A Correction or Something More?

Baltic Dry Index. 487 -11  Brent Crude 56.40 Spot Gold 1581

Brexit  Freedom  Underway

Trump’s Nuclear China Tariffs Now in effect.

Coronavirus Cases 2/2/20 China 17,205 Deaths 361

I learned early that there is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again. I’ve never forgotten that.

Jesse Livermore

Stock markets and commodity markets, will be dominated for the next few weeks, by what happens next in the Chinese, and global, coronavirus outbreak.

From a handful of cases in China and one reported death in China on January 11th 2020, the latest figures from China for yesterday stood at 17,205 cases and 361 deaths. That jump is in less than a month. Where will we stand this time next month?

With over 60 million people in China in a lockdown, and many firms in China extending the Lunar New Year break by a few days to up to a week, this outbreak will have a big impact on the Chinese economy, the world’s second largest economy. The question is just how big an impact?

With the Chinese authorities ordering mutual funds not to sell shares, and the People’s Bank of China pumping in roughly 174 billion dollars of extra liquidity, will it be enough to stabilise global markets this week? Next week?

Nobody knows of course, but most stock markets are long overdue a correction, and many commodity markets and the Baltic Dry (shipping) Index are signalling that a correction is already underway.

Below the latest news from Asia as our great new money management experiment gets underway.

Chinese markets plunge as rising virus death toll fuels fears for global growth

February 2, 2020 / 12:39 AM

BEIJING/SHANGHAI (Reuters) - Chinese stock and commodity markets fell heavily on Monday as the death toll from a coronavirus epidemic in China rose to 361 and investors retreated into safe-haven assets in the first trading session after an extended Lunar New Year break.

Markets plunged at the open in their first session since Jan. 23, when the outbreak of the newly identified virus had claimed only 17 lives in Wuhan city, the epicentre of the outbreak, in Hubei province. 

Since then, the flu-like virus has been declared a global emergency and spread to more than two dozen other countries and regions, with the first death outside of China reported on Sunday, that of a 44-year-old Chinese man who died in the Philippines after travelling from Wuhan.

The number of deaths in China rose to 361 as of Sunday, up 57 from the previous day, the National Health Commission said. The number of new confirmed infections in China rose by 2,829, bringing the total to 17,205.

The Shanghai Composite index .SSEC shed 8% to hit one-year low on Monday, wiping almost $370 billion off the market value, according to Reuters calculations.

The yuan began trade onshore at its weakest level this year CNY=. Iron, oil and copper traded in Shanghai all dropped by their daily limits, catching up with global price falls as the spread of the virus has weighed on the world's growth outlook.

Investors were bracing for volatility when onshore trade in Chinese stocks, bonds, yuan and commodities resumed, following a steep global selldown on fears about the impact of the virus on the world’s second-biggest economy.

Looking to head off panic, China’s central bank injected 1.2 trillion yuan ($173.8 billion) of liquidity into the markets via reverse repo operations on Monday.

More

https://uk.reuters.com/article/uk-china-health/chinese-markets-plunge-as-rising-virus-death-toll-fuels-fears-for-global-growth-idUKKBN1ZW009?il=0

China regulator urges fund managers not to sell shares unless they face redemptions - sources

February 3, 2020 / 4:20 AM

SHANGHAI (Reuters) - China’s securities regulator has urged mutual fund managers not to sell shares unless they face investor redemptions, four sources told Reuters, as the country’s stock markets plunged on Monday amid a growing virus outbreak.

The China Securities Regulatory Commission (CSRC) is giving verbal instructions to mutual fund companies, asking them not to offload their stock holdings unless necessary, according to the fund sources with direct knowledge of the so-called window guidance. 

CSRC gave the instruction on Sunday evening, according to one source.

Chinese stocks tumbled more than 8% in morning trading on Monday as mainland markets reopened following a week-long holiday, giving investors the first chance to react to the rapidly-spreading coronavirus.[.SS]

https://uk.reuters.com/article/uk-china-market-regulator-guidance/china-regulator-urges-fund-managers-not-to-sell-shares-unless-they-face-redemptions-sources-idUKKBN1ZX0C8?il=0

China Oil Demand Has Plunged 20% Because of the Virus Lockdown

By Alfred Cang, Javier Blas and Sharon Cho

February 2, 2020, 10:37 PM GMT Updated on February 3, 2020, 5:18 AM GMT

·        

Executives describe privately the scale of the demand shock

·         Brent oil extends losses on Monday; OPEC weighs its response

 

Chinese oil demand has dropped by about three million barrels a day, or 20% of total consumption, as the coronavirus squeezes the economy, according to people with inside knowledge of the country’s energy industry.

 The drop is probably the largest demand shock the oil market has suffered since the global financial crisis of 2008 to 2009, and the most sudden since the Sept. 11 attacks. It could force the hand of OPEC and its allies, which are considering an emergency meeting to cut production and staunch the decline in prices, which are headed for the lowest close in four months.

“It is truly a black swan event for the oil market,” said John Kilduff, a partner at Again Capital LLC in New York who has more than 15 years of experience in energy trading. “There was some hope for the demand outlook this year before the outbreak, but that has been knocked off its block. OPEC+ has to react. If there are no further production cuts, there will only be more price losses.”

China is the world’s largest oil importer, after surpassing the U.S. in 2016, so any change in consumption has an outsize impact on the global energy market. The country consumes about 14 million barrels a day -- equivalent to the combined needs of France, Germany, Italy, Spain, the U.K., Japan and South Korea.

The price of Brent, the global oil benchmark, has fallen more than 10% since Jan. 20, when financial markets first took notice of the magnitude of the health crisis in China. The April contract extended losses in Asian trade on Monday, dropping 0.4% to $56.40 a barrel in London as of 1:16 p.m. in Singapore. West Texas Intermediate was steady near the lowest close since August after falling 2.2% earlier.

Chinese and Western oil executives, speaking on condition of anonymity because they aren’t authorized to discuss the matter publicly, said the decline was measured against

More

https://www.bloomberg.com/news/articles/2020-02-02/china-oil-demand-is-said-to-have-plunged-20-on-virus-lockdown?srnd=premium-europe

Caixin data shows slower China factory activity

By MarketWatch

Published: Feb 2, 2020 10:38 p.m. ET

BEIJING--Growth in China's factory activity slowed to a five-month low in January, according to a private gauge, weighed by subdued overseas demand.

The Caixin China manufacturing purchasing managers index fell to 51.1 in January from 51.5 in December, Caixin Media Co. and research firm Markit said Monday. The reading stayed above the 50 mark that separates expansion in activity from contraction.

Companies surveyed by Caixin reported slower increases in new orders and output in January, while their payrolls fell for the first time since October.

The subindex for new export orders fell into contraction territory, ending three straight months of expansion.

But confidence in the upcoming year's production outlook was boosted by an easing of the trade tensions between the U.S. and China, Caixin said.

Caixin didn't say whether its survey reflected the impact of the outbreak of a deadly coronavirus in central China. It said the Chinese economy will be weighed down by the epidemic and the government will have to implement countercyclical policies to support growth.

China's official manufacturing PMI, released last week, fell to 50.0 in January from 50.2 in December. The gauge hasn't reflected the impact of the epidemic, the National Bureau of Statistics said.

The Caixin PMI more closely tracks small, private manufacturers, while the official index focuses more on large, state-owned firms. Many Chinese exporters are small and private firms.

The official PMI has a larger sample base, surveying 3,000 manufacturers nationwide, while Caixin polls 500 companies.

https://www.marketwatch.com/story/caixin-data-shows-slower-china-factory-activity-2020-02-02?mod=mw_latestnews 

Crooks and Scoundrels Corner.

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

Today, more on that “black swan” coronavirus.

Coronavirus Eclipses Trade as Global Economy’s Biggest Threat

The health emergency will crimp growth in China and could prevent it from honoring commitments in the phase-one deal with the U.S.

By Malcom Scott  February 1, 2020, 10:00 AM GMT

 

Delegations of dark-suited trade negotiators shuttling back-and-forth between Washington and Beijing seemed to hold the world economy’s fate in their hands last year. So when the U.S.-China phase-one trade deal was signed in mid-January, the path finally seemed clear for an acceleration in investment, trade, and global economic growth.

But as U.S. President Donald Trump and Chinese Vice Premier Liu He were holding up signed copies of their accord for the world’s media, more and more people in the central Chinese city of Wuhan were coming down with a new pneumonia-like virus.

Now, less than three weeks after the Jan. 15 signing ceremony, more than 200 people are dead, thousands infected, and a global health emergency has been declared, leaving the outlook for the world economy in the hands of the brave biohazard-clad health workers scrambling to contain the virus’s spread.

Initial efforts were complicated by the onset of the Lunar New Year, China’s equivalent to Thanksgiving or Christmas, when families reunite for a week of feasting, shopping, and moviegoing. The holiday started on Jan. 24, just as the severity of the outbreak was becoming clear.

Wuhan, a crucial transport, steel, and auto manufacturing hub with 11 million people, was locked down and its buses, trains, and airports shuttered. But an estimated 5 million people left during the holiday, some of them carrying the virus with them to nearby towns, bigger cities, and around the world.

Since then, more areas have been locked down and the holiday has been extended for an additional week in 14 provinces. They include export powerhouses Guangdong, which includes the tech city Shenzhen; Shanghai, home to China’s largest port and a newly built Tesla Inc. plant; and Jiangsu, where Nike shoes are manufactured. The provinces accounted for almost 69% of China’s gross domestic product in 2019, according to Bloomberg calculations.

----From Tokyo to London, hotels, casinos, airlines, and retailers are already recording a downturn and bracing for weeks, if not months, of plummeting spending. About 163 million Chinese tourists made overseas trips in 2018—more people than live in Russia—accounting for more than 30% of travel retail sales worldwide. In 2003, when severe acute respiratory syndrome broke out, only 20 million Chinese travelers went abroad. In Macau, China’s gambling enclave, new travel restrictions and a growing fear of crowds have slashed visitor numbers from the mainland by 82% so far during the Lunar New Year holiday.

Hong Kong, already reeling from months of often violent anti-China protests, is the most exposed, with a probable hit of 1.7 percentage points to growth in the first quarter, the economists wrote. South Korea and Vietnam will also suffer, as will Japan, which is scheduled to host the Olympic Games in Tokyo this summer. Commodity exporters such as Australia and Brazil will also suffer. Big Western economies, with the exception of Germany, face less of a blow because of their smaller export exposure.

Financial markets are also reeling, and any sustained risk aversion and tightening in financial conditions could amplify the economic impact of the outbreak. Monetary authorities including Federal Reserve Chairman Jerome Powell are watching.

More

https://www.bloomberg.com/news/articles/2020-02-01/coronavirus-has-eclipsed-trade-as-global-economy-s-biggest-threat?srnd=premium-europe

 

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 21^st century onwards?

Anti-solar cells: A photovoltaic cell that works at night

Date: January 29, 2020

Source: University of California - Davis

Summary: What if solar cells worked at night? That's no joke. In fact, a specially designed photovoltaic cell could generate up to 50 watts of power per square meter under ideal conditions at night, about a quarter of what a conventional solar panel can generate in daytime, according to a recent concept article.

What if solar cells worked at night? That's no joke, according to Jeremy Munday, professor in the Department of Electrical and Computer Engineering at UC Davis. In fact, a specially designed photovoltaic cell could generate up to 50 watts of power per square meter under ideal conditions at night, about a quarter of what a conventional solar panel can generate in daytime, according to a concept paper by Munday and graduate student Tristan Deppe. The article was published in, and featured on the cover of, the January 2020 issue of ACS Photonics.

Munday, who recently joined UC Davis from the University of Maryland, is developing prototypes of these nighttime solar cells that can generate small amounts of power. The researchers hope to improve the power output and efficiency of the devices.

Munday said that the process is similar to the way a normal solar cell works, but in reverse. An object that is hot compared to its surroundings will radiate heat as infrared light. A conventional solar cell is cool compared to the sun, so it absorbs light.

Space is really, really cold, so if you have a warm object and point it at the sky, it will radiate heat toward it. People have been using this phenomenon for nighttime cooling for hundreds of years. In the last five years, Munday said, there has been a lot of interest in devices that can do this during the daytime (by filtering out sunlight or pointing away from the sun).

More

https://www.sciencedaily.com/releases/2020/01/200129174512.htm

Finally, the most important battle few have ever heard of.

Battle of Diu 3 February, 1509.

The Battle of Diu was a naval battle fought on 3 February 1509 in the Arabian Sea, in the port of Diu, India, between the Portuguese Empire and a joint fleet of the Sultan of Gujarat, the Mamlûk Burji Sultanate of Egypt, and the Zamorin of Calicut with support of the Republic of Venice.^[4]
The Portuguese victory was critical: the great Muslim alliance were soundly defeated, easing the Portuguese strategy of controlling the Indian Ocean to route trade down the Cape of Good Hope, circumventing the traditional spice route controlled by the Arabs and the Venetians through the Red Sea and Persian Gulf. 

After the battle, Portugal rapidly captured key ports in the Indian Ocean like Goa, Ceylon, Malacca and Ormuz, crippling the Mamluk Sultanate and the Gujarat Sultanate, greatly assisting the growth of the Portuguese Empire and establishing its trade dominance for almost a century, until it was lost at the Battle of Swally during the Dutch-Portuguese War, over a hundred years after.
More
https://en.wikipedia.org/wiki/Battle_of_Diu_(1509)

The monthly Coppock Indicators finished January

DJIA: 28,256 +97 Up. NASDAQ: 9,151 +152 Up. SP500: 3,226 +130 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, made all the more urgent by the rising economic threat from the coronavirus crisis.