Weekly Commentary: Latent Fragilities

I have a rather simple Bubble definition: "A self-reinforcing but inevitably unsustainable inflation." Most Bubble discussions center on the deflating rather than the inflating phase. A focus of my analysis is the progressively powerful dynamics that fuel Bubble excess, along with attendant distortions and maladjustment - and how they sow seeds of their own destruction.

The ongoing "global government finance Bubble" is unique in history. Rarely has market intervention and manipulation been so widely championed. Never have governments and central banks on a concerted basis inflated government debt and central bank Credit. And almost a full decade since the crisis, the massive inflation of "money"-like government obligations runs unabated - across the continents.

The IMF calculated first quarter real global GDP growth at 3.64%, near the strongest expansion since 2011. U.S. Q2 GDP of 4.1% was the strongest since Q3 2014. There have been only eight stronger quarters of U.S. growth over the past 18 years.

Extreme and protracted (fiscal and monetary) policy stimulus has indeed stimulated real economy expansion. Given sufficient scope and duration, stimulus will invariably fuel spending and investment. Unfortunately, the artificial boom is also not without myriad negative consequences. Is the boom sustainable? Have we today reached the point where economic growth is self-supporting? Or, instead, is the global boom vulnerable to the curtailment of aggressive stimulus measures? Has global government stimulus promoted a return to stability? Or has an almost decade of unprecedented measures only exacerbated Latent Fragilities?

It was yet another week that seemed to support the Acute Latent Fragility Thesis.

July 22 - Financial Times (Gabriel Wildau and James Kynge): "China's central bank injected Rmb502bn ($74bn) into its banking system on Monday to help fortify a weakening domestic economy against the impact of an escalating trade war with the US and growing friction with Washington over its falling currency. The injection was the most emphatic move in a series of recent indications that Beijing is moving to ease monetary policy… Raising the risk that the US-China trade war could turn into a currency war, Mr Trump has accused Beijing of manipulating the renminbi, which last Friday reached its lowest point for a year against the US dollar. It has fallen 5% since the start of last month."

Despite GDP growth in the neighborhood of 6.0%, booming household borrowings, an unrelenting apartment Bubble and an ongoing Credit boom, China has once again been compelled to resort to aggressive stimulus in an attempt to hold its tottering Bubble upright. The Chinese economy's vulnerability to a U.S. trade war is generally offered as the impetus behind recently announced measures. Perhaps exposure to the faltering EM Bubble is also a pressing concern in Beijing.

July 22 - Wall Street Journal (Jeremy Page and Saeed Shah): "Pakistan's first metro, the Orange Line, was meant to be an early triumph in China's quest to supplant U.S. influence here and redraw the world's geopolitical map. Financed and built by Chinese state-run companies, the soon-to-be-finished overhead railway through Lahore is among the first projects in China's $62 billion plan for Pakistan. Beijing hoped the $2 billion air-conditioned metro, sweeping past crumbling relics of Mughal and British imperial rule, would help make Pakistan a showcase for its global infrastructure-building spree. Instead, it has become emblematic of the troubles that are throwing China's modern-day Silk Road initiative off course. Three years into China's program here, Pakistan is heading for a debt crisis, caused in part by a surge in Chinese loans and imports for projects like the Orange Line, which Pakistani officials say will require public subsidies to operate."

A few decades back it was Japanese Bubble Finance spreading its tentacles across the world. This week saw Japanese 10-year yields almost reach 11 bps, near the high going back to January 2016. It took two Bank of Japan (BOJ) interventions - offers to buy unlimited JGBs - to push yields back below 10 bps by Friday. There is considerable market focus on next week's BOJ policy meeting, along with heightened concerns in Japan for the sustainability of the BOJ's policy course. Holding "market" yields indefinitely at zero promotes distortions and imbalances. Various reports have the BOJ contemplating adjusting this policy. The bank may also adjust an ETF purchase program viewed as distorting the Japanese equities market.

Sharing a similar experience to central bankers around the globe, the BOJ has seen the impact of its inflationary policies much more in booming securities markets rather than in (stagnant) aggregate price levels in the real economy. Despite a massive expansion of central bank Credit, Japanese core consumer price inflation is expected this year to be about half the bank's 2.0% policy target. Increasingly, the 1% difference in CPI must seem secondary to risks mounting in the financial markets.

July 26 - Bloomberg (Masaki Kondo and Chikafumi Hodo): "For all the speculation over possible Bank of Japan policy tweaks next week, the most important change for global bond markets may already be underway. While market watchers disagree about whether the BOJ will adjust its target of keeping 10-year yields around zero percent, its steady reduction in purchases of longer-maturity debt and more expensive overseas hedging costs mean Japanese funds are already contemplating bringing more money back home. The BOJ's steps to buy fewer bonds has seen the annual increase in its debt holdings slow to 44.1 trillion yen ($398bn) versus its guidance of 80 trillion yen. Last quarter the reductions were entirely focused on so-called super-long bonds, which are the most attractive to insurers. What happens next in the world's second-largest bond market has the potential to cascade globally given Japanese investors hold $2.4 trillion of overseas debt."

It's a big number: $2.4 TN. BOJ policy has nurtured great Latent Fragilities. For one, policy measures have incentivized Japanese institutions and investors to comb the world for positive yields (Bubble fuel). Moreover, there is surely a large yen "carry trade" component, as financial speculators essentially borrow free in yen to leverage in higher-yield global instruments. The dollar/yen bottomed in late March, not coincidently about the same time U.S. and global (developed) equities put in trading bottoms. After trading as low as 104.74, a weaker yen saw the dollar/yen rally to trade last week at 112.88. Having reversed course, the dollar/yen closed Friday at 111.05.

I would argue that the ECB has also nurtured great Latent Fragilities. The ECB Thursday confirmed that policy rates would remain near zero at least through the summer of 2019. "What are they afraid of?" German two-year yields ended the week at negative 0.61%, the French two-year at negative 0.44%, and Spanish yields at negative 0.33%. Even Portugal enjoys negative borrowing costs out to two-year maturities (-0.23%). The German government is paid to borrow out to five years (-0.17%). To be sure, European debt instruments have inflated into one of history's most distorted Bubble markets. I'll assume Mario Draghi is not oblivious.

Italian 10-year yields jumped 15 bps this week to a four-week high 2.74%. Draghi was again questioned about Target2 balances during the ECB's post-meeting press conference. It's a critical issue that garners surprisingly little attention, perhaps because it is deftly deflected by the head of the ECB. Besides, it was a 2012 worry that proved short-lived.

Journalist: "How do you rate the risk in this [Target2] system, especially for the Bundesbank and compared to the Italy National Bank, for example?"

ECB President Mario Draghi: "First of all, let me make a general point. Target2 is a payment system, as such it doesn't generate instability. It's the way a monetary union settles its payments, and it's devised to make sure the money flows unencumbered across countries, individual sectors, companies - all economic agents. So that's the first thing we should always keep in mind.

The second thing is how to interpret recent numbers which show an increased number of Target liabilities in certain countries. Well, this is again a question that was asked several times in the past. Most of the movement in Target2 liabilities depends on our own asset purchase program - and depends on how and where - especially where - the balances of the purchases of bonds are settled. About 50% of the institutions… that sell bonds to the national central banks are not in the euro area and settle their account with one or two core countries where the financial centers reside. So, in this sense, you see that the accounting settlement of the balances do depend on where the settlement is made. It has nothing to do with capital flows from one country or another. Keep in mind that 80% of the institutions - banks namely - that sell bonds to the national central banks do not reside in the country where the purchaser's national central bank resides. A lot of inter-country payments and flows do not say anything very specific about the overall situation.

But going back to the recent movements in the liabilities in certain countries, you see that first of all they are not unprecedented - this is not the first time. We've seen movements as large and even larger in the past. Second…, they are of second order with respect to the massive movements produced by our own purchase program. So, the bottom line is the system works very well. The people who want to cap it, collateralize, limit - I mean, the truth is that they don't like the euro. They don't like the monetary union. Because the only way a monetary union can work is if they have an efficient payment system - which is what Target2 is. And I think it is just too early to understand exactly what part of the liabilities do reflect political uncertainty."

Italy's Target2 liabilities rose $16.3 billion during June to a record $481 billion, with a two-month gain of almost $55 billion. It's worth noting that Italy's liabilities surged from about zero in mid-2011 to $289 billion at the height of the European crisis back in August 2012. The ECB's "whatever it takes" stabilization program saw these liabilities shrink to $130 billion by July 2014. They've been basically heading south ever since.

Clearly, there is a lack of confidence in Italy's future status in the monetary union. And, at this point, it is not clear what might reverse the steady outflows from Italian financial institutions and assets. I don't completely disagree with Mr. Draghi's assertion that ECB policy is having a significant influence on Target2 balances. When Eurozone central banks buy Italian debt securities in the marketplace, the sellers are choosing to hold (or dispose of) these balances in other countries - thus creating a Bank of Italy liability to eurozone central banks (largely the Bundesbank). Why is this not a major festering problem? Germany's Target2 assets rose $20 billion in June to a record $976 billion - having now more than doubled since December 2014.

That Germany will soon have accumulated an astounding $1.0 TN of Target2 assets implies acute Latent Fragility in the euro region. This was never supposed to happen. These balances reflect mounting imbalances plugged by free-flowing central bank "money." ECB sovereign debt purchases have so compressed interest-rate differentials that there is today insufficient incentive to hold Italian and other "periphery" debt. But a market adjustment toward more realistic Credit spreads risks bursting Bubbles and blowing up debt markets. The entire European monetary integration experiment hangs in the balance.

So, the ECB is forced to stick with negative interest rates and "money" printing operations, as countries such as Italy accumulate liabilities that they will never service - leaving the German people to fret receivables that will never settle. Draghi's assertion that the payment system "works very well" is at best misleading. With imbalances growing bigger by the month, the semblance of a well-functioning payment system depends on monetary policy remaining extraordinarily loose. Stated differently, Acute Financial Fragilities are held at bay only so long as "money" remains free and created in abundance.

I believe we've reached the stage where a meaningful tightening of finance in Europe risks both acute bond market instability and even the entire euro experiment. For those believing this is hyperbole, allow me to phrase this differently: Italy and other "periphery" nations are one financial crisis away from demanding an alternative monetary regime.

A reasonable question: Why then is the euro not under more pressure? Well, Japan is only a meaningful tightening of financial conditions away from major bond market and financial system issues. The yen is a big wildcard. China is only a meaningful tightening away from major financial and economic issues. The renminbi is a big wildcard. The emerging markets are already suffering the effects of a tightening of financial conditions. Many EM currencies are in trouble.

Why is the euro not weaker against king dollar? Because the dollar is fundamentally an unsound currency - in a world of competing unsound currencies.

July 24 - Wall Street Journal (Josh Zumbrun): "The U.S. remained by far the largest driver of global current-account imbalances in 2017, running the world's largest deficit and adopting policies-mainly a shift toward much larger fiscal deficits-that are likely to increase its imbalances in coming years. The U.S. ran a $466 billion current-account deficit, meaning the nation imported far more than it exported. The U.S. has become an increasingly large driver of global deficits, accounting for 43% of all global deficits last year, up from 39% in 2016, according to the International Monetary Fund's annual assessment of the state of global imbalances. Washington's shift toward major deficit spending will move the U.S. trade deficit 'further from the level justified by medium term fundamentals and desirable policies,' the IMF said."

I would argue that the U.S., as well, is only a meaningful tightening of financial conditions away from serious issues. Inflated U.S. securities markets have been on the receiving end of huge international flows, much a direct consequence of QE (i.e. ECB and BOJ) and rampant Credit growth (China and EM). It would appear that U.S. residential and commercial real estate markets are already feeling the effects of waning international flows.

In the eyes of complacent markets, vulnerabilities - China, Japan, EM, Eurozone, UK, etc. - ensure the coterie of global central bankers remain trapped in aggressive stimulus. Yet there appears increasing recognition within the central bank community that further delays in the start of "normalization" come with mounting risks. That they have all in concert for far too long delayed getting the process started ensures great Latent Fragilities.

The Dow jumped 1.6% this week, the Banks 2.4% and the Transports 2.0%. The S&P500 added 0.6%, its fourth straight weekly gain. But the week saw (Crowded Long) declines of 16.7% in Facebook, 21.4% in Twitter, 9.5% in Electronic Arts and 8.2% for Intel. The broader market underperformed. Interestingly, the Goldman Sachs Most Short index dropped 3.1%. Rather abruptly, there are indications of nervousness and vulnerability below the market's surface.

The historic mistake was to believe that aggressive monetary policy would reduce systemic Fragilities. Stimulation of economies and animal spirits, no doubt, but at the cost of mounting latent instability. It's the six-year anniversary of "whatever it takes;" approaching the 10-year anniversary of the financial crisis; and going on ten years since China's massive stimulus. This week provided further evidence of trapped central banks.

EM rallied again this week, reducing the safe haven Treasury bid. Two-year Treasury yields jumped eight bps this week to 2.67%. The ten-year is again knocking on the door of 3.0% yields. I have little doubt that a surprising spike in Treasury yields would expose Latent Fragilities. The same question applies to Treasuries as it does to fixed-income markets around the globe: How much speculative leverage has accumulated over the past decade? Keep in mind it's the speculation and leverage that typically dooms a Bubble. Indeed, the interaction of leverage and depreciating asset values becomes a critical factor in why Bubbles are unsustainable.

First it was the February blow-up of the "short vol" trade. Then instability engulfed the emerging currencies, debt and equities markets, followed by a destabilizing spike in Italian yields. The Chinese renminbi sinks a quick 5%. This week saw further weakness in the Chinese currency, along with hints of instability in Japanese and Italian bonds. Importantly, Beijing stimulus measures come with atypical currency vulnerability.

All in all, the Latent Fragility case is coming together. Financial conditions are tightening, and myriad Bubbles are showing the strain. And while the VIX traded below 12 this week (closing Friday at 13.03), my hunch would be that liquidity in the volatility markets has quietly receded. The next VIX spike could get interesting.


For the Week:

The S&P500 added 0.6% (up 5.4% y-t-d), and the Dow rose 1.6% (up 3.0%). The Utilities increased 0.6% (down 0.3%). The Banks jumped 2.4% (up 2.6%), while the Broker/Dealers slipped 0.5% (up 4.9%). The Transports rose 2.0% (up 3.2%). The S&P 400 Midcaps fell 1.2% (up 3.9%), and the small cap Russell 2000 dropped 2.0% (up 8.3%). The Nasdaq100 declined 0.7% (up 14.1%). The Semiconductors gained 1.0% (up 9.5%). The Biotechs lost 1.5% (up 19.3%). With bullion down $9, the HUI gold index sank 3.7% (down 13.9%).

Three-month Treasury bill rates ended the week at 1.94%. Two-year government yields jumped eight bps to 2.67% (up 79bps y-t-d). Five-year T-note yields rose eight bps to 2.84% (up 63bps). Ten-year Treasury yields gained six bps to 2.96% (up 55bps). Long bond yields rose six bps to 3.08% (up 34bps). Benchmark Fannie Mae MBS yields gained seven bps to 3.68% (up 68bps).

Greek 10-year yields slipped four bps to 3.81% (down 26bps y-t-d). Ten-year Portuguese yields fell six bps to 1.73% (down 22bps). Italian 10-year yields jumped 15 bps to 2.74% (up 73bps). Spain's 10-year yields rose six bps to 1.38% (down 19bps). German bund yields added three bps to 0.40% (down 2bps). French yields increased two bps to 0.70% (down 8bps). The French to German 10-year bond spread narrowed one to 30 bps. U.K. 10-year gilt yields rose five bps to 1.28% (up 9bps). U.K.'s FTSE equities index added 0.3% (up 0.3%).

Japan's Nikkei 225 equities index was little changed (down 0.2% y-t-d). Japanese 10-year "JGB" yields jumped seven bps to 0.10% (up 6bps). France's CAC40 rallied 2.1% (up 3.7%). The German DAX equities index jumped 2.4% (down 0.4%). Spain's IBEX 35 equities index rose 1.5% (down 1.8%). Italy's FTSE MIB index increased 0.7% (up 0.5%). EM equities were mixed. Brazil's Bovespa index gained 1.6% (up 4.5%), and Mexico's Bolsa advanced 1.5% (up 0.6%). South Korea's Kospi index added 0.3% (down 7.0%). India’s Sensex equities index rose 2.3% (up 9.3%). China’s Shanghai Exchange rallied 1.6% (down 13.1%). Turkey's Borsa Istanbul National 100 index gained 1.6% (down 17.1%). Russia's MICEX equities index rose 2.0% (up 8.7%).

Investment-grade bond funds saw inflows of $1.986 billion, while junk bond funds had outflows of $548 million (from Lipper).

Freddie Mac 30-year fixed mortgage rates gained two bps to 4.54% (up 62bps y-o-y). Fifteen-year rates added two bps to 4.02% (up 82bps). Five-year hybrid ARM rates were unchanged at 3.87% (up 69bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-yr fixed rates up four bps to 4.58% (up 47bps).

Federal Reserve Credit last week declined $7.0bn to $4.249 TN. Over the past year, Fed Credit contracted $186bn, or 4.2%. Fed Credit inflated $1.438 TN, or 51%, over the past 299 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt gained $4.1bn last week to $3.412 TN. "Custody holdings" were up $86.5bn y-o-y, or 2.6%.

M2 (narrow) "money" supply jumped $20.0bn last week to a record $14.148 TN. "Narrow money" gained $521bn, or 3.8%, over the past year. For the week, Currency increased $3.7bn. Total Checkable Deposits slipped $1.5bn, while Savings Deposits rose $10.7bn. Small Time Deposits increased $2.3bn. Retail Money Funds gained $4.9bn.

Total money market fund assets slipped $3.0bn to $2.843 TN. Money Funds gained $203bn y-o-y, or 7.7%.

Total Commercial Paper rose $5.9bn to $1.068 TN. CP gained $91bn y-o-y, or 9.3%.

Currency Watch:

The U.S. dollar index added 0.2% to 94.669 (up 2.8% y-t-d). For the week on the upside, the Mexican peso increased 2.1%, the South African rand 1.8%, the Brazilian real 1.5%, the South Korean won 1.4%, the Canadian dollar 0.7%, the Japanese yen 0.3%, the Swedish krona 0.1% and the Singapore dollar 0.1%. For the week on the downside, the euro declined 0.6%, the New Zealand dollar 0.3%, the British pound 0.2%, the Swiss franc 0.2%, the Australian dollar 0.2% and the Norwegian krone 0.1%. The Chinese renminbi declined 0.64% versus the dollar this week (down 4.5% y-t-d).

Commodities Watch:

The Goldman Sachs Commodities Index rallied 1.5% (up 5.0% y-t-d). Spot Gold declined 0.7% to $1,223 (down 6.1%). Silver slipped 0.4% to $15.493 (down 9.6%). Crude recovered 43 cents to $68.69 (up 14%). Gasoline rallied 4.5% (up 20%), and Natural Gas gained 0.9% (down 5.8%). Copper jumped 1.7% (down 15%). Wheat rose 2.8% (up 24%). Corn gained 2.0% (up 7%).

Trump Administration Watch:

July 25 - Wall Street Journal (Valentina Pop, Vivian Salama and Bob Davis): "President Donald Trump and European Commission President Jean-Claude Juncker turned down the heat on a trade dispute between two of the world's largest economic powers, suggesting… they would hold off on further tariffs while they talk through their differences. Speaking in a joint news conference…, the two leaders agreed to begin discussions on eliminating the tariffs and subsidies that hamper trade across the Atlantic, and to resolve the steel and aluminum tariffs the Trump administration had imposed this year as well as the retaliatory tariffs the European Union imposed in response."

July 26 - Financial Times (Edward Luce): "It was Wednesday so Europe went from being a 'foe' of America to a 'great friend'. Next Monday might be different. Perhaps Europe will still be in Donald Trump's good books. The only person who can say for sure is Mr Trump. Even he probably has little idea. But my hunch is that the ceasefire he struck with Jean-Claude Juncker, president of the European Commission, will hold… Europe has won a reprieve. The portents for China have commensurately darkened. They were already dimming before Mr Trump's latest rabbit trick. His squeeze on China is now likely to be backed by the Europeans and the US business community. Both have long advocated combined western pressure on China to put foreign investors on a level playing field. Both share deep concern about China's systemic technology transfer."

July 24 - CNBC (Jeff Cox): "President Donald Trump cranked up the rhetoric on tariffs on Tuesday, saying they are a good bargaining tool in his quest to get better trade agreements. In a morning tweet, the president dug in on his position in the global trade war, declaring 'Tariffs are the greatest!' 'Tariffs are the greatest! Either a country which has treated the United States unfairly on Trade negotiates a fair deal, or it gets hit with Tariffs. It's as simple as that - and everybody's talking! Remember, we are the 'piggy bank' that's being robbed. All will be Great!'"

July 25 - Reuters: "U.S. President Donald Trump accused China… of targeting American farmers in a vicious way and using them as leverage to get concessions from him on trade. 'China is targeting our farmers, who they know I love & respect, as a way of getting me to continue allowing them to take advantage of the U.S. They are being vicious in what will be their failed attempt. We were being nice - until now!' Trump wrote…"

July 26 - CNBC (Berkeley Lovelace Jr.): "Treasury Secretary Steven Mnuchin told CNBC… he's 'closely monitoring' the weakening in the Chinese currency. 'What I've said over the last week [is] we are obviously closely monitoring the Chinese rmb and the weakening in that market," Mnuchin said… He said the administration is looking at other currencies as well. 'The long-term strength of the dollar is important. It's the result of a very strong U.S. economy,' Mnuchin continued. 'But we will closely monitor, as we do in the Treasury, currency manipulation across lots of different markets. And make sure people don't use currency for unfair trade advantages.'"

July 21 - Wall Street Journal (Jeffrey T. Lewis): "U.S. Treasury Secretary Steven Mnuchin said he 'wouldn't minimize' the possibility that the U.S. will impose tariffs on all $500 billion worth of goods that the U.S. imports from China, amplifying a threat President Donald Trump made… earlier in the week… Mr. Mnuchin stressed that the administration's goal is to achieve a 'more balanced' trade relationship with China, by getting the Asian country to open its economy and permitting U.S. exports there to increase."

July 21 - Wall Street Journal (Jamie Tarabay): "The goal of China's influence operations around the world is to replace the United States as the world's leading superpower, the CIA's Michael Collins said Friday. Speaking at the Aspen Security Forum during a session on the rise of China, Collins, the deputy assistant director of the CIA's East Asia Mission Center, said Chinese President Xi Jinping and his regime are waging a 'cold war' against the US. 'By their own terms and what Xi enunciates I would argue by definition what they're waging against us is fundamentally a cold war, a cold war not like we saw during the Cold War, but a cold war by definition. A country that exploits all avenues of power licit and illicit, public and private, economic and military, to undermine the standing of your rival relative to your own standing without resorting to conflict. The Chinese do not want conflict,' Collins said."

Federal Reserve Watch:

July 25 - Bloomberg (Rich Miller): "When Alan Greenspan ruled the Federal Reserve, investors became convinced the central bank could be counted on to prevent a stock market collapse -- the so-called Greenspan put. Now, Chairman Jerome Powell is under pressure to adopt what would amount to a put of his own, except this time it would be tied to the bond market. Some Fed regional bank presidents want the central bank to be cautious in raising interest rates to prevent short-term Treasury yields from rising above long-term ones -- providing a kind of comfort that Greenspan gave equity investors… While sounding sympathetic to their worries, Powell doesn't seem inclined to go along with the idea of running monetary policy to avoid flipping the curve."

U.S. Bubble Watch:

July 26 - New York Times (Jim Tankersley): "The amount of corporate taxes collected by the federal government has plunged to historically low levels in the first six months of the year, pushing up the federal budget deficit much faster than economists had predicted. The reason is President Trump's tax cuts. The law introduced a standard corporate rate of 21%, down from a high of 35%, and allowed companies to immediately deduct many new investments…The Office of Management and Budget said this month that it had revised its forecasts from earlier this year to account for nearly $1 trillion of additional debt over the next decade - on average, almost $100 billion more a year in deficits."

July 26 - Financial Times (John Authers): "When Richard Fuld, the chief executive of Lehman Brothers, received the news in 2008 that no one would ride to the rescue of his failing bank, he is reported to have said: 'So I'm the schmuck?' Almost a decade later, Lehman is still the only US investment bank that was allowed to fail. Its peers have been restored to health with risks removed. Mr Fuld appears to be the ultimate 'schmuck' of the financial crisis. But that judgment may be premature… While risk no longer sits in the banking system, it has not vanished. It grows ever clearer that risk has been moved, primarily to the pension system. This means that the long-term dangers in the financial system have become more insidious: easier to ignore but ultimately even more dangerous."

July 24 - Bloomberg (Shobhana Chandra): "Sales of previously owned U.S. homes unexpectedly fell in June, indicating a shortage of affordable listings and rising prices continue to limit demand… Contract closings fell 0.6% m/m to a 5.38m annual rate (est. 5.44m), a third straight decline, after a revised 5.41m (prev. 5.43m). Median sales price increased 5.2% y/y to a record $276,900. Inventory of available properties rose 0.5% y/y to 1.95m for first increase since mid-2015."

July 24 - Wall Street Journal (Esther Fung): "Chinese real-estate investors, facing pressure from Beijing, are reversing a yearslong buying spree in the U.S. where they often paid record prices for marquee properties like New York's Waldorf Astoria hotel. Chinese insurers, conglomerates, and other investors have turned net sellers of U.S. commercial real estate for the first time in a decade. They have spent tens of billions of dollars to acquire hotels, office buildings, and vast swaths of empty land to build residential towers. But Chinese investors sold $1.29 billion worth of U.S. commercial real estate in the second quarter, while purchasing only $126.2 million of property, according to… Real Capital Analytics. This marked the first time that these investors were net sellers for a quarter since 2008."

July 24 - CNBC (Diana Olick): "Southern California home sales hit the brakes in June, falling to the lowest reading for the month in four years. Sales of both new and existing houses and condominiums dropped 11.8% year over year, as prices shot up to a record high, according to CoreLogic. The report covers Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties. Sales fell 1.1% compared with May… The weakness was especially apparent in sales of newly built homes, which were 47% below the June average. Part of that is that builders are putting up fewer homes, so there is simply less to sell."

July 22 - Reuters (Jonathan Spicer): "By almost every measure, the U.S. economy is booming. But a look behind the headlines of roaring job growth and consumer spending reveals how the boom continues in large part by the poorer half of Americans fleecing their savings and piling up debt. A Reuters analysis of U.S. household data shows that the bottom 60% of income-earners have accounted for most of the rise in spending over the past two years even as the their finances worsened - a break with a decades-old trend where the top 40% had primarily fueled consumption growth."

July 22 - Wall Street Journal (Jacob Bunge): "Meat is piling up in U.S. cold-storage warehouses, fueled by a surge in supplies and trade disputes that are eroding demand. Federal data… are expected to show a record level of beef, pork, poultry and turkey being stockpiled in U.S. facilities, rising above 2.5 billion pounds… U.S. consumers' appetite for meat is growing, but not fast enough to keep up with record production of hogs and chickens. That leaves the U.S. meat industry increasingly reliant on exports, but Mexico and China-among the largest foreign buyers of U.S. meat-have both set tariffs on U.S. pork products…"

China Watch:

July 24 - Financial Times (Gabriel Wildau): "China has announced a mix of tax cuts and infrastructure spending citing 'uncertainty', as it ramps up efforts to stimulate demand and counteract a weakening economy. The move… came the same day as an injection of $74bn into the banking system by the People's Bank of China through its Medium-term Lending Facility - the central bank's largest ever, single-day cash injection using that tool. The fiscal measures provide growing evidence that policymakers are concerned about how the trade war with the US will exacerbate a domestic slowdown… The PBoC has already cut the required reserve ratio (RRR) for some banks three times this year in a bid to boost the money supply. Unveiling the measures, the State Council cited external 'uncertainty'…"

July 26 - Bloomberg (Siddharth Verma and Luke Kawa): "The Beijing 'put' is back. China's bid to boost policy stimulus to barricade its domestic economy from the brewing trade war is breathing life into risk assets battered by liquidity and geopolitical angst. Among the winners: Asian junk bonds, the besieged industrial-metals complex and emerging-market stocks. The MSCI Emerging Market Index is heading toward its first monthly gain since the melt-up euphoria of January… 'The largest surprise is that the meeting did not mention deleveraging and financial risk control, a centerpiece in China's economy policy since late 2017,' Credit Suisse Group AG strategists led by Vincent Chan wrote… 'They will be favorable to sectors sensitive to investment demand, like industrials and materials.'"

July 22 - Financial Times (Gabriel Wildau and Yizhen Jia): "A wave of defaults is sweeping across China's Rmb1.3tn ($190bn) peer-to-peer lending industry, causing investors to withdraw funds and platforms to collapse, the latest casualties of Beijing's broader crackdown on debt and financial risk. About 150 online lending platforms have suffered 'problems' since the beginning of June this year, compared with 217 such cases in all of 2017, according to Online Lending House, a research group… The group defines 'problems' as investors being unable to withdraw money, police investigating a platform, or owners running away. In the wealthy city of Hangzhou, local officials converted two sporting stadiums into makeshift welcome centres where various district-level petition bureaus - the traditional channel for Chinese citizens to file miscellaneous grievances - could receive complaints from P2P investors."

July 22 - Bloomberg: "China's regulators took a softer stance than expected as they tightened rules around the $15 trillion asset management industry, underscoring the balancing act between deleveraging the financial system and slowing an economy already facing challenges. The People's Bank of China released guidelines… aimed at asset management products, soon after the banking and securities regulators published their own rules on specific wealth products. The regulations, aimed at shrinking China's sprawling shadow-banking system, were less severe than industry participants and observers had feared, a recognition by policy makers of economic strains that have emerged in recent months."

July 26 - Bloomberg: "China said the changes U.S. airlines have agreed to make on how they refer to Taiwan is incomplete with the carriers seeking two more weeks to fully implement the requirement. American Airlines Group Inc., Delta Air Lines Inc., United Continental Holdings Inc. and Hawaiian Holdings Inc. are the last four foreign airlines out of 44 that didn't fully comply with an order to reflect the island as part of China… The deadline was yesterday. The regulator didn't say what changes the airlines promised were incomplete."

July 26 - Bloomberg (Amogelang Mbatha and Pauline Bax): "BRICS nations must reject protectionism 'outright' and promote trade and investment liberalization, Chinese President Xi Jinping said. 'We must work together at the UN, G20 and World Trade Organization to safeguard a rule-based multilateral trading regime,' Xi said at the BRICS summit… The session was also attended by the leaders of Brazil, Russia, India and South Africa."

July 24 - Bloomberg: "China's record-pacing defaults this year have exposed more than just which borrowers took on too much debt. It's also putting a spotlight on the nation's sluggish credit raters. Any investor relying on domestic Chinese rating firms would have been ill served with Wintime Energy Co., which had not a single rating downgrade before it this month descended into China's biggest default of 2018. It's one of several examples where debt raters have failed to telegraph deteriorating credit quality this year. The problem: until the past few years, China didn't let any company default… Now, without clear guidelines on which firms still have implicit guarantees, ratings companies are operating in a tricky new environment."

EM Watch:

July 24 - Bloomberg (Onur Ant): "Turkey's central bank stunned investors by keeping interest rates unchanged, defying market expectations and heeding President Recep Tayyip Erdogan's demands to refrain from raising borrowing costs. Stocks, bonds and the lira plunged.In its first policy decision since Erdogan won re-election with sweeping new powers, the bank held its one-week repo rate at 17.75%, a full percentage point less than the median estimate… 'This decision essentially confirms the markets' worst fears about the central bank's independence and the future course of economic policies in Turkey,' said Inan Demir, an economist at Nomura International…"

July 24 - Reuters (Iuri Dantas and Christian Plumb): "Brazil's leftist Workers Party would use part of the country's $380 billion in currency reserves to finance an infrastructure development fund if victorious in October presidential elections, a party official said… Marcio Pochmann, an adviser to former President Luiz Inacio Lula da Silva and a coordinator of his planned run for a third term, said roughly 10% of the reserves would be destined for the fund and supplemented by other sources such as loans from state banks Banco do Brasil and Caixa Economica Federal as well as borrowing in the form of debentures."

July 24 - Bloomberg (Andrew Rosati): "Venezuela's inflation will skyrocket to 1 million percent by the end of the year as the government continues to print money to cover a growing budget hole, the International Monetary Fund predicted… The crisis is comparable to that of Germany in 1923 or Zimbabwe in the late 2000s, said Alejandro Werner, head of the IMF's Western Hemisphere department… 'The collapse in economic activity, hyperinflation, and increasing deterioration in the provision of public goods as well as shortages of food at subsidized prices have resulted in large migration flows, which will lead to intensifying spillover effects on neighboring countries,' Werner wrote…"

July 25 - Reuters (Brian Ellsworth): "Venezuela will remove five zeroes from the bolivar currency rather than the three zeroes originally planned, President Nicolas Maduro said…, in an effort to keep up with inflation projected to reach 1 million percent this year. The OPEC nation's economy has been steadily collapsing since the 2014 crash of oil prices left it unable to maintain its socialist economic system…"

Central Bank Watch:

July 22 - Nikkei Asian Review (Moyura Baba): "The Bank of Japan is in a bind created by its prolonged ultra-easy monetary policy and will try to find a solution to the problem during a policy board meeting at the end of July. Prices in Japan have yet to reach the 2% inflation rate targeted by the central bank's easing of credit. While the adverse effects of the policy on financial institutions cannot be ignored, the yen could appreciate if the BOJ adjusts interest rates… Many are worried about the seemingly endless monetary easing. Financial markets pay keen attention these days when BOJ policymakers use the word 'cumulative.' Yukitoshi Funo, a member of the BOJ's policy board, mentioned it at a news conference in June to describe the ramifications of the policy on the earnings of financial institutions. Another member, Takako Masai, also used the word when she referred to the government bond market at a July news conference."

July 25 - Reuters (Leika Kihara): "The Bank of Japan will next week consider changes to its massive stimulus program to make it more sustainable, such as allowing greater swings in interest rates and widening its stock-buying selection, people familiar with its thinking said. The changes, although small, would be the first since 2016 and the latest sign Governor Haruhiko Kuroda is gradually walking away from his radical stimulus program deployed five years ago to shock the public out of a sticky deflationary mindset."

Global Bubble Watch:

July 22 - Reuters (David Lawder and Daniel Flynn): "Global finance leaders called on Sunday for stepped-up dialogue to prevent trade and geopolitical tensions from hurting growth, but ended a two-day G20 meeting with little consensus on how to resolve multiple disputes over U.S. tariff actions. The finance ministers and central bank governors from the world's 20 largest economies warned that growth, while still strong, was becoming less synchronized and downside risks over the short- and medium-term had increased."

July 23 - Financial Times (Roger Blitz): "China's weakening renminbi represents a new risk for a number of Asian currencies that had managed to escape much of the recent rout in emerging markets until now. The Korean won, the Taiwanese dollar and the Singapore dollar are among the vulnerable parts of EM in recent weeks, representing a new chapter in this year's currency weakness versus the US dollar. The dollar's strength has been the main driver of the 2018 EM weakness with the likes of Argentina, Turkey and South Africa particularly vulnerable given their current account deficits. In contrast, those EM countries with surpluses were sheltered."

July 26 - Bloomberg (Alex Barinka): "Don't expect a technology M&A resurgence until Donald Trump's escalating trade war with China cools off. Qualcomm Inc.'s $44 billion takeover of NXP Semiconductors NV -- a two-year-old deal that got trapped in the escalating tariff spat -- is dead. The transaction had been anointed by regulators globally, except in China. The Chinese agencies responsible for vetting mergers had even signed off on it… but final authorization was never given by the government. Technology companies, especially semiconductor makers and other hardware businesses, had been waiting for the Qualcomm-NXP deal to close before deciding whether to embark on their own acquisitions, according to industry advisers."

July 22 - New York Times (Emily Flitter): "In the maze of subsidiaries that make up Goldman Sachs Group, two in London have nearly identical names: Goldman Sachs International and Goldman Sachs International Bank. Both trade financial instruments known as derivatives with hedge funds, insurers, governments and other clients. United States regulators, however, get detailed information only about the derivatives traded by Goldman Sachs International. Thanks to a loophole in laws enacted in response to the financial crisis, trades by Goldman Sachs International Bank don't have to be reported. A decade after a financial crisis fueled in part by a tangled web of derivatives, regulators still have an incomplete picture of who holds what in this $600 trillion market. 'It's a global market, so you really have to have a global set of data,' said Werner Bijkerk, the former head of research at the International Organization of Securities Commissions, an umbrella group for regulators around the world overseeing derivatives markets. 'You can start running 'stress tests' and see where the weaknesses are. With this kind of patchwork, you will never be able to see that.'"

July 21 - Reuters (Scott Squires): "Japanese Finance Minister Taro Aso said on Saturday he expressed concerns at the G20 finance leaders' meeting that monetary policy normalization at advanced economies could accelerate capital outflows from China and emerging market economies."

July 22 - Financial Times (Jennifer Thompson): "Global assets under management are on track to hit the $80tn mark this year, with China and Latin America the fastest-growing regions for investment managers. Assets were $48.2tn on the eve of the financial crisis having grown at a compound annual rate of 12% in the preceding years, according to Boston Consulting Group. The rate fell to 4% between 2007 and 2016 but is now back at the pre-crisis pace. The main drivers are record net inflows to asset managers amid a bull market for both bonds and equities... The market growing at the fastest rate is China, with assets increasing 22% between 2016 and 2017 to $4.2tn."

Europe Watch:

July 22 - Bloomberg (Kevin Costelloe): "Italy's coalition government is heading for an internal struggle over spending, with outspoken Deputy Premier Matteo Salvini ready to flout European Union budget rules while the finance minister urges caution. 'Italians voted for us to be better off, to go into retirement at the right age, to pay lower taxes compared with today's craziness,' Salvini told reporters… He said he'd prefer to keep within EU deficit restrictions, but 'if we have to go above those limits for the good of the Italians, that won't be a problem for us.'"

July 24 - Financial Times (Kate Allen): "Foreign investors shed record volumes of Italian debt in May as a sharp sell-off hit the country's bond market… Italy's governing coalition is set to bring forward a contentious budget this autumn, which some investors fear could threaten the country's fiscal outlook. Earlier this month the new government said it would not take any further measures to cut its deficit this year and warned of a possible downgrade to growth forecasts. The country's bond yields have settled back from the highs they hit at the peak of the sell-off in late May… Two-year Italian debt is yielding about 0.7%, having been in negative territory until mid-May, while 10-year paper is yielding around 2.7%, up from 1.9% before the sell-off."

Japan Watch:

July 22 - Bloomberg (Masaki Kondo and Chikafumi Hodo): "A dramatic day for Japan's debt market saw yields surge on media reports of possible changes to the nation's ultra-loose monetary policy, spurring the central bank to offer to buy an unlimited amount of bonds. The yield on 10-year government securities soared as much as six basis points to 0.09%, its biggest increase in almost two years, pulling the yen higher and weighing on stocks. While the yield came down after the purchase offer by the Bank of Japan, it then bounced back to just one basis point below the day's high."

Fixed Income Bubble Watch:

July 23 - Wall Street journal (Daniel Kruger and Megumi Fujikawa): "Government bond prices world-wide tumbled Monday, roiled by reports that central banks could be on the verge of taking another step back from the easy-money policies that have characterized the postcrisis period. News reports that the Bank of Japan might consider changing its interest-rate targets helped push the yield on the 10-year Japanese government bond as high as 0.09%... from 0.03% late Friday. While that rate and other government bond yields are still generally low, it was the largest one-day move higher for the Japanese bonds in nearly two years. Many investors worry that the end of ultra-low interest rates and other monetary stimulus will remove a critical support that's lifted markets since the financial crisis."

July 22 - Wall Street Journal (Riva Gold and Christopher Whittall): "Many bonds around the globe are becoming harder to trade, prompting some investors to shift to other markets and raising concerns about a broad decline in liquidity. The median gap between the price at which traders offer to buy and sell, a proxy for the ability to move in and out of markets quickly, has widened this year across European corporate debt and emerging-market government and corporate bonds, according to… MarketAxess. Trading in some derivatives has picked up as traders pull back from bond markets they view as increasingly unruly and expensive."

July 26 - Wall Street Journal (Michael Wursthorn and Daniel Kruger): "Investors are fleeing U.S. stocks at a rapid clip as ongoing market volatility and trade tensions push them to seek safety among less risky assets such as U.S. Treasurys. More than $20 billion was pulled from long-term mutual funds and exchange-traded funds focused on U.S. stocks in June, capping the third-worst first half for equity flows over the past 10 years… The trend doesn't appear to be slowing: Investors redeemed more than $11.6 billion from domestic stock funds in the three weeks ended July 18, according to the Investment Company Institute."

July 24 - CNBC (Jeff Cox): "Investors hunting for yield no longer have to look very far. After a decade in which short-term cash and equivalents earned next to nothing, that part of the market has now begun to pick up and offer legitimate returns for those looking for safety in an uncertain environment. In particular, the three-month Treasury bill's yield crossed 2% recently, the first time that has happened in more than a decade. The move has come as the Federal Reserve has continued to boost short-term rates and as the economy continues to show signs of picking up, inflation takes root and investors look for safety amid stock market volatility."

July 24 - Financial Times (Alexandra Scaggs): "Protections for lenders to junk-rated companies have been the weakest on record this year, according to… Moody's, which could hamper recovery rates if a downturn prompts a string of bankruptcies or defaults. The erosion of strength in leveraged-loan covenants, meant to protect lenders' collateral, has been fuelled by rising demand for floating-rate securities such as loans… The vast majority of leveraged loans - roughly 80%, said Moody's - issued in the first quarter were considered to be 'covenant-lite'. These are loans that do not have maintenance covenants requiring borrowers to uphold certain financial standards, such as maximum levels of indebtedness."

Leveraged Speculator Watch:

July 25 - Financial Times (Robin Wigglesworth and Lindsay Fortado): "Investor inflows to computer-powered 'quantitative' hedge funds have halved this year to the most sluggish pace since 2009, after a spate of poor performance from many of the industry's biggest players. So-called 'quants' use a wide array of approaches, from taking advantage of tiny arbitrage opportunities in stock markets to surfing trends in commodity prices. But they all use powerful computers and complex algorithms to implement automated trading strategies. The success of many big quant funds, coupled with a rising belief that the future of investing will be far more machine-driven, has led to billions gushing into the industry in recent years, and many traditional asset managers to adopt some of its techniques. However, many prominent quants have suffered torrid performance this year… Overall, quant equity hedge funds have dropped 1% this year, and quant 'macro' funds have lost more than 4%, according to HFR."

July 25 - Wall Street Journal (Mengqi Sun): "Wall Street money managers are having problems hanging onto insurance companies as customers. American International Group Inc. and MetLife Inc. pulled more than $700 million from hedge funds in the first quarter of 2018… That followed billions of dollars in withdrawals over the previous two years. Net hedge-fund outflows from all U.S insurers amounted to $8.7 billion in 2016 and 2017, according to… A.M. Best Co. Total insurance-industry assets held by hedge funds were $16.4 billion at the"

Geopolitical Watch:

July 22 - CNBC (Everett Rosenfeld and Kevin Breuninger): "President Donald Trump threatened his Iranian counterpart in a Sunday night Twitter post: To Iranian President Rouhani: 'NEVER, EVER THREATEN THE UNITED STATES AGAIN OR YOU WILL SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE. WE ARE NO LONGER A COUNTRY THAT WILL STAND FOR YOUR DEMENTED WORDS OF VIOLENCE & DEATH. BE CAUTIOUS!' Trump's tweet followed Iranian President Hassan Rouhani cautioning the American leader on Sunday about pursuing hostile policies against Tehran, saying: 'War with Iran is the mother of all wars.' 'You are not in a position to incite the Iranian nation against Iran's security and interests,' the Iranian leader said, in an apparent reference to reports of efforts by Washington to destabilize Iran's Islamic government."

July 25 - Financial Times (Najmeh Bozorgmehr): "A top Iranian commander has warned Donald Trump that the Islamic republic's forces 'are close to you in places you cannot think of' as Tehran ramps up its war of words with the US. The comments by Major General Qassem Soleimani, who commands the Quds, the overseas wing of the elite Revolutionary Guards, imply that Iran is prepared to use its troops and proxies outside the Islamic republic to fight the US. 'Mr Trump, the gambler! I tell you that we are close to you in places you cannot think of. We are a nation of martyrdom . . . We have gone through difficult times,' Gen Soleimani said in a speech… 'Come on! We are waiting for you. We are the men of this field . . . You may start this war but it will be us who decide how to end it.'"

July 24 - Bloomberg (Anthony DiPaola): "The war of words between U.S. President Donald Trump and his counterpart in Iran over oil exports and sanctions is shining a spotlight on the narrow, twisting conduit for about 30% of the world's seaborne-traded crude. The Middle East's biggest oil exporters rely on the Strait of Hormuz, the passage linking the Persian Gulf with global waterways, for the vast majority of their crude shipments -- some 17.5 million barrels a day. Should a regional conflict block that bottleneck, three of the largest Gulf Arab crude producers have pipeline networks that would potentially enable them to export as much as 4.1 million barrels via alternative outlets… Even so, this amount of oil, if sent by pipeline, would be less than a quarter of the total that typically sails on tankers through Hormuz."

Friday's News Links

[Reuters] Global stocks set for fourth week of gains as trade angst eases

[Reuters] Consumers, soybeans lift U.S. economic growth to 4.1 percent

[BloombergQ] What the GDP Report Won’t Tell You About the Economy

[BloombergQ] China's Economy Weakened Further in July, Early Indicators Show

[Reuters] Exclusive: China eyes infrastructure boost to cushion growth as trade war escalates - sources

[Yahoo/Bloomberg] China's Gold Mystery: Is the Nation Still Boosting Reserves?

[CNN] Turkey could be the next emerging market to fall into crisis.

[WSJ] Record Drop in Foreigners Buying U.S. Homes

[WSJ] Trump Administration Tries to Ease Republican Worries About Trade Fights

[FT] Sliding lira sets off alarms bells for Turkey’s businesses

Thursday Evening Links

[Reuters] Facebook weighs on Nasdaq and S&P, but trade optimism boosts Dow

[CNBC] Facebook's $100 billion-plus rout is the biggest loss in stock market history

[Reuters] Euro drops most in a month as ECB stays on course

[Reuters] U.S. and China clash at WTO over ideology, state's role

[Fox] These American states are drowning in ‘irretrievable’ debt

[Reuters] U.S. 7-year notes sold to lowest demand since March

[CNBC] Housing market is showing signs of cracking: 'Anything-goes list-price strategy is no longer working'

[BloombergQ] The U.S. Housing Market Looks Headed For Its Worst Slowdown In Years

[CNBC] International buyers are dropping out of US housing market

Thursday's News Links

[BloombergQ] U.S. Stocks Slip on Facebook; Euro Weakens: Markets Wrap

[CNBC] Tech stocks fall with Facebook on track for biggest drop ever

[CNBC] Here's what every major Wall Street analyst had to say about Facebook's plummeting stock

[Reuters] U.S. core capital goods orders, shipments rise strongly in June

[CNBC] Treasury Secretary Mnuchin says he's 'closely monitoring' the weakening in the Chinese currency

[BloombergQ] Trump's China Fight Chills Tech Deals With Death of Qualcomm-NXP

[BloombergQ] ECB Keeps to Policy Path to End Bond Purchases

[Reuters] Facing low inflation, BOJ to mull steps to make stimulus sustainable

[BloombergQ] Here Comes Chinese Stimulus, Back to Save Market Bulls

[BloombergQ] China Unsatisfied With `Incomplete' Changes by U.S. Airlines

[BloombergQ] China's Xi Calls for BRICS to Reject Protectionism `Outright'

[BloombergQ] The Coming U.S.-Mexico Blow-Up

[NYT] How the Trump Tax Cut Is Helping to Push the Federal Deficit to $1 Trillion

[NYT] As Qualcomm Deal Is Scrapped, China Denies Trade Link

[WSJ] Outflows From U.S. Stocks Swell as Investors Seek Refuge in Bonds

[WSJ] After Trump’s Threat to Iran, White House Convenes a Policy Meeting

[FT] Pensions risk could make schmucks of savers

[FT] China should really start to worry about Trump

[FT] Lost in translation: three things to watch at the ECB

[FT] Quant hedge funds lose their allure as performance sags

[FT] Iran warns US that it has forces ‘in places you cannot think’

Wednesday Evening Links

[Reuters] Wall St. rises as Trump touts EU trade concessions

[CNBC] Facebook plunges more than 14 percent on revenue miss, outlook

[Reuters] Dollar extends losses after U.S. reportedly secures trade concessions from EU

[Reuters] Trump says agreed with EU to work to lower trade barriers

[CNBC] Tariffs are being mentioned on 40 percent of earnings calls

[Reuters] Venezuela to remove five zeroes from ailing currency

[WSJ] U.S., EU Agree to Resolve Trade Differences

[WSJ] Darts Are Beating the Ira Sohn Investing Pros

Wednesday's News Links

[Reuters] Global stocks rally stalls ahead of U.S.-EU trade meeting

[CNBC] Trump set for tense trade talks with top EU chief Juncker

[Reuters] Trump says China targeting U.S. farmers, is being 'vicious'

[Reuters] EU prepares retaliatory tariffs on $20 billion of U.S. goods

[Reuters] Trump downbeat ahead of trade talks with EU

[BloombergQ] Fed Presidents Seek Powell Put to Prevent Inverted Yield Curve

[BloombergQ] What Is the White House Whispering to the Fed?

[BloombergQ] Trump Blames Tariff Critics for Weakening U.S. Bargaining Power

[BloombergQ] What's Fueling Speculation the BOJ Will Change Policy

[CNBC] GM cuts 2018 outlook as Trump trade war drives up steel and aluminum costs

[BloombergQ] The Bear Market in 2-Year Treasuries Turns Two

[FT] China’s debt threat: time to rein in the spending boom

Tuesday Afternoon Links

[BloombergQ] Stocks Pull Back as Nasdaq Fades From Record High: Markets Wrap

[Reuters] Trump to offer U.S. farmers billions to ease trade pain

[BloombergQ] Tax Cut 2.0 Draft Omits Fixes for Retail, #MeToo Victims

[CNBC] 'There Is No Alternative' trade loses luster as short-term bond yields hit 10-year high

[CNBC] Southern California home sales crash, a warning sign to the nation

[Reuters] Brazil Workers Party would use currency reserves for infrastructure

[WSJ] Chinese Reversing Big U.S. Real Estate Buying Spree That Had Helped Boost Prices

[WSJ] Insurers Pull Billions From Hedge Funds

[FT] Loan covenant quality hits record low, says Moody’s

[FT] Foreign investors dumped record volumes of Italian debt

Tuesday's News Links

[BloombergQ] Stocks Rally on Earnings, China; Euro Erases Drop: Markets Wrap

[Reuters] China's bond yields jump, yuan falls on policy stimulus bets

[BloombergQ] Turkey Unexpectedly Holds Rates, Triggering Market Sell-off

[Reuters] Oil prices fall as oversupply concerns weigh

[BloombergQ] It’s Getting Harder for Companies to Escape Trump's China Duties

[CNBC] Trump turns up the heat on trade: 'Tariffs are the greatest!'

[CNBC/FT] China unveils measures to boost economic growth

[BloombergQ] China's Downgrade-Free Defaults Put Focus on Rating Firms

[BloombergQ] Trump’s War of Words With Iran Shines Spotlight on Vital Oil Route

[BloombergQ] Venezuela's Inflation to Reach 1 Million Percent, IMF Forecasts

[Reuters] U.S. airlines poised to change Taiwan references as China deadline looms

[WSJ] Global Central Bank Chatter Rattles Bond Market

[WSJ] China Stimulates Again, but Don’t Expect Fireworks

[FT] Winners and losers grapple with Trump tariff chaos

[FT] What is at stake ahead of Juncker-Trump trade talks

[FT] Analysts react as China moves to bolster finance system

[FT] Belt and Road, or debt trap?

[FT] Renminbi touches new 1-year low despite PBoC moves

Monday Evening Links

[Reuters] Bond yields rise worldwide on stimulus concerns; earnings loom

[Reuters] Wall Street rises as financials gain, tech rebounds

[CNBC] The interest rate that drives mortgages and other loans is snapping higher

[Reuters] U.S. to propose revoking California's ability to set vehicle emissions rules, mandate EVs: source

[Reuters] German 10-year bond yield hits one-month high after Japanese yields jump

[FT] Global bond yields rise as markets digest BoJ talk

Monday's News Links

[BloombergQ] Stocks Under Pressure on Growth Fears; Yen Climbs: Markets Wrap

[MarketWatch] Yen and yuan in focus as traders weigh Trump comments

[BloombergQ] U.S. Sales of Previously Owned Homes Decline for Third Month

[BloombergQ] Currency Truce, Italian Risks, BOJ Pressure: Eco Day

[BloombergQ] What the Fed Will Signal Next Week

[Reuters] Mortgage, Groupon and card debt: how the bottom half bolsters U.S. economy

[BloombergQ] China Unveils New Measures to Aid Growth Amid Trade Uncertainty

[Reuters] China says it won't devalue currency to bolster exports

[Reuters] China eyes more vigorous fiscal policy short of strong stimulus

[BloombergQ] Bank of Japan Offers Unlimited Bond Buying After Yields Jump

[NikkeiAR] BOJ grapples with the difficult side effects of easy money

[BloombergQ] Italy's League Pushes for Challenge to EU Budget Rules

[BloombergQ] China Takes ‘More Flexible Way’ on Wealth Products Rule Changes

[BloombergQ] When Presidents Bully the Fed, Watch Out

[CNBC] Trump warns Iran's President Rouhani: 'NEVER, EVER THREATEN THE UNITED STATES AGAIN'

[NYT] Decade After Crisis, a $600 Trillion Market Remains Murky to Regulators

[FT] Trade war teeters on verge of currency war as Trump, Mnuchin weigh in

[FT] Why Donald Trump is feeling increasingly emboldened on trade

[FT] Trump’s Fed intervention puts investors on notice

[FT] China’s $74bn cash injection highlights growth worries

[FT] PBoC injects $74bn into banking system as China’s economy slows

[FT] China and Latin America help propel global assets to $80tn

Sunday Evening Links

[BloombergQ] Asia Stocks Face Mixed Start; Dollar Holds Loss: Markets Wrap

[Reuters] G20 calls for stepped-up trade dialogue; no agreement on path forward

[BloombergQ] Mnuchin Sees No Chance for Currency War Despite Trump Tweets

[Reuters] U.S. proposals to drop trade barriers taken seriously by allies: Mnuchin

[BloombergQ] Bond Traders See Curve Steepening as Just a Pause

[WSJ] 2.5 Billion Pounds of Meat Piles Up in U.S. as Production Grows, Exports Slow

[WSJ] China’s Global Building Spree Runs Into Trouble in Pakistan

[FT] G20 finance ministers expose schism in global trade

[FT] Renminbi weakness is a game changer for Asian currencies

[FT] Collapse of Chinese peer-to-peer lenders sparks investor panic

Sunday's News Links

[BloombergQ] Global Growth Less Synchronized, More Uncertain, G-20 Draft Says

[BloombergQ] China's Luck on Yuan Devaluation Risks Running Out on Trump Ire

[BloombergQ] BOJ Debating How to Keep Policy Sustainable, Reduce Side Effects

[Reuters] Japan official urges caution over Trump's complaint on strong dollar

[Reuters] Japan's Aso voices concern about capital outflows from China, emerging market

[BloombergQ] Iran Warns Trump Not to Threaten Country's Oil Exports

[Reuters] Iran's Rouhani warns Trump about 'mother of all wars'

[WSJ] Prolonged Slump in Bond Liquidity Rattles Markets

[WSJ] Costs Are Crashing the Party for Manufacturers

Saturday's News Links

[Reuters] Trump not trying to intervene in currency markets: Mnuchin

[Reuters] Wall Street braces for tariff fallout as S&P 500 companies report

[Axios] Mnuchin echoes Trump on hitting China with massive tariffs

[[Reuters] US Treasury Secretary Mnuchin watching Chinese yuan weakness for manipulation

[BloombergQ] Trump Lines Up Powell as Scapegoat If Tax, Trade Moves Sour

[USAT] Warning signs rise for an end to stock market's potential record-setting bull run

[The Hill] The Fed must be insulated from Trump's political objectives

[CNN] CIA official: China wants to replace US as world superpower

[WSJ] Mnuchin Says He ‘Wouldn’t Minimize’ Chance of Tariffs on All Chinese Imports

[WSJ] U.S. and China Match Whiffs in Trade Battle

[FT] Full-scale trade war looms closer

[FT] Bond yields rise on fears of Japanese policy change

Weekly Commentary: Intimidate Nobody

Strangely perhaps, but late in the week my thoughts returned to James Carville's 1992 comment: "I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody."

Things have changed so profoundly since then, though I get no sense that many appreciate the momentous ramifications. It seems like ancient history - the bond market king of imposing discipline. Bonds maintained an intimidating watchful eye. No crazy stuff - from politicians, central bankers or corporate managements. The bond market of old would have little tolerance for $1.0 TN deficits, QE or a prolonged boom in BBB corporate debt issuance. Contemporary markets seem to have only a burgeoning desire to tolerate.

July 19 - Reuters (Trevor Hunnicutt and Saqib Iqbal Ahmed): "Donald Trump's comments that a strong dollar 'puts us at a disadvantage' caused an instant fall in the greenback on Thursday and marked another example of the U.S. president commenting directly - and sometimes contradictorily - on the country's currency. Talking directly about the dollar is a break with typical practice by U.S. presidents, who are wary of being seen as interfering directly with financial markets… 'There are certain comments most presidents wouldn't make,' said Michael O'Rourke, chief market strategist at JonesTrading. 'They'd defer monetary policy to the Fed and the dollar to the Treasury secretary. But Donald Trump is not most presidents.'"

July 19 - CNBC (Jeff Cox): "President Donald Trump's move to criticize the Federal Reserve is almost without precedent in a nation that places a high priority on the independence of monetary policy. Almost all of Trump's predecessors steered clear of Fed critiques in the interest of making sure that interest rates were set to whatever was best for the economy and not to boost anyone's political fortunes. The Trump administration, of course, has been anything but typical, and the Trump comments, if anything, were consistent with a president who cares little for convention and is willing to speak his mind on virtually anything. 'Somebody would say, 'Oh, maybe you shouldn't say that as president,' Trump said… 'I couldn't care less what they say, because my views haven't changed.'"

July 19 - Bloomberg (Christopher Condon, Craig Torres and Jeanna Smialek): "President Donald Trump criticized the Federal Reserve's interest-rate increases, breaking with more than two decades of White House tradition of avoiding comments on monetary policy out of respect for the independence of the U.S. central bank. 'I'm not thrilled' the Fed is raising borrowing costs and potentially slowing the economy, he said... 'I don't like all of this work that we're putting into the economy and then I see rates going up.' The dollar relinquished gains from earlier in the day and Treasury yields dropped following the president's remarks."

The 1992 bond market would have recoiled from even the notion of a U.S. President criticizing the Fed, talking down the dollar or kicking sand in the faces of both allies and major foreign holders of our debt. Considering the backdrop, heightened discussion of market complacency is understandable - and long overdue. Why do today's markets - bonds and otherwise - not respond as they would have traditionally? Why has the idea of markets actually imposing discipline turned into such a humorless joke? Discipline? Heck, there's not even a reaction.

From the Fed's Z.1, Total (Debt and Equity) Securities ended this year's first quarter at a record $89.0 TN, or 446% of GDP. For comparison, Total Securities began 1992 at $13.3 TN, or 215% of GDP - only to end the nineties at 360% of GDP ($34.8TN). The Greenspan Federal Reserve championed a historic shift to "activist" central bank management of "market"-based finance. Pure genius and indeed miraculous. The economy would massively expand the supply of Credit and equities - and no amount of new supply would slow the dramatic inflation in securities prices. Policymakers found themselves with this all-powerful new lever for wealth formulation.

This New Age market finance proved highly unstable. No worries; the Fed would loosen financial conditions with only the wink of a rate cut, as a captive audience of speculators eager to leverage debt securities fixated on every policy twitch. The GSEs were also there to provide increasingly speculative markets a New Age liquidity backstop, with their ballooning balance sheets a harbinger of what was to come from the Federal Reserve and global central bank community. If Fed rate cuts and massive GSE liquidity don't suffice, there's always government deficit spending and bailouts.

The Federal Reserve and Washington thoroughly abused market-based finance. Along the way, unsound "money" and deeply flawed policy doctrine ensured markets turned increasingly dysfunctional. Not only did they not provide a disciplining mechanism, they became a complicit tool to Washington's power grab. The Treasury market essentially became a bet on prospective monetary policy easing. And as Bubble Dynamics increasingly commanded stock and real estate prices, Treasury bonds essentially became the go-to instrument for betting on (or hedging against) bursting Bubbles. "Excess begets excess." This was especially the case after Dr. Bernanke trumpeted the benefits of "helicopter money" and the "government printing press".

Long before the financial crisis, I argued that "activist" central banking was on a very slippery slope. The evolution of New Age Finance took a giant leap with chairman Bernanke's implementation of zero rates and QE. The Fed's move to reflate the system through inflated market prices essentially ended the securities markets as mechanisms of self-adjustment and correction. Market discipline was dead. Today, financial markets now chiefly operate as a tool of government ("government finance quasi-Capitalism").

This complex story turned only more convoluted as the world moved aggressively to adopt U.S.-style policies and, not to be left hopelessly behind, market-based finance. Are the profound changes in monetary management and the rise of the "strongman" politician mere coincidence? I would imagine Greenspan and Bernanke quietly abhor the rise of populism. Do they feel any sense of responsibility?

With central bankers so celebrated for blatantly manipulating markets, of course politicians, dictators and the like would insist on getting a piece of the action. Inflating financial markets became essential to power - economic, political and geopolitical. And as finance became integral to economic growth and the global power play, why not use financial sanctions or the threat of financial repercussions to dictate nation-state behavior? And, over time, attaining financial wealth became an absolute prerequisite for wielding geopolitical power and influence.

The old military variety appears almost feeble standing next to the contemporary Financial Arms Race. And if you seek dominance - domestically, regionally and/or internationally - you had better get a tight rein on the securities markets - whether you're in Washington, Ankara, Moscow or Beijing. Beijing (and it's "national team") moved ahead in this regard, but it would appear Washington is today keen to play catch up. As market-based finance has commandeered the world, the centers of global power have moved to take command of the markets.

July 17 - Wall Street Journal (Nick Timiraos): "Federal Reserve Chairman Jerome Powell delivered an upbeat assessment of the economy and said it justified continued interest rate increases. But he opened the door to a potential policy shift and outlined risks if escalating trade tensions result in permanently higher tariffs. Mr. Powell has mostly sidestepped recent questions on trade policy because he says it is outside of the Fed's responsibilities. He offered words of caution Tuesday… 'In general, countries that have remained open to trade, that haven't erected barriers including tariffs, have grown faster. They've had higher incomes, higher productivity,' said Mr. Powell. 'And countries that have gone in a more protectionist direction have done worse.' Mr. Powell affirmed the Fed's plans to continue with gradual rate increases…"

I'd be curious to know if it was Chairman Powell's trade comments that provoked the first presidential criticism of the Federal Reserve since Richard Nixon. My hunch would be that the administration is crafting a strategy to direct blame at the Federal Reserve in the event the stock market begins to unravel. I cringed Thursday when Larry Kudlow called out Chinese President Xi as personally responsible for the lack of fruitful Chinese trade negotiations. Count me quite skeptical that this kind of pressure will prove an adept negotiating ploy.

This game of chicken is turning more dangerous, and perhaps the administration is preparing to scapegoat the Federal Reserve. I personally find the denigration of U.S. institutions most regrettable. The Fed down the road will have enough problems maintaining public trust and confidence. And with short rates not yet even above 2%, the thought that the Fed is already getting pulled into the muck creates a very uncomfortable feeling. My unease only worsened with the President's strong dollar "puts us at a disadvantage" comment.

Am I the only one that finds it ironic that Russia recently dumped most of its Treasury holdings? The administration seems to save its vitriol for countries with large holdings our of debt instruments. Call me old fashioned, but I suggest treating one's creditors with at least a modicum of respect. Ten-year Treasury yields jumped seven bps Friday, as the dollar was being pressured by the President's comments. If the administration has begun buckling in for a dicey game of chicken, it would be wishful thinking not to contemplate Treasuries and the dollar as possible collateral damage.

It was another extraordinary week. I'll leave it to others to get political. Looking at recent developments, one would see strong support for the view that the President is imploding. Or, one wouldn't see… Either way, he appears emboldened and certainly in no mood for backing down on anything. Markets just take it all in - and exhale calmly. Securities markets have grown fond of disruption (will tend to keep central bankers in check). The threat of a trade war is tolerable - so long as we don't see an actual smash up. Seems reasonable to assume they're not completely reckless, doesn't it? The President is, after all, keen for higher markets, as are leaders around the globe. Markets are keen to accommodate.

July 20 - CNBC (Tae Kim): "President Donald Trump said the stock market rally since his election victory gives him the opportunity to be more aggressive in his trade war with China and other countries. 'This is the time. You know the expression we're playing with the bank's money,' he told CNBC's Joe Kernen… The president has a big cushion. The S&P 500 is up 31% since Trump's win on Election Day, Nov. 8, 2016, through Thursday… Trump added the market would likely be much higher if he didn't escalate the trade issues with China and the rest of the world. 'We are being taking advantage of and I don't like it,' he said. 'I would have a higher stock market right now. … It could be 80% [since the election] if I didn't want to do this.'"

"Still dancing" - spoken infamously in the Summer of 2007. Summer 2018: "We're playing with the bank's money." "The bank's money" as in "the house's" money at a casino? Or "the bank's money" as in central bank "money"? Either way, it's apparently worth risking…

I'm fond of saying how crazy things get near the end of Bubbles. Convinced this is History's Greatest Bubble, I've been anticipating a pretty astonishing variety of "crazy." Watching this all unfold with increasing trepidation, I sense an important line has been crossed. It's time to retire "crazy" - find a replacement that conjures up something more foreboding - more disturbing. And markets, well, they're seemingly fine with it all; at times almost giddy. And that's the fundamental problem: Dysfunctional markets continue to promote incredibly risky policy behavior - the polar (bear) opposite of imposing discipline.

The central banks' "slippery slope" has led us to an ominous place. "Strongmen" now believe it's within their domain to dictate the markets, interest rates and currency levels. All the while, it's regressed into an unprecedented global Bubble replete with a Global Financial Arms Race. Markets trade as if they fully expect all governments to absolutely, at all cost, safeguard their respective financial wealth (i.e. Bubbles). Remember "the West will never allow a Russian collapse"? And "Washington will never allow a housing bust"? Global policymakers will never allow another major crisis. Well, let's see how this game of chicken between President Trump and President/General Secretary Xi plays out.


For the Week:

The S&P500 was little changed (up 4.8% y-t-d), while the Dow added 0.2% (up 1.4%). The Utilities declined 0.5% (down 0.9%). The Banks jumped 2.3% (up 0.2%), and the Broker/Dealers rose 1.9% (up 5.3%). The Transports gained 1.8% (up 1.2%). The S&P 400 Midcaps were little changed (up 5.1%), while the small cap Russell 2000 added 0.6% (up 10.5%). The Nasdaq100 slipped 0.3% (up 14.9%). The Semiconductors rose 1.4% (up 8.5%). The Biotechs were about unchanged (up 21.1%). With bullion down $9, the HUI gold index declined 0.9% (down 10.6%).

Three-month Treasury bill rates ended the week at 1.93%. Two-year government yields added a basis point to 2.59% (up 71bps y-t-d). Five-year T-note yields rose four bps to 2.77% (up 56bps). Ten-year Treasury yields gained seven bps to 2.89% (up 49bps). Long bond yields jumped nine bps to 3.03% (up 29bps). Benchmark Fannie Mae MBS yields rose five bps to 3.61% (up 62bps).

Greek 10-year yields increased two bps to 3.85% (down 23bps y-t-d). Ten-year Portuguese yields gained five bps to 1.78% (down 16bps). Italian 10-year yields rose four bps to 2.59% (up 57bps). Spain's 10-year yields gained five bps to 1.31% (down 25bps). German bund yields added three bps to 0.37% (down 6bps). French yields jumped six bps to 0.68% (down 11bps). The French to German 10-year bond spread widened three to 31 bps. U.K. 10-year gilt yields fell four bps to 1.23% (up 4bps). U.K.'s FTSE equities index added 0.2% (down 0.1%).

Japan's Nikkei 225 equities index increased 0.4% (down 0.3% y-t-d). Japanese 10-year "JGB" yields slipped one basis point to 0.035% (down 1bp). France's CAC40 declined 0.6% (up 1.6%). The German DAX equities index dipped 0.2% (down 2.8%). Spain's IBEX 35 equities index was little changed (down 3.2%). Italy's FTSE MIB index declined 0.4% (down 0.3%). EM equities were mixed. Brazil's Bovespa index rallied 2.6% (up 2.8%), and Mexico's Bolsa gained 1.0% (down 0.9%). South Korea's Kospi index declined 0.9% (down 7.2%). India’s Sensex equities index was about unchanged (up 7.2%). China’s Shanghai Exchange was little changed (down 14.5%). Turkey's Borsa Istanbul National 100 index recovered 4.7% (down 18.4%). Russia's MICEX equities index sank 4.2% (up 6.5%).

Investment-grade bond funds saw inflows of $2.021 billion, and junk bond funds had inflows of $260 million (from Lipper).

Freddie Mac 30-year fixed mortgage rates slipped a basis point to 4.52% (up 56bps y-o-y). Fifteen-year rates declined two bps to 4.00% (up 77bps). Five-year hybrid ARM rates added a basis point to 3.87% (up 66bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-yr fixed rates down two bps to 4.54% (up 48bps).

Federal Reserve Credit last week increased $5.4bn to $4.256 TN. Over the past year, Fed Credit contracted $184bn, or 4.1%. Fed Credit inflated $1.445 TN, or 51%, over the past 298 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt gained $2.2bn last week to $3.408 TN. "Custody holdings" were up $88.4bn y-o-y, or 2.7%.

M2 (narrow) "money" supply declined $11.8bn last week to $14.128 TN. "Narrow money" gained $526bn, or 3.9%, over the past year. For the week, Currency increased $0.9bn. Total Checkable Deposits rose $18.6bn, while Savings Deposits dropped $24.8bn. Small Time Deposits added $2.4bn. Retail Money Funds increased $1.0bn.

Total money market fund assets declined $5.0bn to $2.846 TN. Money Funds gained $229bn y-o-y, or 8.7%.

Total Commercial Paper dropped $12.6bn to $1.062 TN. CP gained $92bn y-o-y, or 9.5%.

Currency Watch:

The U.S. dollar index slipped 0.2% to 94.476 (up 2.6% y-t-d). For the week on the upside, the Brazilian real increased 2.2%, the Swiss franc 1.0%, the Japanese yen 0.9%, the New Zealand dollar 0.8%, the euro 0.3%, the Swedish krona 0.3%, the Singapore dollar 0.2% and the Canadian dollar 0.1%. For the week on the downside, the South African rand declined 1.0%, the South Korean won 0.9%, the Norwegian krone 0.8%, the Mexican peso 0.7%, the British pound 0.7% and the Australian dollar 0.1%. The Chinese renminbi fell 1.15% versus the dollar this week (down 3.88% y-t-d).

Commodities Watch:

The Goldman Sachs Commodities Index declined 1.2% (up 3.4% y-t-d). Spot Gold slipped 0.8% to $1,232 (down 5.5%). Silver lost 1.7% to $15.549 (down 9.3%). Crude dropped $2.75 to $68.26 (up 13%). Gasoline dropped 1.8% (up 15%), while Natural Gas increased 0.2% (down 7%). Copper declined another 0.7% (down 17%). Wheat rallied 3.8% (up 21%). Corn recovered 4.0% (up 5%).

Trump Administration Watch:

July 20 - CNBC (Jeff Cox): "President Donald Trump has indicated that he is willing to slap tariffs on every Chinese good imported to the U.S. should the need arise. 'I'm ready to go to 500,' the president told CNBC's Joe Kernen… The reference is to the dollar amount of Chinese imports the U.S. accepted in 2017 - $505.5 billion to be exact, compared with the $129.9 billion the U.S. exported to China… Thus far in the burgeoning trade war, the U.S. has slapped tariffs on just $34 billion of Chinese products, which China met with retaliatory duties… Trump's comments point to a willingness to push the envelope as far as the U.S. needs to get Chinese tariff concessions, along with a pledge to stop allegedly stealing American technology."

July 18 - CNBC (Michael Sheetz): "President Donald Trump's top economic advisor Larry Kudlow said China trade talks have stalled… 'I do not think President Xi has any intention of following through on any of the discussions we've made and I think the President is so dissatisfied with China on these so-called talks that he is keeping the pressure on and I support that,' Kudlow said. Kudlow pointed to the gap between U.S. and Chinese tariffs, saying 'our average tariff is about' 2.5% while 'China's average tariff is about 14%.' 'Here's my solution, and the president agrees with this: Lower your barriers,' Kudlow said. 'We will export like crazy.' Kudlow added that President XI of China himself is 'holding the game up' but that overall the country would like to make a deal."

July 18 - CNBC (Brian Schwartz): "Steve Bannon, former top advisor to Donald Trump, said Wednesday that the U.S. has been embroiled in a trade conflict with China for decades. 'We're at war with China,' Bannon said, praising Trump for taking on the Chinese. 'We're winning.' Bannon was speaking at CNBC's Delivering Alpha… His appearance comes on the heels of a provocative statement he gave to CNBC on Tuesday in which he said Trump knows he needs to 'unite the West against the rise of a totalitarian China.' For Bannon, the war against China can only end in one way and that's with the U.S. as victors. 'How it ends is in victory. Victory is when they give all full access to their markets,' he said. Bannon says his message is still heard within the White House."

July 19 - CNBC (Mike Calia): "Peter Navarro, one of President Donald Trump's top trade advisors, said… that China is in a 'zero-sum game' with the rest of the world when it comes to trade. Talking to CNBC's Joe Kernen…, he argued that the U.S. needs to protect its interests in rapidly developing technologies. 'This is our future,' Navarro said, citing artificial intelligence, robotics and high-tech industries - all of which are Chinese priorities for the next decade, as well. 'Unfortunately, it's a zero-sum game now between China and the rest of the world, and what we need to do as a country is to work with the rest of the world' to ensure prosperity and high stock markets, he said."

July 20 - CNBC (Tae Kim): "President Donald Trump criticized the Federal Reserve's monetary policy again. 'The United States should not be penalized because we are doing so well. Tightening now hurts all that we have done. The U.S. should be allowed to recapture what was lost due to illegal currency manipulation and BAD Trade Deals. Debt coming due & we are raising rates - Really?' Trump said Friday on social media. Trump's latest comments come a day after his initial critical remarks about the Fed were revealed…"

July 20 - Wall Street Journal (Nick Timiraos and Harriet Torry): "President Donald Trump escalated his criticism of the Federal Reserve Friday, saying in a tweet that its efforts to raise short-term interest rates hurt the U.S. economic expansion, and he accused China and the European Union of manipulating their currencies to hurt the U.S. on trade. The tweets came shortly after CNBC broadcast an interview with Mr. Trump in which the president said he was prepared to raise U.S. tariffs on $500 billion worth of imports from China as part of his push to narrow U.S. trade deficits with China. In the same interview he said he wasn't happy about Fed rate increases. The president had previously been silent about Fed policy, in keeping with a long tradition…"

July 18 - Wall Street Journal (Chester Dawson and Joshua Zumbrun): "President Donald Trump stood by his threats to levy sweeping tariffs on automobile imports as a way to extract concessions from trading partners, despite opposition from the industry and discontent in Congress with the White House's proposal. Resistance to the tariffs is strong and growing. A coalition of foreign and domestic auto companies, along with auto dealers and auto-parts makers, released a letter on Wednesday urging Mr. Trump to refrain from the tariffs. A bipartisan group of 149 House members also urged the president not to move forward with the tariffs. Auto unions were among the few industry players offering qualified support for the tariffs."

July 18 - Reuters (Roberta Rampton and Lisa Lambert): "President Donald Trump said… the United States may hammer out a trade deal with Mexico, and then do a separate one with Canada later, sowing fresh doubts about the future of the North American Free Trade Agreement (NAFTA). 'We have had very good sessions with Mexico and with the new president of Mexico, who won overwhelmingly, and we're doing very well on our trade agreement,' Trump said…"

Federal Reserve Watch:

July 17 - Bloomberg (Craig Torres and Christopher Condon): "The Federal Open Market Committee, the Fed panel that sets interest rates, 'believes that -- for now -- the best way forward is to keep gradually raising the federal funds rate,' Powell said in prepared testimony before the Senate Banking Committee. 'We are aware that, on the one hand, raising interest rates too slowly may lead to high inflation or financial market excesses,' Powell said… 'On the other hand, if we raise rates too rapidly, the economy could weaken and inflation could run persistently below our objective.'"

July 18 - Bloomberg (Katia Dmitrieva and Christopher Condon): "The U.S. economic expansion rolled along and labor markets tightened in June and early July, even as tariffs heightened concern among manufacturers and boosted some producer prices, a Federal Reserve survey showed. The central bank's Beige Book economic report… said 10 of the districts reported 'moderate or modest' growth. 'Manufacturers in all districts expressed concern about tariffs and in many districts reported higher prices and supply disruptions that they attributed to the new trade policies… All districts reported that labor markets were tight and many said that the inability to find workers constrained growth.'"

July 17 - Wall Street Journal (Michael S. Derby): "Federal Reserve Bank of Kansas City President Esther George said… more rate rises are needed, and she warned there may be signs of looming stress inside the financial system. 'Gradual further increases in our policy rate will be necessary to return policy to a neutral stance, although there is considerable uncertainty about exactly how far or fast we need to go,' Ms. George said…"

July 17 - Financial Times (Gillian Tett and Joe Rennison): "It would be a mistake to think that the unexpected flattening of the US yield curve signals a looming recession, Ben Bernanke, the former chairman of the Federal Reserve has warned… 'Historically the inversion of the yield curve has been a good [sign] of economic downturns [but] this time it may not,' because the normal market signals have been distorted by, 'regulatory changes and quantitative easing in other jurisdictions', he said, speaking with former treasury secretaries Hank Paulson and Timothy Geithner at an event to discuss lessons from the 2008 financial crisis. 'Everything we see in terms of the near-term outlook for the economy is quite strong,' he added."

U.S. Bubble Watch:

July 18 - Wall Street Journal (Nick Timiraos): "The Trump administration expects annual budget deficits to rise nearly $100 billion more than previously forecast in each of the next three years, pushing the federal deficit above $1 trillion starting next year. The revisions… reflect the cost of federal spending increases agreed to earlier this year and higher interest payments. The budget proposal released in February showed annual deficits totaling $7.1 trillion over 10 years. The latest revisions increase these cumulative deficits by $926 billion, to $8 trillion."

July 19 - Reuters (Lucia Mutikani): "The number of Americans filing for unemployment benefits dropped to a more than 48-1/2-year low last week as the labor market strengthens further, but trade tensions are casting a shadow over the economy's outlook."

July 17 - Wall Street Journal (Nigel Chiwaya and Lauren Pollock): "U.S. stock-trading volumes have tumbled this month, despite escalating trade tensions with China, a cooling global growth outlook and fears about the impact of rising interest rates. Activity peaked in February as the stock and bond markets swooned. But volumes since then have been relatively muted, with the number of shares changing hands across the New York Stock Exchange and Nasdaq falling on Friday to the lowest level for a full trading session this year."

July 16 - Wall Street Journal (Justin Lahart and Aaron Back): "Sure, Americans are spending more, but where are they getting the money? Retail sales were solid in June, rising 0.5% from a month earlier… More important, May's gain was revised to a strong 1.3% from 0.8%, with nearly every category of spending higher. The data added to evidence that the economy is growing rapidly. Following the sales report, economists at Barclays pushed their estimate of second-quarter gross-domestic-product growth to 5.2% from 5%. The personal saving rate-the share of after-tax income that doesn't get spent-was previously reported at 3.2% in May versus 3.8% a year earlier, and it seems likely it will be revised even lower."

July 18 - Reuters (Ivan Levingston): "Rising uncertainty in markets didn't stop the biggest U.S. banks from hauling in record revenue from investment banking. Wall Street's largest firms posted a surprise jump in advisory and underwriting fees that took their total to $8.54 billion. That, along with better-than-expected trading gains and the lowest level of bad loans in almost a decade, led the six biggest U.S. lenders to report second-quarter earnings that mostly surpassed estimates."

July 18 - Financial Times (Robin Wigglesworth): "Inflows into technology-focused funds have surpassed the $20bn mark for the year so far, despite rising concerns among some fund managers that the 'tech trade' is overextended. Global equity funds dedicated to technology stocks took in another $673m in the week ending July 18 - the 12th straight week of inflows, bringing the total for 2018 to $20.3bn, according to EPFR. That eclipses the $18.3bn raised in 2017 as a whole, which was a record for a calendar year."

July 19 - Bloomberg (Jeanna Smialek): "American businesses want to keep trucking along, but they're running into a persistent roadblock: A driver shortage amid high demand for freight services. The Federal Reserve's July Beige Book, a collection of anecdotes from across the Fed's regional bank districts, showed 25 mentions of 'truck' or 'trucking,' up from just 10 a year earlier. For months, businesses have been expressing anxiety on earnings calls about rising shipping costs and capacity constraints in the trucking industry as a hot economy stokes demand."

July 18 - Reuters (Lucia Mutikani): "U.S. homebuilding fell to a nine-month low in June and permits for future construction declined for a third straight month, dealing a blow to the housing market as it struggles with a dearth of properties available for sale. 'We're seeing pressure on both sides of the market, from increasingly expensive inputs on the supply side to prices that are charging ahead of wage growth on the demand side, and the result is that neither builders nor buyers can keep up,' said John Pataky, executive vice president at TIAA Bank…"

July 17 - Wall Street Journal (Keiko Morris): "Student housing, manufactured homes and industrial property were the top performing commercial real-estate sectors in the past 12 months, according to new data from Green Street Advisors… The Commercial Property Price Index was at 100 in August 2007, its pre-2008 crash high. It hit a low of 61.2 in May 2009. Since then, the index more than doubled as the improving economy pushed rents and occupancies higher and demand strengthened from yield-hungry investors who could borrow money easily due to low interest rates."

July 16 - Financial Times (Javier Espinoza): "Private equity groups are raising money at the fastest rate in more than a decade. Buyout executives are rushing to tap investor demand just as fears grow of a market correction. The average time PE funds, including those investing in infrastructure and real estate, are taking to raise money has fallen to 12 months - from almost two years in 2010 - the quickest pace since at least 2006, according to an analysis by Pitchbook, a data provider. But the figures also show there are fewer funds raising cash from investors in the US - from 328 in 2014 to 271 last year and 111 by the end of June this year."

China Watch:

July 18 - Bloomberg: "China accused American officials of making false accusations as it fired back against a claim Xi Jinping is blocking talks with the U.S. over the trade war between both nations. The rebuke from China's foreign ministry highlights the deepening impasse between the world's two biggest economies over allegations of unfair trade. 'In front of the whole world some U.S. officials are turning facts on their head and making false accusations,' Chinese foreign ministry spokeswoman Hua Chunying said… 'This is beyond the imagination of most people and is shocking.'"

July 19 - Bloomberg: "China's banks are being offered cash and given instructions to boost lending, adding to evidence of a shift toward greater official support for the economy. The banking and insurance regulator has asked financial institutions to 'earnestly implement' plans to help reduce financing costs for small firms, saying big lenders should 'take the lead'… Meanwhile, the People's Bank of China plans to use its Medium-term Lending Facility to encourage bank loans and investment in lower-rated corporate debt, according to China Business News… 'We have seen strong indications that Beijing could be shifting from mere policy-easing measures to a new round of stimulus to avert a credit squeeze and economic growth slowdown,' Lu Ting, chief China economist at Nomura… wrote…"

July 19 - Bloomberg: "Chinese companies are facing a reality check after years of ramping up debt. The deleveraging campaign that President Xi Jinping began in 2016 to curb risks in the nation's financial markets has cracked down on shadow financing and tightened rules on asset management. As a result, firms are having a tough time raising new funds to repay existing debt, leading to a record amount of bond defaults this year… Chinese companies have been piling on debt for at least a decade, ever since the leadership team under Xi's predecessor unleashed a record borrowing binge in response to the global financial crisis. Corporate debt to GDP ratio surged to a record 160% at the end of 2017 from 101% 10 years earlier. Xi and his lieutenants have vowed to deflate asset bubbles by, among other steps, reining in excessive corporate borrowing."

July 15 - Bloomberg: "China's economic expansion slowed in line with expectations… Gross domestic product increased 6.7% in the second quarter from a year earlier. That was the slowest pace since 2016 and down slightly from the 6.8% pace in the previous quarter. Investment growth and industrial output also slowed in June. Industrial output rose 6% last month from a year earlier, versus the forecast of 6.5%... Retail sales increased 9% in June, compared with the forecast 8.8%. Fixed-asset investment climbed 6% in the first six months, the same as forecast. The urban monthly surveyed unemployment rate stood at 4.8% at end-June."

July 16 - Reuters (Yawen Chen and Se Young Lee): "China's new home prices accelerated to their fastest pace in almost two years in June, with buyer demand in bigger cities resilient in the face of fresh curbs against speculation, a sign more restrictions may be needed. Average new home prices in China's 70 major cities rose 1% in June from a month earlier, higher than the previous month's reading of 0.7%... The monthly growth was the highest since October 2016 and marks 38 straight months of price gains."

July 17 - Financial Times (Henny Sender): "International Investors are too fixated on trade tension between the US and China. Instead, they would do well to take heed as Beijing continues a war against non-bank lenders and fintech companies that is tightening liquidity and spooking investors in mainland China. Money remains tight on the mainland even as financial stability has replaced deleveraging as the official order of the day. Speaking at the Lujiazui forum in Shanghai at the end of June, Guo Shuqing, the head of the China Banking and Insurance Regulatory Commission, warned that there would be more corporate defaults in China, adding that it would actually be a good thing as a sign of market discipline. There are already signs that companies are finding it harder to roll over debt and refinance loans, as interest rates rise and earnings slide. There have been 22 corporate defaults this year…"

July 17 - Financial Times (James Kynge): "A majority of Chinese consumers would be prepared to boycott US goods in the event of a trade war with Washington, a survey has found, signalling the high stakes in the escalating trade conflict… The survey found that 54% of 2,000 respondents in 300 cities across China would 'probably' or 'definitely' stop buying US-branded goods 'in the event of a trade war'. Just 13% said they would not. The remaining 33% said they were unsure or did not at present buy US branded goods…"

July 16 - Financial Times (Don Weinland): "Investors have warned of growing systemic risks in China's $1.09tn money market fund industry, as funds buy up bank credit despite a surge in bad debt this year. Comparably high yields and low risk at Chinese money market funds in recent years have made the industry a favourite among retail investors in the country. Assets under management have grown from Rmb600bn at the end of 2012 to an estimated Rmb7.3tn ($1.09TN) in March, making it the second-largest market in the world after the US."

July 20 - Bloomberg: "The shakeout in China's $192 billion peer-to-peer lending industry is accelerating at a rapid clip. At least 118 platforms have failed this month through early Friday, according to Shanghai-based Yingcan Group, whose tally for July stood at 57 just three days ago. The number of failures, which includes platforms that have halted operations or come under police investigation, is already the highest in two years with more than a week left in the month. China's clampdown on financial risk has weighed on P2P platforms for the past two years, but the pressure has intensified in recent months after the country's credit markets tightened and the banking regulator issued an unusual warning to savers that they should be prepared to lose all their money in high-yield products."

July 16 - New York Times (Li Yuan): "Wang Shidong and his two partners were still finishing graduate school two years ago when they raised $45 million in less than two months to start a venture capital fund. His wife, an elementary-school teacher in their home village, was 'terrified' that he got to manage so much money… Things are different this year. After three months and visits with more than 90 potential investors all over China, Mr. Wang and his partners raised only $3 million for a second fund. In June, they shut down the firm. Their fund, East Zhang Hangzhou Investment Management Ltd., was one of nearly 10,000 founded over the past three years amid a technology gold rush powered in part by China's government-guided economic growth engine. Now they have become the latest sign that China's engine is slowing down."

July 18 - Financial Times (Louise Lucas): "In China, a national identity card is required for almost everything, from buying a train ticket, to opening a bank account to using an internet café. They are also now part of a pioneering experiment in the use of facial recognition technology. In a scheme that started last year in the southern city of Guangzhou, the Chinese government is allowing users of WeChat to link their ID cards to the ubiquitous social media app created by tech titan Tencent… The pilot project, due to be rolled out around the country, highlights one of the most intriguing aspects of China's headlong push into the world of artificial intelligence and other frontier technologies: the relationship between the Chinese Communist party and the country's ambitious and enormous tech companies."

EM Watch:

July 19 - Wall Street Journal (Manju Dalal and Mike Bird): "Asia's junk-bond market, anxious over China's debt problem, is showing cracks after years of rampant growth. Falling prices for below-investment-grade Asian bonds have sent yields sharply higher, leaving creditors nursing big paper losses and clouding the prospects for refinancing maturing debt… When 2018 began, interest rates on dollar-denominated Asian junk bonds broadly matched the global market, according to ICE Bank of America Merrill Lynch indexes. Now the yield on the Asian index-representing $138.1 billion in government and corporate debt-runs nearly 2 percentage points above the world average, having recently topped 9%."

Global Bubble Watch:

July 16 - Wall Street Journal (Julie Wernau): "Companies in the emerging world are on a dollar-debt diet. Issuance of dollar-denominated bonds from emerging-market companies is down 14% year-to-date versus the same period last year, according to Dealogic. Local currency debt is on the rise, up 4% year-to-date versus the same period last year, as corporates turn inward for financing amid widespread selling among foreign investors. The decline comes as rising U.S. interest rates are lifting borrowing costs for emerging markets… That's sparked big selloffs in the currencies of countries like Argentina, Hungary, Turkey, Poland and Chile, making it more difficult for them to pay back dollar debts. Corporate defaults in emerging markets have tripled so far in 2018, according to S&P Global Ratings… Dollar-debt issuances among corporates in the emerging world reached a record high in 2017, according to Dealogic. Hard currency debt in emerging markets peaked in the first quarter of 2018 at $5.5 trillion, with corporates accounting for 78% of that…"

July 17 - Reuters (Stephanie Nebehay): "The credibility and survival of the World Trade Organization (WTO) is under 'serious threat' as major economies put up protectionist barriers, independent experts warned… The report issued by the Bertelsmann Foundation comes amid a deepening trade dispute between China and the United States which has engulfed other major trading partners."

July 18 - Wall Street Journal (Asjylyn Loder): "The deluge of money flooding into and out of passive investments can have a very active effect on stock prices, new research says. The report, from the data and research arm of S&P Global Inc., a major provider of financial-market indexes, is the latest salvo in a long-running debate about the pressure index funds exert on the stocks and bonds they are meant to track. The resurgence of market turbulence this year intensified concerns that an exodus from index funds could trigger an avalanche of forced selling. Assets in passive funds that try to match the market rather than beat it have quintupled in the past decade to $6.9 trillion… Exchange-traded funds… have been linked in recent years to unusual price swings in oil, Japanese equities and high-yield debt."

July 17 - Wall Street Journal (Dan Gallagher): "By being so big and still growing so fast, the world's largest technology companies are in uncharted territory. But pulling that off has been expensive-and will be getting even more so. Combined annual revenue for the world's five largest companies by market value already tops the gross domestic product of 90% of the world's countries… But the cost to generate that growth is going upward as well-at a faster clip. Combined spending on research and development is expected to rise 24% in 2018, while capital expenditures for the five are expected to surge by 48% compared with last year. For Big Tech, these expenses reflect the rising costs of running their current businesses while also developing new ones to stay more competitive…"

July 15 - Financial Times (Chris Flood): "State Street suffered net outflows of more than $7bn from its exchange traded fund arm in June as fears about a global trade war blunted growth across the ETF industry in the first half of 2018… This has led to a marked slowdown in new business for asset managers globally. Worldwide inflows into ETFs (funds and products) dropped to $223bn in the first half of 2018, down more than a third on the same period last year… The sharp decline in growth comes after four consecutive years of record inflows into ETFs, which have attracted the bulk of new money in the global asset management industry."

July 16 - Bloomberg (Andrew Mayeda): "Escalating trade tensions are threatening to derail a global upswing that's already losing momentum amid weaker-than-expected growth in Europe and Japan as financial markets seem complacent to the mounting risks, the International Monetary Fund warned. The IMF kept its global forecast unchanged Monday in the latest update to its Global Economic Outlook. The world economy will grow 3.9% this year and next… The pace this year would be the fastest since 2011."

July 19 - Bloomberg (Brian Louis): "Wildfires, hurricanes, tornadoes, hail storms, Nor'easters and mudslides. A string of disasters has pummeled the biggest U.S. insurers over the past year, and the second quarter was no exception. Allstate Corp. estimated its pretax catastrophe losses at $906 million for the period, the most in a year, and Travelers Cos. reported its sixth-straight quarter in which such costs rose above $300 million. The series of tragic weather events 'exceeded our historical experience and our expectations,' Travelers Chief Executive Officer Alan Schnitzer said…, after reciting a list of catastrophes that struck the U.S. 'We haven't seen a string like that in the last decade.'"

Europe Watch:

July 16 - Reuters: "Germany's foreign minister said on Monday Europe could not rely on Donald Trump and needed to close ranks after the U.S. president called the European Union a 'foe' with regard to trade. 'We can no longer completely rely on the White House,' Heiko Maas told the Funke newspaper group. 'To maintain our partnership with the USA we must readjust it. The first clear consequence can only be that we need to align ourselves even more closely in Europe.' He added: 'Europe must not let itself be divided however sharp the verbal attacks and absurd the tweets may be.'"

July 17 - New York Times (Jack Ewing): "President Trump is inciting a trade war, undermining NATO and painting Europe as a foe. It's no wonder, then, that the European Union is looking elsewhere for friends. On Tuesday in Tokyo, it signed its largest trade deal ever, a pact with Japan that will slash customs duties on products like European wine and cheese, while gradually reducing tariffs on cars. The agreement will cover a quarter of the global economy - by some measures the largest free-trade area in the world - and is the latest in a string of efforts either concluded or in the works with countries like Australia, Vietnam and even China. The deal with Japan, and the others being negotiated, point to a more assertive Europe, one that is looking past the frosty ties with the United States…"

July 20 - Bloomberg (John Ainger): "Italian bonds and stocks fell on concern that Finance Minister Giovanni Tria, whose appointment brought a relative calm to the nation's markets, may be forced to step down. Short-end Italian bonds led the declines after La Repubblica reported that the country's populist leaders were united in battle against Tria over nominations for the leadership of state lender CDP. Five Star Movement leader Luigi Di Maio and League chief Matteo Salvini were said to have gone so far as to 'threaten unofficially to use the weapon of seeking Giovanni Tria's resignation.'"

July 18 - Reuters (Foo Yun Chee): "European antitrust regulators fined Google a record 4.34 billion euro ($5bn)… and ordered it to stop using its popular Android mobile operating system to block rivals, a ruling which the U.S. tech company said it would appeal."

Japan Watch:

July 19 - Bloomberg (Connor Cislo and Emi Nobuhiro): "If the U.S. imposes tariffs on cars it can expect a stronger response from Japan than when it slapped levies on steel and aluminum shipments. That's the message from an interview… with Japanese Trade Minister Hiroshige Seko. Japan and the European Union are already working together to address President Donald Trump's protectionist trade policies, and need to cooperate even more closely on threatened auto tariffs, Seko said in Tokyo."

Fixed Income Bubble Watch:

July 19 - New York Times (Matt Phillips): "In the world of finance, there is one number that arguably matters more than any other. You can find it in the small print on adjustable-rate mortgages and private student loans, it is the basis for enormous corporate loans, and it underpins nearly $200 trillion of derivatives contracts. But it is on the way out, and Wall Street has not worked out how to replace it. The number in question is called Libor, which is short for the London interbank offered rate. Published daily, Libor is an interest rate benchmark, or the basis for many other interest rates. If you have heard of it, that might be because it was at the center of a market-manipulation scandal that resulted in jail time for some traders and billions of dollars in fines for many banks."

Leveraged Speculator Watch:

July 19 - Bloomberg (Melissa Karsh): "Investors pulled about $3 billion from hedge funds in the second quarter, the first quarterly outflow since early 2017. Macro hedge funds led net outflows in the period, with $2.8 billion leaving the strategy, according to… Hedge Fund Research Inc. The outflows were offset by equity hedge funds, which saw inflows of $2.4 billion."

July 19 - Financial Times (Robin Wigglesworth): "In November 2016, Vincent Deluard, a strategist at brokerage INTL FCStone, constructed a basket of stocks that failed to qualify for any of the five popular 'smart beta' exchange traded funds, vehicles that aim to beat the market over time by tilting towards a specific investment factor… Yet Mr Deluard's 'dumb beta' portfolio of 207 stocks has narrowly outperformed the smart beta ETF basket since then… Several popular investment factors have suffered a stinker this year, hammering the performance of many funds that surf them. But this is part of a broader, dismal picture for the 'quantitative' investment industry. Quant equity funds have lost 1% this year, while quant macro funds have fallen 4.2%...Given the soaring investor interest in algorithm-powered investment strategies in recent years, this is unquestionably disappointing."

Friday's News Links

[BloombergQ] Stocks, Dollar Decline as Trump Turns Up Rhetoric: Markets Wrap

[CNBC] US dollar falls as Trump accuses 'China, European Union and others' of manipulating their currencies

[CNBC] Trump says he's 'ready' to put tariffs on all $505 billion of Chinese goods imported to the US

[CNBC] Trump hits the Fed again in tweet: 'Tightening now hurts all that we have done'

[CNBC] Trump says stock market gains since election give him opportunity to wage a trade war: 'We’re playing with the bank's money'

[SCMP] China’s central bank preparing further policy easing to counter credit squeeze

[BloombergQ] Italian Markets Rattled After Tria's Future Is Thrown Into Doubt

[CNBC] 4 powerful weapons China has in its arsenal to win the US-China trade war

[BloombergQ] Yuan's Fallout for Markets Means No Summer Lull for Traders

[BloombergQ] China's P2P Platform Failures Surge as Panic Spreads in Market

[BloombergQ] Climate Change Is Disrupting the Planet’s Seasons

[BloombergSubscription] China Firms Went Deep in Debt. Here Come the Defaults

[WSJ] Trump Says He’s Ready to Impose Tariffs on $500 Billion in Chinese Imports

[WSJ] Trump’s Fed Outburst: All Downside, No Upside

[WSJ] U.S. Grain Prices Crunched by Trade Fears

[FT] Quant funds lose their shine as strategies falter

[FT] Henry Kissinger: ‘We are in a very, very grave period’

[FT] Inside China’s surveillance state