Baltic Dry Index. 1937 -10 Brent Crude 63.46
Never ending Brexit now October 31,
maybe. 96 days away.
Trump’s Nuclear China Tariffs
Now In Effect.
USA v EU trade war postponed to
November, maybe.
“Be kind, have courage and
always believe in a little magic.”
It is the weekend before the Trump cowed
Fed gets to rush in on the 31st, and like the fairy godmother, send
America’s Cinderella stock markets to the Ball of new record high prices via an
interest rate cut. What could possibly go wrong?
Plenty, because back in the real world a
manufacturing and export recession seems to have arrived, and one that seems to
be spreading. What if the fairy godmother’s bazooka’s broken?
We open with relatively good news from
the US bean counters. The US economy slowed less than expected, but wait for
the revisions down the road, I suspect. After that, some not quite such good
news for the weekend.
“Perhaps the greatest risk any of us
will ever take is to be seen as we really are.”
Cinderella
U.S. economy slows in second quarter; weak business investment a red flag
July 26, 2019 / 5:09 AM
WASHINGTON
(Reuters) - U.S. economic growth slowed less than expected in the second
quarter as a surge in consumer spending blunted some of the drag from declining
exports and a smaller inventory build, which could further allay concerns about
the economy’s health.
But the
fairly upbeat report from the Commerce Department on Friday had some red flags
for the 10-year-old economic expansion, the longest on record. Business
investment contracted for the first time in more than three years and housing
declined for a sixth straight quarter.
Federal
Reserve Chairman Jerome Powell early this month flagged the two sectors as
areas of weakness in the economy. They are likely to provide additional cover
for the Fed to cut interest rates next Wednesday for the first time in a decade
because of rising risks to the economy’s outlook from a bitter trade war
between the United States and China, and slowing global growth.
“The key to
future economic growth is business spending. Evidently, businesses do not share
the ebullience consumers have,” said Sung Won Sohn, an economics professor at
Loyola Marymount University in Los Angeles. “This is not a good sign for the
economy because there would be fewer jobs for consumers. For this reason, the
Fed will cut rates next week.”
The Fed is
widely expected to cut its benchmark rate by a quarter point at its July 30-31
meeting.
More
China's industrial profits fall in June, add to fears of slowdown
July 27, 2019 / 2:59 AM
BEIJING (Reuters) - Profits earned by
China’s industrial firms contracted in June after a brief gain the previous
month, fuelling concern that a slowdown in manufacturing from a bruising trade
war will drag on economic growth.
China’s
industrial profits have been softening since the second half of 2018 as the
economy slowed and the U.S.-China trade dispute escalated, with many industrial
firms putting off business decisions and scaling back manufacturing investment.
Economic
growth in the second quarter slowed to a near 30-year low.
Industrial
profits fell 3.1% in June from a year earlier to 601.9 billion yuan ($87.5
billion), according to data released by the National Bureau of Statistics (NBS)
on Saturday, following a 1.1% gain in May.
In the first
six months, industrial firms earned profits of 2.98 trillion yuan, down 2.4%
from a year earlier, compared with a 2.3% drop in January-May.
The drop in
first-half profits was driven by declining profits in the auto, oil processing
and steel sectors, Zhu Hong of the statistics bureau said in a statement
accompanying the data.
Producer
price inflation, one gauge of industrial profitability, eased to zero in June
from a year earlier, rekindling worries about deflation, which could prompt
authorities to launch more aggressive stimulus measures.
U.S. and
Chinese negotiators will meet on Tuesday for the first time since their
presidents, Donald Trump and Xi Jinping, agreed in late June to revive talks in
a bid to end the year-long trade war.
More
Asian firms cut capex, weakening outlook for demand and jobs
July 26, 2019 / 6:31 AM
(Reuters) - Asian firms have cut back capital spending this
year, and that means a recovery in regional earnings, jobs and overall demand
could take a while. A Reuters analysis of 6,500 major Asian companies, with comparable financial data available, showed their cumulative capital expenditures in January-March fell 1% to $198.7 billion - the first annual decline for a quarter in two years.
Tensions
from the U.S.-China trade war, the risk of disrupted supply chains and waning
demand have weighed on business confidence and spending this year.
The decline
in capital expenditure (capex) suggests that the weak global growth momentum
could persist until there’s a meaningful recovery in confidence.
The analysis
showed that tech and industrial firms - the two sectors caught in the trade war
crossfire - led the capex declines in the March quarter.
---- The trade war and softening in global
demand led to the decline in capex in Asia, said Alicia Garcia Herrero, chief
Asia Pacific economist at Natixis SA in Hong Kong.
Changes in
the global supply chain mean “corporates need to rethink their future plans”,
especially tech firms that can face “strong sanction power by the U.S.,” she
said.
Rob Subbaraman,
head of global macro research at Nomura, said South Korea, Taiwan, Singapore
and Malaysia could have weak corporate capex this year, given their open
economies with high exposure to tech and China.
Stalling
factory activity in most Asian economies has raised concerns over the
manufacturing sector’s productivity and profits.
In China,
Asia’s economic powerhouse, and in Japan, manufacturing surveys have been weak.
More
U.S. to deny tariff relief for Apple Mac Pro parts from China - Trump
July 26, 2019 / 3:32 PM
WASHINGTON (Reuters) - U.S. President
Donald Trump on Friday said his administration would not grant Apple Inc (AAPL.O) any relief for tariffs on parts made
in China for its Mac Pro computer and later added he thought the firm would
build a plant in Texas.
“Apple will
not be given Tariff waiver, or relief, for Mac Pro parts that are made in
China. Make them in the USA, no Tariffs!” Trump tweeted.
On July 18,
Apple asked the U.S. Trade Representative’s office to waive 25% tariffs on 15
parts, including ones for the Mac Pro desktop computer. The public comment
period for those requests closes on Aug. 1.
Trump later
told reporters he thought Apple would build a plant in Texas, without
elaborating on exactly what he was referring to or how he knew.
“I want
Apple to build their plants in the United States. I don’t want them to build
them in China. So when I heard they were going to build it in China, I said,
‘No, that’s OK, you can build it in China but when you send your product into
the United States we’re going to tariff you,” he said.
“We’ll work
it out,” he said. “I think they’re going to announce that they’re going to
build a plant in Texas. And if they do that, I’m starting to get very happy.”
The Wall
Street Journal reported in June that Apple is shifting manufacturing of its new
Mac Pro desktop computer to China from Texas.
Apple issued
a statement at the time that “like all of our products, the new Mac Pro is
designed and engineered in California and includes components from several
countries including the United States” and emphasized that “final assembly is
only one part of the manufacturing process.”
More
FedEx’s China Woes Cap Week of Industrial Angst
As the manufacturing slowdown intensifies, the risk of China blacklisting the courier and others is getting more serious. Plus more industrial insights.By Brooke Sutherland July 26, 2019, 8:00 PM GMT+1
Add China boycotts to your list of things
to worry about for industrial companies. Concerns that the country may
weaponize its purchasing power and blacklist American entities have been
bubbling since the start of the U.S.-China trade war, but actual evidence of
China doing so has been muted and it remained mostly a theoretical threat.
That may be starting to change: China on
Friday said it didn’t buy FedEx
Corp.’s argument that packages involving Huawei Technologies Co. documents and
products were rerouted due to operational errors. Chinese Foreign Ministry
spokeswoman Hua Chunying said authorities had found other FedEx activities
in violation of the law, and people familiar with the matter have told Bloomberg
News the country has been preparing to add FedEx to a blacklist of “unreliable
entities.” Meanwhile, China’s State Post Bureau has said the country
will encourage domestic logistics providers to expand overseas by
reducing their costs and shortening approval procedures.
FedEx says the packages at the heart of
this fight were erroneously rerouted because it was trying to comply with
“unclear” orders from the U.S. Commerce Department involving the Trump
administration’s efforts to curb sales of U.S. products to Huawei. The
government, however, seems to have little sympathy for FedEx and seems
happy thus far to let it take the fall for this. So is rival United Parcel
Service Inc., which said last month it’s
had no extraordinary issues complying with government requirements and declined
to join FedEx’s lawsuit claiming export restrictions put an unreasonable
policing burden on couriers.
The blacklist threat may be bluster on
China’s part as the country prepares for the first high-level, face-to-face
talks with the U.S. since President Donald Trump and Chinese President Xi Jinping
agreed to a tentative ceasefire last month. But with the two sides still far
apart on key issues, the outcome of those talks is anyone’s guess and the
doubling down on criticism of FedEx is a worrying development. It’s
interesting that it seems to be primarily manufacturing companies getting
caught in the blacklist crosshairs; just as with the tit-for-tat tariffs levied
by both sides, consumer goods companies have managed to stay out of the
fray.
In addition to FedEx, Ford Motor Co.’s
main joint venture in China was accused of antitrust
violations and fined about $24 million in May. Chinese media hinted
earlier this month at a potential boycott of products made by U.S.
companies involved in a proposed arms sale to Taiwan, specifically calling out
Honeywell International Inc. air-conditioning systems, General Dynamics Corp.’s
Gulfstream jets and Oshkosh Corp. fire trucks.
The boycott reports and the growing risk
of more homegrown competition from China are likely to add to the general sense
of unease that’s pervaded this earnings season for industrials. There were
troubling data points everywhere you looked this week: plunging new equipment
orders at United Technologies Corp.’s Carrier and Otis elevator divisions; sales guidance cuts
by Sherwin-Williams Co., Pentair Plc and W.W. Grainger Inc.; a sliding backlog and
rising pricing pressure in China at Caterpillar Inc. – to name a
few.
The IHS Markit flash gauge of U.S. factories showed
activity is hovering right on the borderline between expansion and contraction
in the lowest reading since September 2009, with the slide in output leading
factories to reduce employment for the first time in six years. Fortive Corp.
and Rockwell Automation Inc. both cut their earnings guidance due to a more
pronounced slowdown in markets with shorter sales cycles. 3M Co. maintained its
outlook for as much as 2% organic revenue growth this year, which leaves it
banking on a second-half rebound in China and automotive markets that seems unlikely to materialize.
More
Finally, gold. Russia, China, the Asian “Stans”
continue accumulating gold as part of their de-dollarisation strategy. India
and Russia look to de-dollarise their bilateral trade.
Under President Trump’s aggressive trade
war and sanctions approach to international trade, much of the world has been
incentivised to look for ways to de-dollarise their international trade. If
President Trump follows through on his threats to increase tariffs on French
wines and German autos, expect the EUSSR to join that growing list of
incentivised de-dollarisers.
Russia’s Gold Stockpiles Hit $100 Billion Amid Efforts to De-Dollarise Its Reserves
© RIA Novosti . Alexander Alpatkin 11:57 26.07.2019
Moscow has
been increasing the country’s reserves of the precious metal in recent years
selling off its US Treasury securities at the same time. Although Russia used
to be one of the largest investors in US debt, its stock has now reached $12
billion, the lowest level since 2007.
Russia’s
bullion holdings totaled 2,208 tonnes, the Central Bank of Russia (CBR)
reported, estimating the value of its gold reserves at $100.3 billion as of 1
July. In June alone, Russia added 18 tonnes of the precious metal to its
mountain of gold, keeping up with the recent efforts to de-dollarise its
foreign exchange reserves.
Moscow has increased its stockpiles of the precious metal by 96.4 tonnes since the beginning of the year. In May, April and March, more than 6, around 16, and 18 tons respectively were purchased. However, February still holds the record with 31 tonnes added to the gold reserves.
The 2018 shopping spree, however, exceeded this year’s tempo with Moscow purchasing a record-breaking 275 tonnes in 2018, making it the largest amount of gold bought in a single year, the World Gold Council concluded.
Increasing its bullion holdings, Russia is also decreasing its share of US Treasury securities. Russia’s US debt stocks dropped to $12.024 billion, which is the lowest level since May 2007. These reserves sank 85%, dropping from $96.9 billion to $13.2 billion just last year.
Moscow has previously criticised the US for "abusing" the reserve status of its currency, warning that doing so could backfire. During the recent St. Petersburg International Economic Forum (SPIEF), Russian President Vladimir Putin slammed the US, noting that the dollar has become “a tool for the issuing country to put pressure on the rest of the world”, and argued that the global role of this currency should be reconsidered.
India Says It's Working with Russia on De-Dollarisation of Bilateral Trade
© REUTERS / Dmitri Lovetsky/Pool 12:56 10.07.2019(updated 13:08 10.07.2019)
New Delhi (Sputnik): India says it is working with Russia
to overcome payment issues for its strategic imports from that country. Deputy
National Security Advisor of India, Ambassador Pankaj Saran said both sides are
working on rupee-rouble trade to overcome a crisis caused by US financial
sanctions.Addressing the Second India-Russia Strategic Economic Dialogue in New Delhi on Wednesday, Ambassador Saran said this would help overcome India’s adverse balance of trade with Russia.
“As part of the trading environment, there have been
talks about trade in national currencies. This again is still a work in
progress and we need to see how we can operationalise and move forward on this
idea, because increasingly we see many countries in the world are taking
recourse to trading in their own respective currencies", said Ambassador
Saran.
Ambassador Saran said the problem is not just the relatively low level of trade between India and Russia, but also the fact that India has an adverse balance of trade with Russia, which is growing.
India’s plans to acquire S400 air defence missile systems was hit by US financial sanctions and both countries are working on a solution regarding payment issues. This will also help Russia pitch for India’s upcoming defence contracts like submarines and fighter jets.
Dr Rajiv Kumar, Vice Chairman of India’s national think-tank, National Institution for Transforming India (NITI Aayog) has suggested the possibility of a free trade agreement between the two countries. “It is a possibility, but we need to take it forward", he told Sputnik on the sidelines of the conference.
More
Trump says U.S. could tax French wine in retaliation for digital tax
July 26, 2019 / 5:54 PM
WASHINGTON/PARIS (Reuters) - U.S.
President Donald Trump threatened to tax French wines on Friday in retaliation
for France’s recent proposal to levy a tax aimed at big U.S. technology
companies.
Trump had
told French President Emmanuel Macron last week that he was concerned about the
proposed digital services tax.
“If anybody
taxes them, it should be their home Country, the USA. We will announce a
substantial reciprocal action on Macron’s foolishness shortly,” Trump tweeted
on Friday. “I’ve always said American wine is better than French wine!”
Later in the
Oval Office, Trump told reporters the tax decision was wrong and he threatened
the key French export.
“They
shouldn’t have done this,” Trump said. “I told them, I said, ‘Don’t do it
because if you do it, I’m going to tax your wine.’”
He said a
few minutes later that the U.S. response would be announced soon, saying that
it “might be on wine, it might be on something else.”
Trump and
Macron spoke by telephone on Friday and discussed the tax and next month’s
summit of the Group of 7 rich nations in France, the White House said.
Macron’s
office said the French leader “underlined that the G7 summit would be an
important opportunity to move towards a universal taxation of digital
activities, which is in our common interest, and which we need to keep working
on in order to obtain a broad international agreement.”
More
I know it isn’t easy, but
at least we should try to get along together. And that includes you, your
majesty.
Cinderella (Disney
anticipating Trump.)
New: This weekend’s musical diversion. Giovanni
Punto was reputedly the best French horn player of his age. Born Jan Václav
Stich in Prague in 1746, he is best known in Britain for giving us the term
“Stich-up.” From Wikipedia:
His father was a serf bonded to the estate of Count Joseph Johann von Thun, but Stich was taught singing, violin and finally the horn. The Count sent him to study horn under Joseph Matiegka in Prague, Jan Schindelarz in Munich, and finally with A. J. Hampel in Dresden (from 1763 to 1764). Hampel first taught Stich the hand-stopping technique which he later improved and extended.
Stich then returned to the service of the Count, where he remained for the next four years. At the age of 20 Stich and four friends ran away from the estate. The Count, who had invested heavily in Stich's education, dispatched soldiers with orders to knock out Stich's front teeth to prevent him ever playing the horn again, but they failed to capture the group, and Stich crossed into Italy, into the Holy Roman Empire.
Giovanni
Punto - Horn Concerto No.11 in E-major
The monthly Coppock Indicators finished June
DJIA: 26,600
+51 Up. NASDAQ: 8,006 +70 Down. SP500: 2,942 +50 Up.
The S&P has reversed again to up after only one
month. The Dow has reversed to up, while the NASDAQ remains down. On to next month’s numbers for clarification.
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