in the ongoing violent incidents in Hong Kong. However, the comments from those members of the U.S. Congress have provided the world with new and powerful evidence on the country’s involvement,’ Foreign Ministry Spokesperson Hua Chunying said…”
“Months of protests, violence and large-scale disruptions in Hong Kong have thrust the city into the global spotlight. According to China, there’s ‘powerful evidence’ that the United States has been involved.
A spokeswoman for China’s Foreign Ministry claimed… recent comments from American lawmakers — including House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Mitch McConnell, R-Ky. — demonstrate that Washington’s real goal is to incite chaos in the city. ‘The U.S. denied on many occasions its involvement in the ongoing violent incidents in Hong Kong. However, the comments from those members of the U.S. Congress have provided the world with new and powerful evidence on the country’s involvement,’ Foreign Ministry Spokesperson Hua Chunying said…”
August 14 – Bloomberg:
“China’s regulators are asking commercial banks to assume a greater role in resolving ‘hidden debt’ borrowed by struggling municipalities, according to people familiar with the matter. China Construction Bank Corp. and China CITIC Bank Corp. are now leading efforts to tackle implicit local government debt in Xiangtan city in the central province of Hunan, according to people… China CITIC Bank has proposed new lending to entities such as local government financing vehicles to repay borrowings from financial institutions, according to one of the people. A previous plan for the city spearheaded by policy lender China Development Bank has been suspended, and instead, the financial regulators are encouraging commercial banks to participate in such programs…”
“China’s regulators are asking commercial banks to assume a greater role in resolving ‘hidden debt’ borrowed by struggling municipalities, according to people familiar with the matter. China Construction Bank Corp. and China CITIC Bank Corp. are now leading efforts to tackle implicit local government debt in Xiangtan city in the central province of Hunan, according to people… China CITIC Bank has proposed new lending to entities such as local government financing vehicles to repay borrowings from financial institutions, according to one of the people. A previous plan for the city spearheaded by policy lender China Development Bank has been suspended, and instead, the financial regulators are encouraging commercial banks to participate in such programs…”
Brexit Watch:
August 14 – Reuters (William James):
“The British parliament is set for a September showdown between Prime Minister Boris Johnson’s ‘do or die’ pro-Brexit government and those implacably opposed to leaving the European Union without a divorce deal. Johnson says Britain will leave the EU with or without a deal on Oct. 31 and is refusing to negotiate with Brussels until it agrees to change the Withdrawal Agreement, the deal it negotiated with his predecessor Theresa May. Brussels says it won’t renegotiate. The impasse leaves Britain on course for a no-deal exit unless parliament can stop it.”
“The British parliament is set for a September showdown between Prime Minister Boris Johnson’s ‘do or die’ pro-Brexit government and those implacably opposed to leaving the European Union without a divorce deal. Johnson says Britain will leave the EU with or without a deal on Oct. 31 and is refusing to negotiate with Brussels until it agrees to change the Withdrawal Agreement, the deal it negotiated with his predecessor Theresa May. Brussels says it won’t renegotiate. The impasse leaves Britain on course for a no-deal exit unless parliament can stop it.”
Asia Watch:
August 12 – Associated Press (Kim Tong-Hyung):
“South Korea said… that it has decided to remove Japan from a list of nations receiving preferential treatment in trade in what was seen as a tit-for-tat move following Tokyo’s recent decision to downgrade Seoul’s trade status amid a diplomatic row. It wasn’t immediately clear how South Korea’s tightened export controls would impact bilateral trade”
“South Korea said… that it has decided to remove Japan from a list of nations receiving preferential treatment in trade in what was seen as a tit-for-tat move following Tokyo’s recent decision to downgrade Seoul’s trade status amid a diplomatic row. It wasn’t immediately clear how South Korea’s tightened export controls would impact bilateral trade”
Europe Watch:
August 16 – Bloomberg (Raymond Colitt):
“Germany’s government is ready to run a budget deficit if Europe’s largest economy goes into recession, magazine Der Spiegel reported. Chancellor Angela Merkel and Finance Minister Olaf Scholz would be willing to increase debt in order to offset a tax revenue shortfall due to an economic slump, the magazine said, citing sources in the chancellery and the finance ministry…”
“Germany’s government is ready to run a budget deficit if Europe’s largest economy goes into recession, magazine Der Spiegel reported. Chancellor Angela Merkel and Finance Minister Olaf Scholz would be willing to increase debt in order to offset a tax revenue shortfall due to an economic slump, the magazine said, citing sources in the chancellery and the finance ministry…”
August 14 – Reuters (Sujata Rao):
“Slumping exports sent Germany’s economy into reverse in the second quarter, with prospects of an early recovery slim as its manufacturers struggle at the sharp end of a global slowdown amplified by tariff conflicts and fallout from Brexit. Overall output fell 0.1% quarter-on-quarter… With pressure growing on a thus far reluctant government to provide more fiscal stimulus, the economy minister said action was needed to prevent a second consecutive quarter of contraction that would tip the country into recession.”
“Slumping exports sent Germany’s economy into reverse in the second quarter, with prospects of an early recovery slim as its manufacturers struggle at the sharp end of a global slowdown amplified by tariff conflicts and fallout from Brexit. Overall output fell 0.1% quarter-on-quarter… With pressure growing on a thus far reluctant government to provide more fiscal stimulus, the economy minister said action was needed to prevent a second consecutive quarter of contraction that would tip the country into recession.”
Emerging Markets Watch:
August 13 – Financial Times (Benjamin Parkin):
“Indian vehicle sales fell more than 30% in July as an intensifying economic slowdown drags what was considered among the world’s most promising car markets through one of its worst slumps on record.
In the largest fall since the turn of the millennium, passenger vehicle sales fell 31% last month from the same time a year earlier… It was the worst month in a dismal spell that has seen sales fall 20% or more for four consecutive months… ‘This is the first such kind of a decline,’ said Basudeb Banerjee, a motor analyst at… Ambit. ‘Cars have never faced such bad days in the last 20 years.’”
“Indian vehicle sales fell more than 30% in July as an intensifying economic slowdown drags what was considered among the world’s most promising car markets through one of its worst slumps on record.
In the largest fall since the turn of the millennium, passenger vehicle sales fell 31% last month from the same time a year earlier… It was the worst month in a dismal spell that has seen sales fall 20% or more for four consecutive months… ‘This is the first such kind of a decline,’ said Basudeb Banerjee, a motor analyst at… Ambit. ‘Cars have never faced such bad days in the last 20 years.’”
Global Bubble Watch:
August 13 – Financial Times (Tommy Stubbington):
“Bonds worth $15tn — roughly a quarter of the debt issued by governments and companies around the world — are currently trading with negative yields. That means prices are so high that investors are certain to get back less than they paid, via interest and principal, if they hold the bond to maturity. They are, in effect, paying someone to look after their money. The spread of negative-yielding debt has raised profound questions about the extraordinary lengths central banks have gone to in a bid to revive the economy over the past decade. At the same time, bond markets’ journey through the looking glass has befuddled many investors. ‘Free money — it’s sort of an insane concept,” said David Hoffman, a bond portfolio manager at Brandywine Global… ‘Having grown up in a very different world it’s challenging to navigate this.’”
“Bonds worth $15tn — roughly a quarter of the debt issued by governments and companies around the world — are currently trading with negative yields. That means prices are so high that investors are certain to get back less than they paid, via interest and principal, if they hold the bond to maturity. They are, in effect, paying someone to look after their money. The spread of negative-yielding debt has raised profound questions about the extraordinary lengths central banks have gone to in a bid to revive the economy over the past decade. At the same time, bond markets’ journey through the looking glass has befuddled many investors. ‘Free money — it’s sort of an insane concept,” said David Hoffman, a bond portfolio manager at Brandywine Global… ‘Having grown up in a very different world it’s challenging to navigate this.’”
August 14 – Wall Street Journal (Greg Ip):
“When assumptions about how the world works are shattered, a global downturn is often the result.
The world learned in the early 1970s that the era of cheap oil was over, in the early 1980s that countries could default, and a decade ago that American mortgages and global banks aren’t safe. Today, a similar rethink of globalization is under way. From Washington to Buenos Aires, nations’ mutually reinforcing commitment to open markets is disintegrating. In response, investors are rearranging portfolios, businesses are rethinking investments and policy makers are struggling to respond—all of which are pushing the global economy closer to recession. Investors believe central banks—the last bastion of the technocratic, globalized elite—can use their limited ammunition to stave off recession. Yet central banks may be dragged into the competitive fray.”
“When assumptions about how the world works are shattered, a global downturn is often the result.
The world learned in the early 1970s that the era of cheap oil was over, in the early 1980s that countries could default, and a decade ago that American mortgages and global banks aren’t safe. Today, a similar rethink of globalization is under way. From Washington to Buenos Aires, nations’ mutually reinforcing commitment to open markets is disintegrating. In response, investors are rearranging portfolios, businesses are rethinking investments and policy makers are struggling to respond—all of which are pushing the global economy closer to recession. Investors believe central banks—the last bastion of the technocratic, globalized elite—can use their limited ammunition to stave off recession. Yet central banks may be dragged into the competitive fray.”
August 13 – Wall Street Journal (Esther Fung):
“Commercial-property prices in major cities around the world tumbled in the second quarter, amid signs of slower global growth and heightened trade tension… Average property prices fell in the second quarter from the first quarter in Hong Kong and Seoul to London and Washington, D.C., according to… Real Capital Analytics. Paris commercial real-estate prices declined the most among the markets that Real Capital Analytics tracks in Europe, tumbling 2.6% for the quarter. Prices in Central Chicago fell 2.1%, making it the worst performer among U.S. cities. In Australia, where the economic growth has slowed sharply since mid-2018, property prices were down more than 2% in Melbourne and Central Sydney.”
“Commercial-property prices in major cities around the world tumbled in the second quarter, amid signs of slower global growth and heightened trade tension… Average property prices fell in the second quarter from the first quarter in Hong Kong and Seoul to London and Washington, D.C., according to… Real Capital Analytics. Paris commercial real-estate prices declined the most among the markets that Real Capital Analytics tracks in Europe, tumbling 2.6% for the quarter. Prices in Central Chicago fell 2.1%, making it the worst performer among U.S. cities. In Australia, where the economic growth has slowed sharply since mid-2018, property prices were down more than 2% in Melbourne and Central Sydney.”
Japan Watch:
August 14 – Reuters (Leika Kihara and Daniel Leussink): “Japan’s core machinery orders unexpectedly rebounded in June to post their largest monthly expansion on record, in a sign corporate investment remains resilient to slowing global growth and international trade frictions. …Core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, rose 13.9% in June from the previous month.”
Geopolitical Watch:
August 14 – Reuters (Farah Master and Tony Munroe): “Hong Kong braced for more mass protests over the weekend, even as China warned it could use its power to quell demonstrations and U.S. President Donald Trump urged Chinese President Xi Jinping to meet personally with the protesters to defuse weeks of tensions. Hundreds of China’s People’s Armed Police (PAP) on Thursday conducted exercises at a sports stadium in Shenzhen which borders Hong Kong after the U.S. State Department said it was ‘deeply concerned’ about the movements, which have prompted worries that the troops could be used to break up protests. Ten weeks of confrontations between police and protesters have plunged Hong Kong into its worst crisis since it reverted from British to Chinese rule in 1997 and presented the biggest popular challenge to Xi in his seven years in power.”
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