Baltic Dry Index. 1085
+23 Brent
Crude 62.12
Never ending Brexit
now October 31st, maybe.
Nuclear Trump
China Tariffs Now In Effect.
USA v EU trade war
postponed to November, maybe.
The true costs of very low interest rates
Artificial distortions can cause ‘clusters of errors’ by businesses
Caitlin Long August 11, 2010
Markets tend to cheer falling interest rates. Low interest
rates, however, can entail real economic costs that become evident over time.
For more on
weaponised power cuts scroll down to the end of this section. The old, the ill,
and the new born risk death from weaponised power cuts.
This week our markets
will likely be dominated by expectations of Federal Reserve interest rate cuts
later this year, and by the Fed’s guidance after their meeting ends on
Wednesday afternoon.
Elsewhere, the USA v
China trade war turns into trench warfare, and at the weekend India retaliated imposing
tariffs on US products.
With a no deal Brexit
coming in the autumn, and a USA v EU trade war coming in November it will take
a miracle for the global economy not to enter a new recession, if one hasn’t
already started.
On the good news
front, some sanity returned in Hong Kong Sunday, after almost 2 million people
took to the streets, forcing a Hong Kong government climbdown.
Asian shares edge up, trade, geopolitical tensions cap gains; focus on Fed meeting
June 17, 2019 /
2:56 AM
TOKYO (Reuters) -
Asian stocks inched higher on Monday, with a rebound in the Hong Kong market
helping the mood, as investors remained cautious ahead of a closely-watched
Federal Reserve meeting.
But the simmering trade dispute between the United States and China as
well as political tensions in the Middle East kept risk-appetite in check.
MSCI’s broadest index of Asia-Pacific shares outside Japan edged up
0.1%, after opening slightly weaker. Japan’s Nikkei average ticked up by a
similar amount.
Asian markets got a quick boost after Hong Kong’s Hang Seng Index jumped
as much as 1.4%. At the weekend, the territory’s leader Carrie Lam climbed down
on a bill that would have allowed extradition to China.
The Hang Seng fell for three sessions in a row through Friday, after the
extradition bill triggered mass protests and some of the worst unrest seen in
the territory since Britain handed it back to Chinese rule in 1997.
“Last week the issue looked as if it would become another thorny point
between the United States and China. As the bill is now being postponed
indefinitely, things will likely calm down, which is good for markets,” said
Hiroyuki Ueno, senior strategist at Sumitomo Mitsui Trust Asset Management.
Mainland Chinese shares also firmed, with the benchmark Shanghai
Composite up 0.2% and the blue-chip CSI 300 rising 0.2%.
U.S.
Secretary of State Mike Pompeo told Fox News on Sunday that President Donald
Trump would raise the issue of Hong Kong’s human rights with China’s President
Xi Jinping at a potential meeting of the two leaders at the G20 summit in Japan
later this month.
More
Goldman skeptical of 'insurance' U.S. rate cuts from Fed
June 16, 2019 /
7:36 PM
(Reuters) -
Goldman Sachs economists said on Sunday they are skeptical of “insurance” U.S.
interest rate decreases from the Federal Reserve to forestall possible slowing
in U.S. economic growth due to global trade tensions.
A surprise escalation in trade tensions between Washington and Beijing
since May, together with stubbornly low inflation, have spurred bets among
traders the U.S. central bank may lower key lending rates by 0.75 percentage
points by year-end.
“However, we think the hurdle for such cuts is likely to be higher than
widely believed,” Goldman economists wrote in a research note published on
Sunday.
A number of primary dealers, or the 24 top Wall Street firms that do
business directly with the Fed, anticipate the Fed would lower key borrowing
costs beginning this summer.
---- Goldman economists said the three-quarter point in rate cuts in 1995-1996 and 1998, which some analysts point to as recent examples of pre-emptive policy easing from the Fed, were responses to data “rested at least as much on observable deterioration as on an insurance motive.”
They said another assumption for insurance rate-cuts is that Fed
officials could reserve the moves once the risk abates.
“However, the greater political scrutiny of Fed hikes now—especially
with a presidential election approaching—could make this harder to do in 2020,
so that overly hasty insurance cuts now might increase the risk that the funds
rate gets stuck at too low a level if the economy remains resilient,” they
wrote.
On Friday, U.S. short-term interest rates futures implied traders see
about a 58% chance the Fed would lower short-term rates by 0.75 point by
year-end, up from 54% a week earlier and 7% a month ago, according to CME
Group’s FedWatch too.
Fed policy-makers will meet next Tuesday and Wednesday where analysts
widely expect they would pave the way for possible rate cuts later this year.
More
In that easy to win trade war news, nothing seems to be easy
and no one seems to win. Now India is retaliating. Europe next?
Wilbur Ross lowers expectations of trade deal coming from G-20 talks between Trump, Xi
By Josh
Zumbrun Published: June 16, 2019
11:41 p.m. ET
Commerce Secretary Wilbur Ross played down prospects of a
major trade deal if President Donald Trump and China’s President Xi Jinping
meet at the Group of 20 summit in Japan later this month, but he said he
believes the two sides will ultimately get back to negotiations.“I think the most that will come out of the G-20 might be an agreement to actively resume talks,” Ross said in a phone interview Sunday. “At the presidential level they’re not going to talk about the details of how do you enforce a trade agreement.”
“The most that might come is new ground rules for discussion and some sort of schedule for when detailed technical talks might resume,” said Ross.
Ross was speaking from the Paris Air Show, where aerospace executives are gathering amid concerns for an industry grappling with the fallout of the four-month grounding of Boeing Co.’s BA, -0.49% 737 Max airliner, as well as global trade tensions that have darkened the outlook for many businesses.
https://www.marketwatch.com/story/wilbur-ross-lowers-expectations-of-trade-deal-coming-from-g-20-talks-between-trump-xi-2019-06-16?mod=mw_latestnews
China prepared for long trade fight with the U.S. - party journal
June 16, 2019 /
9:20 AM
SHANGHAI (Reuters) - The United States has underestimated the Chinese
people’s will to fight a trade war and Beijing is prepared for a long economic
battle, an influential Chinese Communist Party journal said on Sunday.
China would not give way on major principles in its negotiations with
the United States on ending the dispute, the commentary in the ideological
journal Qiushi, or Seeking Truth, said.
The editorial represented “a further mobilisation of Chinese society” in
the struggle against U.S. trade pressure, wrote Hu Xijin, editor-in-chief of
the state-run Global Times newspaper, in a tweet.
“China will not be afraid of any threats or pressure the United States
is making that may escalate economic and trade frictions. China has no choice,
nor escape route, and will just have to fight it out till the end,” the
commentary said.
“No one, no force should underestimate and belittle the steel will of
the Chinese people and its strength and tenacity to fight a war.”
The United States kicked off a tariff battle with China in 2018, seeking
sweeping structural changes from Beijing and alleging that the Chinese have
engaged in intellectual property theft over many years, which China denies.
But tensions rose sharply in May after the Trump administration accused
China of reneging on promises it had made during months of talks.
The commentary also accused the United States of trying to hamper
Chinese technological innovation.
“We must keep the initiative of innovation and development firmly in our
hands, increase investment and research in key, core technology areas, pool
together more high-value talents, enhance innovation and get rid of the core
technology plight,” it said.
U.S. President Donald Trump’s top economic advisor, Larry Kudlow, said
on Thursday the economic burden of a trade war would shift to China.
Qiushi said U.S. consumers and businesses had reaped huge benefits from
trade with China and warned that trade frictions would inevitably have a
serious negative impact on the U.S. economy.
More
India announces tariff hike on 28 U.S. exports
June 15, 2019 /
8:20 PM
June 15 (UPI) -- India announced Saturday it is increasing tariffs on U.S. exports
after the Trump administration ended a program that exempted Indian goods from
U.S. import duties.The Indian Finance Ministry released a statement Saturday saying up to 28 U.S. exports, including almonds, lentils and multiple chemical products, will be subject to increased tariffs starting Sunday.
he ministry said U.S. apples, another of the products on the list, will be subject to a 70 percent tariff.
India previously announced plans for new tariffs on U.S. products in 2018, when the United States raised import duties on Indian steel and aluminum, but the measure was delayed repeatedly while the countries held a series of talks.
The move Saturday comes after U.S. President Donald Trump's administration ended incentives to Indian exporters under the Generalized System of Preferences program earlier in June.
The Trump administration has been targeting U.S. trade deficits around the world. The president announced last month tariffs on $200 billion worth of Chinese goods were being increased from 10 percent to 25 percent.
https://www.upi.com/Top_News/World-News/2019/06/15/India-announces-tariff-hike-on-28-US-exports/7061560643251/?ts_=7
Finally,
in other news, what happens if Russia does the same back? Argentina? Did the
USA just run a software test in South America?
U.S. Escalates Online Attacks on Russia’s Power Grid
David E. Sanger and Nicole
Perlroth
June 15 2019
WASHINGTON — The United States is stepping up digital
incursions into Russia’s electric power grid in a warning to President Vladimir
V. Putin and a demonstration of how the Trump administration is using new
authorities to deploy cybertools more aggressively, current and former
government officials said.In interviews over the past three months, the officials described the previously unreported deployment of American computer code inside Russia’s grid and other targets as a classified companion to more publicly discussed action directed at Moscow’s disinformation and hacking units around the 2018 midterm elections.
Advocates of the more aggressive strategy said it was long overdue, after years of public warnings from the Department of Homeland Security and the F.B.I. that Russia has inserted malware that could sabotage American power plants, oil and gas pipelines, or water supplies in any future conflict with the United States.
But it also carries significant risk of escalating the daily digital
Cold War between Washington and Moscow.
The administration declined to describe specific actions it was taking
under the new authorities, which were granted separately by the White House and
Congress last year to United States Cyber Command, the arm of the Pentagon that
runs the military’s offensive and defensive operations in the online world.
But in a public appearance on Tuesday, President Trump’s national
security adviser, John R. Bolton, said the United States was now taking a
broader view of potential digital targets as part of an effort “to say to
Russia, or anybody else that’s engaged in cyberoperations against us, ‘You will
pay a price.’”
Power grids have been a low-intensity battleground for years.
Since at least 2012, current and former officials say, the United States
has put reconnaissance probes into the control systems of the Russian electric
grid.
But now the American strategy has shifted more toward offense, officials
say, with the placement of potentially crippling malware inside the Russian
system at a depth and with an aggressiveness that had never been tried before.
It is intended partly as a warning, and partly to be poised to conduct
cyberstrikes if a major conflict broke out between Washington and Moscow.
Morehttps://www.msn.com/en-us/news/world/us-escalates-online-attacks-on-russias-power-grid/ar-AACV9BZ
Power mostly restored after massive blackout in Argentina, but questions remain
June 16, 2019 / 3:05 PM
BUENOS AIRES (Reuters) - Power
returned to much of Argentina and two neighbouring countries following a
massive blackout that left tens of millions in the dark on Sunday, but
Argentine President Mauricio Macri said the cause of the “unprecedented” outage
was still unclear.
Argentina’s grid “collapsed” around 7 a.m. (1100 GMT), leaving the entire
country without power, Argentina’s Energy Secretariat said. The outage also cut
electricity to much of neighbouring Uruguay and swaths of Paraguay, and shut
down YPF SA’s La Plata refinery, Argentina’s largest.
Power had returned to nearly 90 percent of Argentina by early on Sunday
evening and to virtually all of Uruguay and Paraguay, officials in each country
said.
Macri´s energy secretary, Gustavo Lopetegui, told reporters earlier in
the day that the blackout started with a failure in the country´s
“interconnection system,” known as SADI, but said the root cause of the outage
remained unknown and that results of a full investigation would not be
available for 10 to 15 days.
“There was a failure in the system, the kind that happens regularly in Argentina
and other countries,” said Lopetegui, adding that “a chain of events that took
place later ... caused a total disruption.”
“This case is unprecedented and will be deeply investigated,” Macri said
on social media.
More
Interest
rates are the most important prices in the economy, according to Nobel laureate
F.A. Hayek, because they reflect the collective time preference of individuals
to consume either now or later. Accordingly, interest rates co-ordinate
allocation of capital across the economy by signalling to businesses whether
they should invest. Distortions in interest rates can cause “clusters of
errors” in which large swathes of businesses unwittingly miscalculate at the
same time.
Caitlin Long
August 11, 2010
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled
over.
Today, it’s a funny old deeply integrated world. Why China’s African
swine fever epidemic is affecting America’s milk farmers.
China's African swine fever epidemic drives down American milk prices
June 14, 2019 /
2:40 PM
EVANSVILLE, Ind., June 14 (UPI) -- African swine fever's annihilation of
China's hog population is driving down the global prices of the various
products used to make hog feed -- including milk.
And America's dairy farmers are feeling the pain.
Before the outbreak, the United States was China's main supplier of a milk byproduct called whey.
Whey is a substance that is left over after milk is made into cheese. It is made mainly of lactose (or sugar), protein, vitamins and minerals. The pork industry uses it to make feed more protein-rich.
"The reason African swine fever is so important for whey markets is China was by far the largest importer of whey in the world," Loux said.
China held more than half of the world's 780 million pigs before the outbreak, but experts say that number is dropping fast. The food and agribusiness bank and research firm Rabobank estimates that some 200 million of China's pigs have been infected with the disease, which is deadly to the animals but does not infect humans.
Experts predict China will have lost between 25 and 35 percent of its
herd in the next two years, Loux said.
China already was importing less whey from the United States before
African swine fever began killing its herd. In June 2018, China placed a high
retaliatory tariff on the dairy product -- including whey -- in response to
similar tariffs levied against Chinese goods.
U.S. whey exports to China dropped by 43 percent under the tariff, according to the U.S. Dairy Export Council. Since African swine fever hit, they've fallen 61 percent.
"Now, with African swine fever on top of the tariff, not only has the U.S. market share shrunk, but the entire market has shrunk," Loux said.
This is the latest blow to the already suffering dairy industry.
Various economic factors -- including overproduction -- have kept milk prices historically low over the last four years. Dairy farms across the country are going out of business in record numbers.
More
https://www.upi.com/Top_News/US/2019/06/14/Chinas-African-swine-fever-epidemic-drives-down-American-milk-prices/7061560536466/?ts_fn=1
Corn prices settle at 5-year high as flooding leaves U.S. plantings way behind
By Myra P.
Saefong Published: June 14, 2019 3:30 p.m. ET
83% of crop planted as of
June 9, well behind average pace of 99%
U.S. farmers are millions of acres behind their usual pace of corn planting this spring because of flooding, which may lead to a supply shortage that lifts prices by year end past $5 a bushel to their highest in more than five years.
Corn planted in the 18 states that account for the bulk of U.S. production was at 83% of expected plantings as of the week ended on June 9, significantly below the 99% seen a year earlier, according to the U.S. Department of Agriculture. Some 8.5 million acres in the eastern Corn Belt and 6.5 million acres in the western Corn Belt remain unplanted, according to Peter Meyer, head of grain and oilseed analytics at S&P Global Platts. “By any metric, this is historically the most amount of corn acres left unplanted this late in the season,” he said.
The most-active July contract for corn futures CN19, +0.06% settled at $4.53 a bushel in Chicago on Friday, the highest since June 2014—and nearly 21% higher than the $3.75 finish on Dec. 31. “We normally would…have been done planting corn two weeks ago,” said Arlan Suderman, chief commodities economist at INTL FCStone Financial. “This is a very dire situation for the U.S. corn crop. It has never been this late or this challenging.”
“Merciless rains” in the Great Plains and Midwest triggered flooding in May and led to a “record-slow planting pace” for the nation’s corn, according to the USDA. Most of the crop “was planted in cool wet soils, which is not advantageous for yields,” Suderman said. That may contribute to tighter supplies.
The USDA’s World Agricultural Supply and Demand Estimates report on Tuesday noted a “larger-than-expected reduction in corn yield and acreage, suggesting that more significant reductions are expected in future reports,” said Suderman. The report forecasted a decline in corn production to 13.7 billion bushels for the 2019-20 marketing year, the lowest in four years.
“U.S. corn will be in short supply, but emotions, fears, and hoarding could push it to shortage,” said Ned Schmidt, editor of the Agri-Food Value View Report. The “reality of the situation will develop over time, pushing December 2019 corn to $5.05” a bushel by year end. That would mark a 9% rise from the current $4.63 ½ December corn price CZ19, -0.05% and highest finish for a most-active contract since May 2014.
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?
No update today, more
tomorrow.
Hayek
observed that interest rate stimulus interfered with economic calculations,
causing managers to invest in projects that would not otherwise have appeared
profitable. Losses can subsequently materialise as customer demand fails to
meet forecasts that were, in retrospect, optimistic. Long-term projects are
highly sensitive to interest rates and are therefore more susceptible to such
distortions. Pension obligations and long-term, capital-intensive projects are
at high risk of miscalculation based on artificially low rates.
---- Hayek observed that “clusters of errors”
tended to happen after monetary stimulus sparked an investment boom. When boom
turned to bust he urged quick recognition of losses to free capital trapped in
bad investments so markets could redeploy it to better uses. Any further rounds
of monetary stimulus to cushion the bust would only prolong the inevitable
adjustment and distort economic calculation anew.
Caitlin
Long is head of Corporate Strategy, Capital Markets at Morgan Stanley. 2010
The monthly Coppock Indicators finished May
DJIA: 24,815 +49 Down. NASDAQ: 7,453 +71 Down.
SP500: 2,752 +46 Down.
The S&P has reversed again to down after only one month. Time for
the Fed to step in again to buy stocks.
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