Baltic Dry Index. 1014 +39 Brent Crude 70.62
Never ending Brexit now October 31,
maybe.
Trump’s Nuclear Tariffs Now In
Effect.
USA v EU trade war 4 days away? No one
optimistic.
This
is the way things are, and the Game has been so successful that, like
everything, it will get more and more successful until it stops being
successful.
George
Goodman, aka Adam Smith, The Money Game. 1968.
Yesterday’s US tariff hike against China
will likely take 3 to 4 weeks to start
showing up in import prices, but already almost a year of US import tariffs are
already adversely affecting the global economy.
With a trade war with the EU on autos still to come, plus Brexit fallout,
and an oil price stuck in the 70s, it will take a miracle not to have a new
global recession. The only question is will in start by the end of 2019 or arrive
in US Presidential election year 2020?
That probably depends on how and when
China retaliates, and whether in the current circumstances, President Trump
gets cold feet over starting his trade war with Europe. If China responds quickly,
and Trump attacks EU autos exports forcing the EU into retaliation, we are
probably only six months away from the start of the next global recession.
Central banks will soon be the buyer of
last resort for most stocks and bonds across the G-20, as the financialised “everything
bubble” bursts. If China responds mildly
and Trump U-turns yet again and drops his trade war against Europe, then we
might be a year away from the next global recession, but that probably does in
Trump’s re-election hopes and ushers in a Democrat-Socialist America in 2021.
Barring a miracle and some sanity returning
to Washington District of Crooks, we are at or just passing Peak Bubble.
Somebody has to be on the other side.
George
Goodman, aka Adam Smith. The Money Game. Why Are The Little People Always
Wrong?
Column: Global air freight is falling in a sign of economic strain
May 10, 2019 / 2:56 PM
LONDON (Reuters) - Global air freight
volumes are falling at some of the fastest rates since the end of the great
recession in a warning sign that recessionary forces are building in the world
economy.
Freight
indicators are available with a much shorter lag than most macroeconomic
statistics, which makes them a good barometer of the economy’s health.
Air freight
carries some of the highest-value cargo and reacts quickly to changes in
demand, making it a good leading indicator for freight movements and the
economy in general.
Freight
volumes are now declining at major airports around the world in a signal the
global manufacturing and distribution system is under growing stress.
Hong Kong
International Airport, the busiest cargo hub in the world, reported volume down
7% for the three months between February and April compared with the same
period a year earlier.
London’s
Heathrow Airport reported volume down by more than 3% over the same period, and
growth rates have been sliding for almost two years.
In North
America at Memphis International Airport, the busiest hub in the United States,
volume was up by 1 percent in January-March, but that was a marked slowdown
from 5% growth in May-July 2018.
Memphis
reported continued growth in domestic freight shipments (+1%) but international
freight fell (-1%), which is consistent with a relatively resilient domestic
economy but weakness spreading from abroad.
Around the world, the sharpest slowdown is
concentrated on routes to and from Asia, but other domestic and international
routes also show slackening momentum.
More
President Trump's tariffs, once described as negotiating tools, may be here to stay
The failure
of the United States and China to reach agreement Friday on a comprehensive
trade deal raises the possibility that President Donald Trump's favorite
negotiating tool - high tariffs on imported goods - may be hardening into a
permanent feature of the U.S. economy.
Two days of
talks ended Friday with no sign of the agreement that both governments once had
predicted would be achieved by this point. After parting company with Chinese
Vice Premier Liu He, Treasury Secretary Steven Mnuchin pronounced the latest
discussions "constructive" but declined to elaborate.
Less than 12
hours earlier, U.S. tariffs on $200 billion of Chinese goods had increased to
25% from 10%, in a sign of the president's waning patience with the
negotiations.
Trump, who
has started the process of imposing tariffs on all remaining U.S. imports of
Chinese goods, also issued a flurry of tweets embracing tariffs as his
preferred economic policy and hinting that the China levies might linger.
"The
relationship between President Xi and myself remains a very strong one, and
conversations . . . into the future will continue. In the meantime, the United
States has imposed Tariffs on China, which may or may not be removed depending
on what happens with respect to future negotiations!" the president
tweeted.
Trump's
enthusiasm for tariffs has been no secret since his calls during his
presidential campaign for a 45% tariff on everything Americans buy from China.
But his focus on tariffs is a striking departure from the policies pursued by
his Democratic and Republican predecessors - especially if he proceeds with his
threat to apply tariffs to all $540 billion of annual U.S. purchases from
China.
"Tariffs
will bring in FAR MORE wealth to our Country than even a phenomenal deal of the
traditional kind," he said in an earlier tweet, adding that raising taxes
on imports was "much easier and quicker to do."
Since
launching his tariff wars in January 2018 with a levy on washing machines,
Trump has wielded his tariff club over solar panels and industrial metals, and
in a bid for new trading arrangements with China, Canada, Mexico and the
European Union.
None of the
tariffs that the president has imposed have been removed.
Trump's
refusal to lift tariffs on steel and aluminum imported from Mexico and Canada
has sparked a revolt among Senate Republicans, who are refusing to approve his
new North American trade deal until he lifts those tariffs.
Opposition
has been especially pronounced among senators representing farm states that
have been hurt by Mexico's retaliatory tariffs on U.S. agricultural products.
Along with
more tariffs on Chinese goods, Trump also is considering raising import taxes
on automobiles and a variety of products from the EU. Completing the
administrative process involved in levying tariffs on the remaining Chinese
goods could take months.
But the president
is drawing closer to a choice between a major escalation of his tariff campaign
- one that risks enormous economic and political fallout - and a disappointing
outcome at the bargaining table.
"We're
in a very different spot than we were just a week ago," said Carla Hills,
who was a U.S. trade representative under President George H.W. Bush.
"Tariffs are not a good trade negotiating tool."
The
president's claim that the tariff bill is paid by countries on whose products
levies are imposed has been criticized by economists associated with both
parties. Several studies have shown that the financial impact of the U.S.
tariffs imposed over the past year has fallen almost entirely on American
consumers and businesses.
More
Here’s how hard the escalating tariff fight will hit the economy
Published: May 10,
2019 3:42 p.m. ET
Tariff hike will cost U.S. economy $29 billion by 2020, cost to global economy at $105 billion: Oxford Economics
The escalation of the U.S.-China trade fight — and the threat of further tit-for-tat measures — marks a significant risk to both countries and the world economy, analysts said.The U.S. early Friday increased tariffs on $200 billion of Chinese goods to 25% from 10% and President Donald Trump threatened to extend levies to other goods from the country in an attempt to ratchet up pressure on Beijing as trade negotiations continue. Beijing has said it would retaliate.
“No one wins trade
wars, not even the bystanders,” wrote Gregory Daco, chief U.S. economist at
Oxford Economics, a research firm, in a Thursday note.
Daco updated his outlook for the U.S.,
Chinese and global economies, estimating that the move to hike tariffs to 25%
from 10% on half of U.S. imports from China — with China raising 8% tariffs on
$60 billion of U.S. imports to 25% — would reduce U.S. gross domestic product
by 0.3% in 2020, while curbing China’s output by 0.8% (see chart above).
That translates to a cost to the U.S. economy of around $29 billion by 2020, and a hit to the global economy of 0.3% or more than $105 billion.
Stocks edged mostly higher Friday but pulled back this week as previous confidence that Washington and Beijing would soon complete a trade deal was shattered by U.S. threats to follow through with tariff hikes after charging Beijing had backtracked on pledges made in earlier negotiations. The S&P 500 SPX, +0.37% and Dow Jones Industrial Average DJIA, +0.44% were both on track for weekly declines of more than 2%. China’s CSI 300 stock index has dropped over 8%.
Also see: Trump’s trade fight with China hasn’t affected most Americans so far — here’s what could
change that
Then there’s the potential for even further escalation.
In a scenario where Washington puts tariffs of 25% on all imports from China, with Beijing retaliating in kind, U.S. GDP would take a hit of around 0.5%, he said, leaving the economy around $45 billion smaller by 2020 than in a world without tariffs. That would push real GDP growth — growth minus inflation — dangerously close to 1% by the end of 2020, he said.
China’s GDP growth would be reduced by around 1.3% in 2020, slowing to an unprecedented 5% annual pace, while world GDP would suffer a significant 0.5% loss (see chart below).
---- And then there’s the “extreme scenario” of full-blown, multilateral trade war. In this scenario, Oxford Economics modeled the impact of the U.S. putting 35% tariffs on all Chinese imports and 25% auto tariffs globally, plus 10% blanket tariffs on all other goods imported from the EU, Taiwan and Japan — with all countries retaliating in kind.
The firm
calculated this would result in a 2.1% hit to U.S. GDP in 2020, pushing the
economy into recession later this year. China’s economy would contract by 2.5%,
while Europe and Japan would see average GDP losses of 1.5% and world GDP would
be reduced by 1.7%.
The damage
to private-sector confidence and the accompanying plunge in stock prices would
likely see central banks forced into significant rate cuts and other measures,
Daco said.
https://www.marketwatch.com/story/heres-the-hit-us-chinese-and-global-economies-could-face-as-trade-battle-heats-up-2019-05-09?mod=mw_theo_homepage
In
other news, things are getting serious in US grains.
Midwest farmers under the gun to plant corn
May 10, 2019 / 4:25 AM
EVANSVILLE,
Ind., May 10 (UPI) -- A markedly wet spring means the majority of America's
cornfields still are not planted. After today, farmers begin losing yield every
day their seeds are not in the ground.
If fields
don't dry enough to plant by the end of the month, farmers in many areas of the
Midwest won't be able to grow any corn this year.
"It all depends on how long this wet weather lasts," said Grant Kimberley, director of market development for the Iowa Soybean Association, who grows corn and soybeans in that state. "After May 10, yields get worse every day. May 31 is the final planting date for corn in Iowa."
Most other corn-growing areas operate on a similar schedule. By now, the majority of fields usually are sown. But as of Sunday (the most recent data available), the U.S. Department of Agriculture reported that only 23 percent of the nation's cornfields were planted. And several key corn-growing states were even further behind.
Ohio and Indiana had only 2 percent of their fields planted. North Dakota was at 1 percent. And South Dakota had not planted any.
To turn it around, the Midwest will need at least one full week of uninterrupted warm, sunny weather to pull enough moisture from the soil for farmers to get their tractors onto the fields, Kimberley said.
A few areas -- especially around Illinois -- may see a dry spell next week, according to some forecasts. A storm that forecasters expected to arrive there this weekend has re-routed to the south, which will provide a "dry window" of up to eight days, according to AccuWeather meteorologists.
"There will be a longer stretch of dry weather -- over a week in a lot of places -- and that's enough to allow people to start catching up," AccuWeather senior meteorologist Jason Nicholls said. "I don't think they'll catch up all the way ... They'll make a lot of progress in Illinois next week, though, which is huge."
But elsewhere, the forecast calls for more rain.
---- "If farmers can't get in to plant in the next few weeks here, there could be a switch to planting soybeans," said Jack Scoville, a market analyst for The PRICE Futures Group in Chicago. "That could hurt soybean prices even more if they plant a lot more soybean acres than they planned to, given that fact that we have a large supply already and limited demand."
The farmers'
other option, if they simply can't get corn in the ground, is to forgo planting
this year and file a claim on their "preventative planting insurance
coverage" instead, Kimberley said. Preventative planting coverage can
provide a portion of what farmers who are unable to plant would expect to
receive per acre.
Morehttps://www.upi.com/Top_News/US/2019/05/10/Midwest-farmers-under-the-gun-to-plant-corn/3051557431463/
“Beyond this, the problem is universal. It is that governments
are now held responsible for the welfare of the people. The aspirations of the
people can outrun their ability to pay for them, and nobody has yet found a way
to create answers to the aspirations out of thin air.”
George Goodman, aka Adam Smith, The Money Game. 1968.
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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