Saturday, March 30, 2019

Weekly Commentary: Everything Rally

From the global Bubble perspective, it was one extraordinary quarter worthy of chronicling in some detail. The “Everything Rally,” indeed. Markets turned even more highly synchronized – across the globe and across asset classes. As the quarter progressed, it seemingly regressed into a contest of speculative excess between so-called “safe haven” sovereign debt and the Bubbling risk markets. It didn’t really matter – just buy (and lever) whatever central bankers want the marketplace to buy (and lever): financial assets.

March 29 – Bloomberg (Cameron Crise): “While the total return of the S&P 500 is going to end this month roughly 2% below its closing level in September, a 60/40 portfolio of equities and Treasuries is ending March at all-time highs. Even a broader multi-asset portfolio using an aggregate bond index rather than simply govvies is closer to its high watermark than stocks. Similar to equities, balanced portfolios have enjoyed a stunning quarterly return. The broad balanced portfolio mentioned above returned nearly 8%, its best since 2011.”

According to Bloomberg (Decile Gutscher and Eddie van der Walt), it was the best FIRST quarter for the S&P500 since 1998 (strongest individual quarter since Q3 2009); for WTI crude since 2002; for U.S. high-yield Credit since 2003; for emerging market dollar bonds since 2012; and for U.S. investment-grade Credit since 1995. According to the Wall Street Journal (Akane Otani), it was the first quarter that all 11 S&P500 sectors posted gains since 2014.

March 29 – Financial Times (Peter Wells, Michael Hunter and Alice Woodhouse): “Driven mostly by Wall Street, global stocks ruled off on their largest quarterly advance since 2010. The climb over the past three months was sealed on Friday on hopes for progress in US-China trade talks that resumed in Beijing, while a rally in sovereign bonds eased. The FTSE All World index has risen 11.4% so far in 2019, its biggest quarterly increase since the September quarter of 2010.”

The S&P500 returned 13.6% for the quarter, a stunning reversal from Q4 - yet almost blasé compared to gains in “high beta”. The Nasdaq100 returned 16.6%. The Nasdaq Industrials rose 15.8%, the Nasdaq Computer Index 18.7%, and the Nasdaq Telecom Index 18.3%. The Semiconductors jumped 20.8%, and the Biotechs rose 21.5%. And let’s not forget Unicorn Fever. Money-losing Lyft now with a market-cap of $22.5 billion. Up north in Canada, equities were up 12.4% for the “best first quarter in 19 years.”

The broader U.S. market gave back some early-period outperformance but posted a big quarter all the same. The S&P400 Midcaps jumped 14.0% and the small cap Russell 2000 rose 14.2%. The average stock (Value Line Arithmetic) gained 14.3% during the quarter. The Bloomberg REITs index rose 15.8%, and the Philadelphia Oil Services Sector Index jumped 17.5%. The Goldman Sachs Most Short Index gained 18.5%.

What conventional analysts fancy as “Goldilocks,” I view as acute Monetary Disorder and resulting distorted and dysfunctional markets. For a decade now, coordinated rate and QE policy has nurtured a globalized liquidity and speculation market dynamic. Securities markets have come to be dominated by an unprecedented global pool of speculative, trend-following and performance-chasing finance. The extraordinary central bank-orchestrated market backdrop has over years incentivized the disregard of risk, in the process spurring the move to ETF and passive management – along with a proliferation of leverage and derivatives strategies.

The end of the quarter witnessed the first inverted Treasury yield curve (10-year vs. 3-month) since 2007. Ten-year Treasury yields sank 28 bps to close the quarter at 2.40% vs. three-month T-bills ending March at 2.34% (down 7bps y-t-d). The quarter saw two-year Treasury yields drop 23 bps (2.26%), five-year yields 28 bps (2.23%), and 30-year yields 20 bps (2.81%). Benchmark GSE-MBS yields sank a notable 39 bps to 3.11%. Five-year Treasury yields dropped an amazing 28 bps in March alone (10-year down 31bps). German 10-year bund yields dropped 31 bps during the quarter to negative 0.07% - the low since September 2016. Japan’s 10-year government yields fell another eight bps to negative 0.08%. Swiss 10-year yields dropped 13 bps to negative 44 bps.

March 28 – Financial Times (Robert Smith): “The amount of government debt with negative yields rose back above the $10tn mark this week, as central banks abandoned plans to tighten monetary policy. The idea of investing in bonds where you are guaranteed to lose money — if you hold them to maturity — has always seemed paradoxical. But it begins to make sense in a world where you are sure to lose even more money if you stick the cash in a bank. Parking your money in German government bonds, for example, is also safer than trying to stuff millions of euros under your mattress. More puzzling, however, is the negative-yielding corporate bond, a phenomenon that turns the idea of credit risk on its head. Here investors, in effect, pay for the privilege of lending to companies.”

Economic concerns supposedly pressuring sovereign yields much lower apparently didn’t trouble the corporate Credit sector. After starting the year at 88 bps, investment-grade CDS ended March at a six-month low 56 bps. The LQD investment-grade corporate bond ETF returned 6.18% for the quarter, closing March at a 14-month high. According to Bloomberg, BBB’s (lowest-rated investment-grade) 5.82% gain was the strongest quarterly return since Q3 2009. U.S. high-yield returned 7.04%, the strongest start to a year since 2003. The JNK high-yield bond EFT returned 8.11%, ending the quarter at a six-month high.

The quarter began with Chairman Powell’s dramatic January 4th dovish “U-Turn.” After raising rates and holding to cautious rate and balance sheet normalization at the December 19th FOMC meeting (in the face of market instability), such efforts were abruptly abandoned. The Fed will soon be winding down the reduction in its holdings, while markets now assume the next rate move(s) will be lower.

It was my view that Chairman Powell was hoping to distance his central bank from the marketplace preoccupation with the “Fed put” market backstop. The Fed’s about face delivered the exact opposite impact. Global markets have become thoroughly convinced that the Fed and global central banking community are as determined as ever to do whatever it takes to safeguard elevated international markets. Moreover, markets have become emboldened by the view that December instability impressed upon central bankers that a prompt wielding of all available powers will be necessary to avert market dislocation and panic.

As such, if markets lead economies and central bankers are to respond immediately to market instability, doesn’t that mean safe haven bonds should rally on the prospect of additional monetary stimulus while risk assets can be bought on the likelihood of ongoing loose “money” and meager economic risk? The Central Bank Everything Rally.

The Draghi ECB, fresh from the December conclusion of its latest QE program, also reversed course - indefinitely postponing any movement away from negative policy rates while reinstituting stimulus measures (Targeted LTRO/long-term refinancing operation). Even the Bank of Japan, cemented to zero rates and balance sheet expansion ($5TN and counting!), suggested it was willing to further ratchet up stimulus. Putting an exclamation mark on the extraordinary global shift, the FOMC came out of their March 20th meeting ready to exceed dovish market expectations – booming markets notwithstanding. Message Received.

The dovish turn from the Fed, ECB and BOJ flung the gates of dovishness wide open: The Bank of England, the Reserve Bank of New Zealand, the Swiss National Bank, etc. The tightening cycle in Asia came to rapid conclusion, with central banks in Taiwan, Philippines, and Indonesia (at the minimum) postponing rate increases.

But it wasn’t only central bankers hard at work. Posting an all-time shortfall in February, the fiscal 2019 U.S. federal deficit after five months ($544bn) ran 40% above the year ago level. But this is surely small potatoes compared to the shift in China, where Beijing has largely abandoned its deleveraging efforts in favor of fiscal and monetary stimulus. After an all-time record January, it was most likely a record quarter of Chinese Credit growth - monetary stimulus that spurred stock market gains while nursing sickly Chinese financial and economic Bubbles.

The Stimulus Arms Race accompanied intense Chinese/U.S. trade negotiations, in the process emboldening the bullish market view of a Chinese and U.S.-led global recovery. "My market gains are bigger than yours."  With both sides needing a deal, markets had no qualms with stretched out negotiations.

The Shanghai Composite surged 23.9%. China’s CSI Midcap 200 jumped 33.5%, with the CSI Smallcap 500 up 33.1%. The growth stock ChiNext index surged 35.4%. Underperforming the broader market rally (as financial stocks did globally), the Hang Seng China Financial Index rose 14.2%. Up 33.7%, the Shenzhen Composite Index led global market returns.

Gains for major Asian equities indices included India’s 7.2%, Philippines’ 6.1%, South Korea’s 4.9%, Thailand’s 4.8%, Singapore’s 4.7% and Indonesia’s 4.4%.

Losing 1.9% during the final week of the quarter, Japan’s Nikkei posted a 6.0% Q1 gain. Hong Kong’s Hang Seng index jumped 12.4%, and Taiwan’s TAIEX rose 9.4%. Stocks jumped 9.5% in Australia and 11.7% in New Zealand.

The MSCI Emerging Markets ETF (EEM) gained 9.9%, more than reversing Q4’s 7.6% loss. Gains for Latin American equities indices included Colombia’s 19.8%, Argentina’s 10.5%, Brazil’s 8.6%, Peru’s 9.0% and Mexico’s 3.9%. Eastern Europe equities joined the party as well. Major indices were up 12.1% in Russia, 9.0% in Romania, 8.9% in Czech Republic, 6.5% in Hungary, 5.4% in Russia and 3.4% in Poland.

It was a big quarter for European equities, with the Euro Stoxx 50 jumping 11.7%. Italy’s MIB gained 16.2% (Italian banks up 12.9%), France’s CAC40 13.1%, Switzerland’s MKT 12.4%, Sweden’s Stockholm 30 10.3%, Portugal’s PSI 11.2%, Germany’s DAX 9.2% and Spain’s IBEX 35 8.2%. Major equities indices were up 17.6% in Greece, 14.1% in Denmark, 12.8% in Belgium, 12.5% in Netherlands, 12.0% in Ireland, 10.8% in Iceland, 10.5% in Austria, 8.5% in Finland and 7.3% in Norway. UK’s FTSE100 rose 8.0%.

Especially as the quarter was coming to an end, the conflicting messages being delivered by the safe havens and risk markets somewhat began to weigh on market sentiment. Increasingly, collapsing sovereign yields were raising concerns. U.S. bank stocks were hammered 8.2% in three sessions only two weeks prior to quarter-end, reducing Q1 gains to 9.1%. Portending a global economy in some serious trouble?

I view the yield backdrop as confirmation of underlying fragilities in global finance – in the acute vulnerability of global Bubbles – stocks, bonds, EM, China Credit, European banks, derivatives, the ETF complex, and global speculative finance more generally. While risk market participants fixate on capturing unbridled short-terms speculative returns, the safe havens see the inevitability of market dislocation, bursting Bubbles and ever more central bank monetary stimulus.

And it wasn’t as if global fragilities receded completely during Q1. The Turkish lira sank almost 6.0% in two late-quarter sessions (March 21/22), with dislocation seeing overnight swap rates spike to 1,000%. Ten-year Turkish government bond yields surged about 300 bps in a week to 18.5%. Turkey CDS jumped 150 bps to 480 bps, heading back towards last summer’s panic highs (560bps). With rapidly dissipating international reserves and huge dollar debt obligations, Turkey is extremely vulnerable. Municipal elections Sunday.

A surge in EM flows gave Turkey’s (and others’) Bubble(s) a new lease on life. But as Turkey sinks so swiftly back into crisis mode, worries begin to seep into some quarters of the marketplace that fragilities and contagion risk may be Lying in Wait just beneath the surface of booming markets. The sovereign rally gathered further momentum, while the risk markets saw lower yields and eager central bankers as ensuring favorable conditions. Yet the more egregious the Everything Rally’s speculative run, the more problematic the inevitable reversal. It should be an interesting second quarter and rest of the year.


For the Week:

The S&P500 gained 1.2% (up 13.1% y-t-d), and the Dow rose 1.7% (up 11.2%). The Utilities slipped 0.5% (up 10.5%). The Banks rallied 2.0% (up 9.1%), and the Broker/Dealers recovered 1.6% (up 6.6%). The Transports jumped 3.5% (up 13.5%). The S&P 400 Midcaps rose 2.2% (up 14.0%), and the small cap Russell 2000 gained 2.2% (up 14.2%). The Nasdaq100 increased 0.7% (up 16.6%). The Semiconductors declined 0.4% (up 20.8%). The Biotechs surged 3.6% (up 21.5%). With bullion dropping $21, the HUI gold index fell 1.8% (up 5.8%).

Three-month Treasury bill rates ended the week at 2.34%. Two-year government yields fell six bps to 2.26% (down 23bps y-t-d). Five-year T-note yields slipped a basis point to 2.23% (down 28bps). Ten-year Treasury yields declined four bps to 2.41% (down 28bps). Long bond yields fell six bps to 2.81% (down 20bps). Benchmark Fannie Mae MBS yields added a basis point to 3.11% (down 39bps).

Greek 10-year yields declined four bps to 3.73% (down 67bps y-t-d). Ten-year Portuguese yields slipped a basis point to 1.25% (down 47bps). Italian 10-year yields rose four bps to 2.49% (down 25bps). Spain's 10-year yields increased two bps to 1.10% (down 32bps). German bund yields dropped six bps to negative 0.07% (down 31bps). French yields fell four bps to 0.32% (down 39bps). The French to German 10-year bond spread widened two bps to 39 bps. U.K. 10-year gilt yields declined one basis point to 1.00% (down 28bps). U.K.'s FTSE equities index rose 1.0% (up 8.2% y-t-d).

Japan's Nikkei 225 equities index declined 1.9% (up 6.0% y-t-d). Japanese 10-year "JGB" yields declined one basis point to negative 0.08% (down 8bps y-t-d). France's CAC40 rose 1.5% (up 13.1%). The German DAX equities index rallied 1.4% (up 9.2%). Spain's IBEX 35 equities index increased 0.4% (up 8.2%). Italy's FTSE MIB index gained 1.0% (up 16.2%). EM equities were mixed. Brazil's Bovespa index rose 1.8% (up 4.8%), and Mexico's Bolsa gained 2.3% (up 3.9%). South Korea's Kospi index fell 2.1% (up 4.9%). India's Sensex equities index increased 1.3% (up 7.2%). China's Shanghai Exchange slipped 0.4% (up 23.9%). Turkey's Borsa Istanbul National 100 index sank 6.1% (up 2.8%). Russia's MICEX equities index added 0.2% (up 5.4%).

Investment-grade bond funds saw inflows of $2.754 billion, and junk bond funds posted inflows of $590 million (from Lipper).

Freddie Mac 30-year fixed mortgage rates sank 22 bps to a 14-month low 4.06% (down 38bps y-o-y). Fifteen-year rates fell 14 bps to 3.57% (down 33bps). Five-year hybrid ARM rates declined nine bps to 3.75% (up 9bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-yr fixed rates down 13 bps to a 14-month low 4.16% (down 33bps).

Federal Reserve Credit last week declined $6.9bn to $3.921 TN. Over the past year, Fed Credit contracted $436bn, or 10.0%. Fed Credit inflated $1.111 TN, or 40%, over the past 334 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt dropped $9.3bn last week to $3.470 TN. "Custody holdings" gained $25.9bn y-o-y, or 0.8%.

M2 (narrow) "money" supply declined $11.2bn last week to $14.489 TN. "Narrow money" gained $573bn, or 4.1%, over the past year. For the week, Currency increased $1.2bn. Total Checkable Deposits dropped $40.1bn, while Savings Deposits jumped $22.7bn. Small Time Deposits gained $3.8bn. Retail Money Funds added $1.3bn.

Total money market fund assets jumped $36.5bn to $3.101 TN. Money Funds rose $243bn y-o-y, or 8.5%.

Total Commercial Paper slipped $3.7bn to $1.079 TN. CP expanded $17.4bn y-o-y, or 1.6%.

Currency Watch:

The U.S. dollar index gained 0.7% to 97.284 (up 1.1% y-t-d). For the week on the upside, the Canadian dollar increased 0.6% and the Australian dollar 0.2%. For the week on the downside, the Mexican peso declined 1.7%, the British pound 1.3%, the New Zealand dollar 1.1%, the Japanese yen 0.9%, the Norwegian krone 0.8%, the euro 0.7%, the South Korean won 0.4%, the Brazilian real 0.4%, the Singapore dollar 0.2%, the Swiss franc 0.2%, and the Swedish krona 0.1%. The Chinese renminbi increased 0.09% versus the dollar this week (up 2.48% y-t-d).

Commodities Watch:

The Bloomberg Commodities Index increased 0.8% this week (up 5.3% y-t-d). Spot Gold fell 1.6% to $1,292 (up 0.8%). Silver dropped 1.9% to $15.11 (down 2.8%). Crude gained $1.10 to $60.14 (up 32%). Gasoline fell 2.3% (up 42%), and Natural Gas sank 3.8% (down 10%). Copper jumped 3.3% (up 12%). Wheat declined 1.8% (down 9%). Corn sank 4.6% (down 5%).

Market Instability Watch:

March 26 – Bloomberg (Stephen Spratt, Edward Bolingbroke, and Liz McCormick): “The Federal Reserve’s surprise policy shift last week shook markets, but, even still, the intensity of the ensuing drop in U.S. bond yields has puzzled many observers. A massive wave of hedging in the swaps market helps explain the scale of the eye-catching move. Treasuries rallied after the Fed signaled it was done raising interest rates for the moment, driving yields on 10-year notes down to levels last seen in 2017. That forced two sets of traders -- those who had bought mortgage bonds and those who had bet markets would remain calm -- to turn to derivatives markets to tweak their portfolios or stanch their losses. They snapped up positions in interest-rate swaps, pushing Treasury yields down even more.”

March 27 – Bloomberg (Sid Verma): “Whether you call it ‘Japanification,’ a dash for safety or a bet on the Fed’s new normal, bond bulls are charging into some of the most notorious corners of developed debt markets. As benchmark Treasury yields trade at December 2017 lows and those on German bunds sink deeper into negative territory, century bonds riddled with interest-rate risk are suddenly one of the market’s biggest outperformers. And the market value of the world’s investment-grade and high-yield bonds has jumped by almost $1.6 trillion to $55 trillion in the past three weeks, with the index racing toward record highs…”

March 25 – Bloomberg (Cecile Gutscher): “The stockpile of global bonds with below-zero yields just hit $10 trillion -- intensifying the conundrum for investors hungry for returns while fretting the brewing economic slowdown. A Bloomberg index tracking negative-yielding debt has reached the highest level since September 2017 as 10-year bunds trade in negative territory and the U.S. yield curve flashes recession warnings.”

March 24 – Bloomberg (Ruth Carson and Stephen Spratt): “Wherever you look in developed markets, sovereign bond yields are at their lowest levels in years as traders ratchet up bets that major central banks will be easing. Yields in Australia and New Zealand dropped to record lows after a closely-watched part of the U.S. curve inverted on Friday as investors wager that the Federal Reserve will need to cut rates. Trading volumes in Treasury futures were double the norm during Asian trading, while Japan’s 10-year yields fell to the lowest since 2016.”

March 27 – Financial Times (Adam Samson and Laura Pitel): “The cost to borrow Turkish liras overnight more than tripled to above 1,000% on Wednesday in a sign of how money markets have seized up after an apparent bid to stymie foreign short sellers. The offshore overnight swap rate, the cost to investors of exchanging foreign currency for lira over a set period, soared to 1,200%, after hitting 325%, the highest level since 2001, in the previous session. It was 22.6% at the end of last week, Refinitiv data show. The rising cost highlights what some analysts say is an attempt by Turkey’s government to arrest a decline in the lira, after the currency on Friday faced its heaviest plunge since the economic crisis during the summer of 2018.”

March 27 – Bloomberg (Cagan Koc and Firat Kozok): “Some foreign banks were unable to close lira swaps on Tuesday because they couldn’t find a Turkish counterparty to provide a sufficient amount of the currency, a senior official in Turkey said. The country’s central bank had to extend operating hours during which foreign lenders can wire money to Turkey to allow them more time, but some lenders were still unable to close their positions… Those foreign lenders that made a bet on a swift depreciation in the currency are now paying a price after precautions taken by the nation’s banking regulator and the central bank…”

March 27 – Bloomberg (Constantine Courcoulas and Cagan Koc): “Investors dumped Turkish bonds and stocks on Wednesday after the nation orchestrated a currency crunch to prevent the lira from sliding days before an election that will test support for President Recep Tayyip Erdogan’s rule. The cost of borrowing liras overnight on the offshore swap market soared past 1,000% at one point on Wednesday because local banks are under pressure not to provide liquidity to foreign fund managers who want to bet against the lira. A government official said the measures are temporary.”

March 27 – Bloomberg (John Ainger): “Germany’s bond market just flashed another warning sign that Europe’s biggest economy is going the way of Japan. Ten-year bond yields dropped below those of the Asian nation’s for the first time since 2016 after European Central Bank President Mario Draghi said risks for the euro area remain tilted to the downside. A wave of risk-off sentiment is spreading through global markets, adding to a rally in German bonds this year amid a deteriorating outlook for the euro area.”

March 27 – Financial Times (Claire Jones and Adam Samson): “Germany has sold 10-year debt with a negative yield for the first time since the autumn of 2016, amid fears of a worsening global economic outlook… Demand is so high for haven assets that Berlin on Wednesday sold €2.4bn in 10-year paper with an average yield of minus 0.05%, according to the German Finance Agency. The agency said it received 2.6 times more bids for the debt than it accepted.”

Trump Administration Watch:

March 29 – Bloomberg (Christopher Condon): “President Donald Trump ratcheted up his pressure on the Federal Reserve, saying that if the central bank had ‘not mistakenly raised interest rates,’ the U.S. gross domestic product would be higher and markets ‘would be in a better place.’ The president’s comment, in a Twitter post on Friday afternoon, was yet another shot across the bow of Fed Chairman Jerome Powell… ‘Had the Fed not mistakenly raised interest rates, especially since there is very little inflation, and had they not done the ridiculously timed quantitative tightening, the 3.0% GDP, & Stock Market, would have both been much higher & World Markets would be in a better place!’ the president said… Earlier Friday, White House chief economic adviser Larry Kudlow called on the Fed to ‘immediately’ cut interest rates by a half percentage point, escalating the Trump administration’s fight with the central bank and challenging its independence.”

March 27 – Bloomberg: “Even as the U.S. and China near a deal on trade, the Trump administration is becoming increasingly assertive in challenging Beijing on its geopolitical red lines. Since Sunday alone, the U.S. has sailed a warship through the Taiwan Strait, released a report criticizing travel restrictions in Tibet and hosted Uighur exiles at the State Department. The moves -- all of them defying China’s warnings against meddling in what it views as its internal affairs -- came ahead the arrival of Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer in Beijing for trade talks. All three visits by U.S. trade delegations since President Donald Trump and Chinese counterpart Xi Jinping declared their Dec. 1 tariff truce have been presaged by U.S. naval patrols through territory claimed by Beijing.”

March 27 – Reuters (Steve Holland and Lesley Wroughton): “U.S. President Donald Trump… called on Russia to pull its troops from Venezuela and said that ‘all options’ were open to make that happen. The arrival of two Russian air force planes outside Caracas on Saturday believed to be carrying nearly 100 Russian special forces and cybersecurity personnel has escalated the political crisis in Venezuela. Russia and China have backed President Nicolas Maduro, while the United States and most other Western countries support opposition leader Juan Guaido. In January, Guaido invoked the constitution to assume Venezuela’s interim presidency, arguing that Maduro’s 2018 re-election was illegitimate. ‘Russia has to get out,’ Trump told reporters in the Oval Office, where he met with Guaido’s wife, Fabiana Rosales.”

March 25 – Wall Street Journal (Nick Timiraos and Kate Davidson): “Former Trump campaign adviser Stephen Moore, the president’s latest pick for a Federal Reserve Board seat, said the central bank’s recent policy pivot shows that he was right to criticize its December interest-rate increase. Shortly after that rate increase, Mr. Moore delivered a scathing assessment of Fed Chairman Jerome Powell in a December interview with The Wall Street Journal, calling him ‘totally incompetent’ and saying he should resign. Mr. Moore said in a Journal interview Monday that the Fed’s rate increase was a mistake but that he could have chosen his words about Mr. Powell more carefully.”

March 25 – Financial Times (James Politi): “Greg Mankiw, a respected Republican economist, did not mince words when he posted his reaction to Donald Trump’s latest anti-establishment gambit — his nomination of Stephen Moore, a conservative economic analyst, for a seat on the Federal Reserve board. ‘Steve is an amiable guy, but he does not have the intellectual gravitas for this important job,’ wrote Mr Mankiw, the Harvard University professor and former chair of George W Bush’s council of economic advisers… ‘Mr Moore should not be confirmed.’ Just three months ago, Mr Mankiw had written a scathing review of Trumponomics, a book co-authored by Mr Moore, classifying it as a work of ‘rah-rah’ partisanship that ignored economic evidence. ‘In their view, the world is simple, and the opposition is just wrong, wrong, wrong,’ he said.”

March 27 – Reuters (Trevor Hunnicutt and Ann Saphir): “President Donald Trump’s expected nominee for the Federal Reserve Board of Governors, Stephen Moore, said the U.S. central bank should immediately cut interest rates by half a percentage point, according to an interview with the New York Times… Moore, a conservative economic commentator and a fellow at the Heritage Foundation, told the Times he is not a ‘sycophant for Trump’ or ‘a dove’ on monetary policy, a reference to Fed officials who favor an easier policy that supports economic growth.”

Federal Reserve Watch:

March 28 – Bloomberg (Matthew Boesler and Steve Matthews): “U.S. central bankers said the economy is still on track for solid growth this year despite concerns in financial markets that it was heading for trouble. Federal Reserve Bank of New York President John Williams, one of the U.S. central bank’s top policy makers, downplayed fears of recession risks being signaled by bond markets. James Bullard, president of the St. Louis Fed, later said he expected second-quarter growth to rebound after a sluggish start to the year, and that calls for a rate cut were ‘premature.’ For Williams -- vice chairman of the Fed’s rate-setting Federal Open Market Committee -- the ‘most likely case’ is for U.S. growth of 2% with the economy continuing to add jobs. ‘So, I still see the probability of a recession this year or next year as being not elevated relative to any year,’ he said…”

March 26 – Reuters (Noah Sin): “U.S. Federal Reserve policymakers will look at the scale of the slowdown in the Chinese and European economies to determine any possible impact on Fed policy, Charlie Evans, president of the Chicago Fed, said in Hong Kong… ‘It depends a lot on how large the slowdown would be in China, and how big the headwinds would be from European deceleration as well,’ he said…”

March 25 – Reuters (David Milliken and Marc Jones): “One interest rate hike this year ‘at most’ still makes sense given strong U.S. economic conditions, a Federal Reserve official said…, despite risks that keep him in ‘wait-and-see mode’ for now. Strong economic growth and a positive outlook could still keep a rate hike on the table this year and another in 2020, Federal Reserve Bank of Philadelphia President Patrick Harker said…. He also said the Fed will not be making ‘any drastic change in the near future’ to the kinds of bonds it keeps on its $4 trillion balance sheet.”

U.S. Bubble Watch:

March 27 – Reuters (Lucia Mutikani): “The U.S. current account deficit increased more than expected in the fourth quarter amid declining exports, pushing the overall shortfall in 2018 to its highest level in 10 years, and U.S. companies repatriated a record amount of foreign earnings last year following the Republican tax overhaul. …The current account deficit… rose 6.1% to $134.4 billion. The quarterly current account gap was the largest since the fourth quarter of 2008… The deficit increased 8.8% in 2018 to $488.5 billion, the highest level since 2008. For all of 2018, the current account deficit averaged 2.4% of GDP, the biggest share since 2012, from 2.3% in 2017.”

March 29 – Reuters: “Sales of new U.S. single-family homes increased to an 11-month high in February and sales for January were revised higher, suggesting that lower mortgage rates were starting to lift the struggling housing market. …New home sales rose 4.9% to a seasonally adjusted annual rate of 667,000 units last month, the highest level since March 2018. January’s sales pace was revised up to 636,000 units from the previously reported 607,000 units… New home sales in the South, which accounts for the bulk of transactions, rose 1.8% in February to their highest level since July 2007… At February’s sales pace it would take 6.1 months to clear the supply of houses on the market, down from 6.5 months in January.”

March 27 – Reuters (Lucia Mutikani): “The U.S. trade deficit dropped more than expected in January likely as China boosted purchases of soybeans, leading to a rebound in exports after three straight monthly declines. The Commerce Department said on Wednesday the trade deficit declined 14.6%, the largest decline since March 2018, to $51.1 billion also as softening domestic demand and lower oil prices curbed the import bill.”

March 25 – Wall Street Journal (Ben Eisen): “The federal agency that insures mortgages for first-time home buyers is tightening its standards, concerned it is allowing too many risky loans to be extended. The Federal Housing Administration told lenders this month it would begin flagging more loans as high risk. Those mortgages, many of which are extended to borrowers with low credit scores and high loan payments relative to their incomes, will now go through a more rigorous manual underwriting process… The FHA’s decision to tighten underwriting standards could mean fewer first-time home buyers are able to get mortgages. Roughly 40,000 to 50,000 loans a year likely would be affected, or about 4% to 5% of the FHA-insured mortgages originated annually in recent years…”

March 25 – Wall Street Journal (Eliot Brown): “Ride-hailing company Lyft Inc. is leading a parade of Silicon Valley companies to Wall Street that display an unusual quality with parallels to companies going public in the dot-com era: lots of red ink. With its initial public offering expected this week, Lyft will serve as one of the biggest tests ever of investors’ appetite for money-losing companies. Lyft posted last year a loss of $911 million, more than any other U.S. startup lost in the 12 months preceding its IPO… Lyft’s loss, in the sixth year since the company’s founding, could soon be eclipsed by 10-year-old Uber Technologies Inc., which has been losing more than $800 million a quarter. Uber plans to go public later this year. Many other highly funded startups with a propensity for heavy spending similar to Lyft and Uber are considering listing as they age.”

March 27 – Financial Times (Joe Rennison): “Homeowners across the US are rushing to take advantage of lower borrowing costs by refinancing their mortgages, helping in the process to fuel the sharp rally in government bonds. Applications to refinance home loans rose about 12% in volume last week from the previous week… This means investors that own the debt expecting to be paid a certain coupon for a certain period of time could soon find the loans fully paid off. To guard against that possibility, some big money managers are buying Treasuries and interest rate swaps in an attempt to offset, at least partially, the lost income from the mortgages.”

March 26 – CNBC (Diana Olick): “Home prices are rising, but the gains are shrinking, since fewer buyers are able to afford the homes available for sale. Nationally, prices rose 4.3% annually in January, down from the 4.6% gain in December, according to the S&P CoreLogic Case-Shiller price index. The 10-city composite rose 3.2%, down from 3.7% in the previous month. The 20-city composite gained 3.6% year over year, down from 4.1% in December. The last time it advanced this slowly was April 2015. ‘In 16 of the 20 cities tracked, price gains were smaller in January 2019 than in January 2018,’ said David Blitzer, managing director… at S&P Dow Jones Indices. ‘Only Phoenix saw any appreciable acceleration. Some cities where prices surged in 2017-2018 now face much smaller increases.’”

March 27 – Wall Street Journal (Laura Kusisto): “The exurbs, the engine of the American housing market, are back. A decade ago, the sight of new homes under construction in Maricopa, an enclave of tidy cul-de-sacs 35 miles from downtown Phoenix, was almost unimaginable. Four in five homeowners were underwater, with their outstanding mortgages worth more than their properties… Neighbors felt compelled to cut the hedges and clean up garbage at empty houses. Last year, Maricopa issued permits for nearly 1,000 new homes. In the depths of the housing downturn, in 2010, it issued just 110. Across the country, the housing market overall has slowed. But in the regions just beyond the affluent suburbs, new home building and sales are showing signs of life.”

March 26 – CNBC (Robert Ferris): “U.S. auto sales are falling as vehicle prices climb, indicating that buyers at the lower end are getting squeezed out of the new car market… First-quarter auto sales are expected to drop by nearly 2.5% from a year earlier, to 4 million units, according to J.D. Power and LMC Automotive. Retail sales, which exclude sales to rental car companies and other commercial businesses, are expected to drop by about 5% to 2.9 million units. It’s the first time first-quarter retail sales are projected to fall short of 3 million units in six years…”

March 26 – Bloomberg (Ben Steverman): “The bad news is that almost half of Americans approaching retirement have nothing saved in a 401(k) or other individual account. The good news is that the new estimate, from the U.S. Government Accountability Office, is slightly better than a few years earlier. Of those 55 and older, 48% had nothing put away in a 401(k)-style defined contribution plan or an individual retirement account, according to a GAO estimate for 2016… That’s an improvement from the 52% without retirement money in 2013.”

March 26 – Reuters (Ann Saphir): “Federal Reserve policymakers need to be vigilant that muted inflation does not become ingrained in their expectations, but the U.S. central bank’s patient approach to monetary policy should allow inflation to reassert itself, San Francisco Federal Reserve Bank President Mary Daly said…”

March 27 – Financial Times (Robin Wigglesworth, Richard Henderson and Shannon Bond): “The New York Stock Exchange zealously enforces its dress code for the trading floor, even insisting that beards, moustaches and sideburns be kept ‘neatly trimmed’. But for one day last week the floor looked more like a Bruce Springsteen convention, with traders decked out in stonewashed jeans and denim jackets… It is also a reminder of the fierce battles that are being waged in US markets between exchanges for prestigious listings, bankers for the fees initial public offerings bring, and among big technology companies hustling to sell shares before markets turn turbulent again. A fear of missing out is one that haunts many executives, according to Craig Coben, vice-chairman of global capital markets at Bank of America Merrill Lynch. ‘When the IPO window opens you usually want to be one of the first ones out,’ he said. ‘That is especially true now, given that the outlook is pretty uncertain. There’s still a fear that we might have another market correction.’”

March 26 – Wall Street Journal (Konrad Putzier): “Private real-estate fund managers, sitting on record amounts of cash, are finding it increasingly difficult to spend all that money within the deadlines they promised investors. Funds with fixed lifespans generally promise investors they will spend the money they commit within three to five years. But as of last June, closed-end real-estate vehicles launched in 2013 and 2014 still held $24.8 billion in dry powder…, according to research and data firm Preqin Ltd. The problem is likely to get worse. The total amount of dry powder held by closed-end private property funds increased to a record $333 billion this month, up from $134 billion at the end of 2012… In a 2018 survey, 68% of real-estate fund managers told Preqin that it was more difficult to find attractive investments than it had been a year before.”

China Watch:

March 27 – Reuters (Kevin Yao and Yawen Chen): “China will cut ‘real interest rate levels’ and lower financing costs for companies, Premier Li Keqiang said on Thursday in a speech at the annual Boao forum held in the southern island of Hainan.”

March 26 – Reuters (Stella Qiu, Ryan Woo and Min Zhang): “China’s industrial firms posted their worst slump in profits since late 2011 in the first two months of this year…, as increasing strains on the economy in the face of slowing demand at home and abroad took a toll on businesses… Profits notched up by China’s industrial firms in January-February slumped 14.0% year-on-year to 708.01 billion yuan ($105.50bn)… It marked the biggest contraction since Reuters began keeping records in October 2011.”

March 26 – Bloomberg: “China’s economy showed ‘an unmistakable first-quarter recovery’ after a weak end to 2018, though the level of new borrowing casts doubt on the sustainability of the rebound, according to the China Beige Book. ‘The recovery extends across both sectors and geographies, with every major sector and each one of our regions showing better revenue results than Q4,’ CBB International said… ‘Yet this rally didn’t appear out of nowhere, and there are at least three compelling reasons to doubt its staying power: credit, credit, and credit.’”

March 24 – Bloomberg: “China has embraced the idea of defaults imposing some discipline on debtors in its bond market. And some of the most troubled debtors are local governments’ financing vehicles. So an LGFV default has long seemed on the cards. But it just isn’t happening. Moody’s… thought the first one might come in 2017. Almost two years later, there have been some close calls -- including with a late payment by a unit owned by Qinghai province on a dollar bond last month that caused ripples through the investment community -- but no default. What it suggests is China’s leadership isn’t prepared for a borrower with a regional authority’s imprimatur to renege on its principal, triggering higher borrowing costs across a swathe of the world’s third-largest bond market.”

March 25 - Bloomberg (Shuli Ren): “China’s most prominent development bank has been noticeably low-profile lately. For the last decade, the 16 trillion yuan ($2.39 trillion) China Development Bank, and its less-muscular cousins Agricultural Development Bank of China Ltd. and Export-Import Bank of China, were on the forefront of every major stimulus push. In 2008, CDB financed the 4 trillion yuan spending pledge by the Ministry of Finance, its former controlling shareholder. The bank shifted its focus to the monetary side after 2015, disseminating 3.5 trillion yuan of helicopter money for the central bank via shantytown developments. At this year’s National People’s Congress, though, policy banks seemed to be getting sidelined. There was hardly any mention of them; instead, the heavy stimulus lifting will be financed by special-purpose municipal bonds.”

March 27 – Wall Street Journal (Stella Yifan Xie): “The world’s biggest money-market fund, overseen by China’s Ant Financial Services Group, drew 114 million new investors last year despite regulatory pressure to shrink. Ant’s asset-management arm… said 588 million users of Alipay, Ant’s highly popular mobile-payments network, had parked cash in its flagship Tianhong Yu’e Bao fund at the end of 2018. That means more than a third of China’s population is now invested in the fund, whose assets under management totaled 1.13 trillion yuan ($168.26bn) at the end of last year.”

March 26 – Bloomberg: “Hui Ka Yan, China’s second-richest man and chairman of one of the nation’s biggest residential developers, has a funding challenge on his hands. China Evergrande Group has debt maturing in 12 months or less that exceeds its cash by 114 billion yuan ($17bn)… The gap is partly the result of a drop in its cash buffer in the second half of 2018.”

Central Bank Watch:

March 27 – Reuters (Francesco Canepa and Balazs Koranyi): “The European Central Bank could further delay an interest rate hike and may look at measures to mitigate the side-effects of negative interest rates, ECB President Mario Draghi said…, warning that risks to growth were on the rise… ‘Just as we did at our March meeting, we would ensure that monetary policy continues to accompany the economy by adjusting our rate forward guidance to reflect the new inflation outlook,’ Draghi told a conference… ‘If necessary, we need to reflect on possible measures that can preserve the favorable implications of negative rates for the economy, while mitigating the side effects, if any… That said, low bank profitability is not an inevitable consequence of negative rates.’”

March 26 – Bloomberg (Tracy Withers): “New Zealand’s central bank joined the global shift away from higher interest rates, saying its next move is more likely to be a cut and sending the kiwi dollar tumbling by the most in seven weeks. ‘Given the weaker global economic outlook and reduced momentum in domestic spending, the more likely direction of our next OCR move is down,’ Governor Adrian Orr said… after leaving the official cash rate at 1.75%. ‘Core consumer price inflation remains below our 2% target mid-point, necessitating continued supportive monetary policy.’”

March 26 – Reuters (Dhara Ranasinghe, Jennifer Ablan, Virginia Furness): “‘Whatever it takes’ is a daunting legacy for any departing central bank chief to bequeath a successor and leaves world markets anxious about what is to come after Mario Draghi leaves the European Central Bank later this year. Draghi’s 2012 pledge to save the euro won the confidence of financial markets and arrested the currency bloc’s debt crisis. Investors admired his willingness to break new policy ground — maneuvering past internal and external opposition — and clear communication of the ECB’s thinking. With growth and inflation flagging again, and the ECB’s policy arsenal depleted, whoever succeeds him may need to be similarly bold. Growing questions about the orthodoxies of economic policy — including monetary policy models — could present an additional test.”

March 27 – Bloomberg (William Horobin and Catherine Bosley): “The European Central Bank is hoping the economic situation will improve through 2019, but has the necessary tools to react if it worsens, Governing Council member Francois Villeroy de Galhau said… ‘We are continuing to follow the economic situation very closely, and without any doubt we have the tools and margins for maneuver that are sufficiently powerful to act as much as necessary,’ Villeroy said…”

March 22 – Bloomberg (William Horobin and Craig Stirling): “Jens Weidmann may struggle to pass the test that France’s finance minister is setting for prospective successors to European Central Bank President Mario Draghi. In a rare foray on the matter this week, Bruno Le Maire lavished praise on the Italian incumbent for quantitative easing, and suggested France would want someone with similar ‘courage’ as a replacement…. ‘Draghi’s term has changed deeply the approach to conducting monetary policy in the euro zone,’ said Bruno Cavalier, economist at Oddo BHF. ‘The only candidate who would represent a break from that is Weidmann.’”

Brexit Watch:

March 24 – Financial Times (Wolfgang Münchau): “Forecasting Brexit is still the same old mug’s game it always was. But the probability of a no-deal Brexit has risen dramatically since last week’s summit of European leaders. That scenario can be avoided, for now, if Theresa May were to be ousted as prime minister. The EU would always accept a request for a further delay in such a situation. But it would still insist Britain organise European Parliament elections on May 23 — the UK cannot be allowed to undermine the legitimacy of the European Parliament while it is negotiating its way out. And a new leader would face the same problems in finding a way out of the current impasse. The EU will not renegotiate Mrs May’s withdrawal agreement.”

Europe Watch:

March 24 – Reuters (Joseph Nasr): “The risk of Britain leaving the European Union without a deal is the biggest risk facing the slowing euro zone economy in the short term, Finnish central bank chief Olli Rehn told Germany’s Die Welt newspaper… ‘In the short term Brexit is surely the biggest threat,’ said Rehn, who sits on the European Central Bank’s rate-setting Governing Council. ‘Financial markets seem to be too relaxed and appear to underestimate the risk.’ He said the ECB had made arrangements with the Bank of England to blunt turbulence in the case of a disorderly Brexit.”

March 28 – Financial Times (Valentina Romei): “Lending to eurozone businesses gathered speed in February, the largest increase in the annual rate in more than two years, but remained weak in peripheral member states… In February, adjusted lending growth to non-financial companies rose 3.7% compared with the same month last year, picking up the pace since the previous month’s 3.4%...”

EM Watch:

March 25 – Financial Times (Laura Pitel and Katie Martin): “Turkish authorities have turned up the heat on western institutions with a critical view of the country’s economic policies, but the prospects of an investment backlash mean that probes into US bank JPMorgan Chase are unlikely to lead to a real clampdown, say analysts. Over the weekend, Turkey’s capital markets board and the country’s banking supervisor launched parallel investigations into the… investment bank, responding to what they described as ‘misleading’ and ‘manipulative’ advice from the bank to sell the lira. President Recep Tayyip Erdogan threatened a ‘very heavy price’ for foreign groups ‘trying to provoke us’.”

March 28 – Financial Times (Laura Pitel and Adam Samson): “Turkey has burnt through around a third of its foreign reserves this month in an effort to prop up the faltering lira ahead of local elections this weekend, spooking investors and sending the currency sliding on Thursday… When converted into dollars, the fall in the first three weeks of March was roughly $10bn, or 29%, leaving the reserves at about $24.7bn…”

March 28 – Reuters (Tuvan Gumrukcu and Ece Toksabay): “President Tayyip Erdogan said on Thursday he was ‘in charge of Turkey’s economy’ as he piled pressure on the central bank to cut interest rates despite double-digit inflation and a tumbling lira… The Turkish currency dived 5% against the dollar on Thursday after banks started providing lira liquidity to the London market again following several days of authorities withholding liquidity to support the currency. The renewed selling pressure stems from concerns about Turkey’s balance of payments, its ability to service its foreign debt, and repeated calls by Erdogan, who has described himself as an ‘enemy of interest rates’, for cheaper credit.”

March 27 – Bloomberg (Kerim Karakaya, Cagan Koc and Asli Kandemir): “The last time Turks went to the polls, the country’s paramount leader for the past 16 years vowed to tighten his grip on the economy. With another national campaign — this time for municipal offices — nearing its climax, he’s rolling out the same playbook. In the past eight months, President Recep Tayyip Erdogan’s government has imposed price controls, forced lenders to keep credit flowing and banned the use of dollars in most contracts. Most recently, he trained his invective on a familiar target: foreign bankers, with the promise of an investigation into… JPMorgan… for predicting a decline in the lira.”

March 26 – Reuters (Jorge Otaola and Cassandra Garrison): “Argentina’s peso currency weakened 1.34% to an all-time low close of 42.65 per dollar on Tuesday, as concerns about high inflation and political uncertainty ahead of the October presidential election dented confidence in the economy.”

March 27 – Bloomberg (Raymond Colitt and Simone Preissler Iglesias): “Three months into Brazilian President Jair Bolsonaro’s term, voters, investors and some supporters are starting to doubt if he can deliver on pledges to kick-start the economy and crack down on crime. At times, his government even looks like it could fall apart. The 64-year-old former Army captain has plummeted in opinion polls and antagonized key allies, while his cabinet is plagued by intrigue and infighting. Meanwhile, support for a pension overhaul looks more uncertain than ever, raising the risk of further debt increases and sovereign credit rating downgrades.”

Global Bubble Watch:

March 25 – Financial Times (Leslie Hook): “Global carbon dioxide emissions rose to their highest levels last year after a surge in energy demand stoked by a strong economy and extreme weather, according to the world’s energy watchdog. The… International Energy Agency said energy demand rose 2.3% last year — its fastest rate since 2010 — and that the growth was met mainly by fossil fuels. That pushed global emissions of carbon dioxide to a record high of 33bn tonnes in 2018, up 1.7% from the previous year. Fatih Birol, the head of the IEA, said the rise in energy demand was ‘exceptional’ and a ‘surprise for many’, moving the world further away from its climate goals.”

Japan Watch:

March 25 – Reuters (Leika Kihara): “Bank of Japan policymakers debated the feasibility of ramping up monetary stimulus at their rate review this month as heightening overseas risks weighed on the country’s fragile economy, a summary of opinions of the meeting showed on Tuesday.”

Fixed-Income Bubble Watch:

March 25 - Bloomberg (Finbarr Flynn): “Leveraged loans are suffering a ‘slow bleed’ and are the weakest link in U.S. credit markets, says UBS Group AG, adding to an expanding list of warnings. ‘We are growing more concerned over the deterioration in loan fundamentals, which is broad-based and appears less related to trade and more to fading cyclical momentum and a hangover from an M&A-driven debt boom,’ UBS credit strategists led by Matthew Mish wrote…”

March 26 – Wall Street Journal (Gunjan Banerji): “Illinois and its biggest city kick off hundreds of millions of dollars in borrowings this week, a test of investors’ willingness to lend to stressed governments prone to spending more money than they bring in. The state launched borrowings with about a $440 million bond deal on Tuesday, followed by a roughly $730 million sale by Chicago… Analysts expect what could be billions more especially from the state, as it puts together funds to do everything from paying retirees’ pensions to launching capital projects.”

Leveraged Speculator Watch:

March 25 – Financial Times (Robin Wigglesworth): “In 1988, Revolution Books, a tatty Communist bookstore near New York’s Union Square, got some strange new upstairs neighbours: a bunch of geeky programmers trying to crack the code to financial markets. In the early days, the embryonic hedge fund founded by David Shaw, a former computer science professor at Columbia University, was a ramshackle start-up. Exposed pipes and extension cords meant that tripping on a cable could take out its entire trading system. Yet today DE Shaw is one of the hedge fund industry’s biggest players, managing over $50bn of assets.”

March 27 – Bloomberg: “Three months after news first emerged of a hedge fund blowup that threatens to saddle Citigroup Inc. with millions of dollars in losses, details of the fund’s implosion are becoming clearer. GF Securities Co. said… its GTEC Pandion Multi-Strategy Fund SP lost $139 million in 2018 primarily on foreign exchange trades, leaving it with negative capital. As the fund’s losses spiraled last year, it faced margin calls from Citigroup, its prime broker… Pandion’s losses stemmed mainly from trades in the Turkish Lira…”

Geopolitical Watch:

March 28 – Reuters (Tom Balmforth and Maxim Rodionov): “Russia said on Thursday it had sent ‘specialists’ to Venezuela under a military cooperation deal but said they posed no threat to regional stability, brushing aside a call from U.S. President Donald Trump to remove all military personnel from the country.”

March 26 – AFP: “Secretary of State Mike Pompeo warned Russia Monday the United States will not ‘stand idly by’ as Moscow inserts military personnel into Venezuela to support the regime of President Nicolas Maduro. In a phone call with Foreign Minister Sergei Lavrov, Pompeo denounced the growing Russian military reinforcements as prolonging the political crisis in the South American country. Pompeo told Lavrov ‘the United States and regional countries will not stand idly by as Russia exacerbates tensions in Venezuela,’… ‘The continued insertion of Russian military personnel to support the illegitimate regime of Nicolas Maduro in Venezuela risks prolonging the suffering of the Venezuelan people who overwhelmingly support interim President Juan Guaido,’ he said.”

March 24 – Reuters (Idrees Ali): “The United States sent Navy and Coast Guard ships through the Taiwan Strait on Sunday, the U.S. military said, as part of an increase in the frequency of movement through the strategic waterway despite opposition from China. The voyage risks raising tensions with China further but will likely be viewed by self-ruled Taiwan as a sign of support from Washington amid growing friction between Taipei and Beijing.”

March 23 – Reuters (Giselda Vagnoni): “Italy endorsed China’s ambitious ‘Belt and Road’ infrastructure plan on Saturday, becoming the first major Western power to back the initiative to help revive the struggling Italian economy. Saturday’s signing ceremony was the highlight of a three-day trip to Italy by Chinese President Xi Jinping, with the two nations boosting their ties at a time when the United States is locked in a trade war with China. The rapprochement has angered Washington and alarmed some European Union allies, who fear it could see Beijing gain access to sensitive technologies and critical transport hubs.”