Baltic
Dry Index 610 -19
Brent Crude 61.27
Trump
25 percent tariffs 20 days away. Brexit 50
days away.
In any great organization it is far, far safer to be wrong with the majority than to be right alone.
John Kenneth Galbraith.
According to President U-turn yesterday, President Trump has no plans on meeting President Xi before the March one deadline that triggers 25 percent punitive tariffs on China’s exports to the USA. He as good as said that barring a miracle climbdown by America or China in next weeks trade talks in Beijing, 25 percent tariffs are coming in, just three weeks away.
Though
Asian markets eased on the news, stock markets everywhere are in deep denial of
this increasingly likely outcome. Something will turn up next week in the trade
talks to pull a white rabbit out of the conjurer’s empty hat.
I
have my doubts. Neither President Trump or President Xi can be seen to be the
loser to the other. Having stated how easy it is to win a trade war, President
Trump is trapped in a corner of his own making. But President Xi is equally
trapped by his new “strong man” leadership role at the top of the Chinese
Communist Party. With neither able to give any meaningful ground next week, the
wheels are about to fly off most of the world’s stock markets next week.
Below,
ever so slowly the new reality sinks in. The panic probably starts next week.
Asian markets drop on renewed worries over U.S.-China trade talks
Asian markets tumbled on Friday after President Donald Trump said he doesn’t plan to meet Chinese leader Xi Jinping before a tariffs truce ends in March.Hong Kong’s Hang Seng HSI, -0.32% , reopening after a Lunar New Year break, gave up 0.8%. The Kospi SEU, -1.12% in South Korea declined 1.2% and Australia’s S&P ASX 200 XJO, -0.34% was down 0.4%.
----Stocks fell in Indonesia JAKIDX, -0.17% and Singapore STI, -0.17% but rose in Malaysia FBMKLCI, -0.50% . Markets in China and Taiwan were closed.
On Thursday, Trump did not dismiss the possibility of meeting Xi in the next month or so. But he shook his head and said no when reporters asked if the meeting would take place before March 2.
That marks the end of a 90-day tariffs truce mooted after Trump and Xi met in December.
Read: New White House message on China is that there’s a long way to go before striking trade deal
Unless American and Chinese negotiators come to a new agreement, the U.S. is expected to raise import taxes from 10% to 25% for $200 billion in Chinese goods. The trade dispute between the world’s two largest economies, which has cooled in recent months, has weighed on the outlook of businesses and the global economy.
“The worries surround the uncertainties of a resolution to the likelihood of further tariffs in this on-again, off-again confidence with regards to a deal,” Jingyi Pan of IG said in a market commentary.
U.S. Treasury Secretary Stephen Mnuchin and trade representative Robert Lighthizer will lead a delegation to Beijing next week for the next round of trade talks. Officials have reported little progress on contentious issues but remain hopeful that a deal will be struck.
Japan’s Nikkei 225 index NIK, -1.99% was 1.6% lower. On Friday, Japanese electronics and entertainment company Sony 6758, +4.18% announced its first 100 billion yen ($911.2 million) share buyback for 2.36% of its Tokyo-listed stock. Its shares were up by 5%early trading. Meanwhile, Nikon 7731, -11.73% plunged and auto makers such as Toyota 7203, -1.92% and Honda 7267, -2.23% slipped.
On Wall Street, stocks closed lower Thursday following a sell-off by technology companies, health care stocks and banks. Twitter TWTR, -9.84% plunged almost 10% after issuing a weak forecast. The broad S&P 500 index SPX, -0.94% shed 0.9% to 2,706.05. The Dow Jones Industrial Average DJIA, -0.87% was 0.9% lower at 25,169.53 and the Nasdaq composite COMP, -1.18% slid 1.2% to 7,288.35.
More
In EUSSR news, as usual it was dog
against dog and all against Brussels and Berlin. More and more it looks like
the rump-EU is entering recession, even before Brexit, now just about seven
weeks away. But if the EUSSR enters recession, and 25 percent US punitive tariffs
go into effect in three weeks against China’s exports, how long before the rest
of the world plunges into recession? How long before over priced stocks smash
into the wall of reality?
How Italy’s Escalating Feud With Macron Puts Business at Risk
By Gregory Viscusi and John FollainTies run deep between the two euro-area powers, making President Emmanuel Macron’s withdrawal of the French ambassador to Rome all the more stunning. It’s another divisive moment for the European Union as the regional economy weakens and the EU’s enemies circle.
“You
have to go back to the war to find relations this bad,” said Marc Lazar, a
history professor at Sciences Po university in Paris.
The feud between Macron and Italy’s two deputy
premiers, Matteo Salvini and Luigi di Maio, is escalating ahead of European
Parliament elections in May that they and other populists view as the next
chance to cut the political establishment down to size. Here’s a look at what’s
dividing France and Italy and the stakes involved.
France’s two biggest banks, BNP Paribas and Credit Agricole, own retail units in Italy, meaning they’re among the most exposed if a selloff in Italy starts to affect the economy and spreads through Europe’s financial system.
Read more: Why Italy’s Staggering Debts Are Europe’s Problem
Italy is France’s third-biggest export market and France is Italy’s second-largest, combining for an estimated $89 billion in trade in 2017, according to IMF data.
$10 Billion Train Link
France wants to move ahead with a high-speed rail link between Lyon and Turin, which envisages a 57-kilometer (36-mile) tunnel through the base of the Alps. That’s in doubt since Italy’s anti-establishment government took power last year: Salvini favors the project, while Di Maio opposes it as a waste of money. Some of the more than 800 million euros ($909 million) in approved EU funding are at risk because of the holdup.
More
German industrial output falls, raising risk of recession
February 7, 2019 / 7:12 AM
BERLIN (Reuters) - German industrial output
unexpectedly fell in December for the fourth consecutive month, sending another
signal that growth in Europe’s biggest economy is weakening.
Data from the Federal Statistics Office on Thursday
showed industrial output was down by 0.4 percent, confounding a Reuters
forecast for an increase of 0.7 percent.
Analysts said the fall makes it more likely that
the economy contracted in the fourth quarter, which would translate into a
recession after growth domestic product fell in the third quarter.
After nearly a decade of steady growth, the German
economy has been facing headwinds from trade frictions between the United
States and both China and the European Union. Britain’s possible departure from
the EU next month without a deal is also clouding the outlook for German
manufacturers.
December’s drop in industrial output was led by the
construction sector, where activity shrank by more than 4 percent, which could
not be offset by a small rise in manufacturing output, a breakdown of the data
showed.
The economy ministry said the auto sector, which
has been a drag on the economy because new emissions standards translated into
fewer new vehicle registrations, rebounded in December as output rose by more
than 7 percent.
The figure for November was revised up to a fall of
1.3 percent from a previously reported drop of 1.9 percent.
“A positive GDP reading in the fourth quarter of
2018 now looks tight,” said Thomas Gitzel of VP Bank Group. “A positive
(industry) reading would have reduced the chance of a negative GDP reading in
the fourth quarter.”
More
EU cuts euro zone growth forecast, inflation to slow
February 7, 2019 / 10:22 AM
BRUSSELS (Reuters) - The European Commission sharply
cut on Thursday its forecasts for economic growth in the euro zone this year
and next because of an expected slowdown in the largest countries of the bloc
caused by global trade tensions and growing public debt.
In its quarterly economic forecasts, the EU executive
also revised down its estimates for the inflation in the 19-country currency
bloc next year, which now is expected to be lower than forecast by the European
Central Bank - likely complicating the bank’s plans for an interest rate hike
this year.
The Commission said euro zone growth will slow to
1.3 percent this year from 1.9 percent in 2018, and is expected to rebound in
2020 to 1.6 percent.
The new estimates are less optimistic than the
Commission’s previous forecasts, released in November, when Brussels expected
the euro zone to grow 1.9 percent this year and 1.7 percent in 2020.
Growth in the 27-nation European Union - without
Britain which is planning to leave in March - is expected to slow to 1.5
percent this year from 2.1 percent in 2018. Next year, the bloc is forecast to
expand by 1.8 percent.
All countries of the European Union are poised to
continue growing, with the bloc expected to post its seventh consecutive year
of expansion, but the larger member states will brake significantly.
More
Nothing is so admirable in politics as a short memory.
John Kenneth Galbraith.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over banksters and politicians.
Today, where there’s a will and a
profit, commodity traders will find a way. But is it entirely legal? Does US
ethanol really get blended with Asian ethanol or merely blended with rebranded
US ethanol? I don’t know either, but will China now seize a few a few hapless
pawns, Huawei CFO style?
Long, strange trip: How U.S. ethanol reaches China tariff-free
February 7, 2019 / 7:07 AM
NEW YORK/KUALA LUMPUR (Reuters) - In June, the High
Seas tanker ship loaded up on ethanol in Texas and set off for Asia.
At the time, the roundabout route puzzled global ethanol traders and ship brokers, who called it a convoluted and costly way to get U.S. fuel to China. (MAP: tmsnrt.rs/2HP1ywa )
But the journey reflects a broader shift in global ethanol flows since U.S. President Donald Trump ignited a trade war with China last spring.
Although China slapped retaliatory tariffs up to 70 percent on U.S. ethanol shipments, the fuel can still legally enter China tariff-free if it arrives blended with at least 40 percent Asian-produced fuel, according to trade rules established between China and the Association of Southeast Asian Nations (ASEAN), the regional economic and political body.
In a striking example of how global commodity markets
respond to government policies blocking free trade, some 88,000 tonnes of U.S.
ethanol landed on Malaysian shores through November of last year - all since
June, shortly after China hiked its tax on U.S. shipments. The surge follows
years of negligible imports of U.S. ethanol to Malaysia.
In turn, Malaysia has exported 69,000 tonnes of
ethanol to China, the first time the nation has been an exporter of the fuel in
at least three years, according to Chinese import data.
Blending U.S. and Asian ethanol for the Chinese
market undermines the intent of Beijing’s tariffs and helps struggling American
ethanol producers by keeping a path open to a major export market that would
otherwise be closed.
“Global commodity markets are incredibly creative
in finding ways to ensure willing sellers are able to meet the demands of
willing buyers,” Geoff Cooper, head of the Renewable Fuels Association, said in
a statement to Reuters. The group represents U.S. ethanol producers.
In at least two cases examined by Reuters,
including that of the High Seas, blending of U.S. ethanol cargoes with other
products appeared to have occurred in Malaysia before the cargoes were shipped
on to China, according to a Reuters analysis of shipping records and interviews
with port officials.
Chinese merchants including the state-backed oil
company Unipec notified Chinese authorities about the unusual activity last
summer - which represented competition they had not anticipated under the
tariff scheme, according to two industry sources.
More
"In economics, hope and faith coexist with great scientific
pretension."
John Kenneth Galbraith.
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?
Cyber-warfare could be entering a new and alarming phase, ex-CIA analyst tells MPs
Future attacks, says Christopher Porter, could target the global financial system and government debt
· CBC News · Posted: Feb 06,
2019 7:34 PM ET
Online attacks on Canada's financial system could
become far more destructive as more militaries around the globe get involved in
cyber operations, a security expert and former CIA analyst told a House of
Commons committee Wednesday.
Christopher Porter, the chief intelligence
strategist for the cyber security company Fireeye, Inc., testified that as NATO
countries share their expertise on how to defend against and defeat
online threats, "major cyber powers outside the alliance" will
likely do the same.
The consequences, he said, could be dire.
The West's imposition of sanctions on
"some countries" has in the past been met with denial-of-service
attacks on financial services websites, he said — attacks that have only
been disruptive.
"In the future, they may respond with
destructive attacks aimed at permanently disabling financial services or
altering data in ways that undermine trust in the global financial system, such
as by delaying or impairing the trustworthy settlement of collateralized
government debt," Porter said.
"For countries sufficiently sanctioned and
therefore increasingly outside that financial system anyway, there is little
incentive not to do so during a confrontation."
He did not name the countries he believes pose an
imminent threat, but North Korea, Russia and Iran are widely known to possess
sophisticated cyber capabilities and — in some cases — loose associations with
groups of private hackers.
The Commons public safety committee is studying
security in the financial sector. Wednesday's hearing focused on online
threats.
"I am gravely concerned about the
militarization of cyber operations," said Porter, who spent nearly nine
years at the CIA and served as the cyber threat intelligence briefer to
White House National Security Council staff.
"(The) proliferation of cutting-edge offensive
cyber power, combined with an increased willingness to use it with minimal
blowback and spiraling distrust, has set the stage for more disruptive and
destabilizing cyber events, possibly in the near future."
The cyber espionage threat Canada faces is
still "moderate," said Porter, but his organization has noted at
least 10 groups from China, Russia and Iran that have targeted Canada in the
last few years.
His grim assessment was echoed by another private
sector expert who appeared before the committee. Jonathan Reiber,
head of cybersecurity at Illumio, an American business data
center, said most of Washington's efforts to get everyone to step back
from the cyber-warfare brink have gone nowhere.
He also suggested that online militarization was
inevitable. "Adversaries have escalated in cyberspace, despite U.S.
efforts at deterrence," he said.
More
Another
weekend, possibly the last weekend before the recession Panzers, May 1940 style,
come crashing through complacent, unprepared positions. Have a great weekend
everyone. A little excitement seems to lie ahead if President Trump’s new
assessment holds.
Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof.
John Kenneth Galbraith
The monthly Coppock Indicators finished January.
DJIA: 24,999 +76 Down. NASDAQ: 7,282 +124 Down.
SP500: 2,704 +71
Down.
Normally
this would suggest more correction still to come, but with President Trump
wanting to be judged by the performance of the stock market and the Fed’s Plunge
Protection Team now officially part of President Trump’s re-election team, probably
the safest action here is fully paid up synthetic double options on most of the
major indexes.
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