Baltic Dry Index. 1676 -32 Brent Crude 74.29
“The best laid schemes o' mice an'
men - Gang aft a-gley.”
Robert Burns, To A Mouse.
We open with two days left to dress up stocks
for the month end and first month of the second half of the year. Trickier this
time round with central bank meetings, including a two day Federal Reserve
meeting, the possible start of the next round of the tariff wars, a massive
crack in the FANGS, and everyone waiting to see what happens next in the Yuan
depreciation/devaluation.
Not the usual easy going “all news is good
news” spin to dress up Tuesday. In fact,
if the great FANG crack sets off a great rotation out of technology in general,
that great crack could all too easily turn into a chasm.
July 30, 2018 / 1:49 AM
Asia shares subdued for central bank, data test
SYDNEY (Reuters) - Asian share markets
drifted lower on Monday while currencies kept to familiar ranges at the start
of a busy week peppered with central bank meetings, corporate results and
updates on U.S. inflation and payrolls.
Technology and energy shares led Japan's Nikkei .N225 down 0.7 percent, and tech also featured in South Korea's .KS11 0.2 percent decline.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS eased 0.5 percent and Chinese blue chips .CSI300 by 0.3 percent.
The week features quarterly earnings from more than 140 S&P 500 companies, including Apple Inc (AAPL.O).
Disappointing results from Intel Corp (INTC.O) and Twitter Inc (TWTR.N) soured the mood on the Nasdaq .IXIC on Friday, though the S&P 500 <.SPX) and Dow .DJI still ended firmer for the week.
Analysts at JPMorgan cited relatively aggressive moves into “value” stocks - in particular banks - and away from shares leveraged to economic growth.
“Tech really began cracking on Tuesday
before the floodgates opened on Friday,” they wrote in a note.
----The U.S. Federal Reserve meets on Tuesday and Wednesday and is widely expected to stand pat while reaffirming the outlook for further gradual rate rises.
The market is almost fully priced for a hike in September and leaning
towards a further move before year-end.
A Bank of Japan policy meeting that ends on Tuesday has taken on greater
importance amid talk it could tweak its massive asset-buying campaign.
Elias Haddad, a senior currency strategist at Commonwealth Bank of
Australia, doubted the BoJ would move just yet, but felt it may abandon the
negative interest rate applied to accounts held by financial institutions at
the central bank.
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A good trial barrister learns fast to never
ask a question of a witness that he doesn’t already know the answer to. It
makes sense when starting trade wars to follow that same logic. Never start a
trade war that you don’t know the final outcome of.
Even though US Trump Trade Tariffs, and their
retaliation, are only so far affecting a tiny proportion of global trade, the
tempest in a teapot trade war, so far, is not responding to Washington’s
script. If all the planned tariff escalations actually happen, the Great Global
Trump Trade War will soon go off script entirely.
Below, as the best laid plans of mice and
Trump go oft awry.
But Mousie, thou art no
thy-lane,
In proving foresight may be
vain:
The best laid schemes o’ Mice
an’ Men
Gang aft agley,
An’ lea’e us nought but grief
an’ pain,
For promis’d joy!
Robert Burns. To A Mouse.
July 28, 2018 / 6:05 PM
G20 agriculture ministers slam protectionism, pledge WTO reforms
BUENOS
AIRES (Reuters) - Agriculture ministers from the G20 countries criticised
protectionism in a joint statement on Saturday, and vowed to reform World Trade
Organization (WTO) rules, but did not detail what steps they would take to
improve the food trade system.
In the statement, they said they were “concerned about the increasing
use of protectionist non-tariff trade measures, inconsistently with WTO rules.”
The ministers from countries including the United States and China, in
Buenos Aires for the G20 meeting of agriculture ministers, said in the
statement they had affirmed their commitment not to adopt “unnecessary
obstacles” to trade, and affirmed their rights and obligations under WTO
agreements.
The meeting came amid rising trade tensions that have rocked agricultural
markets. China and other top U.S. trade partners have placed retaliatory
tariffs on American farmers after the Trump administration put duties on
Chinese goods as well as steel and aluminium from the European Union, Canada
and Mexico.
U.S. growers are expected to take an estimated $11 billion hit due to
China’s retaliatory tariffs. Last week, the Trump administration said it would
pay up to $12 billion to help farmers weather the trade war.
U.S. Agriculture Secretary Sonny Perdue told Reuters in an interview on
the sidelines of the meeting that Trump’s plan would include between $7 billion
and $8 billion in direct cash relief that U.S. farmers could see as early as
late September.
---- Citing the Trump administration’s relief measures, German Agriculture Minister Julia Kloeckner said farmers “don’t need aid, (they) need trade.”
“We had a very frank discussion about the fact that we don’t want
unilateral protectionist measures,” Kloeckner said in a news conference after
the meeting.
The ministers, whose countries represent 60 percent of the world’s
agricultural land and 80 percent of food and agricultural commodities trade,
did not specify which measures they were referring to in the statement. Asked
for details, Kloeckner said the ministers did not want to “criticise a single
country.”
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Trump's Soybean 'Deal' With the E.U. Is Actually Pretty Insignificant
Europe already imports soybeans for free, and the European market isn't big enough to make up for China anyway.
Eric Boehm|Jul. 26, 2018 12:00 pm
It's a testament to the power of the tiny soybean—or, actually, the political
power of the farmers that grow them—that the Trump White House has
been scrambling this week to appease growers' complaints about the consequences
of the president's ill-thought-out trade war. But the president's latest
maneuver will do nothing to alleviate the harm caused by his own bellicose
trade policies.First, there was the attempt to buy farmers' support, with the White House announcing that it would spend $12 billion through a New Deal-era crop insurance program to bail out farms harmed by tariffs. This is the policy equivalent of lending a garden hose to the fire department after setting your house on fire (and then sticking taxpayers with the water bill). Then, on Tuesday, Trump was eager to announce the bare bones of a trade deal with European Commission President Jean-Claude Juncker that would see the E.U. importing more soybeans.
Soybeans are a critical battleground in the trade war because the United States produces so damn many of them. Farmers planted more than 89 million acres of soybeans across the United States in 2018, narrowly edging out the 88 million acres of corn that were planted, according to an annual survey by the Department of Agriculture. The United States is the world's largest exporter of soybeans, with nearly half the U.S. crop exported annually—and China is the largest importer of them. There are few singular products that better illustrate the benefits of global trade between the world's two largest economies than the humble soybean.
But it was only after this year's soybean crop was already planted that Trump announced his tariffs on steel, aluminum, and Chinese-made goods. China responded to those tariffs by targeting America's soybean crop—since then, the price of soybeans has fallen dramatically—leaving American farmers in the lurch.
That's why, at first blush, yesterday's joint announcement by Trump and Juncker appears to be a positive development—and, to be fair, any indication of a cease fire in the trade war is welcome. But a mere handshake agreement to send more soybeans across the Atlantic won't make up for a reduction in exports across the Pacific.
For starters, that's because the European Commission doesn't actually have authority over how many soybeans Europe imports. It doesn't procure soybeans for European markets and it doesn't tell European businesses where to buy their soybeans.
Of course, there are other ways that governments can encourage businesses within their borders to purchase materials from certain sources. Lowering trade barriers is one way to do it. If the Trump-Juncker agreement would lower European tariffs on American-grown soybeans, for example, that might do the trick of getting Europe to buy more American beans.
Except, well, the European Commission currently doesn't charge any tariffs on American soybeans. Which means European businesses already have access to all the American soybeans they would want. It's hard to see how—short of subsidizing demand across the pond—Juncker will follow through with his promise to have Europe buy more soybeans (falling global prices might encourage more buying in Europe, but not to a significant degree).
Rather
than being an agreement to import more soybeans, it seems like
Tuesday's deal was really nothing more than a pledge that Europe would not slap
new tariffs on soybeans in response to American tariff-raising, like China did.
Further reporting from Brussels seems to bear out that conclusion.
----It's
also worth considering the scale of the soybean markets in China and Europe. In
2016, the most recent year for which full data are available in the United
Nations Food and Agriculture Organization database, China
imported more than 86 million tons of soybeans while Europe imported just under
19 million tons. Unless Juncker and Trump plan to start jamming soybeans down
European throats, foie gras-style, there's simply no way that Europe
can consume enough soybeans to make up for the loss of China as an American
export market.
Koch network meeting kicks off with anti-protectionism message from Charles Koch
Michelle Ye Hee LeeJuly 28 at 7:18 PM
COLORADO SPRINGS — In 2003, billionaire industrialist Charles Koch
gathered a small group of like-minded business leaders to oppose increased
federal spending and steel tariffs under the George W. Bush administration.
Koch, 82, is now ringing the alarms again 15 years later at this
weekend's meeting, which has grown to include more than 500 major donors to his
influential network, amid the brewing trade war under President Trump.
The twice-annual confab kicked off Saturday afternoon with a video
message released to reporters in which an impassioned Koch decries
protectionism and those who support it.
“They’re doing whatever they can to close themselves off from the new,
hold on to the past and prevent change,” Koch says in a video. “This is a
natural tendency, but it’s a destructive one because when people act in
protectionist ways, they erect barriers, which makes everyone worse off.”
----He describes the beginnings of Koch Industries as historical footage of a younger Koch flashes on the screen, and he credits the growth of his company to “rejecting protectionism for a vision of mutual benefit and continual transformation.”
“When the U.S. has followed this vision, it's succeeded beyond what
anyone could have imagined,” Koch says in the video. “And if we remain true to
this vision as a network, we will help people improve their lives beyond what
any of us can imagine.”
But, he adds, “we face a herculean task. Protectionism is perverting the
key institutions of our society. It’s created immense barriers that are holding
people back. So if we want to help all people realize their potential, we have
to break these barriers.”
----“The policy response to tariffs in order to achieve anything is absolutely inappropriate policy, and we intend to make that case very strongly to the American people,” said Brian Hooks, a top Koch official. “The policies right now are hurting people, no doubt about it.”
The network’s top officials sharply criticized Trump's plan to provide $12 billion in emergency aid to farmers caught in the trade war, calling it a “bailout of bad policy.”
“We put tariffs, supposedly, to hurt and put pressure on China, and then it actually hurts farmers here,” said James Davis, a Koch network spokesman. “Crops waste away in the field, and then you pull a Depression-era program out to bail out farmers, to make them whole. But who’s underwriting our debt?”
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Still, thou art blest,
compar’d wi’ me!
The present only toucheth
thee:
But Och! I backward cast my
e’e,
On prospects drear!
An’ forward tho’ I canna see,
I guess an’ fear!
Robert Burns. To A Mouse.Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.
Today, the US auto industry.
While everyone’s watching the Fed’s 2-10 yield curve to forecast the next
recession arriving, did US motors just signal recession six months ahead?
Carmageddon in Detroit
by Wolf
Richter • Jul 26, 2018 •
Suddenly it gets ugly – but these are still the good times.
It’s confession time among the Detroit automakers: GM, Fiat Chrysler, and Ford all got ugly, in unison, in one day, something we haven’t seen since the Financial Crisis.Back at the end of May, GM shares (GM) were trading at $38 when it announced that SoftBank, the Japanese company that is blowing borrowed billions left and right, would invest $2.25 billion in GM’s self-driving car unit Cruise. By June 11, GM shares had shot up to $45. But this morning they’re at $37.16. That’s a 17% plunge from June 11, including the 5% drop Wednesday and today.
In its earnings report Wednesday morning, it lowered its profit outlook for 2018 by 5% to 9%, as its operating profits in its North America business plunged 23% in the quarter. GM’s “adjusted” profits had hit a record in 2017 of $12.8 billion. That record is now moving out of reach.
It blamed currency woes in Brazil and Argentina and raw materials, primarily steel and aluminum, whose prices – “driven by a variety of market forces,” as CFO Chuck Stevens said – rose more sharply than it had expected when it gave its guidance at the beginning of 2018.
Fiat Chrysler didn’t help. Wednesday morning it announced earnings and slashed full-year earnings guidance by about 7%. Its shares (FCAU) on Wednesday and this morning have plunged 13% and are down 31% since April.
FCA lost $114 million in Asia-Pacific region, mainly China, and blamed “lower shipments from the China JV as a result of market decreases, particularly in the SUV segments, and increased competition from domestic brands in China.”
“Clearly when you step back and look at our results for the quarter, the biggest challenges we face, and frankly we’re going to face to some extent for the balance of the year, are all focused in China,” said the new guy, CEO Mike Manley, who just filled the slot of Sergio Marchionne who passed away this week. He added, “With duty changes that were announced, these particularly impacted Maserati, which resulted in a slowdown of sales and shipments to dealers.”
Ford’s turn to confess came Wednesday evening – and it was ugly. It’s Q2 earnings plunged nearly 50% to $1.1 billion, as total revenues fell 2.4% to $38.9 billion. It slashed its earnings projections for the full year by about 11% and announced another restructuring program that could drag out for three to five years and cost $11 billion.
Or whatever, because in April, CEO Jim Hackett, the new guy, had announced a rejiggering process that would cost $25.5 billion through 2022 that included abandoning all car lines in the US, except for the Mustang [Carmageddon for Cars: “Cars” Are Scheduled to Die].
Hackett said in the statement that his cost-cutting measures “continue to take hold.”
Ford blamed the current set of problems on a disruption at a supplier for its high-margin pickups, rising costs of commodities, particularly steel and aluminum, difficulties in Europe, where it had a $73 million operating loss in Q2, and collapsing sales in China, where it had a $483 million operating loss in Q2.
But the collapse of Ford’s sales in China isn’t a new thing. That started in 2016. The chart below shows deliveries (in thousands) of all models made by Ford and its Chinese joint ventures for the first half of each year (data via carsalesbase.com):
----Not since the Financial Crisis have we seen earnings warnings by the three Detroit automakers balled up like this, all in one day, in unison.
But this isn’t the Financial Crisis. This is as good as it gets. The economy is growing. GDP in Q2 is projected to rise, depending on who is doing the projecting, between 2.8% and inexplicably 4.5%. Deliveries of new vehicles in the US peaked for the big three Detroit automakers in 2015 and have edged down since then, but they have raised prices on their profitable and hot trucks, SUVs, and crossovers, and in dollar terms, sales and profits in the US were solid – until now.
So these ugly outlooks hailing down on the good times are rattling nerves and leaving folks to wonder what will happen to the automakers when the times are no longer this good.
More
Technology Update.
With events happening fast in the development
of solar power and graphene, I’ve added this section. Updates as they get
reported. Is converting sunlight to usable cheap AC or DC energy mankind’s
future from the 21st century onwards?
New two-dimensional material could revolutionize solar fuel generation
International group of researchers including Brazilian scientists obtain new material from iron ore with application as a photocatalyst
Date:
July 26, 2018
Source:
Fundação de Amparo à Pesquisa do Estado de São Paulo
Summary:
Scientists have obtained from hematite a new material with application as a
photocatalyst, christened 'hematene.' The three-atom thick hematene is a
ferromagnetic material, as opposed to the iron ore from which it was created.
Following the isolation of graphene in 2004, a race began to synthesize
new two-dimensional materials. 2D materials are single-layer substances with a
thickness of between one atom and a few nanometers (billionths of a meter).
They have unique properties linked to their reduced dimensionality and play a
key role in the development of nanotechnology and nanoengineering.
An international group of researchers including Brazilian scientists
affiliated with the University of Campinas (UNICAMP) have succeeded in producing
a new material with these characteristics.
The researchers extracted a 2D material they call hematene from ordinary
iron ore like that mined in many parts of the world, including Brazil. The
material is only three atoms thick and is thought to have enhanced
photocatalytic properties.
The innovation is described in an article published in Nature
Nanotechnology. The research was conducted at the Center for Computational
Engineering and Sciences (CCES), one of the Research, Innovation and
Dissemination Centers (RIDCs) funded by the São Paulo Research Foundation --
FAPESP, and during a research internship abroad that was also supported by
FAPESP .
"The material we synthesized can act as a photocatalyst to split
water into hydrogen and oxygen, so that electricity can be generated from
hydrogen, for example, as well as having several other potential
applications," said Douglas Soares Galvão, one of the authors of the study
and co-principal investigator at CCES.
The new material was exfoliated from hematite, one of the most common
minerals on earth and the main source of iron, which is the cheapest metal,
used in many products and above all to make steel.
----Hematene photocatalysis is more efficient because photons generate both negative and positive charges within a few atoms of the surface, the researchers said. By pairing the new material with titanium dioxide nanotube arrays, which provide an easy pathway for electrons to leave the hematene, the scientists found they could allow more visible light to be absorbed.
"Hematene may be an efficient photocatalyst, especially for
splitting water into hydrogen and oxygen, and could also serve as an ultrathin
magnetic material for spintronic-based devices," said the FAPESP RIDC
researcher. Spintronics (or magnetoelectronics) is a new technology used to
store, display and process information based on changes brought about by an
electron's spin, which is directly coupled to its magnetic moment.
The group have investigated other non-van der Waals materials for their
potential to give rise to other 2D materials with exotic properties.
"There are a number of other iron oxides and derivatives thereof that are
candidates for originating new 2D materials," Galvão said.
The monthly Coppock Indicators finished June.
DJIA: 24,271 +221 Down. NASDAQ:
7,510 +267 Down. SP500: 2,718 +169 Down.
All
three slow indicators moved down in March and have continued down in April. May
and June. For some a new bear signal, for others a take profits and get back to
cash signal.
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