Tuesday 6 August 2019

Trade War Goes Nuclear.


Baltic Dry Index. 1774 -14   Brent Crude 60.38

Never ending Brexit now October 31st, maybe.  86 days away.
Nuclear Trump China Tariffs Now In Effect.
USA v EU trade war postponed to November, maybe.

Always do what is right. It will gratify half of mankind and astound the other.

Mark Twain.

It was always likely to have been an exit rally in stocks, with stocks rallying to highs in the face of a growing global manufacturing and exports slowdown, plus an escalating bitter trade war between the USA and China, and a new one starting between Japan and South Korea.

The big question now is, was yesterday’s selloff it, or is there a more protracted selloff to come? My guess is that with yesterday’s salvos from both China and America, any relief rallies will bring out exit sellers.

After a long bull market run in global stock markets, even with yesterday’s selloffs, many of the longs still have enormous profits and it’s never wrong to book profits, but especially during a time of great and rising uncertainty.

Below, when elephants fight it’s best to get out of their way.

Dow ends nearly 770 points lower as intensifying trade tensions trigger stock rout

By William Watts and Andrea Riquier  Published: Aug 5, 2019 4:36 p.m. ET
Stocks suffered their biggest one-day decline of 2019 on Monday as China allowed its currency to fall to a more-than-10-year low versus the dollar after President Donald Trump rattled markets by announcing additional tariffs on Chinese goods late last week.

----The rout marked the biggest one-day selloff, in percentage terms, for the Dow since Dec. 24 and the biggest drop for the S&P 500 and Nasdaq since Dec. 4. The drop marked the lowest close for the S&P 500 and Nasdaq since June 6 and the lowest finish for the Dow since June 5. It left the S&P 500 off 6% from its record close set on July 26, while the Nasdaq is off 7.3% from its all-time closing high set the same day and the Dow has pulled back 6% from its July 15 record finish.

The steep selloff came just one trading day after the S&P 500 and Nasdaq had their biggest weekly declines of 2019.

Until last week, market participants had been able to “compartmentalize” the U.S.-China trade war, said Art Hogan, chief market strategist at National, in a phone interview. Investors were aware of the continued trade tensions, but were reassured that negotiations were continuing and that neither side was prepared to escalate, he said.

See: What a falling Chinese yuan means for the stock market and the trade war

That changed Thursday, when Trump announced 10% tariffs on an additional $300 billion of imports from China to take effect on Sept. 1, and was compounded when China allowed the yuan to drop.

----Stocks extended early losses after the Institute for Supply Management said its nonmanufacturing, or services, index fell to 53.7% in July from 55.1% in June — marking a slowdown in growth. The reading was the lowest since August 2016. A reading of more than 50 indicates expansion in activity.
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Asia markets fall sharply, extending global losses

Date created :
Asian markets slumped in morning trade Tuesday, tracking global losses after Wall Street suffered its worst sell-off of the year as investors fretted over US-China trade war fears.

A sharp fall in the Chinese yuan's value against the dollar -- breaching the 7.0 level seen as a key threshold by investors -- prompted US President Donald Trump to formally designate Beijing as a currency manipulator.

Tensions have escalated since Trump last week vowed to impose fresh tariffs on Chinese goods from September 1, which would subject virtually all of the $660 billion in annual merchandise trade between the world's two top economies to punitive duties.

On Monday, the yuan dropped to its lowest level to the dollar since August 2010, fuelling speculation that Beijing was devaluing its currency to support exporters and offset Trump's latest threat to hit $300 billion in Chinese goods with 10 percent tariffs.

The slide in the yuan's value drew sharp criticism from Trump who called it "a major violation which will greatly weaken China over time".

The US leader has repeatedly accused China of currency manipulation -- charges Beijing has long denied.

Beijing's prior policy on the yuan had been to purchase foreign currencies, in part to avoid triggering capital outflows, but analysts said further weakening was likely.

"Continued yuan depreciation should be expected, albeit at a staggered pace," said Edward Moya, senior market analyst at OANDA.

"Currency wars are taking centre stage," he warned, adding that "Beijing is likely to tolerate further weakness and we could see another 5% before the end of the year."

---- The outlook remained grim in Asia on Tuesday, when Tokyo opened nearly three percent lower before recovering to end the morning two percent down.

Hong Kong fell 2.4 percent while Shanghai and Sydney shed 2.6 percent. Manila and Wellington were also down around two percent.

Although Chinese and US negotiators are set to reconvene in Washington in early September for another round of talks after last week's discussions in Shanghai, investors are not expecting a reprieve in the near future, analysts said.

"China is gearing up for a long trade battle with the US", said Rodrigo Catril, senior strategist at National Australia Bank.

"Recent events suggest a US-China trade deal is unlikely... any time soon and indeed it seems reasonable to expect trade tensions to get worse before they get better."
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U.S. 'destroying international order', China media says, after currency-manipulator branding

August 6, 2019 / 3:01 AM
SHANGHAI/BEIJING (Reuters) - China’s official Communist Party newspaper said on Tuesday the United States was “deliberately destroying international order”, a day after Washington branded Beijing a currency manipulator in a rapidly escalating trade dispute.

In a strongly-worded editorial, the People’s Daily also said the United States was holding its own citizens to ransom, without mentioning the latest U.S. move. 

The responsibility of big countries is to provide the world with stability and certainty while creating conditions and opportunities for the common development of all countries, according to the editorial. “But some people in the United States do just the opposite,” it said.

The U.S. Treasury Department said on Monday that it had determined for the first time since 1994 that China was manipulating its currency, taking the countries’ year-long trade war into uncharted territory and adding to frenzied selling in global financial markets.[MKTS/GLOB]

The announcement came hours after China let its yuan currency break through a key support level to an 11-year low, in a sign Beijing might be willing to tolerate more currency weakness as Washington threatens to impose more tariffs.

The yuan extended losses in onshore and offshore markets on Tuesday after falling sharply against the dollar the previous day, but it pulled off early lows amid signs that China’s central bank may be looking to stem the slide, which has sparked fears of a global currency war.[CNY/]

The yuan has tumbled 2.3% in three days since President Donald Trump’s sudden declaration last week that he will impose 10% tariffs on $300 billion of Chinese imports from Sept. 1, breaking a brief ceasefire in the trade dispute.

The latest U.S. move came less than three weeks after the International Monetary Fund (IMF) said the yuan’s value was in line with China’s economic fundamentals, while the U.S. dollar was overvalued by 6% to 12%.

---- The China Daily said in an editorial on Tuesday that the yuan was weak as a result of “unilateral and protectionist moves by the U.S. government” and said long-term exchange rates were decided by “economic fundamentals”.

Analysts said the U.S. move could escalate the trade war, which had already been spreading beyond tariffs to other areas, such as technology.

J.P. Morgan Asset Management APAC Chief Market Strategist Tai Hui said it was “another major setback to the possibility of a trade agreement”.

In a further sign of deteriorating ties, China’s commerce ministry announced overnight that its companies had stopped buying U.S. agricultural products in retaliation against Washington’s latest tariff threat.

Trump had earlier declared China’s currency move to be “a major violation”, and analysts said it is likely the White House pressured the Treasury Department to issue the designation.
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China Retaliation Is ‘11’ on Scale of 1 to 10, Wall Street Warns

Felice Maranz Bloomberg
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. 

Analysts continued to warn about the dangers of an escalating trade war on Monday, as China moved to strike back at the U.S., hitting U.S. stocks and boosting Treasuries.

Semiconductors, with direct exposure to trade, and banks stocks, which are sensitive to interest rates, were among the decliners. The biggest U.S. banks slid, with the KBW Bank Index dropping as much as 4.1% to the lowest since June 4. Bank of America Corp. led index decliners, with a drop of 5.5%, the most since Dec. 4, while Citigroup Inc. shed more than 4% and JPMorgan Chase & Co. slipped 3.8%.

Micron Technology Inc. fell 6.2% while Texas Instruments Inc. lost 4.4% and Intel Corp. was down 4%. Apple Inc. dropped 5.6%, the most since May 13. Shares in Chinese tech giants Alibaba Group Holding and JD.com Inc. fell near two month lows in U.S. Trading.

Agriculture equipment makers Deere & Co. and AGCO Corp. tumbled as China suspended imports of U.S. agricultural products. The escalating trade tensions are also a major risk for the U.S. automotive industry, which has a significant exposure to the country. According to UBS’s Global Wealth Management Chief Investment Officer Mark Haefele, the latest spat raises the possibility that "tariffs could also be placed on auto imports."

Here’s a sample of some of the latest commentary:

Cowen, Chris Krueger

Krueger called China’s retaliation “massive,” adding that “on a scale of 1-10, it’s an 11.” He cited the Chinese government calling on state buyers to halt U.S. agricultural purchases, while there’s “increased anecdotal evidence that the Chinese government is tightening its overview of foreign firms.”

“While there were measures that could have been chosen with larger direct effects on supply chains, the announcements from Beijing represent a direct shot at the White House and seem designed for maximum political impact,” Krueger said. “ We expect a quick (and possibly intemperate) response from the White House, and consequently expect a more rapid escalation of trade tensions.”

“There now will be increased expectations that the Fed will cut again in September to offset the drag caused by this escalation in the trade war,” he added. “Such moves will only be a partial, lagged offset to the recessionary headwinds a cycle of retaliation would cause.”

In a mid-day note, Krueger added that “the next stop on the currency manipulation road is probably off the map.” Krueger expects Trump’s “drumbeat on currency” will get louder, with the potential for the president to use a “charge of currency manipulation to justify some combination of (more) tariffs, investment restrictions and export controls.”
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Finally, is the “easy to win” trade war now starting to cost Trump his re-election base? If it is, what does the prospect of a far left Democrat President mean for the global economy? Gold anyone?

Farm Groups Sound Alarm Over Trump’s China Trade War Escalation

By Mike Dorning
·        

American Farm Bureau says China’s import halt is ‘a body blow’
·         Rural voters are a key constituency for Trump’s re-election

Major American farm groups sounded an alarm Monday after China halted U.S. agriculture imports, signaling a key Republican political constituency is losing patience with President Donald Trump’s escalating trade war.

Zippy Duvall, president of the the American Farm Bureau Federation, the nation’s largest and most influential general farm organization, called China’s import cut-off “a body blow to thousands of farmers and ranchers who are already struggling to get by.”
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 If you don’t read the newspaper, you’re uninformed. If you read the newspaper, you’re misinformed.

Mark Twain.

Crooks and Scoundrels Corner.

The bent, the seriously bent, and the totally doubled over.

Today, trouble in Trumpland? Is a Democrat Socialist already ordering carpets for the White House?

Opinion: Job growth in Trump Land is dead in the water

By Rex Nutting  Published: Aug 3, 2019 9:27 a.m. ET
Since the economy began adding jobs after the Great Recession nine years ago, about 21.5 million jobs have been created in the United States, the second-best stretch of hiring in the nation’s history, second only to the 1990s. 

But job growth isn’t being spread evenly across the land. Most of the new jobs have been located in a just a few dozen large and dynamic cities, leaving slower-growing cities, small towns and rural areas — where about half of Americans live — far behind.

Also read: U.S. adds 164,000 new jobs in July to keep unemployment near 50-year low of 3.7%

Along with climate change and racial justice, economic development is America’s biggest challenge over the next few decades. Inclusive growth is a must, or else our society will fall apart.

The problem: No one — certainly not President Trump — has found the magic wand that will bring back jobs to rural and small-town America.

According to a study titled “The Future of Work in America” by the McKinsey Global Institute released in July, 25 cities that are home to about 30% of Americans will capture about 60% of the job growth between 2017 and 2030, just as they did between 2007 and 2017.

Twelve are megacities (and their extended suburbs): Atlanta, Boston, Chicago, Dallas, Houston, Los Angeles, Miami, New York, Philadelphia, Phoenix, San Francisco and Washington.

Another 13 are high-growth hubs in smaller cities: Austin, Charlotte, Denver, Las Vegas, Minneapolis, Nashville, Orlando, Portland (Ore.), Raleigh, San Antonio, San Jose, Seattle, and Tampa.

A few other smaller, fast-growing cities will also add jobs, while vast swaths of the South, Midwest and Plains will lose jobs. The New York metro area, home to 20 million people, added more jobs over the past year than all the small towns and rural areas — with 46 million people — did combined.

Anyone who’s been paying attention to the political map will recognize that the growth is mostly occurring in places that vote for Democrats, while the stagnation is mostly in places that vote for Republicans.

Donald Trump has appealed to those who are the most fearful, the most resentful and the most despairing, but the situation hasn’t gotten any better since his election. Rural America is older, sicker, poorer and more dependent upon state aid than it was before.

The divide between the superstar metros and everyone else has widened further in the past year or two.

Over the past year, only 12% of 389 metro areas had any statistically significant job growth, according to an analysis of Bureau of Labor Statistics data by Aaron Sojourner, a former White House economist and now an associate professor at the Carlson School of Management at the University of Minnesota.

For most of this post-crisis expansion, about 80% of metro areas were experiencing significant gains.
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https://www.marketwatch.com/story/job-growth-in-trump-land-is-dead-in-the-water-2019-08-02?mod=mw_latestnews

A clear conscience is the sure sign of a bad memory.

Mark Twain.


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?

Hyundai’s solar panel roof ready for production

05/08/2019 in Manufacturer News
Hyundai is launching its first car with a solar roof charging system that can provide vehicles with additional electrical power, as well as increasing fuel efficiency and driving range.

The system makes its debut on the new Sonata Hybrid, a car that is only offered in the Korean market.

It works by supporting the vehicle’s electric power source, to improve fuel efficiency and reduce CO2 emissions.

Hyundai says it will roll out the technology to other vehicles across its range in the coming years.

“Solar roof technology is a good example of how Hyundai Motor is moving towards becoming a clean mobility provider. The technology allows our customers to actively tackle emissions issue” said, Heui Won Yang, senior vice president and head of Body Tech Unit of Hyundai Motor Group. “We are striving to further expand the application of the technology beyond eco-friendly vehicle line up to vehicles with internal combustion engine.”

The solar roof system includes a structure of silicon solar panels that are mounted on the car’s roof. Being able to charge even while driving, the solar roof system can charge 30 to 60% of the battery per day during a six hour period.

It is expected to provide 800 miles of travel annually.

The system is composed of a solar panel and a controller. Electricity is produced when solar energy activates the solar panel’s surface, which converts this energy by using photons of light from the sun. 
This creates the electron-hole pairs in silicon cells, which generate solar electricity.

The electricity from this process is converted to the standard voltage by the controller, then stored in the battery. Hyundai Motor took not only efficiency but also design into account while developing the solar charging system.

While the solar roof system currently plays a supporting role, it opens up perspectives for vehicles that no longer need fossil fuel to operate.

Modern money is inherently worthless, but everybody accepts it as real.
Paul Seabright, a professor of economics, identified two traits that underpin
systems of trust including money: the capacity to weigh up the costs and
benefits of trusting others and the instinct to return favors in kind or seek
revenge when trust is betrayed. When it is working well, the system enables
strangers to deal with each other safely. When the fragile trust fails, people
withdraw their money from banks, and they seek the refuge of cash. Ironi-
cally, in times of crisis, people seek paper money that has no intrinsic worth,
illustrating the power of the monetary illusion.

Satyajit Das. Extreme Money. Masters of the Universe and the Cult of Risk

The monthly Coppock Indicators finished July

DJIA: 26,864 +53 Up. NASDAQ: 8,175 +65 Down. SP500: 2,980 +53 Up. 

The S&P and Dow remain up, but in very unconvincing fashion. The NASDAQ remains down.  Like the Fed, I would await a better data driven signal.

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