Friday, 2 May 2025

US And China. A Trump Tariff U-turn Coming? US Jobs Day.

Baltic Dry Index. 1411 +25         Brent Crude 62.52

Spot Gold 3254               US 2 Year Yield 3.70 +0.10

US Federal Debt. 36.796 trillion!!!

On the whole, human beings want to be good, but not too good, and not quite all the time.

George Orwell

I hadn’t intended to use my private email alert of yesterday, but on reflection, I think it unethical not to share my concerns in the LIR. Hoping to be completely wrong. Please use the comment section below if you would like to be added to my occasional private email updates.

Sell in May, go away, goes the old Wall Street adage, so I thought it timely on Mayday to review our stock casinos as of today.  Bull or bear.

Well dinosaur Graeme is bearish. 

The US economy is contracting, with more contraction likely to come over the next few quarters due to tariffs generating an inventory drawdown.

The Fed’s favourite inflation indicator Core PCE is 2.6%, but Goldman is expecting 3.5% in a few months due to the Trump tariff hit.

The US consumer is increasingly showing sign of stress.  Credit card minimum payments are rising as are defaults, albeit from a modest level.  Over 40% of consumers are reportedly/allegedly using “buy now, pay later” loans for groceries.  Mortgage delinquency rates are rising.  Tariff inflation/emptying shelves has yet to kick in.

Having declared trade war on friend and foe alike, friend and foe alike seems to have declared a tourism war on the USA, led of course by a deeply offended Canada and Denmark, supported in depth by Germany, France and most of the other EU.

More importantly though, Warren Buffet is sitting on over 340 billion in cash and isn't buying this dip.  Why would he with the Buffett Indicator still at 177%, above 100 represents stocks in bubble territory?

The Cape Ratio is at 33. Far above  a normal 15-16,  suggesting a crash is the likely ending.

Unless Team Trump abandons the tariff war and soon, as in immediately, I expect by July the US and global economies to be heading into Great Depression 2.0, but this time with Pacific Ocean sized consumer and national debt. Something that didn't exist for consumers back in Great Depression 1.0. Europe had vast national debt due to WW1, but America was debt free.

A banking crisis developing in the US Agriculture States too, as the US harvest season gets underway in June, but with little to no export potential due to tariffs.

Briefly, to me rallies in the stock casinos, if they occur, are exit rallies for holders of large stock positions. I see a vast tariff global trade disaster looming, starting slowly this month, accelerating in June, but soaring like a rocket in July when the 90 day pause on Trump's tariffs ends.

In better news, Team Trump are desperate to get trade talks started with China. Another Trump U-turn coming on China tariffs?

Hong Kong stocks lead gains in Asia as China evaluates possibility of trade talks with the U.S.

Updated Thu, May 1 20251 1:58 PM EDT

Asia-Pacific markets rose after China said that it was evaluating possible trade talks with the U.S.

Markets in the region also trailed gains on Wall Street after all three key benchmarks advanced overnight on optimism that a slowdown in the global economy will not impede the progress of developments in artificial intelligence.

Hong Kong markets led gains in the region, with the Hang Seng Index up 1.74% while the Hang Seng Tech index surged 3.45%.

India’s benchmark Nifty 50 moved up 0.46% while the broader BSE Sensex was flat in early trade.

Japan’s benchmark Nikkei 225 added 0.87% while the broader Topix index advanced 0.3%.

Over in South Korea, the Kospi index edged up 0.19% while the small-cap Kosdaq moved 0.76% higher.

Australia’s S&P/ASX 200 climbed 0.94%.

China markets are closed for the Labor Day public holiday.

U.S. stock futures edged up as investors cheered China’s consideration of trade talks with the U.S.

Overnight stateside, stocks rose as strong quarterly results from Meta Platforms and Microsoft - two Big Tech “Magnificent Seven” stocks - eased concerns of a slowdown in artificial intelligence-powered developments amid the current macroeconomic uncertainty.

The Dow Jones Industrial Average climbed 83.60 points, or 0.21%, to close at 40,752.96. The S&P 500 gained 0.63% to end at 5,604.14, still slightly below its levels from before President Donald Trump’s “Liberation Day” tariffs announcement in early April. The Nasdaq Composite increased 1.52%, to close at 17,710.74 and wipe out the decline it experienced since April 2.

Asia markets live: Stocks trade mixed

China says it’s evaluating the possibility of trade talks with the U.S.

Published Thu, May 1 2025 8:36 PM EDT

China said it is evaluating U.S. overtures to initiate trade negotiations, potentially paving the way for the world’s two largest economies to start talks to resolve a trade war that has rumbled financial markets and cast a pall on global economic activity.

Senior U.S. officials have reached out recently “through relevant parties multiple times,” hoping to start negotiations with China on tariffs, a spokesperson for the commerce ministry said in a statement Friday.

While assessing the possibility of starting any negotiations, Chinese authorities reiterated Beijing’s request for the U.S. to remove all unilateral tariffs. Failure to do so would indicate “an outright lack of sincerity” from Washington and “further compromise mutual trust,” according to a CNBC translation.

“If the U.S. wants to talk, it should show its sincerity and be prepared to correct its wrong practices and cancel the unilateral tariffs,” according to the statement.

U.S. President Donald Trump has slapped tariffs of 145% on imported Chinese goods this year, prompting China to impose retaliatory levies of 125%. So far, both sides have sought to blunt the economic impact of tariffs by granting exemptions on certain critical products.

Chinese offshore yuan strengthened 0.14% to 7.2665 against the U.S. dollar following the statement. While China’s onshore markets are closed for a holiday, Hong Kong’s Hang Seng index jumped 1.2% on open.

The latest comments from Beijing follow a flurry of conflicting statements from the Trump administration and Chinese leadership on whether talks were underway, with both sides wanting to avoid being seen as the first to back down.

---- While Beijing appears to signal its readiness to engage in talks with the Trump administration, analysts cautioned that reaching a comprehensive deal will be a complex and time-consuming endeavor.

The wildcard Beijing must contend with before entering any negotiations is the unpredictability of Trump, said Dan Wang, China director at risk consultancy firm Eurasia Group.

“The negotiation is difficult to start because Trump is chaotic. China will not risk losing control of the situation just for the negotiation sake,” Wang said.

She anticipates that both sides will only arrange open negotiation after all details are agreed privately. “A more likely scenario is just a long-lasting painful truce with both sides doing their own type of rolling back in practice without backing down politically in public. It can easily last the entire Trump term,” Wang said.

That said, the substance of such talks — if they happen — will also hinge on both sides’ strategic priorities and economic red lines, with both sides showing little appetite for compromise.

----- “One of the major asks of China will be for tariffs to go back to pre-‘liberation day’ levels, at least during the negotiation period. Such a move could provide significant relief to businesses on both sides; however, it remains uncertain how receptive the Trump administration would be to this proposal,” said Montufar-Helu.

U.S. officials, including Treasury Secretary Scott Bessent, have indicated that there could be an easing in tensions with China. 

More

China says it's evaluating the possibility of trade talks with the U.S.,

US economic woes chip away at McDonald's: Burger chain suffers its biggest sales slump in five years

May 1, 2025

McDonald’s has suffered its biggest US sales slump in five years as consumers cut back on fast food.

Chief executive Chris Kempczinski said lower and middle class Americans were anxious about inflation and wider growth prospects.

US sales fell 3.6 per cent in the first quarter, the biggest decline since 2020. Sales declined by 1 per cent overseas – led by a downturn in the UK. Profits fell 3 per cent to £1.4billion.

It is the latest evidence that Donald Trump’s trade war is thwarting hopes that he could turbo-charge growth. The McDonald’s update came a day after figures showing US gross domestic product shrank at the start of this year, for the first time since 2022.

Kempczinski said: ‘We’re not immune to the volatility in the industry or pressures our consumers are facing.’

Rivals have also come under pressure, with sales falling at Yum Brands, the owner of the Taco Bell, KFC and Pizza Hut.

US economic woes chip away at McDonald's: Burger chain suffers its biggest sales slump in five years

In other news, will the tariff wars destroy Boeing?

Ryanair threatens to cancel huge Boeing order if tariffs raise prices

1 May 2025

DUBLIN (Reuters) -Ryanair on Thursday threatened to cancel orders for hundreds of Boeing aircraft if a U.S.-led tariff war leads to materially higher prices, and said it could look at alternative suppliers, including Chinese planemaker COMAC.

The threat by Europe's largest low-cost carrier and one of Boeing's biggest customers was the latest sign of a potential reordering of the global aerospace industry if U.S. President Trump does not exempt the sector from his tariff plans.

But with COMAC not yet certified in Europe and Boeing's main rival Airbus saying it is sold out through the rest of the decade, Ryanair may find it hard to follow through on its threat, one industry source said.

In a letter to a senior U.S. lawmaker, Ryanair's chief executive Michael O'Leary said Trump's tariffs could threaten 330 Boeing 737 MAX aircraft that his airline has on order, which have a list price of more than $30 billion.

"If the U.S. government proceeds with its ill-judged plan to impose tariffs, and if these tariffs materially affect the price of Boeing aircraft exports to Europe, then we would certainly reassess both our current Boeing orders, and the possibility of placing those orders elsewhere," O'Leary said.

More

Ryanair threatens to cancel huge Boeing order if tariffs raise prices

Major airlines deliver dire warning to Trump administration as grim new twist emerges in tariff drama

1 May 2025

Two major airlines have warned that European tourists are avoiding visiting the US this summer.  

Air France and Lufthansa reported weaker demand for transatlantic bookings from Europe to the US in the first quarter of the year. 

It comes as Donald Trump's aggressive trade policies and border crackdowns are putting tourists off vacationing in America

'We know there are a lot of customers that are holding back in buying tickets for a little more clarity on... the border, and things like that,' Air France-KLM CEO Ben Smith told investors on an earnings call on Wednesday. 

Air France saw a 2.4 percent dip in transatlantic bookings from Europeans for travel in May and June compared with the same time last year, The Financial Times reported. 

Steven Zaat, the airline's chief financial officer, said that the impact on the airline had been limited as there was more demand for tickets going from the US to Europe. 

However, a continued pullback in transatlantic travel could spell major issues for European long-haul airlines which are dependent on the high-margin trips to the US.

Lufthansa, British Airways and Air France all make around 50 percent of their profits from their flights to and from the US, according to analysis from Barclays. 

Lufthansa also reported a weakening in transatlantic bookings as Europeans show hesitancy about visiting the US during the usually busy summer period. 

'When it comes to vacation trips to the US, especially from the German, Austrian and Swiss markets, it's easy to imagine conversations around the kitchen table where families are saying, "We don't know yet if we really want to go,"' CEO Carsten Spohr explained on the airline's earnings call on Tuesday. 

However, Spohr said he hoped the recent softening in the White House's rhetoric on tariffs would lead to a pick-up in demand later in the year. 

'The discussions about tariffs are no longer as heated as they were four weeks ago,' he told analysts.  

'That is why we believe that some of these bookings will be recovered in the coming weeks.'

Despite the hopeful note, Lufthansa still plans to pull back its plans to expand the amount of transatlantic flights from 6 percent to 3 percent by the final quarter of the year.

The total number of foreign visitors to the US dropped by 12 percent in March compared to the same time last year, The Financial Times reported. 

One of the biggest hits has come from Canadians, many of whom are actively boycotting the US following Trump's aggressive trade policies and threats to annex the country into becoming the '51st state.'

More

Major airlines deliver dire warning to Trump administration as grim new twist emerges in tariff drama

Auto giants ditch financial guidance as industry reels from Trump tariff chaos

Published Thu, May 1 2025 1:13 AM EDT

European auto giants reported a sharp drop in first-quarter profit, and many suspended or cut full-year financial guidance, partially attributing the industry pain to U.S. President Donald Trump’s trade tariffs.

The corporate updates were made shortly after Trump imposed a 25% tariff on automotive imports into the U.S. in early April.

Trump sought to water down these levies on Tuesday, signing an executive order designed to prevent a range of other separate duties — such as an additional 25% tariffs on steel and aluminum — from “stacking” on top of one another.

Some automakers applauded the new stance, although analysts warned the fast-changing nature of Trump’s trade tariffs will likely keep any long-term corporate investment decisions at bay.

Stellantis

Stellantis, which owns household names including Jeep, Dodge, Fiat, Chrysler and Peugeot, on Wednesday said that it was withdrawing its full-year financial guidance due to tariff-related uncertainties.

It added the company was “highly engaged” with policymakers on tariff policies, while taking action to adjust production plans and identify opportunities for improved sourcing.

The multinational conglomerate reported first-quarter net revenues of 35.8 billion euros ($40.7 billion), reflecting a 14% drop from the same period last year.

Mercedes

Germany’s Mercedes also scrapped its 2025 earnings guidance and reported sharply lower first-quarter profit.

The automaker said full-year reporting figures could not “be estimated with the necessary level of certainty,” citing the current volatility over tariffs, mitigation measures and potential direct and indirect effects.

“Assuming current trade policies persist, [earnings before interest and taxes] and free cash flow of the industrial business, as well as the adjusted returns on sales of Mercedes-Benz Cars and Mercedes-Benz Vans, will be negatively impacted,” the company said in a statement.

Rella Suskin, equity analyst at Morningstar, said Trump’s recent move to ease car tariffs provides “partial relief” to European automakers.

“The tariff adjustment relieves imported auto parts up to 15% of a car’s content,” Suskin said, noting that BMW and Mercedes assemble roughly half of their vehicles sold in the U.S. domestically.

She nevertheless added that “until there is greater certainty around the permanence and quantum of tariffs, the automakers are unable to make long-term capital allocation decisions.”

Volkswagen

Volkswagen was did not join the ranks of Europe’s top original equipment manufacturers (OEMs) that pulled their financial guidance.

Europe’s biggest carmaker, however, did say it expects operating return on sales, net cash flow and net liquidity to come in at the bottom end of its annual forecasts, citing increasing trade restrictions, political uncertainty and emissions regulations.

Volkswagen on Wednesday posted operating profit of 2.9 billion euros for the first three months of the year, marking a 37% decline from the same period last year.

More

Auto giants ditch guidance as industry reels from Trump tariff chaos

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.

Weekly jobless claims surge to 241,000, more than expected, in latest sign of economic trouble

Published Thu, May 1 2025 8:33 AM EDT

Initial unemployment claims posted an unexpected increase last week in a potential trouble sign for the wobbling U.S. economy.

First-time filings for unemployment insurance totaled a seasonally adjusted 241,000 for the week ended April 26, up 18,000 from the prior period and higher than the Dow Jones estimate for 225,000, the Labor Department reported Thursday. This was the highest total since Feb. 22.

Continuing claims, which run a week behind and provide a broader view of layoff trends, rose to 1.92 million, up 83,000 to the highest level since Nov. 13, 2021.

Much of the gain seemed to come from one state — New York, where claims more than doubled to 30,043, according to unadjusted data. There was no apparent reason for the surge listed in the news release.

The District of Columbia, which had seen a sharp increase earlier this year amid President Donald Trump’s efforts to shrink the federal government payroll, saw a modest rise last week.

The report comes amid several trouble signs for the economy, though the labor market has remained stable.

----Despite the rise in the claims, the longer-term trend remains intact. The four-week moving average climbed 5,500 to 226,000, largely in line with recent trends.

The Labor Department on Friday will release its nonfarm payrolls total for April, with economists expecting an increase of 133,000. The Thursday release will not factor into that number as it is beyond the survey week used for the report.

Weekly jobless claims surge to 241,000, more than expected, in latest sign of economic trouble

Fed inflation gauge sets up stagflation risks as tariff policies bite

April 30, 2025

The Federal Reserve's preferred inflation gauge remained elevated last month, following a weaker-than-expected first-quarter GDP reading that could stoke stagflation concerns in the world's biggest economy. 

The Bureau of Economic Analysis's PCE Price Index report for March, which the Fed closely tracks for a clearer indication of inflation pressures, on Wednesday showed core prices rising at an annual rate of 2.6%. That's just inside the February reading of 2.8% and matched Wall Street's consensus forecast of 2.6%.

Core price pressures, which strip away volatile food and energy components, were unchanged on the month, compared with February's reading of a 0.4% increase and Wall Street's consensus estimate of a 0.1% advance.

The BEA's headline PCE inflation index held at an annual rate of 2.3%, just ahead of Wall Street's estimate of 2.2% but inside the 2.7% pace recorded in February. The BEA said prices were unchanged on the month, compared with the 0.4% increase recorded in February.

The BEA also noted that personal incomes for March rose 0.5%, while spending surged 0.7% as consumers rushed to purchase big-ticket items before the Trump administration implements its tariff plans..

Softer growth + sticky inflation = stagflation risk

Overall, however, the softening growth story set against sticky inflation could suggest the economy is facing early stagflation risks.

"Even if today’s weak GDP may have partially reflected companies trying to get ahead of tariffs, it was still a stagflation warning shot over the bow of the economy," said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.

"This type of data won’t soothe the markets, and it won’t make the Fed’s job any easier."

Fed inflation gauge sets up stagflation risks as tariff policies bite

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.

Graphene: Breakthrough Industrial Applications

May 1, 2025 | By Mamoun Taher, Graphmatech

As research continues, commercial applications expand and manufacturing scales up, graphene is not only set to invigorate existing industries, but also to lay the groundwork for entirely new ones

Graphene, a two-dimensional material derived solely from carbon, is one of the most abundant and versatile elements on Earth. The development of carbon as coal, petroleum and natural gas as energy sources marks the beginning of modern industrial chemistry. Due to its naturally occurring abundance, carbon exists in many forms, such as diamond, fullerenes, carbon nanotubes, charcoal and of course, graphite and graphene.

Graphite is a carbon-based material composed of carbon atoms arranged in a hexagonal lattice structure stacked on top of each other. As a result of its unique properties, such as electrical and thermal conductivity, thermal stability and lubricating characteristics, it has significantly impacted many industries, such as electronics, batteries, composites and refractories.

In 2004, at the University of Manchester, after years of research, difficulty and failed attempts, two academics, Andre Geim and Konstantin Novoselov, carved at graphite until they pulled away a single layer of carbon atoms — what we now know as graphene [1]. Since then, more than two decades of research and development have positioned graphene to make the leap into the commercial sphere, with many promising applications across numerous industries, as described further in this article. Geim and Novoselov’s groundbreaking discovery led to extensive research and innovation into graphene’s unique structure and properties, revealing its potential as a revolutionary “miracle” material across a multitude of industries. Imagine graphite as a thick book made up of many pages stacked together, each page representing a layer of carbon atoms, and graphene is just one single page from that book.

Graphene’s chemistry contributes to industrial applications

Graphene is a single layer of carbon atoms arranged in a two-dimensional honeycomb lattice (Figure 1). It stands out as a groundbreaking material due to its versatile combination of properties. Graphene’s strength is nearly 200 times that of steel, due to the strong bonds between the carbon atoms. Graphene is lighter than cotton, yet it also exhibits exceptional barrier properties against various gas molecules and superior electrical conductivity compared to copper. Moreover, graphene can be sustainably produced from abundant resources like CO2graphitewood, methane and recycled waste [23].

Previously, conventional materials could only combine a maximum of two of these properties (strength, lightness, conductivity and sustainability in production). Graphene breaks this limitation and offers a unique combination of all these properties, presenting a versatile solution to various applications and enabling engineers to further push boundaries of what materials can do.

It is worth noting that graphene is not a single material, but rather a family of different grades, each with distinct manufacturing processes and characteristics. Among these are pristine graphene, graphene-polymer compositesgraphene oxidegraphene nanotubes, reduced graphene oxide, graphene nanoplatelets, graphene metal powders (Figure 2), graphene metal composites, and task-specific functionalized graphene. Each grade’s unique properties are suitable for specialized applications and directly impact performance expectations and the material’s effectiveness in a given use case.

More

Graphene: Breakthrough Industrial Applications | Page 1

Next, the world global debt clock. Nations debts to GDP compared.

World Debt Clocks (usdebtclock.org)

Another weekend and another week closer to the end of the Trump tariff pause. What could possibly go right next week? A massive Trump U-turn on China tariffs to get China trade negotiations underway? But isn’t that China winning?   Have a great weekend everyone.

If you want to destroy a nation, give it too much - make it greedy, miserable and sick.

John Steinbeck


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