Friday, 31 January 2020

A Global Emergency – WHO.

Baltic Dry Index. 498 -27  Brent Crude 59.35 Spot Gold 1574

Brexit  Freedom Day Arrives!!!
Trump’s Nuclear China Tariffs Now in effect.
The USA v EU trade war started October 18.

The World Health Organization on Thursday declared a global emergency as the virus spread to more countries.

Last Friday we wrote:

Now comes the nervous wait in global stock and commodity markets, to see what happens next in China with the new coronavirus.

If its spread is largely contained, with little impact outside of China, by the end of next week it will just have been yet more background noise.

If it starts spreading widely across China due to all the travel in China for next week’s Lunar New Year celebrations, by the end of next week we could start to see international travel restrictions on China, and a rising impact on the Chinese economy and with it the global economy.

This Friday, the virus is far from contained, is spreading outside of China, and inside China seems poised to wreak economic havoc. If the virus spreads into India or Africa, where health care systems are relatively basic, “a global emergency” will turn into a global catastrophe.

Last Friday the World Health Organisation flopped out, failing to recognise the extent of the coronavirus problem.

Markets had steadied overnight, as investors took some solace from the World Health Organisation labelling the outbreak an emergency for China, where 25 people have died and at least 800 have been infected, but not, as yet, for the rest of the world. 

One week too late, yesterday they moved to shut the stable door.

The death toll in Hubei, the Chinese province at the center of the epidemic, had risen to 204 and there were 9,692 cases of infection nationally as of Thursday, Chinese health authorities said. A total of 129 cases have been reported in 22 other countries and regions, with no deaths outside China.

Below this Friday’s unfortunate developments. Risk off for the foreseeable future.  The BDI, copper, and crude oil are all signalling economic trouble  directly ahead.

Next week, it is critical that China gets control over the coronavirus outbreak. But since I don’t believe China’s official figures, I suspect that the time for getting control has already passed. If so, China’s economy, and the global economy, are about to enter an unprecedented, in the modern era, period of stress.

Asia shares struggle for footing after fraught week

January 31, 2020 / 12:31 AM
SYDNEY (Reuters) - Asian share markets fought to regain their footing on Friday as investors clutched at hopes China could contain the coronavirus, even as headlines spoke of more cases and mounting deaths.

Helping the mood were surveys showing Chinese manufacturing activity came in much as expected in January while services actually firmed, though this was likely before the virus took full hold.
Indeed, reports some Chinese provinces were asking companies not to re-start until Feb. 10 suggested activity would take a hard knock this month. 

For now, sentiment got a timely boost when Amazon’s (AMZN.O) sales blew past forecasts and sent its stock soaring 11% after hours, adding over $100 billion in market worth.

MSCI’s broadest index of Asia-Pacific shares  outside Japan .MIAPJ0000PUS managed to eke out a 0.2% gain, but was still down 4% on the week so far. Its 2.3% dive on Thursday had been the sharpest one-day loss in six months.

Japan's Nikkei .N225 bounced 1%, but again was off 2.5% for the week. E-Mini futures for the S&P 500 ESc1 added 0.1%, having rebounded 0.5% late on Thursday.

European bourses looked set to open firmer with EUROSTOXX 50 futures STXEc1 up 0.8% and the FTSE FFIc1 0.7%.

The World Health Organization on Thursday declared a global emergency as the virus spread to more countries.

Tedros Adhanom Ghebreyesus, WHO director-general, said the greatest worry was the potential for the virus to spread to countries with weaker health systems.

Yet investors took heart from his comments that the drastic steps Beijing was taking would “reverse the tide” and contain the outbreak.

“Some shorts covered after the director gave the WHO’s stamp of approval to China’s aggressive containment effort,” said Stephen Innes, Asia Pacific market strategist at AxiCorp.

“For now, the market’s risk lights have shifted from flickering on red to a steady shade of amber, which could bring more risk back into play.”

That helped Wall Street recoup its losses so the Dow .DJI finished up 0.43%, while the S&P 500 .SPX gained 0.31% and the Nasdaq .IXIC 0.26%. After the bell, NASDAQ futures NQc1 pushed 1.3% higher on the Amazon results.

U.S. warns citizens against travel to China as virus toll tops 200

January 30, 2020 / 11:07 PM
SHANGHAI/BEIJING (Reuters) - The U.S. government warned Americans not to travel to China as the death toll from a new coronavirus reached 213 on Friday and the World Health Organization (WHO) declared a global health emergency.

A new State Department travel advisory raised the warning for China to the same level as Iraq and Afghanistan. 

In a notice posted on its website, the department said: “Do not travel to China due to novel coronavirus first identified in Wuhan, China.”

Beijing has not commented on the U.S. travel warning, but in response to the WHO declaration a foreign ministry spokeswoman said China had taken “the most comprehensive and rigorous prevention and control measures”.

---- Tedros Adhanom Ghebreyesus, WHO director-general, said the organization “doesn’t recommend - and actually opposes” restrictions on travel or trade with China.

The death toll in Hubei, the Chinese province at the center of the epidemic, had risen to 204 and there were 9,692 cases of infection nationally as of Thursday, Chinese health authorities said. A total of 129 cases have been reported in 22 other countries and regions, with no deaths outside China.

International alarm over the new coronavirus that emerged in Wuhan, the capital of Hubei, in December, is driven by its rapid spread and the fact that infectious disease experts cannot yet know how deadly or contagious it is.

Italian Prime Minister Giuseppe Conte said all air traffic between Italy and China would stop, a more drastic measure than most countries have undertaken, after Italy announced its first confirmed cases in two Chinese tourists.

An increasing number of airlines have stopped flying to mainland China, including Air France KLM SA, British Airways, Germany’s Lufthansa and Virgin Atlantic, while others have reduced flights.

The president of Japanese airline ANA Holdings (9202.T) said the company may consider suspending China flights, Jiji news agency reported on Friday. The airline said on Thursday that bookings for flights leaving China fell by half in February.

Foreign governments continued evacuating their citizens from Hubei and holding them in quarantine.

---- Statistics from China indicate that just over 2% of people infected have died, suggesting that the virus may be less deadly than the coronaviruses behind 2002-2003 Severe Acute Respiratory Syndrome (SARS) and Middle East Respiratory Syndrome (MERS).

However, economists fear the impact from the virus could be bigger than SARS, which killed about 800 people and cost the global economy an estimated $33 billion, as China’s share of the world economy is now far greater.

Japan urges citizens to avoid non-urgent trips to all of China

January 31, 2020 / 4:33 AM
TOKYO (Reuters) - Japanese Prime Minister Shinzo Abe told parliament on Friday the government has decided to raise its infectious disease advisory level for China, excluding Hubei province, to 2, urging citizens to avoid non-urgent trips to the country.

The government is already telling its citizens not to take any trips to China’s central province of Hubei. 

Wuhan, the epicentre of the newly-identified coronavirus outbreak, is located in Hubei.

China trade agency to offer firms force majeure certificates amid coronavirus outbreak

January 31, 2020 / 2:02 AM
BEIJING (Reuters) - A Chinese international trade promotion agency said it would offer force majeure certificates to companies struggling to cope with the impact of the new coronavirus epidemic on their business with overseas partners.

The move by the China Council for The Promotion of International Trade (CCPIT), officially accredited with Beijing’s Commerce Ministry, was announced late on Thursday and comes with the death toll in the country from the virus topping 200. The number of cases confirmed worldwide has risen rapidly in what the World Health Organisation has declared a global health emergency. 

“Some Chinese companies have suffered severe impacts on goods and logistics and may not be able to fulfil their contracts amid the coronavirus,” the CCPIT said in a statement.

It didn’t identify any companies affected, and didn’t disclose whether it had received any requests for force majeure certificates, which can absolve parties of liability for contracts that can’t be fulfilled due to extraordinary circumstances beyond their control.

The CCPIT said companies that can provide legitimate documents, including proof of delays or cancellation of transportation, exports contracts and customs declaration, to it online system would be granted force majeure certificates. The agency says on its website that its certification is recognised and accepted overseas.

Do NOT buy the dip, warns investor who says a ‘brutal bear market’ looms

Published: Jan 30, 2020 11:44 a.m. ET
Kevin Smith, chief investment officer at Crescat Capital, says the bear case for U.S. stocks has never been stronger” and it’s time for investors to be aware of the “gravity” of the current situation.

“We certainly did not predict the Coronavirus, but it may prove to be the catalyst to tip this market that is trading at truly historic valuation levels after a record long U.S. economic expansion,” he told clients in a note this week. “Median EV-to-sales for the S&P 500, based on our work recently reached an insane, euphoric level of 3.6 times, two times than the tech bubble peak.”

He used this chart to tell the story:

---- “A top this month would certainly make sense to us given the recent overbought conditions, unsustainably high bullish sentiment levels, bear capitulation (not Crescat), and deteriorating macro indicators,” Smith wrote.

He said the median enterprise value-to-sales is one of the best ways to understand just how inflated the current stock bubble is. The ratio is seen by many, including Smith, as more accurate than other more commonly cited valuation metrics in part because it takes company debt into account.

“Investors will need a good grounding in valuation and business cycle analysis to reject the common buy-the-dip advice that is soon to become prevalent in the still early stages of what is likely to become a brutal bear market,” he warned.

Crescat portfolio manager Tavi Costa, who co-wrote the note with Smith, tweeted that valuations are “truly insane” at this point and offered up another chart:

Coronavirus is less deadly than SARS — but that also explains why it’s so contagious

By Quentin Fottrell  Published: Jan 31, 2020 1:22 a.m. ET
Two months into the epidemic, the coronavirus has not proven to be as deadly as the SARS virus. That, however, may also help explain why it’s spreading so quickly. It has an incubation period of up to two weeks, which enables the virus to spread through person-to-person contact.

The coronavirus, a highly contagious, pneumonia-causing illness that infects the respiratory tract, is now responsible for 213 deaths in China as of late Thursday and 9,692 infections worldwide, according to Chinese officials and official figures from the World Health Organization

SARS, or severe acute respiratory syndrome, infected 8,096 people worldwide with approximately 774 official SARS-related deaths. Even with 43 new fatalities reported, the fatality rate remains steady.

SARS had a fatality rate of 9.6% compared to the fatality rate of 2% for the coronavirus. However, that death toll could rise as the weeks progress, and drug companies scramble to come up with a vaccine for the virus. Whether the fatality rate remains steady has yet to be determined.

The difference in these two fatality rates gives more context as to why the coronavirus has spread so quickly. Medical experts say an effective flu-like virus can extend its reach by not killing its host too rapidly and/or making the host sick enough to pass it on before finally becoming bedridden.

“Every now and then a disease becomes so dangerous that it kills the host,” Matan Shelomi, an entomologist and assistant professor at National Taiwan University, wrote on Quora in 2017. But, ideally for the host at least, it must strike a balance.

“If the disease is able to spread to another host before the first host dies, then it is not too lethal to exist. Evolution cannot make it less lethal so long as it can still spread,” he added. “If a hypothetical disease eradicates its only host, both will indeed go extinct.”

Crooks and Scoundrels Corner.

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

Today, more on the impact to the Chinese economy.

Coronavirus: Technology giants join China shutdown

Google is temporarily closing all of its offices in China, Hong Kong, and Taiwan as a result of the coronavirus.

Other tech giants, including Amazon and Microsoft, have also taken action to protect staff from infection.

This week global corporations have been shutting operations in China and advising overseas staff not to visit the country.

Many employees are being asked to work from home or extend their Lunar New Year holiday.

Google said it is stopping staff travelling to China and Hong Kong, while employees currently in the country have been advised to leave as soon as possible and then work from home for a minimum of two weeks.

Google has four offices in mainland China, although the company has not said how many staff it employs there.

While Google's search engine is not available in China, its offices focus on sales and engineering for its advertising business.

Other global technology giants, including Microsoft and Amazon, have announced similar measures as they attempt to prevent the spread of the deadly virus.

"Out of an abundance of caution, we are restricting business travel to and from China until further notice and encouraging our employees to follow the health and safety guidelines provided by international health agencies", an Amazon spokesperson told the BBC.

Earlier this week Facebook became the first major US firm to tell staff to avoid travelling to China.

Meanwhile General Motors has become the latest big car maker to announce that it is extending its Lunar New Year holiday manufacturing plant closures. The US company said its Chinese factories will remain shut until 9 February.

On Wednesday Toyota also announced that its production plants in China will stay closed until 9 February. The Japanese car maker said the closures were in line with transport lockdowns imposed by Chinese authorities and as the company assesses its supply chain.

Several other international car companies operating in Wuhan, which is at the epicentre of the outbreak, have previously said they were taking action to bring staff back to their home countries.

French car making group PSA, which owns the brands Peugeot and Citroen, and Japan's Honda and Nissan have announced plans to evacuate staff and their families from China.

Wuhan is China's seventh biggest city and a major motor manufacturing hub.

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?

What a pair! Coupled quantum dots may offer a new way to store quantum information

Date: January 29, 2020

Source: National Institute of Standards and Technology (NIST)

Summary: Researchers have for the first time created and imaged a novel pair of quantum dots -- tiny islands of confined electric charge that act like interacting artificial atoms. Such ''coupled'' quantum dots could serve as a robust quantum bit, or qubit, the fundamental unit of information for a quantum computer. 

Researchers at the National Institute of Standards and Technology (NIST) and their colleagues have for the first time created and imaged a novel pair of quantum dots -- tiny islands of confined electric charge that act like interacting artificial atoms. Such "coupled" quantum dots could serve as a robust quantum bit, or qubit, the fundamental unit of information for a quantum computer. Moreover, the patterns of electric charge in the island can't be fully explained by current models of quantum physics, offering an opportunity to investigate rich new physical phenomena in materials.

Unlike a classical computer, which relies on binary bits that have just one of two fixed values -- "1" or "0" -- to store memory, a quantum computer would store and process information in qubits, which can simultaneously take on a multitude of values. Therefore, they could perform much larger, more complex operations than classical bits and have the potential to revolutionize computing.

Electrons orbit the center of a single quantum dot similar to the way they orbit atoms. The charged particles can only occupy specific permitted energy levels. At each energy level, an electron can occupy a range of possible positions in the dot, tracing out an orbit whose shape is determined by the rules of quantum theory. A pair of coupled quantum dots can share an electron between them, forming a qubit.

To fabricate the quantum dots, the NIST-led team, which included researchers from the University of Maryland NanoCenter and the National Institute for Materials Science in Japan, used the ultrasharp tip of a scanning tunneling microscope (STM) as if it were a stylus of an Etch A Sketch. Hovering the tip above an ultracold sheet of graphene (a single layer of carbon atoms arranged in a honeycomb pattern), the researchers briefly increased the voltage of the tip.

The electric field generated by the voltage pulse penetrated through the graphene into an underlying layer of boron nitride, where it stripped electrons from atomic impurities in the layer and created a pileup of electric charge. The pileup corralled freely floating electrons in the graphene, confining them to a tiny energy well.

But when the team applied a magnetic field of 4 to 8 tesla (about 400 to 800 times the strength of a small bar magnet), it dramatically altered the shape and distribution of the orbits that the electrons could occupy. Rather than a single well, the electrons now resided within two sets of concentric, closely spaced rings within the original well separated by a small empty shell. The two sets of rings for the electrons now behaved as if they were weakly coupled quantum dots.
Another weekend, and GB freedom weekend. GB no longer a member of the wealth a jobs destroying EUSSR.  But if China has another coronavirus week like last week, or the new virus gets into India or Africa, a major global economic slowdown lies directly ahead, inside or outside of the EUSSR. Have a great weekend everyone.
That, he said, is why the Black Death, which ravaged much of Europe and Asia in the Middle Ages is now extinct. “The strain of the Black Death plague (Yersinia pestis) from the 14th Century was too virulent and is now extinct,” with only modern, less devastating strains in existence.

Animals are useful for viruses to jump humans. “The animal is the disease reservoir,” Shelomi wrote. “Even if all humans were vaccinated against such a disease, we’d need to vaccinate the animal reservoir too in order to eradicate the disease, which is impractical if not impossible.”

The monthly Coppock Indicators finished December

DJIA: 28,538 +91 Up. NASDAQ: 8,973 +125 Up. SP500: 3,231 +114 Up.

All higher again, but it’s not a buy signal I would take. The rally is all down to the Fed monetizing at a rate of about 100 billion a month. I continue to look on the Fed’s latest stock bubble as an exit rally.