Friday, July 13, 2018

Weekly Commentary: $247 Trillion and (Rapidly) Counting

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I chronicled mortgage finance Bubble excess on a weekly basis. Relevant data were right there in plain sight, much of it courtesy of the Federal Reserve. Yet only after the Bubble burst did it all suddenly become obvious. Flashing warning signs were masked by manic delusions of endless prosperity and faith in the almighty "inside the beltway". These days, data for the global government finance Bubble is not as easily-accessible, though there is ample evidence for which to draw conclusions. It will all be frustratingly obvious in hindsight.

The Institute of International Finance is out with their latest data that, unfortunately, is not made available in detail to the general public. Global debt ended the first quarter at a record $247 Trillion, or 318% of GDP. Even after a decade of historic Credit inflation, global debt continues to expand at ("Terminal Phase") double-digit rates (11.1% y-o-y).

Global debt growth accelerated during the first quarter to $8.0 Trillion - and surged $30 Trillion over just the past five quarters. In a single data point not to be disregarded, Global Debt Has Expanded (a difficult to fathom) $150 Trillion, or 150%, Over the Past Ten Years. Actually, the trajectory of Bubble-period Credit expansion may seem rather familiar. It's been, after all, a replay of the reckless U.S. mortgage Credit episode, only on a much grander global scale.

July 10 - Financial Times (Jonathan Wheatley): "The amount of debt in the world increased by nearly $25tn in the year to the end of March, piling more pressure on a global financial system already struggling to deal with rising US interest rates, widening spreads for borrowers and a strengthening US dollar. The Institute of International Finance… said total debts owed by households, governments and financial and non-financial corporations amounted to $247.2tn at the end of March, up from $222.6tn a year earlier and an increase of nearly $8tn in the first quarter alone. 'The increase in the level of debt, both in absolute terms and relative to GDP, against a backdrop of tightening financial conditions, is, of course, a cause for concern,' said Hung Tran, the IIF's executive managing director… The IIF said the debts of non-financial corporations in EMs rose $1.5tn in the first quarter to $31.5tn, the equivalent of 94.4% of GDP…"

A few notable quotes from press reports:

"With global growth losing some momentum and becoming more divergent, and U.S. rates rising steadily, worries about credit risk are returning to the fore - including in many mature economies," the IIF said.

"Non-financial borrowers in the corporate sector, in the household sector, in the government sector having very high debt levels, will find it very costly and difficult to refinance and borrow more in order to sustain investment and consumption going forward. That is really causing growth to falter, so what I term headwinds to growth." IIF Executive Managing Director Hung Tran.

"For many emerging markets, which rely heavily on bank financing, higher borrowing costs for banks could be passed through to the corporate and household sectors, so something of a hidden risk in terms of this floating rate borrowing," said IIF Senior Director Sonja Gibbs.

Bloomberg (Alexandre Tanzi): "Government debt has risen most sharply in Brazil, Saudi Arabia, Nigeria and Argentina, according to the report. Of the four, U.S. dollar refinancing risk is particularly high for Argentina and Nigeria, where over three-quarters of redemptions will be in dollars. About $900 billion is in U.S. dollar-dominated emerging bonds/syndicated loans that will mature by 2020…"

July 10 - Yahoo Finance (Dion Rabouin): "'The pace is indeed a cause for concern,' IIF's Executive Managing Director Hung Tran told Yahoo… 'The problem with the pace and speed is if you borrow or if you lend very quickly … the quality of the credit tends to suffer.' That means more governments, businesses and individuals have been borrowing that could have trouble paying the money back. 'The quality of creditworthiness has declined sharply,' Tran added… Sonja Gibbs, IIF's senior director of the global capital markets department, noted that there was an increased risk of sovereign debt crises in a select few developed markets as a result of the increase of debt and financing costs. 'Government debt is higher than it was prior to the crisis and corporate debt as well,' Gibbs said… Gibbs added that the United States' debt growth was particularly worrisome, given that it has now grown to more than 100% of GDP. With the increases in spending from President Donald Trump and Congress, the U.S. will now have funding needs of 25% of its GDP. 'The U.S. really stands out here because … a lot of that is the expanding budget deficit as well as maturing debt,' Gibbs said. 'That's a lot of financing need affecting the market.'"

U.S. government debt surpassed 100% of GDP during the quarter. Japanese government debt-to-GDP ended the quarter at 224%, the euro area at 101%, the UK at 105% and the emerging markets to 48% of GDP.

To see non-productive U.S. government debt, the foundational "Core" of global finance, inflate so rapidly should be quite distressing. Worse yet, extreme Credit excess is systematic, as debt balloons also at the "Periphery". From my analytical perspective, we're witnessing catastrophic, all-encompassing "Terminal Phase" excess. The first quarter saw emerging market debt rise by $2.5 trillion, or about 18% annualized, to a record $58.5 TN. EM Non-financial Corporate debt surged $1.5 TN, or about 25% annualized, to $31.5 TN - and now exceeds 94% of GDP. One big final blow-off setting the stage for crisis.

From the FT (Jonathan Wheatley): "'The emerging market bond market has grown tremendously over the past decade but trading volumes have not kept pace,' said Sonja Gibbs, senior director at the IIF. 'When you combine a rising rate environment, stronger dollar and low levels of liquidity, you have a recipe for volatility and the exacerbation of any periods of market strain.'"

My thesis holds that the global Bubble has been pierced at the "Periphery." Not atypically, this follows on the heels of remarkable "Terminal Phase Excess," including phenomenal Credit growth and massive "hot money" inflows. The "hot money" has now reversed; de-risking/de-leveraging dynamics are taking hold. Market complacency is at least partially explained by the sizable reserves the emerging markets have accumulated over recent years, resources the marketplace sees available for stabilizing currencies and Credit systems.

July 9 - Wall Street Journal (Chelsey Dulaney): "Emerging-market central banks are tapping a roughly $6 trillion stash of foreign-exchange reserves as they struggle to contain deepening currency declines. Policymakers across the developing world built up foreign reserve buffers over the past year, capitalizing on investor interest in higher-yielding emerging market assets as global growth remained sanguine. In the first five months of 2018, the central banks added $114 billion to their reserves, the fastest pace of accumulation since 2014…"

The problem, also noted by the WSJ: "Emerging-market central banks used roughly $57 billion in foreign reserves in June, which would rank as the largest monthly intervention since late 2016…" Brazil is said to have burned through $44 billion to support its faltering currency. EM reserve data will be monitored closely over the coming weeks and months. Dwindling reserves will incite a rush to the exits.

There's been considerable market focus on recent woes in Brazil, Turkey and Argentina. But from a more global systemic perspective, I would at this point focus on heavily indebted Asia. Interestingly, Asian currencies were down again this week. The Chinese renminbi declined 0.7%, the Japanese yen 1.7%, the South Korean won 0.7%, the Singapore dollar 0.6%, and the Thai baht 0.5%. Over the past month, the renminbi is down 4.4%, the won 4.1%, the baht 3.5%, the Indonesia rupiah 3.2% and the Singapore dollar 2.2%.

The unfolding trade war is indeed a major issue for EM, arriving at a most inopportune juncture. Financial conditions have already tightened meaningfully throughout Asian markets, though I would contend that the issue goes much beyond trade. Let's start with a China Credit Bubble update:

Total Aggregate Finance expanded $176 billion during June, up from May's $115 billion but 16% below estimates. Aggregate Finance grew $1.36 TN during the first-half, about 18% below comparable 2017. The growth in Bank Loans surged $274 billion in June, up from May's $175 billion to the strongest expansion since January. Meanwhile, key "shadow banking" components contracted. At $106 billion, growth in Household (chiefly mortgage) borrowings remained strong.

June's jump in Chinese bank lending surely emboldens those with the view that Beijing has everything in control - that Chinese officials will adeptly commandeer the financial system to ensure sufficient Credit growth and liquidity. It likely won't be that simple. Chinese banks and corporations have issued enormous quantities of marketable debt over recent years, a significant portion denominated in dollars. Moreover, a massive bank lending campaign at this stage of the cycle will not be confidence inspiring.

It's also worth reminding readers than China's international reserve holdings have declined about $900 billion from 2014 highs to $3.112 TN. China now faces the dilemma that their maladjusted economic system will require several trillion ($) of annual Credit growth. Yes, Beijing can dictate lending from state-directed financial institutions. But aggressive reflationary measures risk spurring capital flight and currency turmoil. A disorderly devaluation would be highly problematic for those on the wrong side of dollar-denominated debt.

July 12 - Bloomberg (Lianting Tu and Finbarr Flynn): "A rout in China's dollar-denominated junk bonds is getting worse as mounting defaults send traders running for cover. Rising trade tensions are also adding to longer-existing difficulties created by the nation's push to cut excessive leverage. Junk bonds from China have been more volatile this year than such securities from all of Asia. The average yield for the nation's speculative-rated notes has surged to 10.5%, the highest since 2015, according to ICE BofAML indexes. Few expect a rebound anytime soon."

July 12 - Bloomberg (Andy Mukherjee): "Donald Trump has made Asian high-yield investors nervous wrecks. First, there are the obvious casualties of his trade war against China. Lenovo Group Ltd.'s bonds are down to 87.4 cents on the dollar from more than 100 cents at the start of the year. Then there's the collateral damage of his greenback-boosting, late-cycle fiscal stimulus, which is making investors worried about Asian currency weakness. Indonesian notes are swimming in a sea of red ink… Liquidity in Asian high yield is so bad that, after a little haggling, a bond quoted at 94 cents on the dollar can be had for 91 cents. Sellers are panicking."

After widening 120 bps in four weeks, Asian high-yield spreads on Wednesday were at their widest level since the Chinese mini-crisis back in Q1 2016. China CDS ended last Friday's trading at a 13-month high (73bps). As noted above, the rout over the past two months has left Chinese junk yields at the highs since early-2015.

"[US Treasury] Yield Curve at its Flattest Since August 2007," was a Friday evening Financial Times (Joe Rennison) headline. "The measure is an important signal for investors of when the Federal Reserve may curtail its policy tightening and is also seen as a warning of a coming recession if it turns negative, which last happened in 2006."

I viewed the flat yield curve back in 2007 as more of a warning of Bubble Fragility than an indicator of imminent recession. But with U.S. mortgage finance at the epicenter of the Bubble back then, the bursting Bubble coincided with an abrupt end to Credit expansion and economic growth. I view today's flat Treasury curve as again signaling Bubble Fragility. The big difference, however, is that global (as opposed to U.S.) finance is at today's Bubble epicenter. Heightened fragility in China, Asia and EM, more generally, risks global financial turmoil and economic vulnerability.

The unusual backdrop is creating quite a dilemma for the Federal Reserve. Cracks in the Global Bubble's "Periphery" are putting downward pressure on Treasury yields, in the process loosening U.S. financial conditions in the face of cautious Fed rate increases. The booming U.S. economy at this point beckons for restrictive monetary conditions, yet a more hawkish Fed risks spurring a dollar melt-up and full-fledged EM financial crisis.

The GSCI commodities index sank 3.6% this week. Copper dropped another 1.7%, boosting y-t-d declines to 16%. Zinc fell 5.7% this week, lead 5.6%, Aluminum 2.4% and Platinum 2.1%. WTI Crude dropped 3.8%. In the agriculture commodities, Soybeans dropped 6.7%, Corn 4.9%, Wheat 3.5%, Sugar 4.8% and Coffee 3.8%.

From the currencies to market yields and yield curves to commodities, markets are signaling trouble ahead. The great irony is that Cracks at the Global Periphery now work to prolong "Terminal Phase Excess" at the "Periphery of the Core" - certainly including higher risk U.S. corporate Credit. And booming debt markets feed highly speculative equities and assets Bubbles right along with an overheated U.S. Bubble Economy. After years of Easy Street, central banking has turned into quite a hard challenge.

July 10 - Bloomberg (Danielle DiMartino Booth): "Much has been made of the degradation of the $7.5 trillion U.S. corporate debt market. High yield offers too little, well, yield. And 'high grade' now requires air quotes to account for the growing dominance of bonds rated BBB, which is the lowest rung on the investment-grade ladder before dropping into 'junk' status. And then there's the massive market for leveraged loans, where covenants protecting investors have all but disappeared. How does that break down? Corporate bonds rated BBB now total $2.56 trillion, having surpassed in size the sum of higher-rated debentures, which total $2.55 trillion, according to Morgan Stanley. Put another way, BBB bonds outstanding exceed by 50% the size of the entire investment grade market at the peak of the last credit boom, in 2007… In 2000, when BBB bonds were a mere third of the market, net leverage (total debt minus cash and short term investments divided by earnings before interest, taxes, depreciation and amortization) was 1.7 times. By the end of last year, the ratio had ballooned to 2.9 times."

For the Week:

The S&P500 rallied 1.5% (up 4.8% y-t-d), and the Dow jumped 2.3% (up 1.2%). The Utilities fell 1.0% (down 0.5%). The Banks increased 0.2% (down 2.0%), and the Broker/Dealers added 0.5% (up 3.4%). The Transports gained 0.7% (down 0.6%). The S&P 400 Midcaps increased 0.3% (up 5.0%), and the small cap Russell 2000 slipped 0.4% (up 9.9%). The Nasdaq100 advanced 2.3% (up 15.3%). The Semiconductors declined 0.6% (up 7.0%). The Biotechs rose 2.2% (up 21.2%). With bullion down $14, the HUI gold index sank 3.2% (down %).

Three-month Treasury bill rates ended the week at 1.90%. Two-year government yields rose four bps to 2.58% (up 70bps y-t-d). Five-year T-note yields added a basis point to 2.73% (up 52bps). Ten-year Treasury yields slipped a basis point to 2.83% (up 42bps). Long bond yields were unchanged at 2.93% (up 19bps). Benchmark Fannie Mae MBS yields declined one basis point to 3.56% (up 56bps).

Greek 10-year yields fell 10 bps to 3.83% (down 24bps y-t-d). Ten-year Portuguese yields dropped seven bps to 1.73% (down 21bps). Italian 10-year yields sank 16 bps to 2.55% (up 54bps). Spain's 10-year yields declined five bps to 1.26% (down 30bps). German bund yields rose five bps to 0.34% (down 9bps). French yields dipped two bps to 0.62% (down 17bps). The French to German 10-year bond spread narrowed seven to 28 bps. U.K. 10-year gilt yields added a basis point to 1.27% (up 8bps). U.K.'s FTSE equities index increased 0.6% (down 0.3%).

Japan's Nikkei 225 equities index rallied 3.7% (down 0.7% y-t-d). Japanese 10-year "JGB" yields increased one basis point to 0.04% (down 1bp). France's CAC40 gained 1.0% (up 2.2%). The German DAX equities index increased 0.4% (down 2.9%). Spain's IBEX 35 equities index fell 1.7% (down 3.1%). Italy's FTSE MIB index slipped 0.2% (up 0.2%). EM equities were mixed. Brazil's Bovespa index gained 2.1% (up 0.3%), while Mexico's Bolsa fell 1.2% (down 1.9%). South Korea's Kospi index rallied 1.7% (down 6.3%). India’s Sensex equities index jumped 2.5% (up 7.3%). China’s Shanghai Exchange recovered 3.1% (down 14.4%). Turkey's Borsa Istanbul National 100 index sank 8.9% (down 22.1%). Russia's MICEX equities index was little changed (up 11.2%).

Investment-grade bond funds saw outflows of $2.859 billion, while junk bond funds had inflows of $1.852 billion (from Lipper).

Freddie Mac 30-year fixed mortgage rates added a basis point to 4.53% (up 50bps y-o-y). Fifteen-year rates gained three bps to 4.02% (up 73bps). Five-year hybrid ARM rates jumped 12 bps to 3.86% (up 58bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-yr fixed rates down two bps to 4.56% (up 45bps).

Federal Reserve Credit last week declined $9.1bn to $4.251 TN. Over the past year, Fed Credit contracted $176bn, or 4.0%. Fed Credit inflated $1.440 TN, or 51%, over the past 297 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt gained $9.7bn last week to $3.405 TN. "Custody holdings" were up $82.9bn y-o-y, or 2.5%.

M2 (narrow) "money" supply gained $8.3bn last week to a record $14.141 TN. "Narrow money" gained $622bn, or 4.6%, over the past year. For the week, Currency increased $2.3bn. Total Checkable Deposits rose $8.3bn, while Savings Deposits declined $8.0bn. Small Time Deposits gained $3.2bn. Retail Money Funds added $2.2bn.

Total money market fund assets jumped $28.9bn to $2.851 TN. Money Funds gained $224bn y-o-y, or 8.5%.

Total Commercial Paper rose $10.0bn to $1.075 TN. CP gained $114bn y-o-y, or 11.9%.

Currency Watch:

The U.S. dollar index gained 0.8% to 94.677 (up 2.8% y-t-d). For the week on the upside, the South African rand increased 1.5%, the Mexican peso 0.8% and the Brazilian real 0.3%. For the week on the downside, the Swedish krona declined 1.8%, the Japanese yen 1.7%, the Swiss franc 1.2%, the New Zealand dollar 1.1%, the Norwegian krone 1.1%, the South Korean won 0.7%, the Canadian dollar 0.6%, the Singapore dollar 0.6%, the euro 0.5%, the British pound 0.5% and the Australian dollar 0.1%. The Chinese renminbi declined 0.73% versus the dollar this week (down 2.76% y-t-d).

Commodities Watch:

July 12 - Bloomberg (Robert Burgess): "Plunge, tumble and rout are overused by the financial media to describe a market in decline, but such superlatives would not be out of place to describe what's happening to commodities. The Bloomberg Commodity Index of 25 raw materials ranging from oil to copper to cattle dropped as much as 2.80% on Wednesday, the most since 2014, before closing at its lowest level since December. That brought the gauge's decline to 8.88% from this year's peak in late May."

July 11 - Reuters (Manolo Serapio Jr): "Copper, zinc and lead prices slumped to their weakest in about a year and other metals also sank in a broad selloff on Wednesday after the United States raised the stakes in a trade war with China with threats of more tariffs. The Trump administration said it would slap 10% tariffs on another $200 billion worth of Chinese imports, raising fears the festering trade dispute between the world's two biggest economies could hit global growth."

July 11 - MarketWatch (Myra P. Saefong and Sarah McFarlane): "Oil futures finished sharply lower Wednesday, with the U.S. benchmark registering its sharpest daily slump in about 13 months as fears of flagging demand and renewed production from Libya overshadowed a report showing the biggest weekly drop in domestic crude supplies in nearly two years. August WTI crude, the U.S. benchmark, fell $3.73, or 5%, to $70.38 a barrel…"

The Goldman Sachs Commodities Index sank 3.6% (up 4.7% y-t-d). Spot Gold lost 1.1% to $1,241 (down 4.7%). Silver dropped 1.6% to $15.815 (down 7.8%). Crude dropped $2.79 to $77.01 (up 18%). Gasoline was little changed (up 17%), while Natural Gas sank 3.7% (down 7%). Copper dropped 1.7% (down 16%). Wheat fell 3.5% (up 16%). Corn sank 4.9% (up 1%).

Trump Administration Watch:

July 11 - Bloomberg (Brendan Scott and Enda Curran): "U.S. President Donald Trump is pushing his trade conflict with China toward a point where neither side can back down. By Aug. 30, as the U.S. nears mid-term elections vital for Trump's legislative agenda, the White House will be ready to impose 10% tariffs on $200 billion of Chinese-made products, ranging from clothing to television parts to refrigerators. The levies announced Tuesday -- together with some $50 billion already in the works -- stand to raise import prices on almost half of everything the U.S. buys from the Asian nation. China has seven weeks to make a deal or dig in and try to outlast the U.S. leader. President Xi Jinping, facing his own political pressures to look tough, has vowed to respond blow-for-blow."

July 11 - Bloomberg (Saleha Mohsin, Jenny Leonard, Jennifer Jacobs and Andrew Mayeda): "High-level trade talks between the U.S. and China have ground to a halt as the Trump administration threatens to escalate a trade war that shows little sign of abating, according to five people familiar… The countries held three rounds of formal negotiations since May, led by U.S. Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross and Vice Premier Liu He in China. But communications between senior members of the Trump and Xi administrations have petered out, and there's no immediate plan to restart the formal talks…"

July 6 - Wall Street Journal (Bob Davis): "The U.S. economy's strength is emboldening the Trump administration to play hardball in its trade offensive against China. Tariffs tend to be economic downers with an impact like sales taxes, which push up costs for consumers and businesses and slow growth. But so far it is tough to argue that the spat with China is having a broad macroeconomic impact. Economic output in the second quarter is estimated by many economists to have expanded at a 4% annual rate or more, roughly twice the pace of the nine-year-old expansion."

July 7 - Associated Press: "High-level talks between the United States and North Korea appeared to hit a snag… as Pyongyang said a visit by U.S. Secretary of State Mike Pompeo had been 'regrettable' and accused Washington of making 'gangster-like' demands to pressure the country into abandoning its nuclear weapons. The statement from the North came just hours after Pompeo wrapped up two days of talks with senior North Korean officials without meeting North Korean leader Kim Jong Un…"

July 9 - Reuters (Susan Heavey and David Brunnstrom): "President Donald Trump suggested on Monday that China might be seeking to derail U.S. efforts aimed at denuclearizing North Korea, but said he was confident that North Korean leader Kim Jong Un would uphold a pact the two agreed last month."

July 10 - Reuters (Jeff Mason, Robin Emmott, Alissa de Carbonnel): "U.S. President Donald Trump accused Germany on Wednesday of being a 'captive' of Russia due to its energy reliance, before a NATO summit where he pressed allies to more than double defense spending. Having lambasted NATO members for failing to reach a target of spending 2% of national income on defense, Trump told fellow leaders in Brussels he would prefer a goal of 4%, similar to U.S. levels, officials said."

Federal Reserve Watch:

July 11 - Wall Street Journal (Nick Timiraos): "The boost to U.S. economic growth from recent tax cuts and spending increases, together with more-stable price pressures, has made Federal Reserve officials comfortable with raising interest rates more than they anticipated earlier this year. Among them is Federal Reserve Bank of Chicago President Charles Evans… In an interview Monday, he said he is now comfortable with one or two more Fed rate increases this year, following on the central bank's two moves so far this year. 'The economy seems so strong it seems natural that businesses and consumers can live with' slightly higher interest rates, he said… Mr. Evans's comments echo those of Fed governor Lael Brainard, another once-prominent advocate for a slow pace of rate increases who has recently shifted toward warning against the dangers of letting the economy overheat."

July 12 - CNBC (Michael Sheetz): "Members of the Federal Reserve are telegraphing two more rate hikes this year, with Federal Open Market Committee voting member Loretta Mester… repeating the central bank's expectation for the next six months. 'The economy can certainly handle two more increases this year,' Mester, the president of the Cleveland branch of the Fed, said… 'We could end up getting behind if we don't keep moving things up, so I'm very comfortable, if the economy stays on the path it's going that we move rates up as appropriate this year.'"

July 11 - Reuters (Howard Schneider and Lindsay Dunsmuir): "Federal Reserve officials are scouring new niches of the financial markets to find signals accurate enough to warn the central bank when it is time to stop hiking interest rates before they risk tipping the economy into a recession… New research from staff economists Eric Engstrom and Steven Sharpe, presented at the Fed's June meeting, suggests that some of the traditional warning signs of recession, such as the gap in interest rates between 10-year and 2-year Treasuries, may not be as powerful as analysis that focuses on shorter term rates."

U.S. Bubble Watch:

July 12 - Bloomberg (Reade Pickert): "The U.S. budget deficit widened by 16% to $607 billion three-quarters of the way through Donald Trump's first full fiscal year as president, as spending accelerated faster than revenue. The shortfall in the nine months through June was larger than the $523 billion gap in the same period of fiscal 2017… Revenue rose to $2.54 trillion in the period, up 1.3% from a year earlier. Spending rose 3.9% to $3.15 trillion."

July 11 - Reuters (Richard Leong): "The U.S. economy is growing at a 3.9% annualized rate in the second quarter following the latest data on domestic wholesale inventory and producer prices, the Atlanta Federal Reserve's GDPNow forecast model showed…"

July 8 - CNBC (Michael Ivanovitch): "America's foreign trade deficits on goods transactions are getting worse. After an increase of 7.7% in 2017, those deficits were growing in the first five months of this year at an almost identical annual rate. Particularly disappointing is the fact that there is no progress at all in bringing trade deficits down with the European Union and China. The deficit with those two large economic systems came in at $218 billion during the January-May period, accounting for nearly two-thirds (64%) of America's total trade gap. That deficit was 11.3% more than recorded over the same interval of last year…"

July 11 - Reuters (Lucia Mutikani): "U.S. producer prices increased more than expected in June amid gains in the cost of services and motor vehicles, leading to the biggest annual increase in 6-1/2 years… The producer price index for final demand climbed 0.3% last month after rising 0.5% in May. That pushed the annual increase in the PPI to 3.4%, the largest rise since November 2011, from 3.1% in May."

July 12 - Reuters: "U.S. consumer prices barely rose in June, but the underlying trend continued to point to a steady buildup of inflation pressures… Consumer Price Index edged up 0.1% as gasoline price increases moderated and apparel prices fell. The CPI rose 0.2% in May. In the 12 months through June, the CPI increased 2.9%, the biggest gain since February 2012… Excluding the volatile food and energy components, the CPI rose 0.2%, matching May's gain. That lifted the annual increase in the so-called core CPI to 2.3%, the largest rise since January 2017…"

July 10 - Financial Times (Andrew Edgecliffe-Johnson): "Stock buyback announcements by US companies smashed records in the second quarter, feeding the debate over how boardrooms are spending their windfall from the Republican tax cuts… The almost $437bn in buyback plans announced in the three months to June 30 eclipsed the previous quarterly record of $242bn, which was set just three months earlier, according to TrimTabs… 'Corporate America's actions suggest that most of the benefits of the corporate tax cut will flow to investors in general and top corporate executives in particular,' TrimTabs said."

July 8 - Wall Street Journal (Rachel Louise Ensign): "Business borrowing is picking up, a welcome relief for banks and a sign of strength for the U.S. economy. Preliminary second-quarter data from the Federal Reserve indicate the year-over-year growth rate of business loans rose to 5.5% in late June from less than 1% near the end of 2017. The upturn marks the reversal of a prolonged slump in business-loan growth that began in earnest about two years ago. The rebound reflects increased confidence at companies."

July 9 - Associated Press: "Americans increased their borrowing in May at the fastest pace in a year and a half, boosted by a big increase in credit card borrowing. Consumer debt rose $24.5 billion in May after an increase of $10 billion in April… It was the biggest monthly increase since a rise of $24.8 billion in November 2016. The category that includes credit cards climbed $16.3 billion in May after increasing by $5 billion in April."

July 12 - Bloomberg (Alex Tanzi and Wei Lu): "The financial burden of living in coastal neighborhoods reveals itself quickly in the Bloomberg study. San Francisco, Seattle, Portland, Jacksonville, and the Bridgeport-Stamford-Norwalk, Connecticut area rounded out the top five areas with the fastest increase in mortgage payments… Slightly over 10% of all metro areas saw rents rising faster than inflation. In three locations, rents increased by more than 5%. Overall, eight of the top 20 most expensive markets are in California, with three of them among the 100 largest metro areas in the U.S. San Jose, San Francisco and Los Angeles are the three priciest markets… In nine metro regions, aggregate housing costs breached 50% of income."

July 11 - CNBC (Diana Olick): "A slight increase in the number of homes for sale may be helping to juice the mortgage market. After falling for two straight weeks, mortgage application volume rose 2.5% last week… Mortgage applications to purchase a home jumped 7% for the week and were 8% higher than the same week one year ago. Potential homebuyers have been blocked by a severe shortage of homes for sale this year, but more listings have been coming on the market."

July 6 - CNBC (Matt Rosoff): "The average price of a house bought in San Francisco rose by $205,000 in the first half of 2018, the largest six-month increase in history… The average house in the city limits now costs $1.62 million. Condo prices also rose by $71,000, which is a significantly slower pace of change than in past years, but still comes in at a startling $1.21 million. This is a direct outgrowth of the current tech boom in Silicon Valley, which shows no signs of slowing down."

July 10 - CNBC (Scott Cohn): "Seattle-area real estate agent Jerry Martin said he first entered the business in 1977, which means he remembers the days of double-digit mortgage rates and multiple booms and busts. That includes the bubble in 2006 and 2007 and the historic collapse that followed. None of that, he said, quite compares to the 'craziness' that has been going on lately. 'It would not be unreasonable for a three-bedroom, one-and-three-quarter bath, 1,500-square-foot home to go on the market and within the hour or two you're looking at multiple offers,' he told CNBC. 'We've had situations where 20, 30 offers were coming in on a piece of property.' The Washington state housing market is the hottest in the country. Prices increased nearly 4% in the first quarter…"

July 12 - Bloomberg (Prashant Gopal): "Got a million bucks to spend on a new home? Good. Just don't expect a palace. The starting price for the most expensive 5% of U.S. residential properties sold in April was at least $1 million in more than half the luxury markets analyzed for its latest report. Sales of million-dollar-plus real estate jumped 25% from April of last year… That's the biggest sales increase in high-end homes since January 2014 and more than twice this January's pace."

July 9 - Wall Street Journal (Ryan Dezember and Laura Kusisto): "Wall Street is betting that more well-off Americans will want to be renters. Financiers who loaded up on homes after the housing bust for pennies on the dollar are buying yet more-despite home prices in many markets being at all-time highs. The number of homes purchased by major investors in 2017 was at least 29,000, up 60% from the previous year, estimates Amherst Capital Management LLC…"

July 10 - Reuters (Lucia Mutikani): "More American workers voluntarily quit their jobs in May, …a sign of confidence in the labor market that economists say will soon boost wage growth. That lifted the quits rate one-tenth of a percentage point to 2.4%, the highest since April 2001."

July 8 - CNBC (Matt Lavietes): "In late June, employees at completed a task that's becoming common in Silicon Valley. They protested. Thousands of tech workers from top companies, including Google, Amazon and Microsoft, have recently led large-scale internal rebellions against their employers. The wave of employee outrage is largely over the use of companies' technology in controversial government contracts - from facial recognition software sold to law enforcement, to drone technology for the military and work with U.S. Immigration and Customs Enforcement."

China Watch:

July 12 - Reuters (Yawen Chen): "China's commerce ministry said on Thursday that China has not been in touch with the United States about restarting trade negotiations and said complaints about forced technology transfers and IP theft are unacceptable. China does not want a trade war, but it does not fear one and would fight if necessary, ministry spokesman Gao Feng told reporters…"

July 11 - Financial Times (Keyu Jin): "As the US-China trade dispute ramps up, with the announcement of $200bn-worth of new tariffs on Chinese imports, Beijing is savouring a quote from Mao Zedong. In a contest with a foe of great strength, Mao said, 'injuring all of a man's 10 fingers is not as effective as chopping off one, and routing 10 enemy divisions is not as effective as annihilating one of them'. China is adopting the same strategy in dealing with rising trade tensions. The concern in Beijing is that this trade war is not really about surpluses or unfair practices, but about Chinese aspiration. In the Bill Clinton era, the US viewed China as a 'constructive strategic partner'. The administration of George W Bush saw the Chinese as 'responsible stakeholders', while Barack Obama sought to build a relationship with Beijing based on 'mutual respect'. But by the time of the Trump administration's first national security strategy, …China had become the US's principal 'competitor'. So what does 'chopping off one finger' signify in this context? It means focusing on pain points; going after a narrow set of products in the US, goods which have easy substitutes readily available in other markets - soyabeans from South America, for instance."

July 8 - Reuters: "China's offshore dollar debt crackdown could boomerang on the faltering yuan. Officials are moving to curb overseas currency bond issuance by Chinese firms, in particular indebted real estate developers. This could put more downward pressure on the exchange rate, and possibly on the country's $3.1 trillion foreign exchange reserves. The National Development and Reform Commission… said last month that real estate firms should issue new dollar-denominated bonds primarily to repay existing debt. Thomson Reuters IFR also reported that officials are giving oral guidance to private issuers restricting short-term dollar bond issues."

July 12 - Bloomberg (Ben Bartenstein and Giulia Morpurgo): "Donald Trump's tariff barrage pushed Chinese markets into their worst selloff since a shocking currency devaluation three years ago. The offshore yuan fell the most since August 2015…, as the White House said it's ready to impose 10% tariffs on $200 billion of Chinese-made products. Beijing said it would be forced to retaliate, describing the move as 'totally unacceptable.' Meanwhile, the iShares China Large-Cap exchange-traded fund extended a two-day slide to 2.5%. 'It's going to be difficult to find some place to hide," said David Lebovitz, global strategist at JPMorgan Asset Management… China can allow the currency to weaken a bit further, but at some point it will step in as too much weakness would be counterproductive, according to him."

July 8 - Financial Times (Gabriel Wildau and Yizhen Jia): "China is retreating from a policy that has channelled about $1tn in subsidies to homebuyers since 2016, a reversal that has sent tremors through the country's residential property market amid broader concerns about a housing bubble. Mainland property shares have tumbled since an executive from China Development Bank said… this month that CDB was tightening loan approvals for the subsidy programme. CDB, the state-owned policy bank with $2.4tn in assets, is the main source of loans for China's slum redevelopment policy, which began as a lending programme to support urban renewal but evolved into cash payments for displaced residents."

July 10 - Wall Street Journal (Jacky Wong): "China's crackdown on shadow banking has caused some high-profile blowups. Now it's driving the country's car makers off course. One big target for Beijing has been the proliferation of peer-to-peer lending platforms-total transactions on these ballooned to 2.8 trillion yuan ($423bn) last year, more than 10 times the total in 2014… The worry is that such platforms have become a hotbed for embezzlement, or could simply run out of money. Local media reported dozens of them collapsing in the past few months alone. About 20% of the platforms in existence last year disappeared in the first half… New rules introduced late last year to tame growth in P2P lending seem to be hitting the auto sector now."

July 9 - Reuters (Lusha Zhang and Elias Glenn): "China's producer inflation accelerated to a six-month high in June… The producer price index (PPI) …rose by a stronger-than-expected 4.7% in June from a year earlier, compared with a 4.1% increase in May… The consumer price index (CPI) rose 1.9% in June from a year earlier, in line with expectations for a slight pick-up from May's gain of 1.8%."

July 10 - Bloomberg: "For a lens on how China's stock market rout is affecting companies and brokerages, consider Hubei Broadcasting & Television Information Network Co.'s recent convertible bond sale. The… operator of a digital television network sought to sell 1.7 billion yuan ($256 million) of six-year securities, but investors only subscribed for about two-thirds of the offering… The sole bookrunner, Zhongtai Securities Co., ended up buying the remaining notes, putting the brokerage on the hook for losses… The deal underlines the funding pressures that are squeezing Chinese companies, with convertible debt -- once so popular with investors that gains were all but guaranteed -- becoming a harder sell as stocks languish near two-year lows."

July 11 - Bloomberg: "International investors have long fretted over the inflated credit scores Chinese domestic rating firms assign to local bonds. This latest example shows their worry may be well justified. Yields on coal producer Zhongrong Xinda Group Co.'s yuan bond maturing in August surged to 335%... amid concern defaults by its shareholder and business partner Wintime Energy Co. will hurt the company's operations. Yet United Ratings still has a AAA score on Zhongrong Xinda and many of its bonds including the one due next month."

EM Watch:

July 10 - Wall Street Journal (Christopher Whittall, Yeliz Candemir and Ira Iosebashvili): "Global investors who were once eager to buy any dip in emerging markets are now backing away, fearing that a big tumble could herald more weakness ahead… Global money that flowed into developing countries last year is slowing considerably. Flows into emerging market stocks and bonds have been $59.7 billion this year, down from $167.6 billion in the same time in 2017… A stronger dollar and higher yields in the U.S. have made it more difficult for investors to ignore shortcomings in countries like Turkey, where external debt stands at 53.4% of gross domestic product…"

July 11 - Financial Times (Laura Pitel and Adam Samson): "Turkish equities, bonds and the lira took a hammering on Wednesday as President Recep Tayyip Erdogan predicted a fall in interest rates and investors fretted over the health of the country's economy. Asked about a slide in the Turkish lira since he announced his new cabinet at the start of the week, the newly re-elected Turkish president told journalists that a combined treasury and finance ministry headed by his son-in-law 'will of course do whatever is necessary', according to Hurriyet newspaper… Turkey must find about $200bn a year in foreign financing - most of it in the form of short-term 'hot money' flows - to fund the current account deficit as well as maturing debt."

July 10 - Wall Street Journal (Julie Wernau and Ira Iosebashvili): "Emerging markets could become collateral damage in an escalating trade conflict where the U.S. is squaring off against China and Europe. The first tariffs levied by the U.S. and China went into effect Friday, but worries over the trade spat have already rippled through a broad range of emerging markets, hurting prices for stocks, bonds and currencies from Indonesia to Brazil. Export-dependent Asian economies may be especially vulnerable, and major stock markets in the region have tumbled in recent weeks. A significant portion of U.S.-bound exports from countries like Malaysia, South Korea and Thailand pass through China, thanks to its central role in the global supply chain."

July 10 - Financial Times (Laura Pitel): "Recep Tayyip Erdogan has gained the power to appoint the governor of Turkey's central bank and hundreds of other senior officials, unnerving markets as the country's new executive presidency comes into force. The Turkish leader issued his first set of presidential decrees just hours after being sworn into office, triggering the transition to a muscular system of governance that Mr Erdogan has sought for years."

July 10 - Financial Times (Laura Pitel): "From the moment he entered politics just three years ago, it was clear that Berat Albayrak would not be constrained by the limits of his official energy brief. As the son-in-law of President Recep Tayyip Erdogan, the former business executive soon found himself setting out the Turkish government's position on military operations, joining high level overseas visits and accompanying his wife's father on the campaign trail. Few expected, however, that Mr Erdogan would be bold enough to put his 40-year-old protégé in sole charge of the economy at a time of mounting concerns about its health."

July 10 - New York Times (Peter S. Goodman): "Looming like a fortress over the Black Sea, Istanbul's new airport has been engineered to provoke awe, underscoring Turkey's desire to reclaim its imperial glory. The project is expected to cost nearly $12 billion and carve six runways across a swath of land as big as Manhattan. When completed in a decade, the complex is supposed to transport some 200 million people a year, dwarfing all rivals as the busiest airport on the planet. But the airport has also become a symbol of a less savory aspect of Turkey's modern-day incarnation: its reckless disregard for arithmetic and the independence of critical government institutions. Together, they have placed the nation at growing risk of sliding into a financial crisis. In a global economy increasingly plagued by worries… Turkey may present the most immediate cause for alarm."

July 8 - BBC: "Turkey has sacked another 18,000 state workers, in the latest purge triggered by a failed coup two years ago. Those dismissed include soldiers, police and academics. A TV channel and three newspapers have also been closed. Since the coup attempt the government has fired more than 125,000 people, introduced emergency rule and clamped down on the media and the opposition."

July 12 - Bloomberg (Lilian Karunungan, Jasmine Ng and Abhishek Vishnoi): "For Mark Mobius, there may be worse to come even after the U.S. fired new shots in its trade war with China: a further 10% drop in emerging-market stocks and a global financial crisis. 'There's no question we'll see a financial crisis sooner or later because we must remember we're coming off from a period of cheap money,' the veteran investor in developing nations said… 'There's going to be a real squeeze for many of these companies that depended upon cheap money to keep on going.'"

Central Bank Watch:

July 9 - Financial Times (Claire Jones): "Mario Draghi has delivered a bullish assessment of the eurozone's economic prospects, saying monetary stimulus undertaken by policymakers had been and would continue to be 'very effective' in boosting growth and inflation. The European Central Bank chief told lawmakers at the European Parliament… that the measures - which include negative interest rates and a €2.4tn bond-buying programme - would boost growth and inflation… The ECB is starting to unwind the strategy measures, which were unleashed in 2014 and 2015 to counter the threat of weak growth triggering a severe bout of deflation."

July 9 - Bloomberg (Piotr Skolimowski and Alexander Weber): "Mario Draghi said the improvement in euro-area inflation is on a self-sustained path as he struck a confident tone that the European Central Bank can withdraw its stimulus despite the rising specter of a global trade war. Addressing European Parliament lawmakers, the ECB president urged the region's governments to lead by example by pushing back against creeping protectionism, which he singled out as the main risk for the area's economic expansion."

July 12 - Financial Times (Claire Jones): "The eurozone's central bankers are set to call time on the expansion of their €2.5tn bond buying spree later this year because they are increasingly convinced the region's economy is now strong enough to take the slow withdrawal of some of their crisis era support, according to accounts of the European Central Bank's June policy vote. The ECB's governing council voted unanimously to lower the amount of bonds it buys each month under its landmark quantitative easing programme from €30bn to €15bn in September, before ending the purchases for good after December…. Rates will remain on hold at their current record lows of zero for the main refinancing rate and minus 0.4% for the deposit rate 'at least through the summer of 2019'."

July 11 - Reuters (Larry King): "European Central Bank policymakers are split over when the ECB might raise interest rates next year, with some saying an increase is possible as early as July 2019 and others ruling out a move until autumn, according to several sources… Some expressed annoyance with an overly dovish message by ECB President Mario Draghi that pushed rate hike expectations to December, a date hawks consider too late."

July 7 - Wall Street Journal (Tom Fairless): "The decision on who will succeed Mario Draghi as European Central Bank president is still a year away, but the jockeying for position is already under way. The 19 countries that use the euro are preparing for a delicate political dance that will decide who will steer the eurozone economy away from years of easy-money policies. The favorite, Jens Weidmann, the conservative president of Germany's central bank, risks becoming a lightning rod for criticism of the nation's dominance of the $14 trillion currency bloc."

Global Bubble Watch:

July 11 - Bloomberg (Shannon D. Harrington, Sally Bakewell, Christopher Cannon and Mathieu Benhamou): "Masayoshi Son and Elon Musk leveraged their dreams to the hilt. Patrick Drahi stockpiled debt to build a global cable empire. Michael Dell loaded his computer company with risky loans to buy out activists threatening his control. And a group of Chinese developers borrowed big to expand in the nation's booming property market. Call them the titans of junk. They're the headliners in a decade-long, $11 trillion corporate borrowing frenzy, fueled by central banks that flooded the global financial system with ultra-cheap money. Investors have been lending to virtually anyone willing to pay a decent yield. But now the easy money is coming to an end… For many companies, it will bring new financial pressures… Bloomberg News delved into corporate filings, debt offerings, M&A deal tables and bond indexes to find the biggest beneficiaries of this decade of loose lending. The search identified 69 companies spanning the globe that have boosted their debt levels by 50% or more in the past five years and now have at least $5 billion of debt. Together, they're sitting on almost $1.2 trillion of bonds and loans, most of it rated junk…"

Europe Watch:

July 12 - Bloomberg (Patrick Donahue): "German Chancellor Angela Merkel said European defense spending and trade with the U.S. are separate issues, rejecting a link made by President Donald Trump. Merkel's comments came at the end of a North Atlantic Treaty Organization summit marked by the U.S. president's renewed demands for European NATO allies, and Germany in particular, to pay a greater share of the alliance's defense spending. At a news conference in Brussels on Thursday, Trump again appeared to link European willingness to be forthcoming on defense spending to U.S. trade conflicts with the European Union."

July 8 - Financial Times (Kate Allen and Claire Jones): "A widely watched measure of eurozone capital flows suggests that Italy's debts to the European Central Bank are set to hit €500bn this summer, reflecting the eurozone's persistent financial imbalances. The country's Target 2 balance - the difference between incoming and outgoing cross-border payments - is €480bn in the red and growing rapidly… Meanwhile, Germany's Target 2 surplus is on track to reach €1tn. Target 2 was set up by the ECB and eurozone national central banks to allow banks to make large payments to one another quickly. More than 1,700 banks use it to transact with one another."

July 10 - Bloomberg (Patrick Donahue and Birgit Jennen): "German Chancellor Angela Merkel praised China for opening up to foreign investment, drawing a contrast with trade conflicts burdening both countries' relations with the U.S. Merkel's positive take followed a meeting on Monday in Berlin with Chinese Prime Minister Li Keqiang, who presented himself as an ally in her defense of rules-based global trade. They also agreed that they want to preserve a nuclear accord with Iran that President Donald Trump has ditched."

July 10 - "Italian European Affairs Minister Paolo Savona warned… that the country had to be ready for 'all eventualities' on its Eurozone membership. He told a panel in the Senate that 'we may find ourselves in a position where it's not we who decide but others.' Hence, 'my position regarding a Plan B … is that we have to be ready for all eventualities.'"

July 10 - Financial Times (Claire Jones): "House prices across the eurozone are rising at their fastest since before the global financial crisis, forcing the region's banks to squeeze the supply of credit to would-be mortgage holders. …House prices in the 19-member currency area rose 4.5% in the year to the first quarter of 2018 - a level last seen in early 2007. Five countries - Latvia, Slovenia, Ireland, Portugal and Slovakia - saw double-digit price rises."

Brexit Watch:

July 9 - Bloomberg (Thomas Penny, Kitty Donaldson, Robert Hutton and Timothy Ross): "Prime Minister Theresa May battled to stave off a full-blown crisis after three ministers quit within 24 hours to protest her Brexit plan. The resignation of Foreign Secretary Boris Johnson, the face of the campaign to leave the European Union in 2016, compounded the chaos in government following the departures of Brexit Secretary David Davis and his deputy late Sunday."

Fixed Income Bubble Watch:

July 12 - Bloomberg (Sally Bakewell): "Wall Street's junk war is heating up. On one side are major banks, which are diving back into high-risk corporate lending now that U.S. regulators have loosened up. On the other are so-called shadow lenders -- private equity shops, boutique banks and other financial players that muscled in on this business when regulators restrained the big banks five years ago. The result: ever-growing competition to provide junk-rated debt used in corporate takeovers. It could turn out to be a 'race to the bottom,' said Frank Ossino, a senior portfolio manager at Newfleet Asset Management… For the $2.3 trillion-plus market in junk bonds and leveraged loans, the question is whether all this competition ultimately brings new, greater risks."

Leveraged Speculator Watch:

July 11 - Bloomberg (Dani Burger): "The dog days of summer have arrived for quants. Systematic traders who tie their fortunes to the ebbs and flows of stock markets are experiencing some of their worst returns in eight years… Factor investing -- which slices and dices equities based on traits like profitability and price volatility -- has buckled while the broader market has stayed afloat. For example, AQR Capital Management LLC's $1.9 billion mutual fund, one of the largest in the sector, last month nursed its steepest loss since inception. It's all adding insult to injury for quants struggling to make money this year as equity volatility awakens and economic angst builds… A market-neutral version of value -- which bets on companies priced cheaply while offsetting the broader market --rounded off its worst quarter since 2011. Meanwhile, momentum, which bets on the highest fliers like tech stocks, saw its biggest monthly drawdown in more than two years… Only 17% of large-cap active quant mutual funds outperformed the Russell 1000 index in June, the worst monthly showing in more than eight years…"

July 9 - Wall Street Journal (Mengqi Sun): "Hedge funds have long touted their ability to do better when things turn volatile. But they lagged behind the S&P 500 for the first half of 2018 despite market swings tied to trade policy tensions and interest rate increases. A widely followed hedge-fund index maintained by data research company HFR dropped 0.46% in June… The index rose .81% in the first two quarters, which is lower than the 2.65% return on the S&P 500… The only large category of hedge funds that posted an increase in June were funds that seek to capitalize on mergers and acquisitions… Those that specialized in stock picking and macroeconomic analysis posted declines."

Geopolitical Watch:

July 7 - Reuters (Phil Stewart, Idrees Ali and Jess Macy Yu): "Two U.S. warships passed through the Taiwan Strait on Saturday on a voyage that will likely be viewed in the self-ruled island as a sign of support by President Donald Trump amid heightened tension with China… Washington has no formal ties with Taiwan but is bound by law to help it defend itself and is the island's main source of arms. China regularly says Taiwan is the most sensitive issue in its ties with the United States."

Friday Evening Links

[BloombergQ] Stocks Edge Higher; Treasuries Rise, Dollar Falls: Markets Wrap

[Reuters] Fed emphasizes 'solid' U.S economic growth, repeats gradual approach

[CNBC] Trump reportedly considers tapping emergency oil supplies to tame crude prices

[FT] Yield curve at its flattest since August 2007

Friday's News Links

[Reuters] Global stocks rally before earnings, trade war jolt boosts dollar

[Reuters] Oil falls for second week as supply concerns ease

[Reuters] Euro, yuan dip as U.S.-China trade fears boost dollar

[BloombergQ] China Trade Surplus With U.S. Hits Record as Tensions Rise

[Reuters] China's June exports jump, surplus with U.S. at record high

[BloombergQ] Trump Is Misjudging China’s Resolve on Trade

[BloombergQ] Powell Faces a Delicate Balance in Testimony to Congress

[BloombergQ] Guggenheim's Minerd Says Trade War Devastating for U.S., China

[NYT] As Trade War Persists, Mnuchin Says China Talks Have ‘Broken Down’

[WSJ] Inflation Is Eating Away Worker Wage Gains

[WSJ] Investors Bet on Higher Rates as U.S. Inflation Firms

[WSJ] China’s Land Grab Could End Badly

[WSJ] Fear of Missing Out Drives Stock Performance

[FT] Beijing hopes for a backlash against Donald Trump’s trade policy

[FT] China’s globalisation paradox