Baltic Dry Index. 1049
+08 Brent
Crude 71.73
Never ending Brexit
now October 31st, maybe.
Nuclear Trump
Tariffs Now In Effect.
USA v EU trade war postponed
to November, maybe.
Adam Smith (1723-1790) grudgingly
admits that retaliation in a trade war may have some good effect if it leads to
the abandonment of the initial protective duty, but he is highly doubtful that
the “insidious and crafty animal, vulgarly called a statesman or politician”
can or really wants to end protection in this manner. All it does is benefit a
few at the expense of the many:
"There may be good policy in
retaliations of this kind, when there is a probability that they will procure
the repeal of the high duties or prohibitions complained of. The recovery of a
great foreign market will generally more than compensate the transitory
inconveniency of paying dearer during a short time for some sorts of goods. To
judge whether such retaliations are likely to produce such an effect, does not,
perhaps, belong so much to the science of a legislator, whose deliberations
ought to be governed by general principles which are always the same, as to the
skill of that insidious and crafty animal, vulgarly called a statesman or
politician, whose councils are directed by the momentary fluctuations of
affairs. When there is no probability that any such repeal can be procured, it
seems a bad method of compensating the injury done to certain classes of our
people, to do another injury ourselves, not only to those classes, but to
almost all the other classes of them."
America, China, and the slowing global economy are
deep in the swamps of a fast escalating trade war, with both America and China
determined to head further in.
Practically daily, we get more statistics on the damage this trade war
is doing to the slowing heavily integrated global economy, but for now our
global stock market remain in deep denial, hoping desperately for something to
turn up. Essentially, churning away near the highs, but burning through cash.
I suspect this denial will not go on for much longer.
Brexit, an angry European Parliament vote commencing tomorrow and finishing on
Sunday, are all too likely to push the EU into recession by summer’s end. That and the intensifying trade war, are
likely to generate a new global recession probably as early as the first half
of next year.
If unemployment starts to rise in Asia and Europe, as
summer turns to autumn and autumn turns to winter, America’s trade war will
likely get the blame. If America’s economy starts to stumble, and unemployment
there also start to rise, America is in for a most unpredictable presidential
election year.
With nearly 50 years following commodity and stock
markets, I am all too aware how suddenly market sentiment changes, often for no
apparent reason at the time. Without an end to the escalating trade war, rising
uncertainty and rising economic pain is our future, and churning stock markets
is not the place to be. A speculative put option bet on falling commodity
prices ahead, would be an option here for high risk accounts.
Asia stocks fragile as trade anxiety overshadows Huawei reprieve
May 22, 2019 /
2:04 AM
TOKYO (Reuters) -
Asian stocks were on shaky ground on Wednesday, as earlier relief over
Washington’s temporary relaxation of curbs against China’s Huawei Technologies
failed to offset deeper worries about trade frictions between the world’s two
largest economies.
The Chinese markets, which have endured a volatile few months, started
off on a cautious note. The Shanghai Composite Index was last down 0.1%.
Australian stocks gave up 0.1% and South Korea’s KOSPI fell 0.2%.
Japan’s Nikkei edged up 0.3%.
MSCI’s broadest index of Asia-Pacific shares outside Japan moved in and
out of the red and last stood little changed.
“Some in the markets will continue to cling on to hopes of the United
States and China reaching an agreement at the upcoming G20 meeting,” said
Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.
“But the ongoing trade conflict looks to be a protracted one, and its
potentially negative impact on various economies is becoming a running
concern.”
Leaders from G20 nations are scheduled to gather for a summit in Japan
at the end of June.
---- Shares of technology companies helped lift Wall Street on Tuesday after Washington’s easing of curbs on Huawei. Chipmakers, many of which sell to Huawei, had been hit at the start of the week. [.N]
“Notwithstanding the latest tweet from President Trump that some
restrictions on Huawei had been eased, global equity markets have continued to
underestimate the relentless expansion of the U.S.-China trade dispute,” wrote
Sean Darby, chief global equity strategist at Jefferies.
“The progression from tariffs, to direct actions against single Chinese
companies and their inter-linked supply chains, has a wide-ranging impact on profitability
for corporates in both economies that investors will find difficult to
quantify.”
More
South Korea think tank lowers 2019 growth forecast
By Kwanwoo
Jun Published: May 22, 2019 12:40
a.m. ET
SEOUL--South Korea's state-run think-tank has lowered its growth
forecast for the country this year on an anticipated contraction in exports and
domestic demand--the latest signal of Asia's fourth-largest economy losing
steam.
The Korea Development Institute, in a biannual economic outlook report
released Wednesday, said it now expects South Korean growth to expand 2.4% on
year in 2019, weaker than its November projection of 2.6%, after growing 2.7%
in 2018. It expects South Korea to grow 2.5% in 2020.
The sluggish Korean economy at risk of returning to a low-growth phase
again after the global financial crisis a decade ago, KDI said.
KDI proposed the economy should keep its fiscal and monetary policy mix
expansionary to arrest the feared slowdown.
South Korea is facing headwinds from the U.S.-China trade dispute, with
a slowdown in China taking a heavy toll on the export-reliant Korean economy,
which sends a quarter of its total exports to the world's second-largest
economy.
The latest KDI outlook--though in line with the revised Organization for
Economic Cooperation Development forecast Tuesday--is more pessimistic than the
government's growth forecast of 2.6% to 2.7% and the central bank's 2.5% growth
estimate for this year.
More
Japan's exports fall for fifth straight month
By Mayumi
Negishi Published: May 21, 2019 9:40
p.m. ET
TOKYO--Japanese exports declined for the fifth straight month in April
as the buildup in trade tensions between its two biggest trading partners--the
United States and China--weighed on the country's key engine of growth.
Exports in April fell 2.4% from the same month a year ago, data released
by the Ministry of Finance data showed Wednesday. The dip was more than the
median 1.8% decline forecast by economists polled by FactSet.
The weak exports, mainly on account of lower shipments of chip-making
tools and semiconductor parts to China, along with a surge in crude oil
imports, translated to a 90% fall in Japan's trade surplus to 60 billion yen
($543 million).
The trade data showed exports to China, Japan's biggest trading partner,
fell more than 6% year-over-year on lower shipments of chip-making tools, amid
increased pressure by the U.S. on its allies to restrict use of China-made
chips. Exports to Europe also fell by almost 3% on lower appetite for Japanese
goods.
While exports to China and Europe fell, exports to the U.S. rose almost
10% on strong demand for Japanese cars, expanding Japan's trade surplus with
the U.S. by almost 18%. The data comes ahead of U.S. President Donald Trump's
visit to Japan this week, where he is expected to push for a trade deal.
Last week, Mr. Trump put off a decision for six months on whether to
impose new tariffs on automobile and auto-part imports from Japan and other
countries.
More
Xi Jinping calls for ‘new Long March’ in dramatic sign that China is preparing for protracted trade war
·
Xi Jinping told cheering crowds in Jiangxi: ‘We
are now embarking on a new Long March, and we must start all over again’
·
His comments come amid an increasingly sour mood
in official Chinese media, which have become more forceful in anti-US rhetoric
since trade war talks collapsed
Published: 8:24pm, 21 May, 2019
Chinese President Xi Jinping has called for the nation to embark on a
new Long March and “start all over again”, in the most dramatic sign to date
that Beijing has given up hope of reaching a trade deal with the United States
in the near term.
Xi is in Jiangxi province for his first domestic tour since the escalation of the
trade war two weeks ago. Jiangxi is where China’s defeated Red Army started its
fabled Long March in 1934, and Xi’s choice of destination is being viewed as an
effort to invoke a spirit of endurance and to rally public spirit amid rising
tensions with Washington.
The economy is already slowing and the
trade war could trim as much as 1 per cent from its gross domestic product,
Wang Yang, one of the seven members of the elite Politburo Standing Committee
of the Communist Party of China, said last week.
Vice-Premier Liu He, China’s top trade
negotiator, accompanied Xi for the tour and is clearly visible at the
president’s side in video footage of the tour.
---- The Long March was a military retreat between
1934 to 1936 undertaken by the Red Army, the forerunner of the People’s
Liberation Army, to evade Kuomintang troops during the Chinese civil war. The
thousands of marchers covered some of the country’s harshest terrain and the
feat is often evoked as a symbol of Chinese unity by the ruling Communist
Party.
Xi’s message was delivered at a time when the
country’s official media outlets have adopted increasingly nationalistic tones
in relation to the trade war and broader Sino-US relations. However, media reports
have stopped short of directly criticising US President Donald Trump.
More
Air China asks Boeing for compensation over 737 MAX grounding: state TV
May 22, 2019 /
5:17 AM
BEIJING (Reuters) - Air China has formally asked Boeing Co for
compensation over the grounding of its 737 MAX aircraft and delayed deliveries
of its orders, the state TV China Central Television reported on Wednesday.
On Tuesday, China Eastern Airlines said it has requested compensation
from Boeing for the grounding of its 14 737 MAX aircraft.
U.S. could blacklist Chinese surveillance tech firm Hikvision: NYT
May 22, 2019 /
2:22 AM
(Reuters) - The U.S. administration is considering limits to Chinese
video surveillance firm Hikvision’s ability to buy U.S. technology, the New
York Times reported on Tuesday, in a move that deepens worries about trade
frictions between the world’s two top economies.
The move would
effectively place Hikvision on a U.S. blacklist and U.S. companies may have to
obtain government approval to supply components to Hikvision, the paper said.
The U.S. Commerce Department blocked Huawei Technologies from buying
U.S. goods last week, effectively banning U.S. companies from doing business
with the Chinese firm, a major escalation in the trade war, saying Huawei was
involved in activities contrary to national security.
The White House did not immediately respond to a request for comment on
the report.
Hikvision shares opened 10% lower but an executive in the
company’soffice told Reuters the company had not been informed of the possible
U.S. blacklisting.
“The chips Hikvision uses are very commercial and most of the suppliers
are actually in China although there are some in the United States,” said the
executive, who declined to be named due to the sensitivity of the matter.
“Even if the U.S. stops selling them to us we can remedy this through
other suppliers” she said.
Hikvision and Dahua Technology which produce audio-visual equipment that
can be used for surveillance were specifically cited in a letter to Trump’s top
advisers last month, signed by more than 40 lawmakers.
The lawmakers said China’s actions in its western region of Xinjiang
“may constitute crimes against humanity” and urged tighter U.S. export controls
to ensure that U.S. companies are not assisting the Chinese government’s
crackdown there.
More
Oil Falls as Deepening Trade War Stokes Fear Over Global Growth
By Tsuyoshi Inajima
Updated on 22 May 2019, 04:38 BST
·
·
WTI futures drop as much as 1% after closing
lower on Tuesday
Oil headed for its biggest drop in more than a week as signs the worsening U.S.-China trade war will take a toll on global economic growth overshadowed the prospect of OPEC and its allies extending production curbs.
Futures in New York fell as much as 1% after Federal Reserve Bank of Boston President Eric Rosengren said the trade standoff is adding a downside risk to his economic forecasts and the Organization for Economic Cooperation and Development downgraded its projection for global growth.
More
https://www.bloomberg.com/news/articles/2019-05-21/oil-loses-steam-as-trade-war-stokes-concern-on-demand-outlook?srnd=premium-europe
Finally, more of the coming future.
Does anyone have a plan for all the unemployed?
Crewless ship prepares for transatlantic crossing
Final preparations are underway for a 39 ft. long metal ship to attempt a world first transatlantic crossing with no crew on board.
"The
rules-based multilateral trading system is the bedrock of economic
globalization and free trade, and provides important safeguards for win-win
outcomes. The authority and efficacy of the system should be respected and
protected. Some WTO rules do need to be improved. The right approach is for all
to sit down as equals to find solutions.
"The
fundamental principles of free trade should be upheld, the interests and
concerns of all parties be accommodated, and the broadest possible consensus on
reform be built up. Taking a unilateralist approach will not solve any
problems."
Chinese Premier Li Keqiang, World Economic Forum, 2018.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled
over.
Today, Tesla again. Just what,
if anything, is Tesla worth? Not much, says Morgan Stanley.
Morgan Stanley piles pressure on Tesla with $10 worst case call
May 21, 2019 /
10:52 AM
(Reuters) - Shares
of Tesla Inc were on track for a fifth straight session of losses on Tuesday,
as Morgan Stanley analysts outlined a worst case scenario that could see the
electric carmaker’s stock price fall as low as $10.
Another brokerage, Baird, was the latest to cut its price target for the
Elon Musk-run company to $340 from $400, saying concerns over demand,
credibility and noise around the company have kept incremental buyers out of
the market.
Tesla’s stock, which has almost halved in value since last August, was
down another 3% at $199. In the last 10 days, it has gained only once, when the
company boosted prices of its Model 3 sedan last week.
It was among Wall Street’s more heavily shorted stocks with about a
fifth of its float on the line. Prices of the company’s debt also continued to
sink.
Morgan Stanley analyst Adam Jonas, previously a major Tesla bull, said
rising debt and geopolitical exposure, including the risk that Chinese demand
for the company’s cars could suffer, had led him to cut his worse-case scenario
to $10 from $97.
“Tesla has grown too big relative to near-term demand, putting great
strain on the fundamentals,” wrote Jonas, rated a five-star analyst by
Refinitiv for the accuracy of his forecasting on the company.
“The departure of key executives, price discounting, and extraordinary
cost-cutting efforts add to the narrative of a company facing real potential
stress.”
The market action follows hot on the heels of a $2.7 billion fundraising
round by the company two weeks ago that was oversubscribed, but has done little
to settle the nerves of holders of Tesla’s existing debt.
Its $1.8 billion high-yield bond due in 2025 with a 5.3% coupon
weakened for a third straight day in European trading, with its price edging
below 82 cents on the dollar and the yield up to 9.16% after touching a record
high 9.25% overnight.
The spread of its yield over Treasury
securities, a gauge of the added compensation demanded by investors for holding
Tesla rather than safer government debt, widened to nearly 693 basis points.
By comparison, the average spread on corporate bonds rated “B” - roughly
the same as “B-“ rated Tesla - is 442 basis points, according to ICE
BofAML bond index data.
It was also becoming increasingly expensive to insure Tesla bonds
against the risk of default. Its credit default swap prices rose to a
seven-month high on Monday and now reflect a 43% probability of default within
five years, according to data from IHS Markit. That is up from around 36%
earlier this month.
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?
China rare earth firms' stocks soar on trade war speculation
May 21, 2019 /
12:10 PM
SHANGHAI (Reuters)
- Shares in rare earth-related companies in China soared on Tuesday, a day
after Chinese President Xi Jinping visited a rare earth firm in southern China,
sparking speculation the sector could be the next front in the Sino-U.S. trade
war.
Xi on Monday visit JL MAG Rare-Earth Co Ltd in Jiangxi province, state
media reported.
China accounted for 80% of the rare earths, a group of 17 chemical
elements used in high technology consumer electronics and military equipment,
imported by the U.S. from 2014 to 2017.
So far, China’s rare earths exports have been spared from recent tariffs
by the United States, which has decided not to impose import duties on those
and some other critical minerals from China as part of the trade war.
Beijing, however, has raised tariffs on imports of U.S. rare earth metal
ores from 10 percent to 25 percent from June 1, making it less economical to
process the material in China.
Analysts said that Xi’s visit might indicate China is considering using
rare earths as a weapon in the trade war, which provided support for the shares
of the Chinese firms.
“No question it’s saber rattling,” said Ryan Castilloux, managing
director of Adamas Intelligence, a consultancy that tracks the rare earths
market. “I think China would be reluctant to cut off supplies to anyone just
yet, but the optics are designed to send a clear message – we know your
vulnerabilities.”
Shares in JL MAG Rare-Earth Co Ltd surged the maximum limit of 10% on
Monday following Xi’s visit, and rose another 10% on Tuesday.
Shares in Innuovo Technology Co Ltd, a rare-earth permanent magnetic
materials and products maker, also soared 10% to their highest since October
2017. The firm’s shares have gained 54.7% so far in May.
Yantai Zhenghai Magnetic Material, Chengdu Galaxy Magnets Co Ltd and
Jiangmen Kanhoo Industry Co Ltd rose by as much as 9%.
In Hong Kong, China Rare Earth Holdings Ltd soared more than 80%.
Asked if China would consider limiting
rare earth exports to retaliate against the United States, China’s foreign
ministry spokesman Lu Kang said on Monday that Xi’s visit was normal and there
was no need for over-interpretation.
More
“Peace,
commerce, and honest friendship with all nations...entangling alliances with
none”
The monthly Coppock Indicators finished April
DJIA: 26,593 +51 Down. NASDAQ: 8,095 +89 Down.
SP500: 2,946
+55 Up
.
The S&P has
reversed to up largely as a result of the Fed falling into line with President
Trump’s demands, 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 still fully paid up synthetic double options on most of the
major indexes. This could all go very wrong very fast.
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