Baltic Dry Index 1093 +75 Brent
Crude 58.80
Every
generation imagines itself to be more intelligent than the one that went before
it, and wiser than the one that comes after it.
George
Orwell.
It was a bad week and it ended
badly. Bunker time! Will 2018 now end badly? From stocks to commodities to
cryptocurrencies, there was epic paper wealth destruction everywhere. Worse the
chances are high that the wealth destruction continues next week.
The three bears haven’t just slaughtered
Goldilocks, they’ve gone on a rampage attacking everyone else. That stocks were
living on borrowed time has been obvious to most since mid-summer, but the
sudden collapse in oil prices suggests that the global economy has already turned
down.
If in fact it has, and a new
recession is starting to arrive, 2019 will be the year we all become Trump
trade war losers.
Forget hard or soft Brexit
worries, a new recession will collapse a massive debt mountain run up since
2009, blow up the emerging market economies, blow up many over inflated real
estate markets, and I think blow up the destructive, wealth and jobs destroying
EUSSR.
Oil tumbles on oversupply concerns, sinking world stocks
November 23, 2018 / 1:07 AM
NEW YORK (Reuters) - Oil prices
plunged on Friday on concerns about oversupply, sending world stock markets
lower as lagging energy shares weighed down Wall Street.
Both Brent
and U.S. crude fell to their lowest levels since October 2017 and were on
course for their biggest one-month decline since late 2014. Although the
Organization of the Petroleum Exporting Countries is expected to curb output,
rising U.S. oil supply has fuelled persistent concerns about a global surplus.
Tumbling oil
prices pushed U.S. energy shares down more than 3 percent. As a result, the
benchmark S&P 500 stock index ended lower to confirm correction territory,
having dropped more than 10 percent from its record closing high in late
September. Trading volume was light in a shortened session after the
Thanksgiving holiday.
MSCI’s gauge
of stocks across the globe also fell.
Underwhelming economic data from
Europe also dimmed market sentiment, investors said. Surveys of German and euro
zone purchasing managers came in weaker than expected.
“Oil
dropped, and some of the numbers from Europe have been a little weak,” said
John Carey, managing director and portfolio manager at Amundi Pioneer Asset
Management in Boston.
“Today just
confirms the recent weakness due to persisting worries about the economy and
the effect of higher interest rates on price-to-earnings multiples, borrowing
costs and so forth.”
Prices of
base metals, including nickel and copper, fell sharply on worries of weakening
demand in China and a slowdown in global growth as a result of trade tensions
between China and the United States.
More
German GDP data confirms contraction in 3Q
Published: Nov 23, 2018 3:02 a.m. ET
FRANKFURT--Germany's economy
shrank in the three months to September, weighed down by lackluster foreign
trade and households' reluctance to buy new cars, the nation's statistics agency
confirmed on Friday.
German gross domestic product
was 0.2% lower in the quarter ending Sept. 30 than the preceding three months,
after adjusting for prices and the time of year, the agency said, confirming an
earlier estimate.
It was the first quarter-on-quarter
decrease for Europe's largest economy since the start of 2015. GDP was up 1.1%
from the same period a year earlier.
The decline was mainly due to
a drop in exports of goods and services, which fell by 0.9% compared with the
previous period, the agency said. Imports were up 1.3%.
Household expenditure fell by
0.3%, partly because consumers were reluctant to buy new cars.
Rising recession risk leaves Europe acutely vulnerable to no-deal Brexit shock
Germany and Italy are flirting with recession while eurozone business growth has slumped to a four-year low, leaving the region nakedly exposed to the possible shock of a no-deal Brexit.The closely watched IHS Markit index of German manufacturing fell to 50.2 in November, close to the ‘boom-bust line’ that divides growth from contraction. It is the weakest level since the tail-end of eurozone banking crisis in 2013. Foreign export orders fell to a six-year low.
Germany’s data office Destastis confirmed on Friday that the country’s economy contracted by 0.2pc in the third quarter. It blamed crumbling global demand and disruption in the car industry from new vehicle test standards called WLTP.
Italy’s economy has also stalled. Peter Praet, the European Central Bank’s chief economist, warned that the country is uncomfortably close to a fresh crisis as the budget showdown between Brussels and the insurgent Lega-Five Star coalition in Rome continues to escalate.
Risk spreads on 10-year Italian bonds have been stuck above 300 basis points for nearly two months, gradually tightening the noose on the economy. Italian banks are mostly unable to roll over their bonds, forcing them to curb lending. Mortgage rates are being reset upwards. “No country can sustain such high spreads for a long time,” he said.
Mr Praet told the Handelsblatt that there would be no ECB reprieve for Italian lenders at the next meeting in December, a warning that may cause alarm in banking circles. “It is too early to decide on a new TLTRO,” he said, referring to a renewal of the ECB’s €800bn (£708bn) lending window for banks.
Hopes that the economic slowdown in the third quarter would prove nothing worse than a 'soft patch' have been dashed as a blizzard of ominous figures point to further trouble in the fourth quarter. The eurozone’s open trading economy and heavy reliance on export demand makes it more leveraged to the ups and downs of the world cycle than the US economy.
It is becoming clear that the credit crunch in emerging markets - caused by vanishing dollar liquidity - is doing more damage to Europe than anticipated. So is the economic slowdown in China, where monetary and fiscal policy stimulus has so far failed to gain much traction.
More
In G-20/trade war
news, it’s make or break week for the markets. Will president Trump declare
victory at next weekend’s G-20 meeting and drop his punitive tariffs on China
due to start on January 1st, giving the global economy a chance to
avoid a new recession in 2019, or will he escalate his attempt to take out
China before China overtakes the USA economy?
But the signs are not
good for Trump declaring victory.
China wants trade talks with United States to be equal, mutually beneficial
November 23, 2018 / 2:20 AM
BEIJING (Reuters) - Trade
talks between the United States and China should be equal and mutually
beneficial, Chinese Vice Commerce Minister Wang Shouwen said on Friday, adding
that he hoped the two countries can find ways to manage their differences
through dialogue.
U.S. President Donald Trump
and his Chinese counterpart Xi Jinping are expected to hold talks during the
G20 summit in Buenos Aires next week as trade ties between the world’s two
largest economies become increasingly fraught.
“We hope that, on the basis of
equal consultations, mutual benefits and trust, we could make common efforts to
manage differences and find ways to resolve problems,” Wang told a news
conference in Beijing, the capital.
Officials of both countries
were in close contact, instructed by their leaders, he added.
Washington wants Beijing to
improve market access and intellectual property protections for U.S. firms, cut
industrial subsidies and slash a $375-billion trade gap. Trump has imposed
tariffs on $250 billion of Chinese imports to force concessions.
The U.S. tariff rate on $200
billion in Chinese goods is set to increase to 25 percent from 10 percent on
Jan. 1. Trump has threatened to impose tariffs on all remaining Chinese imports
- about $267 billion more in goods - if Beijing fails to address U.S. demands.
Trump said on Thursday he
hoped he could make a deal with China when he meets Xi.
“I can say this, China wants
to make a deal very badly - because of the tariffs,” Trump told reporters in
the town of Palm Beach in Florida.
“China wants to make a deal;
if we can make a deal, we will,” he said.
The high-stakes meeting comes
as the Trump administration shows little sign of backing down in its demands
and rhetoric.
More
WTO says G20 trade restrictions soar, cover $481 billion of trade
November
22, 2018 / 2:24 PM
GENEVA
(Reuters) - Countries belonging to the G20 group of the world’s biggest
economies applied 40 new trade restrictive measures between mid-May and
mid-October, covering around $481 billion of trade, the World Trade
Organization said on Thursday.
The
new restrictions covered six times more trade than in the previous period and
were the largest since the WTO started monitoring G20 trade in 2012, it said in
a statement.
“The report’s findings should
be of serious concern for G20 governments and the whole international
community,” WTO Director-General Roberto Azevedo said in the statement.
“Further escalation remains a
real threat. If we continue along the current course, the economic risks will
increase, with potential effects for growth, jobs and consumer prices around
the world.”
The WTO was doing all it could
to help de-escalate the situation, he added, but solutions would need political
will and leadership from the G20, whose leaders will meet in Argentina next
week.
The monthly number of trade
restrictions averaged eight during the period covered by the report, up from
six per month in the previous report, which covered mid-October 2017 to mid-May
2018, the WTO statement said.
“The proliferation of
trade-restrictive actions and the uncertainty created by such actions could
place economic recovery in jeopardy. Further escalation would carry potentially
large risks for global trade, with knock-on effects for economic growth, jobs
and consumer prices around the world,” it said.
Three-quarters of the latest
trade restrictions were tariff hikes, many of them retaliation to steel and
aluminium tariffs imposed by U.S. President Donald Trump in March.
But the WTO did not count
measures that had been announced and not yet implemented, and one G20 country
had asked for its tariff retaliation to be omitted from the monitoring report,
which was done for “transparency” purposes, the WTO said.
More
EU sees global trade tensions dominating G20 summit
November 22, 2018 / 1:49 PM
BRUSSELS
(Reuters) - Trade tensions between the United States and China are likely to
dominate the G20 summit of the world’s 20 biggest economies next week,
according to a senior European Union official who said the EU was keen to act
as a bridge-builder.
The
United States and China have been imposing tariffs on each others goods in an
escalating dispute over market access, forced technology transfer, intellectual
property rights and state subsidies to certain sectors that distort
competition.
The European Union, Canada and
Japan are also involved because of U.S. tariffs on steel and aluminum products
imposed by Washington earlier this year.
“The success of the G20 summit this
year will be measured by its capacity to de-escalate the current trade
tensions,” the EU official, involved in preparations for the talks, said.
The official said the EU
shared many of the United States’ concerns over China’s trade practices, but
favored a different approach. While Washington pursued unilateral actions, the
EU wants to deal with them in the World Trade Organisation.
The United States is
skeptical, saying the WTO is not equipped to deal with the new trade
challenges.
----
The EU will push for the G20 final
communique to uphold previous commitments to keep markets open, fight
protectionism and to support the multilateral trading system, the official
said, adding the EU also wanted the issue of excess global steel capacity
addressed.
“We (also) want to have the
fight against climate change recognized in the declaration as we have done last
year,” he said.
“There is one particular country,
the United States, which has a different approach on this. We will maintain our
commitment in order to have a strong paragraph on this and an effective
implementation of these agreements.”
"On
the whole human beings want to be good, but not too good, and not quite all the
time.”
George
Orwell.
The monthly Coppock Indicators finished October.
DJIA: 25,116 +176 Down. NASDAQ:
7,306 +232 Down. SP500: 2,712 +146 Down. All three slow indexes went sharply down in
October, suggesting there’s more of the correction to come.
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