Baltic Dry Index. 434 +09 Brent Crude 57.07 Spot Gold 1586
Brexit Freedom
Underway
Trump’s Nuclear
China Tariffs Now in effect.
Coronavirus Cases
18/2/20 China 73,335 Deaths 1873 (Maybe.)
Just a brief
update today as I try to answer 3 days of emails, and dig through a mountain of
accumulated news articles, following my 3 days of a 1970s like existence without
internet access.
Due to travel tomorrow,
the LIR update will again be smaller than usual, with the next update after
that on Friday.
We open today with
a covid-19 warning from Apple. The first of many more to come I suspect. I
doubt covid-19s economic impact ill be limited to just the first quarter of
2019. Can cruising, as we know it,
survive?
Global stocks fall after Apple warns on coronavirus impact
February 18, 2020
/ 1:03 AM
TOKYO (Reuters) - Asian shares fell and
Wall Street retreated from record highs on Tuesday after Apple Inc (AAPL.O)
said it will not meet its revenue guidance for the March quarter as the
coronavirus outbreak slowed production and weakened demand in China.
S&P500 e-mini futures ESc1 dipped as much as 0.3% in Asian trade.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.65% while Tokyo's Nikkei .N225 slid 1.0%. Shanghai shares .SSEC dipped 0.2%, having gained in nine of the past 10 sessions largely on hopes for policy support by Beijing.
China’s central bank cut the interest rate on its medium-term lending on Monday, which is expected to pave the way for a reduction in the benchmark loan prime rate on Thursday.
But sentiment was shaken when Apple told investors its manufacturing facilities in China have begun to re-open but are ramping up more slowly than expected, reinforcing signs of a broader hit to businesses from the epidemic.
“Apple is saying its recovery could be delayed, which could mean the impact of the virus may go beyond the current quarter,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
“If Apple shares were traded cheaply, that might not matter much. But when they are trading at a record high, investors will be surely tempted to sell.”
Asian tech shares were also hit. Samsung Electronics (005930.KS) dropped 2.1%, Taiwan Semiconductor Manufacturing Co (TSMC) (2330.TW) lost 1.7% and Sony (7267.T) shed 2.6%.
In China, the number of new Covid-19 cases fell to 1,886 on Monday from 2,048 the day before. The World Health Organization cautioned on Monday, however, that “every scenario is still on the table” in terms of the epidemic’s evolution.
More
Investors track ships, chase rumours to get edge on COVID-19 risks
February 18,
2020 / 6:05 AM
NEW YORK (Reuters) - As investors crunch numbers to determine how
the coronavirus will hit China’s economy, hedge fund manager Nathaniel Polachek
has tied much of his outlook to the fate of a ship anchored near Weihai, China.
The vessel carries some 750 tons of lead concentrate that Polachek, head
of New York-based Commodity Asset Management, purchased in Greece to sell on
the Chinese mainland.
The coronavirus outbreak has kept the ship idling off China’s coast for
weeks, as movement restrictions and factory closures slow swathes of the
world’s second-largest economy to a crawl.
Word that the ship has been allowed to dock in Weihai - an access point
to one of China’s main industrial hubs and home to several metal refineries and
smelters - would be one signal that business activity is finally picking up,
Polachek said.
Another encouraging sign would be an increase in air pollution levels
over key Chinese manufacturing areas, which Polachek monitors daily using the
Air Quality Index web site.
“The best indicators are … from the physical world,” he said. “I want to
see how long it takes for materials to get off the boat, how long it takes for
me to get paid for them.”
Doubts over whether there are more cases in China than are being
captured by official figures have fuelled a do-it-yourself approach among
investors looking to determine the outbreak’s trajectory and gauge its economic
impact. The tools they use range from artificial intelligence and computer
modelling to simple word of mouth.
Investors “don’t believe the stuff they’ve been hearing from the Chinese
government,” said Leland Miller, head of China Beige Book International, which
regularly surveys thousands of Chinese firms to gauge business conditions in
the country.
---- Many of Miller’s clients—which include hedge funds and pension funds with as much as $100 billion under management—remain uneasy about the potentially disruptive effects of the virus on global growth, even as they continue betting on more upside in an equity rally that’s taken markets to record highs.
“Everyone realizes that they are not pricing in much risk,” he said.
His firm’s next survey will contain new questions about the effects of
the lockdown, such as whether the respondent has returned to work or working
from home.
Others are relying on their contacts inside the country. Kevin Smith,
founder of Denver-based Crescat Capital and a longtime sceptic on China’s
economy, increased his bets against the country’s stocks after receiving an
email from one of the firm’s Chinese clients describing “paralysing and tragic
scenes” in Hubei, the outbreak’s epicentre.
“It’s not really possible for us to be any more bearish on China,” said
Smith, who has been betting against China’s currency since 2014. “But we are
more convinced that this is a catalyst for a downturn.”
More
No One Wants to Be Stuck on the Next Virus-Hit Cruise Ship
· Passenger capacity more than doubled over the past six years
Edgar Chan, a 28-year-old software
engineer from Hong Kong, was among the thousands quarantined on the World Dream
cruise ship off the city this month after passengers on an earlier cruise
tested positive for the lethal new coronavirus.
He won’t be taking another vacation
at sea any time soon. Being stuck on what local media called the “zombie ship”
was annoying, and worrying about getting sick was frightening. “Getting a cold
on a cruise is normal, but getting a virus, a highly infectious disease, is
horrible.”
The cruise industry’s fear is that
Chan is far, far from alone.
Asia -- Chinese travelers in particular -- was supposed to be a great growth market. But across the region, cruise line operators have had to cancel departures and in some cases keep guests on board, often without ports willing to let them disembark. Coverage of passengers being quarantined on ships such as the World Dream, run by Genting Hong Kong Ltd., and Carnival Corp.’s Diamond Princess have been broadcast around the globe, creating a public relations disaster. Another Carnival boat, the Westerdam, was rejected by multiple ports before being accepted by Cambodia on suspicion there could be a virus case on board.
“This is terrible for the cruise
industry,” said Christopher Muller, a professor at Boston University’s School
of Hospitality Administration. “In the new markets of Asia, the rebound will
take longer since the overall market is not as mature and built up.”
---- Royal Caribbean Cruises Ltd., the industry’s second-biggest player, said on Thursday that it had canceled 18 sailings in Southeast Asia, and if it’s forced to eliminate all its excursions there through April, it could cost the company $1.20 per share in earnings this year.
The comments echoed those of
Carnival, its bigger rival, which said on Wednesday that its earnings this year
could fall as much as 65 cents per share, under similar circumstances. Carnival
had about 4% of its capacity in China in 2019 -- and was hoping that would grow
to 5% in 2020, according to a public filing.
---- Estimating the potential impact to company earnings at this point is nearly impossible and that won’t change until the coronavirus outbreak is over and media coverage of the industry’s troubles ends, Instinet analyst Harry Curtis told his clients this week.
Making matters worse for the industry, the crisis is coming during the
“wave” season, which is when cruise lines see most of their bookings for the
coming year.
Morehttps://www.bloomberg.com/news/articles/2020-02-14/once-a-growth-market-china-s-cruise-industry-takes-a-viral-hit
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled
over.
Today, China again. What can you trust out of China,
certainly not the official figures.
Hospital director dies in China's Wuhan, epicentre of coronavirus outbreak
February
18, 2020 / 4:16 AM
BEIJING (Reuters) - The head of a leading hospital in China’s central
city of Wuhan, the epicentre of a coronavirus outbreak, died of the disease on
Tuesday, state television said, becoming the second prominent Chinese doctor to
have succumbed to the pathogen.
Liu Zhiming, the director of Wuhan Wuchang Hospital, died at 10:30 a.m.,
it said.
Earlier this month, millions in China mourned the death of Li Wenliang,
a doctor who was previously reprimanded for issuing an early warning about the
coronavirus.
Tens of thousands of medical workers have been fighting to contain the
spread of the coronavirus, believed to have first surfaced in a seafood market
in Wuhan, the capital of the central province of Hubei.
As in the case of Li’s death, there was confusion on the Chinese
internet about Liu’s condition on Monday night.
On Monday night, the Communist Party propaganda department of the Hubei
Health Commission wrote in a social media post that Liu had died.
But it said in a subsequent post that Liu was alive.
---- It has not posted any message since state television announced Liu’s death on Tuesday morning.
Beijing was accused of covering up the full extent of the Severe Acute
Respiratory Syndrome (SARS) outbreak in 2003. In the current coronavirus
outbreak, Beijing has called for transparency.
A senior Chinese health official said on Friday that 1,716 health
workers have been infected by the coronavirus and six of them have died.
Coronavirus infections slow in China as Apple becomes latest business casualty
February 18,
2020 / 1:27 AM
BEIJING/SHANGHAI
(Reuters) - The number of new coronavirus infections in mainland China fell
below 2,000 on Tuesday for the first time since January, although global
experts warn it is still too early to say the outbreak is being contained.
The economic fallout from the epidemic spread to U.S. technology titan
Apple, which warned of iPhone shortages and lower than expected revenue, while
South Korea’s president called the situation in his country an economic
emergency.
Tough restrictions on travel and movement have helped to limit the
spread of the virus outside the epicentre in Hubei province, but at great cost
to the Chinese economy and global business.
Apple Inc became the latest company to flag lower revenue as a result of
the epidemic, saying it would not meet its guidance for the March quarter
because of slower iPhone production and weaker demand in China.
The U.S. technology company’s manufacturing facilities in China had
begun to reopen but they were ramping up more slowly than expected, and the
resulting iPhone shortages would hit sales, it said in a statement to
investors.
---- China is the world’s biggest market for smartphones and some analysts have estimated that the virus may slash demand for handsets by half in the first quarter in China.
Analysts at Nomura again downgraded their China first-quarter economic
growth forecast, to 3%, half the pace in the fourth quarter, and said there was
a risk it could be even weaker.
“Too much damage has already been done and initial policy stimulus will
not be very effective,” they said in a note on Monday. “China is experiencing
the rare case of simultaneous demand and supply shocks.”
South Korea President Moon Jae-in declared an economic emergency on
Tuesday and promised measures to stimulate demand and shield businesses from
the impact of the coronavirus outbreak.
Hong Kong increased government handouts to businesses and the Hospital
Authority to HK$28 billion ($3.6 billion) from HK$25 billion pledged
previously, to ease the impact on the Chinese-ruled city’s battered economy.
The moves came after economic data released in Japan, the world’s
third-largest economy, and regional finance and travel hub Singapore, pointed
to possible recession in the coming quarter.
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?
U.S. Turns Up the Heat Over Huawei, Warning of Threat to NATO
· Pompeo says Chinese
Communist Party is threat to western ideas
U.S. Secretary of Defense Mark Esper
warned that Beijing is moving further outside the international order and that
allies using Chinese technology risk undermining NATO.
Under the leadership of Xi Jinping,
China “is heading even faster and further in the wrong direction –- more
internal repression, more predatory economic practices, more heavy-handedness,
and, most concerning for me, a more aggressive military posture,” Esper said at
the Munich Security Conference Saturday.
Esper and Secretary of State Michael
Pompeo dialed up the rhetoric on China after a more junior official said on
Friday that there was no threat of retribution against allies that used
equipment from Huawei Technologies Co.
The U.S. has warned that partners
using Huawei hardware in their 5G telecommunications networks could put
military and intelligence relationships at risk because of the danger of
Beijing accessing their communications.
“If you don’t understand the threat
and we don’t do something about it, at the end of the day, it could compromise
what is the most successful military alliance in history: NATO,” Esper said.
The U.S. and China have been locked
in a trade war during the administration of President Donald Trump and are
competing for economic influence and military advantage in the Asia-Pacific
region. Their inability to cooperate on the coronavirus is one sign of how
much the relationship has deteriorated over the past few years.
Chinese Foreign Minister Wang Yi
challenged the U.S. view when he spoke later.
“All these accusations against China
are lies,” he said. “The U.S. does not want to see the rapid development and
rejuvenation of China, still less, the success of a Socialist country. China’s
drive toward modernization is an inevitable trend of history and will not be
held back by any force.”
---- The U.S.’s hardline stance over Huawei has strained relations with its European allies, who have found themselves caught up in the power play between China and Washington.
Pompeo sought to push back against the idea that Trump’s America First
policy has made the U.S. an unreliable partner, telling the gathering that the
demise of transatlantic partnership is “grossly exaggerated.’
More
U.S. mulls cutting Huawei off from global chip suppliers, with TSMC in crosshairs
February 17,
2020 / 9:33 PM
WASHINGTON (Reuters)
- The Trump administration is considering changing U.S. regulations to allow it
to block shipments of chips to Huawei Technologies from companies such as
Taiwan’s TSMC (2330.TW), the world’s largest contract
chipmaker, two sources familiar with the matter said.
New restrictions on commerce with China’s Huawei are among several options to be considered at high-level U.S. meetings this week and next. The chip proposal has been drafted but its approval is far from certain, one of the sources said.
The measure would be a blow to the world’s no. 2 smartphone maker as well as to TSMC, a major producer of chips for Huawei’s HiSilicon unit and mobile phone rivals Apple Inc (AAPL.O) and Qualcomm Inc (QCOM.O).
“What they’re trying to do is make sure that no chips go to Huawei that they can possibly control,” the second source said.
---- To target global chip sales to Huawei, U.S. authorities would alter the Foreign Direct Product Rule, which subjects some foreign-made goods based on U.S. technology or software to U.S. regulations.
Reuters reported possible changes to that rule in November.
Under the draft proposal, the U.S. government would force foreign
companies that use U.S. chipmaking equipment to seek a U.S. license before
supplying Huawei - a major expansion of export control authority that could
anger U.S. allies worldwide.
The U.S. Commerce Department declined to comment on the proposal.
More
The monthly Coppock Indicators finished January
DJIA: 24,999 +76 Down. NASDAQ: 7,282 +124 Down.
SP500:
2,704 +71 Down.
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.
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