Baltic Dry Index. 889 +20 Brent Crude 72.15
Never-ending Brexit now October 31,
maybe.
Day 148 of the never-ending USA v China
trade talks. Everyone’s “optimistic.”
USA v EU trade war 18 days away? No one
optimistic.
If all else fails, immortality can always be assured by
spectacular error.
John Kenneth Galbraith.
Mayday,
the day President Trump brags he will sanction the world for buying oil from
Iran. In reality, that would be China, India, Turkey, South Korea and Japan.
The last two being virtual client states of the USA, will immediately comply or
else. Turkey it’s anyone’s guess. The first two it’s more problematic. It’s a
very short shipping route from Iran to India. Will India seek compensation from
Uncle Scam for compliance?
With
China it’s far more complicated as many refineries are set up to use Iranian
crude specifically, but it’s far more complicated than that. Will President Xi
really be prepared to publicly, humiliatingly, kowtow to President Trump next
week, 19th century style?
But
first this.
Who
doctored the USA GDP numbers and why? Under President Trump, are the US numbers
now scripted as in Communist China? With the Powell Fed already in Trump’s
re-election 2020 camp, has the Bureau of Economic Analysis now signed up too?
If
economists could manage to get themselves thought of as humble, competent
people on a level with dentists, that would be splendid.
John
Maynard Keynes
Economy grows 3.2% in first quarter, GDP shows, in report showing strength as well as short-term boosts
By Greg Robb Published:
Apr 26, 2019 5:35 p.m. ET
The gain was well above forecasts. Economists polled by MarketWatch had forecast a 2.3% increase in gross domestic product. The economy grew at a 2.2% rate in the final three months of 2018.
Inflation moderated a bit in the first quarter.
What
happened: One
unexpected factor behind the acceleration in GDP growth in the first quarter
was a sharp upturn in state and local government spending.
Spending at
this level jumped 3.9% after a 1.3% drop in the prior three months. This was
the fastest gain in three years. Spending by local governments likely picked up
due to the partial federal government shutdown.
Also fueling
the stronger GDP growth were stronger inventory building and trade. These
factors are volatile and could reverse this quarter.
Final sales to domestic purchasers, which excludes trade and inventory behavior, rose 2.3% in the first quarter, the smallest gain in three years, but still well above what economists were expecting.
The value of inventories increased to $128.4 billion from $96.8 billion, adding to GDP.
More
The big mystery in the GDP report — where did the inventories come from?
By Greg Robb
Published: Apr 26, 2019 5:36 p.m. ET
Mystery theater comes to government data
It is a case
that would make Sherlock Holmes proud.
Growth in
the first quarter smashed expectations, fueled in part by strong inventory
building. According to the government, $32 billion of goods were added to
inventories this quarter, or $128 billion annualized.
This
stockpiling of goods boosted first-quarter GDP growth by about 70 basis points
and helped propel growth to a 3.2% annual rate, well above forecasts.
The problem
is that it is not at all obvious where these inventories came from. Goods have
to come from somewhere, either produced by domestic firms or imported from
abroad.
The mystery
is that both production and imports fell in the first three months of the year,
according to government data.
“You can’t stockpile what you do not import or do not produce,” said Robert Brusca, chief economist at FAO Economics.
The Fed reported last week that industrial output slipped at a 0.3% annual rate in the first quarter.
Read: Industrial production weakens further in March
And the government’s GDP report estimates that imports fell 3.7% in the first three months of the year.
The one other explanation — that consumption fell sharply enough to leave businesses with unexpected unsold goods — also doesn’t fit the evidence, Brusca said.
Consumption did not fall faster than industrial production or imports to generate any surplus, he said. To be sure, spending on consumer durable goods fell 5.3%, the biggest drop in 10 years. Business spending on equipment was also weak.
“Any way you slice it, this GDP report...is an apparent mess,” he said.
More
Column: Global economy is close to stalling as trade falls
April 26, 2019 / 1:26 PM
LONDON (Reuters) - World trade volumes are
falling for the first time since the end of the financial crisis in a sign the
global economy is only one more major shock away from recession.
Trade is retreating for the first time since the fourth quarter of 2009, when the economy was still being buffeted by aftershocks from the financial crisis (“World trade monitor”, CPB, April 25).
South Korea’s KOSPI-100 equity index, dominated by companies heavily exposed to trade, has been signalling a severe slowdown for almost a year now.
Hong Kong’s International Airport, the world’s busiest air cargo hub, reported volumes were down more than 5 percent year-on-year in the first three months of 2019.
And containers handled through the U.S. Port of Long Beach, one of the major transhipment hubs for goods between the United States and Asia, were down more than 7 percent in the first quarter.
Inside the United States, truck freight growth slowed, and rail freight fell, in the three months from December through February compared with the same period a year earlier.
Around the world, manufacturers have reported that export orders have been falling for seven months in a row, the longest slowdown since 2012, according to the JPMorgan global purchasing managers’ survey.
So far, the loss of momentum has been felt most strongly in manufacturing and transportation, sectors with heavy international exposure, rather than in more domestically focused services.
Bellwethers including 3M Company (diversified manufacturing), Intel (chip manufacturing), Bombardier (rail and aircraft) and UPS (distribution services) all downgraded their outlooks for 2019 on Thursday.
More
Finally,
this weekend that oil news. Who sabotaged Russian oil exports? Why? Is Trump really about to try to sanction
China next week for buying Iran’s oil? How will that help the trade deal and
the never-ending trade talks? Who benefits from accelerating another global
recession and the next Lehman?
Russia to restore oil pipeline supplies to Europe in two weeks
April 26, 2019 / 6:34 AM
MINSK/MOSCOW (Reuters) - Russia plans to
restore oil supplies via its key Druzhba pipeline to Europe in two weeks, after
joint talks with Belarus, Ukraine and Poland on Friday in Minsk.
Poland,
Germany, Ukraine and other countries suspended imports of Russian oil via the
pipeline this week due to contamination. Halting those supplies has knock-on
effects further along the network.
After joint
talks in the Belarus capital on Friday, Russia’s Deputy Prime Minister Dmitry
Kozak said in a statement that the four countries had agreed on joint measures
to eliminate the effects of the contamination.
“This would
allow us, as earlier planned, to supply... (clean) oil to the border with
Belarus by April 29 and to restore the pipeline (to stability) in two weeks,”
Kozak said in the statement on Friday.
Pavel
Sorokin, Russia’s deputy energy minister, told reporters in Minsk after the
talks that one of the options for supplying clean oil was to mix the
contaminated product with regular supply.
Russia’s
pipeline monopoly Transneft said on Friday that the contamination which led to
the suspension of the oil flows to Europe could be deliberate, Interfax news
agency reported.
The problem
arose last week when an unidentified Russian producer contaminated oil with
high levels of organic chloride, which is typically used to boost oil output
but which must be separated before shipment as it can destroy refining
equipment.
“A criminal
case was opened over an intended contamination of Russian oil,” Transneft
spokesman, Igor Dyomin, was quoted as saying by Interfax.
---- Ukrtransnafta suspended the transit of oil through the pipeline on Thursday, closing supplies via Druzhba’s southern route to Slovakia, the Czech Republic and Hungary.
The
suspension cut off a major supply route for Polish refineries owned by Poland’s
PKN Orlen and Grupa Lotos, as well as plants in Germany owned by Total, Shell,
Eni and Rosneft.
The pipeline
issue, which has supported global oil prices, lifted Russian Urals crude
differentials to an all-time high on Thursday. [O/R]
With
pipeline supplies to Europe shut, Russia faces a challenge of how to divert
about 1 million barrels per day (bpd) that was meant to be shipped through the
network to other destinations at a time when export capacity is at its limits.
More
No wind-down for China on stopping its Iran oil buys: Trump officials
April 26, 2019 / 7:37 PM
WASHINGTON (Reuters) - Two Trump
administration officials said on Friday that neither a wind-down period nor a
short-term waiver on China’s oil purchases from Iran are being contemplated
after Washington surprised Iran’s customers on Monday by demanding they halt
the purchases by May 1 or face sanctions.
The administration has been clear to China, Iran’s top oil consumer, about no additional waivers to the sanctions after the ones granted last November, one of the senior officials said.
“They’ve known about it, so to my knowledge that’s not being contemplated,” said the official, adding that ultimately questions about any wind-down period are for the State Department. The State Department did not immediately respond to a request for comment.
Under U.S. sanctions law, importers of Iranian oil including China, India and Turkey, could be allowed a wind-down period before getting to zero oil purchases, including a short-term waiver. Any wind-down measures would be different than the 180 day exceptions the Trump administration granted in November to China and seven other importers for significantly reducing oil purchases from Iran, measures set to end in May.
---- President Donald Trump left the Iran nuclear deal between Tehran and six world powers last May. Trump is now reapplying the oil sanctions, without exceptions, for reducing oil purchases, a step the Obama administration never took when it slapped sanctions on Iran.
Trump’s sanctions on Iran are intended to curb its nuclear and ballistic missile program and reduce its influence in Syria, Yemen and other countries in the Middle East. Obama’s sanctions targeted only Iran’s nuclear program.
After the Trump administration announced
on Monday its intent to sink Iran’s oil exports to zero, Iran’s Revolutionary
Guards repeated a threat to block the Strait of Hormuz, a vital shipping route
linking Middle East oil producers to markets in Asia, Europe and North America.
If China does not cut Iran oil purchases to zero, the Trump administration may have to make a decision on blocking Chinese banks from the U.S. financial system. That could have unintended consequences for finance and business between the world’s two biggest economies, already in negotiations over trade disagreements.
“It could,” one official conceded about the potential for unintended consequences, “but that’s why China’s decision is easy, it’s not a difficult decision for them mathematically. They do business with the U.S. which is critical, they do business with Iran which is not critical.”
“If
you're not gonna pull the trigger, don't point the gun.”
James Baker. United States Secretary of the Treasury under
President Ronald Reagan, and U.S. Secretary of State and White House Chief of
Staff under President George H. W. Bush.
The monthly Coppock Indicators finished March
DJIA: 25,929
+54 Down. NASDAQ: 7,729 +94 Down. SP500: 2,834 +53 Down.
Normally this would suggest more correction still to
come, but with President Trump wanting to be judged by the performance of the
stock market and the Fed’s Plunge Protection Team now officially part of
President Trump’s re-election team, probably the safest action here is fully
paid up synthetic double options on most of the major indexes.
