Monday 28 November 2022

China, How Bad? A Difficult Winter Ahead.

 Baltic Dry Index. 1324 +82     Brent Crude 81.11

Spot Gold 1750          US 2 Year Yield 4.42 -0.04

Coronavirus Cases 02/04/20 World 1,000,000

Deaths 53,100

Coronavirus Cases 28/11/22 World 646,197,721

Deaths 6,636,381

“Let China Sleep, for when she wakes, she will shake the world” 

Napoleon Bonaparte.

Will/has China’s Covid-19 cases surge, lockdowns and the rising protests the lockdowns generate, tip the global economy into recession in 2022 rather than 2023?

Statistically that’s probably not possible, but the social unrest in China if not contained soon will likely sink any chance for a “Santa Claus rally” end to a dismal, inflation ruined, tech and crypto routed 2022.

Both the crude oil market and the inverted US Treasury yield curve are now signalling recession directly ahead, although I suspect that the UK and Germany, plus a few other EU countries are already in recession.

A long difficult winter seems to lie ahead.

 

Hong Kong stocks lead losses in Asia on China unrest, oil at lowest in 2022

UPDATED MON, NOV 28 2022 12:11 AM EST

Hong Kong stocks led losses in a negative Asia-Pacific session on Monday amid unrest in China over its continued zero-Covid policy. Oil futures hovered around new 2022 lows as demand concerns from the world’s second-largest consumer of oil weighed on prices.

The Hang Seng index in Hong Kong fell 1.98%, paring some of the losses after shedding 4% at the open. The Hang Seng Tech index fell 2.28%. In mainland China, the Shanghai Composite fell 1.03% and the Shenzhen Component also fell 1%.

The offshore yuan weakened sharply against the dollar after ending last week around 7.20 per dollar. Futures of West Texas Intermediate crude, the U.S. benchmark for oil, dipped around 3% to the lowest levels since Dec. 2021.

The People’s Bank of China over the weekend announced to cut the reserve requirement ratio for banks by 25 basis points to 7.8% and inject around 500 billion yuan in long-term liquidity. The National Bureau of Statistics said industrial profits fell 3% for the first 10 months of the year on an annualized basis.

In Australia, the S&P/ASX 200 fell 0.38% as retail sales slipped 0.2% in October from the month before. The Nikkei 225 shed 0.5%, and the Topix lost 0.69%. The Kospi in South Korea declined 0.9%.

Hong Kong stocks lead losses in Asia on China unrest, oil at lowest in 2022 (cnbc.com)

Stock futures trade lower on China Covid concerns after a winning holiday week

UPDATED MON, NOV 28 2022 12:35 AM EST

Stock futures fell early Monday as social unrest from China’s prolonged Covid restrictions weighed on markets, sending oil prices lower  after Wall Street notched gains during the Thanksgiving holiday-shortened week.

Futures tied to the Dow Jones Industrial Average lost 178 points, or 0.52%. S&P 500 futures were 0.67% lower and Nasdaq 100 futures shed 0.85%.

Over the weekend, demonstrations broke out in mainland China as people vented their frustrations with Beijing’s zero-Covid policy. Local governments tightened Covid controls as cases surged, even though earlier this month Beijing adjusted some policies that suggested the world’s second biggest economy was on its way to reopening.

The developments weighed on sentiment in Asia trade, with oil futures hovering around new 2022 lows around demand concerns.

The moves come after all three major U.S. indices ended last week higher, even with the shortened trading time due to the Thanksgiving holiday. The Dow rose 1.78%, and the S&P 500 increased 1.53% during the short week. The tech-heavy Nasdaq is lagging the other two indexes but is still up 0.72% in the same timeframe.

Stocks were lifted during the week by comments from Federal Reserve officials signaling that the central bank would step down its aggressive rate hike path as inflation cools. Minutes from the Fed’s November meeting confirmed the likely shift in policy.

“A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate,” the minutes stated.

In the last week of November, investors will be watching more earnings reports and a slew of economic releases that will give further information on the state of the consumer and the U.S. economy. Intuit, Salesforce and Five Below are scheduled to report earnings. Personal consumption data and the labor report for November will also be released this week.

Both U.S. crude futures and Brent crude futures shed more than 2% each in Asia’s morning trade as fears on demand from China faltering came into focus.

West Texas Intermediate futures fell as low as $73.86 per barrel, the lowest levels since Dec. 2021, while Brent crude futures slipped to $81.16 per barrel at the session’s lows so far.

WTI was last down 2.58% at $74.31 per barrel, while Brent crude last traded 2.37% lower at $81.65 per barrel.

Stock futures trade lower on China Covid concerns after a winning holiday week (cnbc.com)

China COVID cases hit fresh record high after weekend of protests

Mon, November 28, 2022 at 1:31 AM

By Martin Quin Pollard

BEIJING (Reuters) - China posted another record high COVID-19 infections on Monday, after an extraordinary weekend of protests across the country over restrictive coronavirus curbs, in scenes unprecedented since President Xi Jinping assumed power a decade ago.

In Shanghai, demonstrators and police clashed on Sunday, with police taking away a busload of protesters, with the BBC saying that police assaulted and detained one of its journalists covering the events before releasing him after several hours.

Stocks and oil slid sharply on Monday as the rare protests raised worries about the management of China's zero-COVID policy and its impact on the world's second-largest economy, while Chinese censors scrambled to remove related images and posts.

During the weekend, protesters in cities including Wuhan and Lanzhou overturned COVID testing facilities, while students gathered on campuses across China in actions that were sparked by anger over an apartment fire late last week in the far western city of Urumqi that killed 10 people.

The deadly fire fuelled speculation that COVID curbs in the city, parts of which had been under lockdown for 100 days, had hindered rescue and escape, which city officials denied. Crowds in Urumqi took to the street on Friday evening, chanting "End the lockdown!", according to unverified videos on social media.

In Beijing, large crowds were gathered past midnight on Sunday along the capital's 3rd Ring Road during peaceful but often impassioned scenes.

In the early hours of Monday, one group chanted “we don’t want COVID tests, we want freedom” while brandishing blank white pieces of paper, which have become a symbol of protest in China in recent days.

Cars that passed by regularly joined in the fanfare by honking their horns and giving thumbs up to protesters which in turn generated massive cheers from those gathered.

The protesters were trailed by dozens of uniformed police officers, with plain-clothes security personnel in among the crowd and police cars moving along nearby.

More

China COVID cases hit fresh record high after weekend of protests (yahoo.com)

Global Inflation/Stagflation/Recession Watch.

Given our Magic Money Tree central banksters and our spendthrift politicians, inflation now needs an entire section of its own.

Oil falls over $2 a barrel as China's COVID protests fuel demand fears

TOKYO, Nov 28 (Reuters) - Oil futures fell more than $2 a barrel on Monday, with WTI hitting an 11-month low, as protests in top importer China over strict COVID-19 curbs fuelled demand concerns.

Brent crude dropped $2.16, or 2.6%, to trade at $81.47 a barrel at 0230 GMT, after diving to $81.16 earlier in the session -- its lowest since Jan. 11.

U.S. West Texas Intermediate (WTI) crude slid $2.08, or 2.7%, to $74.20 a barrel. It fell as far as $73.82 earlier -- its lowest since Dec. 27, 2021.

Both benchmarks, which hit 10-month lows last week, have posted three consecutive weekly declines. Brent ended the latest week down 4.6%, while WTI fell 4.7%.

"On top of growing concerns about weaker fuel demand in China due to a surge in COVID-19 cases, political uncertainty, caused by rare protests over the government's stringent COVID restrictions in Shanghai, prompted selling," said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

WTI's trading range is expected to fall to $70-$75, he said, adding the market could stay volatile depending on the outcome of the OPEC+ meeting and the price cap on Russian oil.

China, the world's top oil importer, has stuck with President Xi Jinping's zero-COVID policy even as much of the world has lifted most restrictions.

Hundreds of demonstrators and police clashed in Shanghai on Sunday night as protests over China's strict COVID restrictions flared for a third day and spread to several cities in the wake of a deadly fire in the country's far west.

More

Oil falls over $2 a barrel as China's COVID protests fuel demand fears | Reuters

Treasury market’s big recession trade gathers momentum

The US economy has so far shown itself to be quite resilient in the face of rate hikes

Published:  November 27, 2022 09:32

The bond market is zeroing in on a US recession next year, with traders betting that the longer-term trajectory for interest rates will be down even as the Federal Reserve is still busy raising its policy rate.

Long-dated Treasury yields are already below the Fed’s overnight benchmark range - currently 3.75 per cent to 4 per cent - and there’s still an extra percentage point of central bank increases priced in for the coming months. Activity has also emerged in the options market that suggests some are hedging against the risk that policy rates could eventually halve from their current level.

Rather than wait for conclusive economic evidence that this year’s frenetic monetary tightening will deliver recessionary conditions in 2023, investors have been buying bonds - a stance advocated by Pacific Investment Management Co., among others.

“Fed policy is dynamic and they are still signaling they are going to go higher,” said Gregory Faranello, head of US rates trading and strategy at AmeriVet Securities. “But the market trades like it is more comfortable with the Fed getting to an end game.”

Demand for Treasuries with longer tenors this week dragged the rate on 10-year and 30-year securities below the lower bound of the Fed’s overnight range. With front-end rates holding relatively steady, that’s seen an intensification of the most pronounced yield curve inversion in four decades - a widely watched indicator of potential economic pain to come.

“The recession indicator narrative is strong, but from the Fed’s perspective it is part of the solution,” said Faranello.

The US economy - and in particular the labour market - has so far shown itself to be quite resilient in the face of Fed rate increases, which are aimed at trying to curb high and seemingly persistent inflation. Investors will therefore be keenly attuned to the monthly jobs report this coming Friday for signs of cracking, or indications about whether it might pave the way for the Fed to tweak its policy course.

They’ll be scrutinising carefully the words of Fed Chair Jerome Powell and his colleagues, who will speak publicly next week for the last time before heading into the customary blackout period ahead of the Fed’s December 13-14 policy meeting. While minutes of their most recent meeting showed that they’re likely to slow the pace of tightening soon, officials have been firm in reiterating the need for policy rates to move above current levels.

More

Treasury market’s big recession trade gathers momentum | Business – Gulf News

Below, why a “green energy” economy may not be possible, and if it is, it won’t be quick and it will be very inflationary, setting off a new long-term commodity Supercycle. Probably the largest seen so far.

The “New Energy Economy”: An Exercise in Magical Thinking

https://media4.manhattan-institute.org/sites/default/files/R-0319-MM.pdf

Mines, Minerals, and "Green" Energy: A Reality Check

https://www.manhattan-institute.org/mines-minerals-and-green-energy-reality-check

"An Environmental Disaster": An EV Battery Metals Crunch Is On The Horizon As The Industry Races To Recycle

by Tyler Durden Monday, Aug 02, 2021 - 08:40 PM

https://www.zerohedge.com/markets/environmental-disaster-ev-battery-metals-crunch-horizon-industry-races-recycle


Covid-19 Corner

This section will continue until it becomes unneeded.

With Covid-19 starting to become only endemic, this section is close to coming to its end.  

Omicron BQ Covid variants, which threaten people with compromised immune systems, are now dominant in U.S.

The omicron BQ coronavirus subvariants have risen to dominance in the U.S. as people gather and travel for the Thanksgiving holiday, putting people with compromised immune systems at increased risk.

BQ.1 and BQ.1.1 are causing 57% of new infections in the U.S., according to data published by the Centers for Disease Control and Prevention on Friday. The omicron BA.5 subvariant, once dominant, now makes up only a fifth of new Covid cases.

The BQ subvariants are more immune evasive and likely resistant to key antibody medications, such as Evusheld and bebtelovimab, used by people with compromised immune systems, according to the National Institutes of Health. This includes organ transplant and cancer chemotherapy patients.

There are currently no replacements for these drugs. President Joe Biden, in an October speech, told people with compromised immune systems that they should consult with their physicians and take extra precautions this winter.

New variants may make some existing protections ineffective for the immunocompromised. Sadly, this means you may be at a special risk this winter,” Biden said.

The XBB subvariant is also circulating at a low level right now, causing about 3% of new infections. Chief White House medical advisor Dr. Anthony Fauci, in a briefing Tuesday, said XBB is even more immune evasive than the BQ subvariants.

Fauci, director of the National Institute of Allergy and Infectious Diseases, said the new boosters, which were designed against omicron BA.5, probably aren’t as effective against infection and mild illness from XBB. But the shots should protect against severe disease, he said. Singapore saw a spike in cases from XBB, but there wasn’t a major surge in hospitalizations, he added.

Moderna and Pfizer said last week that their boosters induce an immune response against BQ.1.1, which is a descendent of the BA.5 subvariant.

Fauci, in the press briefing, said public health officials believe there is enough immunity from vaccination, boosting and infection to prevent a repeat of the unprecedented Covid surge that occurred last winter when omicron first arrived.

Covid: Omicron BQ variants dominant, XBB circulating at low level (cnbc.com)

NY Times Coronavirus Vaccine Tracker. https://www.nytimes.com/interactive/2020/science/coronavirus-vaccine-tracker.html

Regulatory Focus COVID-19 vaccine tracker. https://www.raps.org/news-and-articles/news-articles/2020/3/covid-19-vaccine-tracker

Some other useful Covid links.

Johns Hopkins Coronavirus resource centre

https://coronavirus.jhu.edu/map.html

Centers for Disease Control Coronavirus

https://www.cdc.gov/coronavirus/2019-ncov/index.html

The Spectator Covid-19 data tracker (UK)

https://data.spectator.co.uk/city/national

Technology Update.

With events happening fast in the development of solar power and graphene, among other things, I’ve added this section. Updates as they get reported.

Solar power ban on England’s farms could see farmers missing out on £1bn benefit, analysis reveals

Published 24th November 2022

Almost 80% of farms in England do not have solar panels installed but, if they did, they could reap significant financial benefits by avoiding high gas prices and generating additional revenue streams, a new analysis has concluded.

Published today by the Energy and Climate Intelligence Unit (ECIU), the analysis reveals that 78% of farms in England have no renewable energy generation installed onsite. The most common form of onsite generation for English farmers is solar.

 

It concludes that, if all farms which could install solar did so, they could reap some £1.1bn of financial benefits within a two-year period from 2023. The benefits would primarily arise from reduced energy bills, through the avoidance of expensive gas and gas-fired electricity, and through the ability for farmers to sell energy back to the grid, providing an additional revenue stream.

 

The ECIU is emphasising that these savings would almost cover the extra that farmers are having to pay for fertilisers. Fertiliser prices have skyrocketed this year because Russia’s war in Ukraine has disrupted global supply chains; pre-war, Russia and Ukraine accounted for more than 40% of the global ammonia supply.

 

With these findings in mind, the ECIU is urging the UK Government to stop considering a ban on solar development on large swathes of agricultural land. It was reported in early October that the Department for Food, the Environment and Rural Affairs (Defra) is looking to extend its ban on solar for high-grade farmland to land categorised as 3b, or “sub-grade”. Land within this category accounts for the majority of the planned pipeline for ground-mounted solar on farms. The ban already applies to grade 1, 2 and 3a land.

More

Solar power ban on England’s farms could see farmers missing out on £1bn benefit, analysis reveals - edie

The best way to make every one poor is to insist on equality of wealth.

Napoleon Bonaparte.

 

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