Financial Data and Economic News for the week ending August 12, 2022

 FULL ARTICLE  HERE:

Credit Bubble Bulletin : Weekly Commentary: The Everything Squeeze

Credit Bubble Bulletin, 
by Doug Noland

Following is an edited easy to read version
by Ye Editor

For the Week ending August 12, 2022:

FINANCIAL  DATA:

S&P500 rose 3.3% (down 10.2% y-t-d)

Dow gained 2.9% (down 7.1%)

Utilities added 2.8% (up 6.2%)

Transports advanced 3.7% (down 8.1%)

S&P 400 Midcaps jumped 4.4% (down 8.0%)

Small cap Russell 2000 surged 4.9% (down 10.2%)

Nasdaq100 advanced 2.7% (down 16.9%)

Semiconductors increased 0.5% (down 22.3%)

Biotechs declined 0.9% (down 8.5%). 

With bullion jumping $27, 

the HUI gold stock index rallied 4.6% (down 17.3%).

Three-month Treasury bill rates ended the week at 2.4675%. 

Two-year government yields added two bps to 3.25% (up 251bps y-t-d). 

Five-year T-note yields were unchanged at 2.96% (up 169bps). 

Ten-year Treasury yields were unchanged at 2.83% (up 132bps). 

Long bond yields increased four bps to 3.11% (up 121bps). 

Benchmark Fannie Mae MBS yields dropped 11 bps to 4.04% (up 197bps).

U.K.'s FTSE increased 0.8% (up 1.6% y-t-d).

Japan's Nikkei gained 1.3% (down 0.9% y-t-d).  

France's CAC40 rose 1.3% (down 8.4%).

German DAX rose 1.6% (down 13.2%). 

Spain's IBEX 35 jumped 2.8% (down 3.6%). 

Italy's FTSE MIB gained 1.7% (down 16.0%)

 Brazil's Bovespa surged 5.4% (up 7.1%)

Mexico's Bolsa jumped 4.5% (down 8.3%). 

South Korea's Kospi gained 1.5% (down 15.1%). 

India's Sensex rose 1.8% (up 2.1%). 

China's Shanghai Exchange increased 1.5% (down 10.0%). 

Turkey's Istanbul National 100 index jumped 4.1% (up 54.2%). 

Russia's MICEX rallied 4.5% (down 43.3%).

Federal Reserve Credit last week declined $6.3bn to $8.841 TN. 
Fed Credit is down $59.4bn from the June 22nd peak. 
Over the past 152 weeks, Fed Credit expanded $5.115 TN, or 137%. 

Freddie Mac 30-year fixed mortgage rates
 jumped 23 bps to 5.22% (up 235bps y-o-y).

Fifteen-year rates surged 33 bps to 4.59% (up 244bps). 

Five-year hybrid ARM rates gained 18 bps to 4.43% (up 199bps). 

Bankrate's survey of jumbo mortgage borrowing costs 
had 30-year fixed rates up 15 bps to 5.53% (up 247bps).

Currency Watch:

For the week, the U.S. Dollar Index 
declined 0.9% to 105.63 (up 10.4% y-t-d). 

 The Chinese (onshore) renminbi 
increased 0.41% versus the dollar (down 5.74% y-t-d).

Commodities Watch:

Bloomberg Commodities Index rallied 4.5% (up 24.2% y-t-d). 

Spot Gold gained 1.5% to $1,802 (down 1.5%). 

Silver recovered 4.7% to $20.82 (down 10.7%). 

WTI crude rallied $3.08 to $92.09 (up 22%). 

Gasoline surged 6.7% (up 37%)

Natural Gas spiked 8.7% to $8.77 (up 135%). 

Copper rose 3.3% (down 18%). 

Wheat jumped 6.0% (up 7%)

Corn rose 5.3% (up 8%). 

Bitcoin rallied $897, or 3.9%, this week to $24,157 (down 48%).

DOUG  NOLAND'S  COMMENTARY:
(highly edited)

Wednesday’s CPI release was telling. July consumer price inflation data were somewhat better than forecast. Instead of increasing 0.2%, headline CPI was flat for the month. “Core” prices rose 0.3%, less than the expected 0.5%. From a fundamental perspective, a single month of marginally improved inflation data is not an earthshaking development. 

The Goldman Sachs Short Index (GSSI) surged 5.1% Wednesday (up 7.5% for the week). In what is shaping up as a major squeeze episode, the GSSI is already up 20.6% month-to-date – while rallying 47% off June lows.

Market Structure has been a longstanding CBB theme. It’s turning out to be a critical issue for the first substantive Federal Reserve tightening cycle in 25 years. 

U.S. and global systems have developed robust inflationary biases over the past year. In general, inflation promotes the necessary Credit growth to sustain price momentum. Higher prices, labor shortages, supply chain issues, and the like spur borrowing and investment spending. 

For 25 years, markets became progressively more confident in the central bank liquidity backstop. The so-called “Fed Put” became deeply embedded in Market Structure – in psychology, behavior, products, strategies and asset prices. It became instrumental to derivatives markets and hedging strategies more generally. 

Over time, the backdrop had a profound impact on Market Structure. Risk management was downgraded, while risk embracement was readily rewarded. Markets turned increasingly speculative. 

At least for this round, perceptions held that central bankers retain the capacity to stabilize markets. And now markets are weeks into a major unwind of hedges and short positions, a dynamic that unleashes smoldering speculative dynamics. 

let’s not forget that the Fed ratchets up QT (quantitative tightening) next month.

NEWS  SUMMARY:

Market Instability Watch:

August 8 – Bloomberg (Sagarika Jaisinghani): “A dimming earnings outlook is at odds with the recent rebound in stock markets, according to strategists at Morgan Stanley and Goldman Sachs… Both Morgan Stanley’s Michael J. Wilson and Goldman’s David J. Kostin expect corporate profit margins to contract next year given unrelenting cost pressures, they wrote in separate notes. According to Wilson, who has been one of the most vocal bears on US stocks, ‘the best part of the rally is over.’”

August 9 – Bloomberg (Ronan Martin): “Europe’s bond market is enduring its worst drought in at least 8 years. The market has seen 32 days without a single public debt offering from governments and corporations this year, already surpassing 2018 as the slowest year since records begin in 2014… That tally is certain to rise since activity usually slows markedly during the August vacation season… Last week, there were only 2.6 billion euros ($2.65 billion) of primary-market deals in Europe, the lowest so far this year, and year-to-date volumes are down over 22% from 2021, the data shows.”

Bursting Bubble and Mania Watch:

August 5 – Wall Street Journal (Veronica Dagher): “There are a lot of unhappy people in the housing market right now. Among the most miserable are sellers realizing they have listed their properties too late. For much of the country, real estate had been on a tear since the start of the pandemic. Home prices are up about 44% over the past two years, according to Redfin. But prices have cooled lately and many homeowners are coming to grips with the reality that they may not get the same prices their neighbors did. Roughly one in seven homes on the market had a price reduction in June, according to Realtor.com. That is nearly double the rate of one in 13 homes a year ago.”

August 9 – Wall Street Journal (Heather Gillers): “Public pension plans lost a median 7.9% in the year ended June 30, according to Wilshire Trust Universe Comparison Service data…, their worst annual performance since 2009 and a fresh sign of the chronic financial stress facing governments and retirement savers. Much of the damage occurred in April, May and June, when global markets came under intense pressure driven by concerns about inflation, high stock valuations and a broad retreat from speculative investments including cryptocurrencies. Funds that manage the retirement savings of teachers, firefighters and police officers returned a median minus 8.9% for that three-month period… ‘It was a really, really bad quarter for investing, there’s no way around it,’ said Michael Rush, a senior vice president at Wilshire.”

August 11 – Wall Street Journal (Nicole Friedman): “Home prices continued to climb across nearly all the U.S. in the second quarter, when buyer demand started to fade due to higher mortgage rates but still exceeded the housing market’s unusually low supply. The median sales price was higher in the quarter compared with a year ago for 184 of the 185 metro areas tracked, the National Association of Realtors said... More of the country also experienced double-digit-percentage price gains than earlier in the year. Median prices rose by more than 10% from a year earlier in 80% of the 185 metro areas, up from the first quarter when 70% of metro areas reported double-digit-percentage growth.”

August 8 – Bloomberg (John Gittelsohn): “A palatial five-bedroom home built in 1932 with stained-glass windows, hand-carved doors and jaw-dropping hillside views of downtown San Francisco hit the market in April for $9.5 million. In June, the owners dropped the price to $7 million. It went up for auction last week with an opening bid of $4.5 million. No offers emerged. That kind of pullback is a stark turn for a tech-fueled city long marked by extreme wealth and ever-escalating home prices. Now, as the US housing market slows from a pandemic-era frenzy, the San Francisco area stands to be among the hardest-hit places.”

August 9 – Bloomberg (Prarthana Prakash and Ian King): “Micron Technology Inc., the leading US maker of memory semiconductors, became the latest chipmaker to declare that demand is falling off rapidly. It warned investors that revenue won’t meet projections, sending industry stocks tumbling… The… company is the latest to reveal just how quickly demand for electronic components is declining, following a warning by Nvidia… and weak reports by Intel Corp. and other chipmakers this earnings season.”

Ukraine War Watch:

August 11 – Reuters (Tom Balmforth): “Satellite pictures released… showed devastation at a Russian air base in Crimea, hit in an attack that suggested Kyiv may have obtained new long-range strike capability with potential to change the course of the war. Pictures released by independent satellite firm Planet Labs showed three near-identical craters where buildings at Russia's Saki air base had been struck with apparent precision. The base, on the southwest coast of Crimea, had suffered extensive fire damage with the burnt-out husks of at least eight destroyed warplanes clearly visible.”

U.S./Russia/China Watch:

August 8 – Reuters: “Russia told the United States… it would not allow its weapons to be inspected under the START nuclear arms control treaty for the time being because of travel restrictions imposed by Washington and its allies. Inspection conditions proposed by Washington created ‘unilateral advantages for the United States and effectively deprive the Russian Federation of the right to conduct inspections on American territory,’ the Moscow foreign ministry said…”

August 10 – Reuters: “China, which Russia has sought as an ally since being cold-shouldered by the West over its invasion of Ukraine, has called the United States the ‘main instigator’ of the crisis… China's ambassador to Moscow, Zhang Hanhui, accused Washington of backing Russia into a corner with repeated expansions of the NATO defence alliance and support for forces seeking to align Ukraine with the European Union rather than Moscow. ‘As the initiator and main instigator of the Ukrainian crisis, Washington, while imposing unprecedented comprehensive sanctions on Russia, continues to supply arms and military equipment to Ukraine,’ Zhang was quoted as saying. ‘Their ultimate goal is to exhaust and crush Russia with a protracted war and the cudgel of sanctions…’ Zhang said Sino-Russian relations had entered ‘the best period in history, characterised by the highest level of mutual trust, the highest degree of interaction, and the greatest strategic importance’.”

China/Taiwan/U.S. Watch:

August 11 – Associated Press: “China… renewed its threat to attack Taiwan following almost a week of war games near the island. Taiwan has called Beijing's claims to the self-governing democracy ‘wishful thinking’ and launched its own military exercises. Taiwan’s ‘collusion with external forces to seek independence and provocation will only accelerate their own demise and push Taiwan into the abyss of disaster,’ Chinese Foreign Ministry spokesperson Wang Wenbin said at a daily briefing.”

Economic War/Iron Curtain Watch:

August 7 – Financial Times (Laura Pitel, Amy Kazmin, Alice Hancock and James Politi): “Western capitals are increasingly alarmed at the deepening ties between Turkey’s president Recep Tayyip Erdoğan and Vladimir Putin, raising the prospect of punitive retaliation against the Nato member if it helps Russia avoid sanctions. Six western officials told the Financial Times they were concerned about the pledge made by Turkish and Russian leaders to expand co-operation on trade and energy after the two had a four-hour meeting... One EU official said the 27-member bloc was monitoring Turkish-Russian relations ‘more and more closely’. A senior western official also suggested countries could call on their companies and banks to pull out of Turkey if Erdoğan follows through with the intentions he outlined on Friday — a highly unusual threat against a fellow Nato member state that could severely damage its already fragile $800bn economy.”

August 6 – Bloomberg (Tugce Ozsoy): “Five Turkish banks have adopted Russia’s Mir payments system, Turkey’s President Recep Tayyip Erdogan said on his return from talks with President Vladimir Putin in the Black Sea resort of Sochi. There are serious developments regarding the work that Turkish banks are doing on Russia’s Mir card, Turkey’s state-run Anadolu Agency cited Erdogan as saying... That’s a relief for both Russian tourists and Turkey, he told reporters. Payment in rubles will be a source of financial support for both Russia and Turkey, he said, adding the central bank governors of the two countries also met during the visit.”

Inflation Watch:

August 10 – Bloomberg (Olivia Rockeman): “US inflation decelerated in July by more than expected, reflecting lower energy prices, which may take some pressure off the Federal Reserve to continue aggressively hiking interest rates. The consumer price index increased 8.5% from a year earlier, cooling from the 9.1% June advance that was the largest in four decades… Prices were unchanged from the prior month. A decline in gasoline offset increases in food and shelter costs. So-called core CPI, which strips out the more volatile food and energy components, rose 0.3% from June and 5.9% from a year ago.”

August 10 – Bloomberg (Molly Smith): “Food prices in the US soared in July, keeping the cost of living painfully high even as lower gasoline costs offered some relief to consumers. Overall food prices climbed 10.9% from a year earlier, the biggest increase since 1979… Several essentials like cereal and certain dairy products posted record year-over-year rises. While the headline rate of inflation declined from the previous month, largely due to a drop in energy prices, the surging cost of food -- as well as rising rents -- continues to pinch consumers, especially low-income Americans who spend a bigger chunk of their household budgets on groceries.”

August 10 – Bloomberg (Martine Paris): “Inflation is wreaking havoc on breakfast, with egg prices at grocery stores soaring a whopping 47% in July over last year, according to retail analytics firm Information Resources Inc… Although the Consumer Price Index came in lower than expected at 8.5% in July, inflation is continuing to hit grocery shopping. The food-at-home category soared to 13.1 % over the last year, the largest increase since the period ending March 1979… Overall, food prices are up 14% year over year through July, according to the company.”

August 11 – Financial Times (Reade Pickert): “A key measure of US producer prices unexpectedly fell in July for the first time in more than two years, largely reflecting a drop in energy costs and representing a welcome moderation in inflationary pressures. The producer price index for final demand decreased 0.5% from a month earlier and rose 9.8% from a year ago… The pullback was due to a decline in the costs of goods, though services prices only edged up.”

August 9 – Reuters: “U.S. small business confidence edged up in July as fuel prices eased and job openings became marginally easier to fill, but inflation worries intensified, a survey showed… The National Federation of Independent Business (NFIB) said its Small Business Optimism Index rose four-tenths of a point last month to 89.9, the first monthly increase since December. Still, the level remains well below the 48-year average of 98. Some 37% of owners reported that inflation was their most important problem, the highest level since the fourth quarter of 1979.”

August 10 – Bloomberg (Maria Paula Mijares Torres and Jonnelle Marte): “Rental costs in the US are soaring at the fastest pace in more than three decades, surpassing a median of $2,000 a month for the first time ever and pushing rents above pre-pandemic levels in most major cities. Increases are particularly steep in metropolitan areas that saw large influxes of new residents during the pandemic, but the rental market is sparing almost nowhere and no one. While the affordability crisis in the US is not new, it has snowballed over the past year as people returned to big cities and some areas short on housing supply saw a boom of new residents. Demand for rentals has soared, with many would-be homebuyers backing out of the market after mortgage rates jumped this year as a result of the Federal Reserve’s aggressive interest-rate hikes.”

August 10 – Bloomberg (David Shepardson): “Surging inflation will prompt the U.S. Postal Service to seek higher prices for stamps and other services in January, just five months after its recent hike, as it continues to lose money. USPS raised prices in July by about 6.5%, including increasing the price of a first-class stamp from 58 cents to 60 cents after hiking stamps by 3 cents in August 2021. U.S. Postmaster General Louis DeJoy said… inflation would cause costs to exceed its 2022 budget plan ‘by well over $1 billion.’”

U.S. Bubble Watch:

August 9 – Reuters: “U.S. worker productivity in the second quarter fell at its steepest pace on an annual basis since 1948 when the Labor Department began tracking it, while growth in unit labor costs accelerated, suggesting strong wage pressures will continue to help keep inflation elevated. Nonfarm productivity, which measures hourly output per worker, fell at a 2.5% pace from a year ago... It also declined sharply in the second quarter at a 4.6% annualized rate, after having declined by an upwardly revised 7.4% in the first three months of the year.”

August 7 – Bloomberg (Ros Krasny): “About 69% of Americans think the US economy is getting worse, the highest since 2008, according to an ABC News/Ipsos poll. Three months before mid-term Congressional elections, only 37% said they approve of how President Joe Biden is handling the economic recovery, unchanged from June.”

August 11 – Wall Street Journal (Sarah O’Brien): “More than a third of U.S. adults are dipping into their savings accounts to help them afford higher prices... In the face of high inflation, 36% of people say they have withdrawn an average of $617 from their savings during the first six months of this year, according to New York Life’s latest Wealth Watch survey. In that same time period, the U.S. personal savings rate fell to 5.1% in June from 8.7% in December 2021, according to… the Federal Reserve Bank of St. Louis.”

August 8 – Bloomberg (Carmen Arroyo): “Consumers have become the most pessimistic about housing since 2011, when home prices bottomed in the wake of the global financial crisis... Fannie Mae’s Home Purchase Sentiment Index dropped to the lowest level in over a decade, as consumers expressed pessimism about home buying prospects. The index, which reflects consumers’ views on the housing market, has fallen from roughly 76 to 63 year-over-year… Sentiment hasn’t been as bad since the post-crisis era, when home values plunged as borrowers struggled to make payments, leaving millions facing foreclosure.”

August 9 – Bloomberg (Natalie Wong and Prashant Gopal): “The supply of homes for sale across the US grew at a record rate last month, another sign that higher mortgage costs are cooling down the housing market. The number of active listings nationwide jumped 31% from a year earlier, a record-high increase for a third straight month, according to.. Realtor.com… ‘With inventories increasing, buyers will have more negotiating power,’ said Danielle Hale, chief economist for Realtor.com. ‘The two years of a market heavily tipped in favor of sellers appears to be in the rearview mirror.’”

August 9 – Wall Street Journal (Sarah Chaney Cambon): “Workers’ wages are rising briskly, a factor contributing to four-decade high U.S. inflation. Average hourly earnings grew 5.2% in July from a year earlier, and annual wage gains have exceeded 5% each month this year…The rapid earnings growth adds to other evidence that employers are continuing to increase pay as they try to find and keep workers in a tight job market. Wage gains help consumers spend money in the face of higher prices for restaurant meals, groceries and lodging. But many companies are having to pay more for labor at the same time that other business expenses are rising, including for transportation and logistics, said Omair Sharif, head of forecasting firm Inflation Insights LLC. ‘The entire cost structure of operating a business has increased, including wages,’ Mr. Sharif said. ‘That’s allowing firms in a high-inflation environment to pass those costs on to consumers.’”

August 8 – Reuters (Timothy Aeppel): “Business investment appears to be an early victim of red-hot U.S. inflation and rising interest rates. Nonresidential fixed investment… slipped 0.1% on an annualized basis in the second quarter. This acted as a drag on gross domestic product, the broadest measure of U.S. economic output. It also ended a seven-quarter run of outsized additions to GDP that on average were more than double the category’s historic contributions to growth. The cutbacks hit every industry except mining and drilling.”

August 11 – Financial Times (Andrzej Rzońca): “Zombie companies — businesses whose operating profits are persistently lower than their interest payments — have something in common with high global inflation. Surprisingly, the root cause of both is the Federal Reserve. How did we find ourselves in a situation where, according to a 2021 report, roughly 10% of public companies in the US are zombies? The 2008 financial crisis scared policymakers. US and European central banks introduced unconventional monetary policies — ultra-low interest rates and large-scale asset purchasing programmes. When Lawrence Summers, former US Treasury secretary, claimed that the ‘natural’ interest rate was negative, and thus conventional policies were ineffective, this was an excuse for monetary policymakers to keep their feet on the accelerator pedal. Focused on boosting demand, policymakers forgot about supply and started zombifying the economy.”

China Watch:

August 9 – Bloomberg: “China’s consumer inflation accelerated in July to the highest level in two years, largely due to surging pork costs, while weak consumer demand kept overall price pressures in check. The consumer price index rose 2.7% last month from a year earlier as pork prices surged 20.2%...The pickup in CPI was lower than the 2.9% median estimate… and compares with 2.5% growth in June. Producer price inflation, meanwhile, slowed to 4.2% in July from 6.1% in June as commodity prices weakened.”

August 7 – Asia Markets (Henry Chia): “In the wake of some of the most challenging economic conditions seen in decades, China’s middle class is demonstrating a level of defiance that has arguably never been seen in the country’s modern history. The outside world first became aware of rumblings when China Evergrande’s inability to meet its debt obligations, totalling over $300 billion, began to make headlines throughout 2021. Since, China’s second-largest property developer has been on a downwards spiral – defaulting on its offshore bonds, selling off assets, and for the most part of 2022 its Hong Kong-listed shares have been suspended pending a restructuring proposal, while projects have stalled. But it’s now becoming clear that China Evergrande is just the headline act in what is Chinese debt horror story that runs far deeper.”

August 9 – Bloomberg: “Chinese banks’ issuance of securities backed by home mortgages has plunged, as the crisis in the nation’s property sector drags down a once-popular and relatively safe investment tool. Sales of residential mortgage-backed securities have fallen 92% so far this year to 24.5 billion yuan ($3.63bn)… There’s been no RMBS issuance since the end of February, the longest dry spell since 2015.”

August 9 – Bloomberg: “China’s plans to accelerate its world-leading expansion of solar and wind power are facing a major hurdle as floods, droughts and food-supply issues present authorities with a reality check about how much precious farmland the nation can afford to lose. Solar and wind farms have been supercharged in the past two years since Chinese President Xi Jinping announced a 2060 target for the nation to be carbon neutral, creating an incentive for local governments to allow more large-scale renewable energy projects. But the pandemic and recent bouts of extreme weather have shown how susceptible the nation is to disruptions in food supply. Good arable land is relatively limited considering the appetite of the nation’s 1.4 billion people, and large tracts of some of the most fertile soil in the heavily populated eastern and central provinces have already been swallowed up by urban growth.”

August 9 – Bloomberg: “China’s top auditor is conducting a review of the $3 trillion trust industry, paving the way for a potential overhaul of a key shadow banking sector where losses on property loans are mounting. In an unscheduled move, the National Audit Office -- which previously led an examination of bank exposures to Jack Ma’s Ant Group Co. -- has for the past month been inspecting the books of at least 20 trust firms, including the top five, to gauge the risks they pose to financial stability…. The firms are being asked to report on their risky loans to developers and any plans to dispose of them…”

Global Bubble and Instability Watch:

August 7 – Wall Street Journal (Tom Fairless and Megumi Fujikawa): “From Berlin to Tokyo to Wellington, economic growth is slowing or turning negative across advanced economies, yet labor markets remain historically tight. Talk of a ‘jobful recession’ has centered on the U.S., where payrolls grew by more than half a million in July and the unemployment rate declined to its prepandemic low of 3.5% even as economic output contracted in the three months through June. The same conundrum crops up around the world. In Germany, growth stalled in the three months through June… But the unemployment rate remains close to a 40-year low, and almost half of companies say worker shortages are hampering production. The jobless rate in the wider eurozone is at a record low. New Zealand’s economy shrank in the first three months of the year, but its jobless rate, at 3.3%, has stayed close to a multidecade low.”

August 10 – Reuters (Lucy Craymer): “New Zealand house prices fell in July with the median price recording its first annual fall since 2011, the Real Estate Institute of New Zealand (REINZ) said… The seasonally adjusted median nationwide house value in July fell 2.8% compared with the previous month and was down 1.6% year-on-year... The unadjusted median house price was down 1.8% on year.”

Europe Watch:

August 8 – Bloomberg (William Mathis): “German and French power prices hit record highs as a heat wave bolstered demand, putting pressure on energy supplies ahead of the critical winter period. While demand and prices typically drop off in the summer, this year a decline in Russian gas supplies during the key stockpiling season -- as well as reduced power output in France -- has underpinned a blistering rally.”

August 10 – Associated Press (Daniel Niemann and Frank Jordans): “Water levels on the Rhine River could reach a critically low point in the coming days, German officials said…, making it increasingly difficult to transport goods — including coal and gasoline — as drought and an energy crisis grip Europe. Weeks of dry weather have turned several of Europe’s major waterways into trickles, posing a headache for German factories and power plants that rely on deliveries by ship and making an economic slowdown ever more likely. Transporting goods by inland waterways is more important in Germany than in many other Western European countries, according to Capital Economics. ‘This is particularly the case for the Rhine, whose nautical bottleneck at Kaub has very low water levels but which remains navigable for ships with small drafts,’ said Tim Alexandrin, a spokesman for Germany’s Transport Ministry.”

August 10 – Bloomberg (William Wilkes, Jack Wittels and Irina Vilcu): “In the midst of an arid summer that set heat records across Europe, the continent’s rivers are evaporating. The Rhine — a pillar of the German, Dutch and Swiss economies for centuries — is set to become virtually impassable at a key waypoint later this week, stymieing vast flows of diesel and coal. The Danube, which snakes its way 1,800 miles through central Europe to the Black Sea, is gummed up too, hampering grain and other trade. Across Europe, transport is just one of the elements of river-based commerce that’s been upended by climate change. France’s power crisis has worsened because the Rhone and Garonne are too warm to effectively cool nuclear reactors, and Italy’s Po is too low to water rice fields and sustain clams for ‘pasta alle vongole.’”

Emerging Market Crisis Watch:

August 9 – Reuters (Brendan O'Boyle and Gabriel Araujo): “Mexican annual inflation reached its highest level in nearly 22 years in July…, rising faster than expected and fueling expectations that the central bank will raise the country's benchmark interest later this week. Inflation rose to 8.15% in the year through July from 7.99% in June…”