Baltic
Dry Index. 1340 Fri. Brent Crude 64.59
Spot Gold 3332 US 2 Year Yield 4.00 Fri.
US Federal Debt. 36.900 trillion!!! US GDP 30.032 trillion.
The press of Italy is free, freer than the press of any other country, so long as it supports the regime.
Benito Mussolini
In a show of political support for an independent Canada, Canada’s King will deliver the opening speech in Ottawa’s Parliament later today.
In Asia, more stock casino wobble if the face of President Trump’s unpredictability over tariffs.
Lurking in the background also worrying the
stock casinos, exactly what is going on with rising long bond yields?
Asia-Pacific markets mostly fall as investors
assess Trump's tariff plans
Updated Tue, May 27 2025 12:21 AM EDT
Asia-Pacific markets mostly fell Tuesday
as investors continued to assess global trade climate after U.S. President
Donald Trump deferred 50%
tariffs on European Union imports.
Japan’s benchmark Nikkei 225 fell 0.19% while
the broader Topix index was flat.
In South Korea, the Kospi index declined
0.49%, reversing course from its three-month
high in Monday’s session, while the small-cap Kosdaq dropped 0.12%.
Mainland China’s CSI 300 index retreated 0.56% in
choppy trade, while Hong Kong’s Hang
Seng Index was down 0.3%. China’s industrial profits rose
1.4% in April, compared to 0.8% the month before.
Meanwhile, India’s benchmark Nifty 50 started the day
0.49% lower, while the BSE Sensex fell 0.63%.
Over in Australia, the benchmark S&P/ASX 200 added 0.33%
U.S. markets were closed on Monday for the
Memorial Day holiday.
U.S.
futures jumped as investors welcomed Trump’s postponement of tariffs
on imports from the European Union.
Dow Jones Industrial Average futures added
407 points, or 1%. S&P
500 futures climbed 1.1%, while Nasdaq 100 futures popped
1.3%.
Asia
markets today: Live updates for May 27, 2025
Dai-Ichi Life sees falling volatility in JGB
market
May 27, 2025
The surging bond yields that have saddled
Japan’s insurers with billions of dollars in unrealized losses will weaken
because they are not supported by economic fundamentals, according to Dai-ichi
Life, the country’s largest listed life insurer.
New buyers are entering the market for
Japanese government bonds and amplifying volatility, Chief Executive Officer
Tetsuya Kikuta said in an interview. Yields on 30-year JGBs jumped to a record
last week. This is eroding the value of the bonds already in the insurers’
portfolio. Dai-ichi’s paper losses on its domestic bonds stood at about ¥2
trillion ($14 billion) as of the end of March.
A rout in Japan’s $7.8 trillion government
bond market has spooked several firms including Nippon Life Insurance and
Norinchukin Bank. The Bank of Japan is paring its holdings in the face of
emerging inflation, sparking a selloff in the country’s long-term debt. The
current run-up in yields is a stark reversal for the companies, which until
just a year ago had been suffering diminishing returns from domestic
investments and desperately seeking more attractive assets overseas.
"There are a very limited number of
long-only JGB investors and they are being replaced by short-term players,”
Kikuta said. "That’s pushing up the JGB market’s volatility.”
While yields could jump further in the
near future because of a lack of liquidity, the JGB market will likely calm
down around the end of the year, Kikuta said. Swap rates are roughly 60-125
basis points lower than comparable JGB yields.
"Japan’s potential economic growth
rate is less than 1%. And inflation only affects shorter-term interest rates.
So, fundamentally, I don’t think long-term rates should be where they are now,”
said Kikuta. "They are just overshooting temporarily, due partly to supply
and demand.”
Yields on Japanese super-long bonds fell
ahead of an auction Wednesday that is expected to test demand following a
recent sale that sent jitters through global markets. Yields on 40-year and
30-year maturities slid 10 basis points in Tokyo on Tuesday, adding to drops in
recent days. These moves followed sharp gains last week.
Dai-ichi’s domestic insurance unit owns
¥16.6 trillion worth of JGBs and municipal bonds as of the end of March, and
more than half of the holdings have maturities of over 20 years.
Japan’s life insurers have traditionally
been the main buyers of JGBs with maturities as long as 40 years to cover
obligations spanning decades for insurance policyholders. Recently, hedge funds
have been increasing their trading of Japanese bond futures and yen rate swaps.
Paper losses do not pose an immediate risk
to the insurers and under a new rule, higher interest rates push down the value
of both assets and liabilities and do not affect a regulatory gauge of fiscal
soundness.
While the current yields are already
"very attractive,” the insurer now has little room to buy fresh JGBs, as
it is almost done with a regulation-driven buildup, Kikuta said. The company
will keep replacing lower-yielding bonds with higher ones, he added.
More
Dai-Ichi
Life sees falling volatility in JGB market - The Japan Times
Many investors
remain unaware of the scale of the unfolding bond crisis
Martin
Pelletier: The next phase of financial instability may be driven by weakness in
sovereign debt markets
Published
May 26, 2025
The global bond market is facing increasing turmoil, with long-term yields
rising across major economies and governments struggling to manage growing debt
burdens. Many investors remain unaware of the scale of this unfolding crisis,
but recent developments suggest the next phase of financial instability may be
driven by weakness in sovereign debt markets.
Japan’s
30-year government bond yield surged to an all-time high last week of 3.14 per
cent, following a weak bond auction that highlighted investor concerns over the
country’s fiscal stability. The 40-year yield also hit a record 3.6 per cent,
reflecting broader unease about Japan’s ability to manage debt without causing
market disruptions.
The Bank
of Japan (BOJ) is now stuck in a dilemma. If it raises interest rates to defend
the yen or combat inflation it risks increasing debt servicing costs, which
could exceed 30 trillion yen (about $289 billion) in fiscal 2025 if rates rise
just one per cent beyond expectations. Conversely, keeping rates low risks
destabilizing Japan’s bond market, as investor demand for long-term Japanese
government bonds has weakened significantly.
Article
content
This may
have implications reaching beyond its borders as Japan holds about US$1.13
trillion in U.S.
Treasuries, making it the largest foreign holder of
U.S. debt. Japanese institutions had already sold off US$119.3 billion worth of
U.S. Treasuries in just one quarter, marking the steepest quarterly decline
since 2012. This suggests Japan may be offloading U.S. debt to fund domestic
obligations or defend the yen, potentially triggering broader market shocks.
U.S.
Treasury demand weakens
The
situation in Japan is mirrored in the United States, where Treasury auctions
are also showing signs of strain. A US$16 billion auction of 20-year Treasury
bonds last week saw weaker-than-expected demand, forcing yields higher. The
30-year Treasury yield breached five per cent, reflecting concerns over rising
deficits and long-term borrowing capacity.
Article
content
As a
result, Moody’s downgraded its U.S. debt rating, which has intensified investor
skepticism. The Federal Reserve’s uncertain monetary policy and growing fiscal
instability have further contributed to higher risk premiums for U.S. long-term
Treasuries. As confidence in government debt declines, borrowing costs could
rise, further exacerbating deficit concerns.
Governments’ spending problem
Despite
growing pressure from bond markets, governments continue to resist spending
cuts. The United States leads in deficit spending, with a deficit that was
equivalent to 6.4 per cent of GDP in 2024, according to the U.S. Congressional
Budget Office. This is compared to other larger economies, according to Trading
Economics, such as France (5.8 per cent of GDP in 2024), the United Kingdom
(4.8 per cent in 2024) and Germany (2.8 per cent in 2024). Canada’s deficit to
GDP ratio was two per cent, according to the government’s 2024 Fall Economic
Statement. Interestingly some countries have moved toward budget surpluses,
such Norway, with -13.20 per cent of GDP in 2024 according to Trading
Economics, showing that fiscal discipline is possible despite global headwinds.
There is
growing concern that trade uncertainty, particularly in the wake of policy
shifts by the Trump administration, could serve as an excuse for governments to
maintain large deficits. The spectre of new tariffs, trade wars, and economic
retaliation could add further pressure to already fragile bond markets.
More
Many investors are unaware of the scale of the bond crisis | Financial Post
In other
news.
Businesses are finding a workaround for tariffs —
and it’s entirely legal
Published Mon, May 26 2025 1:04 AM EDT
Businesses are finding a workaround to
minimize the most significant hit from tariffs, using a decades-old piece of
legislation known as the “first sale rule.”
Within U.S. customs law, the first sale
rule allows U.S. importers to use the price of the first sale in a number of
transactions to calculate customs duties.
For instance, a Chinese manufacturer sells
a t-shirt to a Hong Kong vendor for $5. That Hong Kong vendor then sells the
t-shirt to a U.S. retailer for $10. That U.S. retailer then sells the t-shirt
to consumers for $40.
Under the first sale rule, the U.S.
retailer can pay the import duty on the initial $5 price of the good, rather
than the vendor’s inflated $10, thus stripping out the cost associated with the
middleman’s profit.
“What the rules allow you to do is use
that initial sales price from the factory to the vendor to determine the final
duty price,” Brian Gleicher, senior lawyer and member at Miller & Chevalier
Chartered, told CNBC over the phone.
How it works
The first sale rule has been around since
1988, but gained renewed attention under U.S. President Donald Trump’s first
administration and, now, during his latest tariff regime.
“When the first administration had 25%
tariffs [on China in 2018], that’s when we started getting calls. Now with the
new tariffs, the first sale rule has started coming up again,” Sid Paruthi,
partner at U.S. consulting firm Moss Adams, said over video call.
“It’s been around for a very long time but
... everybody’s beginning to explore it with more interest,” Gleicher said.
Here are the criteria businesses must
fulfil to apply the rule:
- There
must be at least two sales involved: One from an overseas producer and one
or more from an intermediary
- The
sales must be carried out at arm’s length by independent and totally
unrelated parties
- There
must be proof that the item was destined for the U.S., rather than simply
ending up there
- There
must be documentation of the first sale price
For some companies, that can be easier
said than done.
Typically, the default duty imposed by
U.S. customs is based on the import price of a good, putting the burden of
proof on the importer to demonstrate the initial cost of that item. That may
not always be something a vendor is willing to reveal.
“If you’re an importer, you need to get
that first sale price. You need to have the data,” Gleicher said. “Vendors may
not want to give that information.”
---- Who’s using it?
Companies appear to be cluing into that.
While the first sale rule is broadly
applicable across products and industries, it is considered particularly useful
in higher-value consumer goods and luxury products, where margins are greater.
Last month, Italian luxury fashion
brand Moncler flagged the
first sale rule as providing “significant benefit” to its cost structure.
“First cost [sale], of course, the
industrial cost ... is much lower than the retail price, and it is about 50% of
the intercompany price. So, of course, it’s a significant benefit,” Luciano
Santel, executive director & chief corporate and supply officer at Moncler,
told investors during an April 16 earnings call.
Swiss-headquartered biotech Kuros
Biosciences earlier this month said that it was altering its operations, which
would allow it to adopt the first sale policy.
More
Businesses are
finding a tariff workaround: the first sale rule
Demand for trips to US slumps among tariff-hit
countries, says Trivago
26 May 2025
Holidaymakers in countries hit hardest by
Donald Trump’s trade tariffs are shunning America for their trips abroad, while
UK and US travellers are increasingly choosing to staycation amid economic
worries, according to hotel search site Trivago.
Johannes Thomas, chief executive of
Trivago, told the PA news agency the group was seeing double-digit declines in
bookings to the US from travellers in Canada, Mexico and
Japan.
Demand among Germans for trips to the US
is also down heavily, with a single-digit decline in bookings for accommodation
in America, although the firm has not seen a significant change in demand from
Britons travelling to the US.
Mr Trump has levied tariffs on more than
180 countries, with Canada and Mexico among the first to be impacted – although
he later paused many of his so-called “reciprocal” tariffs for 90 days
following financial market turmoil.
Germany – the largest economy in Europe –
is set to be hit particularly hard by the US tariffs and the threat to its
exports.
Mr Thomas added that US holidaymakers are
also paring back their holiday spend in the face of economic uncertainty caused
by Mr Trump’s move to unleash higher tariffs on countries across the world.
Mr Thomas told PA: “If you look at the
different markets, the US tends to be the more sensitive one to uncertainty.
“People there
are much more connected to the stock market and have a higher amount of debt,
so are more sensitive to economic developments.”
Bookings on the site show Americans are
spending less on their trips, while there is higher demand for cheaper hotels
and lower star categories.
German-based Trivago, which is
majority-owned by Expedia, said that the economic worries caused by the trade
war has also seen a trend for many travellers across the US and UK to opt for
domestic trips.
Recent booking data shows that in the UK,
there has been a 25% year-on-year leap in demand for domestic travel for the
key months of July to September.
More
Demand
for trips to US slumps among tariff-hit countries, says Trivago
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.
Japan
is now deep in stagflation, and it might only get worse from here
26
May 2025
Prices
in Japan are blowing up while the economy is tanking, and the government looks
like it’s scrambling to keep up. Inflation is smashing records, growth is going
backwards, and people are stuck in the middle of both.
According
to analysts at Bloomberg, the country has officially slid into stagflation, a
nasty mix of rising costs and slowing output that hasn’t hit this hard in
decades.
The
price of rice shot up 98.4% year-over-year in April, the fastest spike since
1971, following a 92.1% increase the month before. At the same time, energy
costs rose 9.3%, after government subsidies for gas and electricity were phased
out in March.
Inflation
gains speed while growth shrinks
The
consumer price index, excluding fresh food, jumped 3.5% compared to last year,
rising from 3.2% in March. This is the fifth straight month inflation has stayed
above 3%.
But while everything is getting more expensive, the economy is shrinking.
Japan’s
GDP fell 0.7% in the first quarter of 2025, the first drop since early 2024. On
an annualized basis, the economy slipped 0.3%, based on median estimates from
economists.
This
slide is showing cracks that formed even before the US tariff measures kicked
in fully. Toru Adachi, an economist, said, “Japan is having its own version of
stagflation. Consumer spending isn’t robust enough to support a moderate
recovery on the whole.” And with numbers like these, there’s no recovery in
sight yet.
The
pressure is hitting politics too. Prime Minister Shigeru Ishiba, who took
office in October, is seeing his approval ratings crash to new lows.
The
sharp inflation has made everything worse for him as he heads into the summer
upper house elections. A poor economic print will only push the ruling party
closer to rolling out a new stimulus package, which many are already whispering
about inside Tokyo.
Trade
talks are not moving as fast as they should
Meanwhile,
President Donald Trump’s tariffs are raising serious concerns in Japan, and
relief doesn’t seem close. On May 9, Commerce Secretary Howard Lutnick said
deals with Japan and South Korea would “take significantly more time” than the
one Trump reached earlier this month with the UK.
“You’ve
got to spend an enormous amount of time with Japan, South Korea. These are not
going to be fast deals,” Howard said in an
interview with Bloomberg Television. His comments made it clear that Japan
shouldn’t expect quick help while it’s already stuck fighting rising prices and
falling output.
More
Japan is now deep
in stagflation, and it might only get worse from here
Economists
Say Canada Recession Has Already Begun as Trade War Rages On
May
24, 2025
(Bloomberg)
-- Canada’s economy is likely in the early stages of a recession, according to
forecasters, as unemployment rises and exports fall because of a trade war with
the US.
Economists
surveyed by Bloomberg say output will shrink 1% on an annualized basis in the
second quarter and 0.1% in the third quarter, a technical recession.
Exports
are tumbling — they will drop 7.4% on an annualized basis in the current
quarter, forecasters estimate, after President Donald Trump’s tariff threats
caused US importers to pull forward their shipments earlier in the year. But
exporters should be able stage a modest recovery, starting later in the
year.
The
trade dispute with Canada’s closest trading partner is hitting the labor market
and household consumption. Economists now say unemployment will rise to 7.2% in
the second half of the year before easing in 2026.
They
expect inflation to run above the central bank’s target, at 2.1% in the third
quarter and 2.2% in the fourth.
That
puts the Bank of Canada in a difficult position, with now a less than 30%
probability of a change to interest rates at its June meeting, according to
Bloomberg’s World Interest Rate Probability.
“The
more we can get uncertainty down, the more we can be more forward-looking as we
move forward in our monetary policy decisions,” Bank of Canada Governor Tiff
Macklem said on Thursday.
Businesses
and consumers are waiting for more clarity on what the US relationship looks
like before making major decisions. That uncertainty has contributed to a
notable slowdown in the housing market, with home prices and sales falling. Economists say
housing starts may be weaker in the second half of 2025 than in the second
quarter.
“I
know Canada is keen to sit down with the US and work through our differences
and come to an agreement,” Macklem said. “If we can get that clarity, we can
get back to growth. Clearly if things move in the other direction, yes, it will
be worse.”
Prime
Minister Mark Carney will get another chance to meet with Trump soon, with the
US president set to make his first trip to Canada since returning to power when
he attends the G-7
leaders’ summit in
Alberta in June.
But
Carney has warned that the
long period of deepening integration between the two countries is over.
Economists
see gross domestic product rising 1.2% in 2025 and 1% in 2026. Those figures
are in line with the previous Bloomberg survey.
The
survey of 34 economists was conducted from May 16 to May 21.
Economists Say
Canada Recession Has Already Begun as Trade War Rages On
Covid-19
Corner
This
section will continue only occasionally when something of interest occurs.
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.
Chinese
tech giants reveal how they’re dealing with U.S. chip curbs to stay in the AI
race
Published
Mon, May 26 2025 1:03 AM EDT
Tencent and Baidu, two of China’s largest technology companies, revealed
how they’re keeping in the global artificial intelligence race even as the U.S.
tightens some curbs on key semiconductors.
The business’ methods include stockpiling chips, making
AI models more efficient and even using homegrown semiconductors.
While the administration of U.S. President Donald
Trump scrapped one controversial Biden-era chip rule, it still tightened exports of some semiconductors from
companies including Nvidia and AMD in April.
Big names in the sector addressed the issue during
their latest earnings conference calls.
Martin Lau, president of Tencent — the operator of
China’s biggest messaging app WeChat — said his company has a “pretty strong
stockpile” of chips that it has previously purchased. He was referring to
graphics processing units (GPUs), a type of semiconductor that has become the
gold standard for training huge AI models.
These models require powerful computing power supplied
by GPUs to process high volumes of data.
But, Lau said, contrary to American companies’ belief
that GPU clusters need to expand to create more advanced AI, Tencent is able to
achieve good training results with a smaller group of such chips.
“That actually sort of helped us to look at our
existing inventory of high-end chips and say, we should have enough high-end
chips to continue our training of models for a few more generations going
forward,” Lau said.
Regarding inferencing — the process of actually
carrying out an AI task rather than just training — Lau said Tencent is using
“software optimization” to improve efficiency, in order to deploy the same
amount of GPUs to execute a particular function.
Lau added the company is also looking into using
smaller models that don’t require such large computing power. Tencent also said
it can make use of custom-designed chips and semiconductors currently available
in China.
“I think there are a lot of ways [in] which we can
fulfill the expanding and growing inference needs, and we just need to sort of
keep exploring these venues and spend probably more time on the software side,
rather than just brute force buying GPUs,” Lau said.
More
Tencent, Baidu
reveal how they're dealing with U.S. AI chip curbs
New solar cell tech by IIT Bombay to sharply cut costs,
enhance efficiency
The
Maharashtra government and ART-PV India Pvt Ltd, a start-up founded at IIT
Bombay are working to provide a complete commercial wafer size solution for
this technology by December 2027
Updated: May 26, 2025 07:51 IST
IN WHAT IS seen as a major
breakthrough in solar energy technology, researchers at IIT Bombay have
developed a high efficiency tandem solar cell with power conversion efficiency
of approximately 30 per cent compared with around 20 per cent now.
This is expected to lead to a
25–30 per cent boost in efficiency over conventional solar technology and
potentially reduce cost of solar power at around `1 per kwh compared with `
2.5-4 per unit now.
More, subscription required.
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world global debt clock. Nations debts to GDP compared.
World Debt
Clocks (usdebtclock.org)
I
discovered freedom for the first time in England.
Emperor Hirohito
