Baltic Dry Index. 664 +06 Brent Crude 65.07
“Oh, how I wish I
could shut up like a telescope! I think I could, if only I knew how to begin.”
For, you see, so many out-of-the-way things had happened lately, that President
Trump had begun to think that very few things indeed were really impossible.
With apologies to
Lewis Carroll and Alice.
After
a week that included a failed US v North Korea summit in Hanoi, a near war
between India and Pakistan, never ending trade talks between China and the USA,
meaningless Fed guidance now that they’ve become a member of President Trump’s
re-election team, a rump European Union intent on a no deal Brexit, and explosive anti-Trump testimony from
President Trump’s convicted former personal lawyer, what does next week have in
store for stock and commodity markets churning away in the stratosphere flying
on a wing and a prayer?
From
London that would appear to be yet more rogue America. More abrogating the
norms of world trade. A new trade war opening against Europe. A signal to China
that agricultural tariffs are bringing Trump to heel. A global trade war inexorably
driving Europe into recession, with or without Brexit.
Below,
reasons to fear an implosion is at hand. Irrational behaviour seems the new
norm. I suspect that the Great Game gets considerably more complicated from
here.
“When I used to
read fairy tales, I fancied that kind of thing never happened, and now here I
am in the middle of one!”
President Trump,
with apologies to Lewis Carroll and Alice.
U.S. says rejects WTO's 'straitjacket' of trade obligations
March 2, 2019 / 2:29 AM
WASHINGTON (Reuters) - The Trump
administration filed another salvo at the World Trade Organisation on Friday,
saying U.S. trade policy was not going to be dictated by the international body
and defending its use of tariffs to pressure China and other trade partners.
A report
drawn up by the U.S. Trade Representative outlining the White House’s trade
agenda for 2019 said the United States will continue to use the
Switzerland-based WTO to challenge what it sees as unfair practices.
However,
“the United States remains an independent nation, and our trade policy will be
made here – not in Geneva. We will not allow the WTO Appellate Body and dispute
settlement system to force the United States into a straitjacket of obligations
to which we never agreed,” the report said.
The United
States has imposed tariffs on $250 billion worth of Chinese imports to press
its demands for changes to what Washington sees as China’s unfair policies on
intellectual property protections, technology transfers, industrial subsidies
and domestic market access.
China has
challenged the Trump administration’s tariffs in the WTO, arguing that they
violate its agreed rules. The case is likely to be ultimately decided by the
WTO’s Appellate Body, the world’s top trade court.
The United
States must be allowed the “policy space” to address trade problems, the report
said.
“That policy
space must include the ability to use tariffs or other forms of leverage to
persuade other countries to take our concerns seriously,” it said.
The report
was not explicit about how the United States would respond to a ruling against
it on the issue.
The report was published a day after a WTO adjudication panel handed Washington a major victory over China, ruling that China’s domestic price supports for wheat and rice constituted an excessive subsidy and violated WTO obligations.
The United States has argued for years that WTO judges have routinely broken with procedures and exceeded their mandates, imposing new obligations on members.
In an effort to force reforms, Washington has routinely blocked the appointment of judges to its Appellate Body, a process that requires consensus among member states. If continued, the tactic will render the body inoperable by December, when terms end for two of the remaining three judges. WTO rules require three judges to hear appeals.
More
Trump Asks China to Immediately Remove Agricultural Tariffs
By Joshua Gallu and Millie Munshi
Updated on 2 March 2019, 01:41 GMT
President
Donald Trump said he has asked China to immediately remove all tariffs on U.S.
agriculture, including beef and pork, citing progress in trade talks between
the two nations.
In making
the demand, Trump noted in a tweet Friday that he refrained from increasing
U.S. tariffs on Chinese goods to 25 percent from 10 percent on March 1, as he
said he would in the absence of progress toward an agreement. Faxes and phone
calls to China’s ministries of commerce and foreign affairs, and the office in
charge of trade talks, went unanswered Saturday outside office hours.
China
imposed retaliatory tariffs on American agricultural products last year, though
Trump did not indicate that his demand was limited to those penalties.
Soybeans, as well as beef, pork and chicken products were on the first batch of
retaliatory tariffs on $34 billion worth of imports imposed in July, and were subject
to an extra 25 percent duty.
It’s unclear what effect Trump’s demand
could have on ongoing talks, which the president signaled earlier this week
were moving toward an agreement. American officials are preparing a final trade
deal that Trump and China’s President Xi Jinping could sign within weeks,
people familiar with the matter have said, even as a debate continues in
Washington over whether to push the Beijing government for more concessions.
Trump,
speaking to reporters in Hanoi Thursday after a summit with North Korea’s Kim
Jong Un, said: “Speaking of China we’re very well on our way to doing something
special. But we’ll see.”
“I am always
prepared to walk,” he said. “I’m never afraid to walk from a deal, and I would
do that with China, too, if it didn’t work out.”
If China were to remove the tariffs, it would likely be a huge boon to U.S. crop markets that have been caught in the trade war crossfire. Soybean, pork and ethanol shipments have all languished amid the duties. China is a key destination for most of the world’s biggest agriculture markets.
Farmers and lawmakers have long decried the tariffs, and the U.S. agriculture economy has suffered under the weight of falling crop prices.
China has already made some good-faith purchases of American soybeans after declaring a trade truce with the U.S. in December. Last week, Agriculture Secretary Sonny Perdue said more soybean purchases were coming.
More
German juggernaut may face economic jam as tariffs and Brexit loom
March 1, 2019 / 7:08 AM
BERLIN (Reuters) - Germany faces the risk
of steep U.S. tariffs on cars and a no-deal Brexit, a double whammy which could
bring a golden decade of growth in Europe’s powerhouse economy to an end.
Chancellor
Angela Merkel and her ministers are working behind the scenes to mitigate the
impact should the worst-case scenario come to pass.
A stagnating
German economy or even a recession would hold back the euro zone as a whole and
cast uncertainty over the European Central Bank’s planned exit from its loose
monetary policy.
The Berlin
government is already facing a budget shortfall of up to 25 billion euros by
2023 as the economic slowdown means tax revenues will come in below previous
estimates, according to a finance ministry document.
Nonetheless,
faced with the threat of a recession, Finance Minister Olaf Scholz is prepared
to bend Germany’s strict debt rules, a senior government official told Reuters
on condition of anonymity.
“If the
double whammy should materialize, we want to pull something out of the hat,”
the official said, suggesting that the government is working on a fiscal
stimulus package.
“This will
be a test to our policy of no new debt and Germany’s debt brake,” the official
added.
The finance
ministry declined to comment on this.
Germany,
which barely avoided a recession last year, is especially vulnerable to both
the risks of U.S. tariffs of up to 25 percent on cars and Britain sliding out
of the EU on March 29 without a deal to govern future trade relations with the
bloc.
Exports make
up nearly half of its economic output and cars are by far its main export with
annual sales worth 230 billion euros ($263 billion), data from the Federal
Statistics Office showed.
The most
important export destination for German cars last year was the United States
with revenues of 27.2 billion euros, followed by China with 24.7 billion euros
and Britain with 22.5 billion euros, the data showed.
In terms of
the number of exported cars, Britain tops the list with 666,000 and the United
States is second with 470,000, according to data from the VDA industry
association.
More
Euro-Area Factories See Biggest Order Slump in Almost Six Years
By Piotr Skolimowski
1 March 2019, 09:00 GMT
Euro-area
factories suffered their biggest drop in orders in almost six years in February
amid mounting concern over trade tariffs and Brexit, dealing a blow to those
anticipating a speedy rebound in momentum.
Led by
Germany and Italy, manufacturing output in the 19-nation region contracted last
month, with a Purchasing Managers’ Index falling to 49.3. Companies continued
to report spare capacity and inflation pressures eased to levels last seen in
late 2016.
“Euro-area
manufacturing is in its deepest downturn for almost six years,” said Chris
Williamson, chief business economist at IHS Markit. Forward-looking indicators suggest
“risks are tilted further to the downside as we move into spring.”
The downbeat
report from a key sector of the euro-area economy comes less than a week before
European Central Bank policy makers meet to decide whether the region could use
another stimulus boost.
So far,
officials have argued the bloc will emerge from its current soft patch in the
second half, but sluggish demand raises questions over the outlook. The ECB is
currently updating its projections for growth and inflation through 2021.
While
factories continued to create new jobs in February they “are likely to take a
more cautious approach to hiring and investment, and instead focus on cost
control,” Williamson said.
It was all very
well to say “Drink me,” but the wise President Xi was not going to do that in a hurry. “No, I’ll look
first,” he said, “and see whether it’s marked ‘poison’ or not.”
With apologies to
Lewis Carroll and Alice.
The monthly Coppock Indicators finished February
DJIA: 25,916
+68 Down. NASDAQ: 7,533 +109 Down. SP500: 2,784 +62 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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