December 13 – Financial Times (Chris Giles and Claire Jones): “When the European Central Bank switches off its money-printing press at the turn of this year and stops buying fresh assets, it will mark the end of a decade-long global experiment in how to stave off economic meltdowns. Quantitative easing, the policy that aims to boost spending and inflation by creating electronic money and pumping it into the economy by buying assets such as government bonds, is on the verge of becoming quantitative tightening. With the Federal Reserve slowly reducing its stocks of Treasuries, central banks are no longer in the buying business. Globally, only the Bank of Japan is left as a leading central bank that has not formally called time on expanding its stock of asset purchases. Arguments over how, or even if, the trillions spent by policymakers helped the global economy recover will rage for years to come. But as central banks step back, the initial view is that the purchases worked — whether through encouraging investors to hold more risky assets, easing constraints on borrowing, providing finance so governments could run larger budget deficits or just showing that central banks still had an answer to weak demand and low inflation.”
At this point, the prevailing view holds that QE “worked.” Moreover, central banks are seen ready and willing to call upon “money printing” operations as need. The great virtue of this policy course, many believe, is that there is essentially no limit to the scope and duration of “QE infinity.” The FT quoted Mario Draghi: “[QE] is permanent and may be usable in contingencies that the governing council will assess in its independence.” Melvyn Krauss, from the Hoover Institution, captured conventional thinking: “No one willingly walks into a room from which there is no exit. Because QE proved temporary, because it worked and because it has ended, it is likely to be used again.”
But what if faith in QE is woefully misguided? What if markets and policymakers alike come to appreciate that QE only masked underlying fragilities and delayed desperately needed structural reform? Worse yet, what if the reality is that QE exacerbated latent financial fragility – through more leverage, speculation, misperceptions and market distortions. And what about social and political instability? Surely, there’s growing recognition that a decade of monetary stimulus and resulting Bubbles have further redistributed wealth and worsened inequality.
It was a downbeat Mario Draghi Thursday discussing the end of the ECB’s QE program. Undoubtedly, he always anticipated concluding an unprecedented $2.6 TN ECB balance sheet expansion with the eurozone in an upbeat environment – with Europe’s markets and economies in a good place. They’re anything but.
December’s aggregate eurozone PMI index declined to 51.4, the lowest reading since February 2016. With chaotic riots, France’s industrial sector is now contracting (PMI below 50). Perhaps more troubling, France’s Services PMI sank five points to 49.6, the low going back to February 2016. Germany’s ZEW economic sentiment index collapsed 13 points in December to 45.3. This is down from 95 early in the year and the lowest reading since January 2015.
Yet Europe’s economy is a pillar of strength when compared to the frail political landscape. Surely QE proponents would have expected the printing of $2.6 TN of new “money” to have, at least for a period, worked to pacify the masses and temper political instability. Detractors of unsound money and Credit are anything but surprised by heightened instability throughout the eurozone, certainly including the heavyweight Italian, French and German economies. The euro is arguably more vulnerable today than back in 2012.
Proponents of central bank stimulus operations take a sanguine view. They note that the ECB joined the global QE party late (2014). Truth be told, the ECB and global central banks are a full decade into their exalted monetary experiment. Let’s not forget Draghi’s “whatever it takes,” along with the ECB’s 2012 “Outright Monetary Transactions" program (OMT). Then there was 2011’s “Long-term Refinancing operations (LTRO),” where the ECB lent $640 billion directly to eurozone banks (liquidity in many instances used to buy government bonds). And back in 2010, the ECB adopted their “Securities Market Program.” All told, the ECB’s balance sheet expanded from a pre-crisis $1.5 TN to almost $4.7 TN.
Proponents proclaim a decade of central bank stimulus has proven a tremendous success. They would point first to stock, bond and asset markets more generally. I view the same markets and see acute instability and fragility. I believe a decade of monetary stimulus has exacerbated financial, economic, social, political and geopolitical instabilities. This will surely be debated for decades to come.
Credit is a financial claim – an IOU. New Credit creates purchasing power. Credit is self-reinforcing. When Credit is expanding, the creation of this new purchasing power works to validate the value of Credit generally. In general, new Credit promotes economic activity, both spending and investment, in the process promoting higher incomes. Credit expansions fuel higher price levels throughout the economy, including incomes, real estate, stocks and bonds. Higher perceived wealth stimulates self-reinforcing borrowing, spending and investment.
Traditionally, bank lending for business investment was a prevailing mechanism for finance to enter into the economic system. There were various mechanisms that worked to contain Credit expansions, including the gold standard and disciplined monetary regimes. As important, there were traditions against deficit spending, running persistent trade deficits and profligacy more generally. Moreover, there were bank reserve and capital requirements that placed constraints on lending and financial excess. In short, there was a limited supply of “money,” with excessive borrowing demands pressuring interest rates higher. There was certainly cyclicality, but systems tended toward adjustment and self-correction.
It’s not only the decade-long experiment with QE (with ultralow rates) that makes contemporary finance unique in history. As the key source of additional system “money” and Credit, banks and business investment were some time ago supplanted by market-based finance and leveraged securities/asset purchases. Contemporary (“digitalized”) finance expands virtually without constraint.
Meanwhile, finance entering the system to speculate on higher asset prices creates a very different dynamic than back when bank loans were financing capital investment. Excessive borrowing and investment placed downward pressure on profits, in the process reducing the incentive to borrow, invest and lend. In contrast, a system of unfettered “money” and Credit financing asset prices is acutely unstable. Expanding finance leads to higher asset prices and only greater impetus to borrow and speculate.
Going on a decade now, I’ve been chronicling the “global government finance Bubble.” It has not been ten years of systemic smooth sailing. History’s greatest Bubble stumbled in 2011 on fears of the Fed’s “exit strategy.” The Fed quickly backed off – and then proceeded to double its balance sheet again by 2014. Europe tottered badly in 2011 and 2012, inciting “whatever it takes” and a reckless ECB balance sheet gambit. Fed, ECB and global central bank liquidity stoked a historic boom throughout the emerging markets. China’s epic Bubble, pushed into overdrive with aggressive global crisis-period stimulus, inflated uncontrollably. All of it almost came crashing down in late-‘15/early-’16. But the Chinese adopted more stimulus, the ECB and BOJ boosted QE, and the Fed postponed “normalization.”
I believe the world over the past two years experienced a momentous speculative blow-off – in stocks, bonds, corporate Credit, real estate, M&A, art, collectibles, and so on. I would further argue that speculative melt-ups are quite problematic for contemporary finance. Surging asset prices spur rapid increases in speculative Credit, unleashing new self-reinforcing liquidity/purchasing power upon markets, financial systems and economies around the globe. The problem is it doesn’t work in reverse. The greater the price spikes, the more vulnerable markets become to destabilizing reversals. De-risking/deleveraging dynamics then see a contraction of speculative Credit, leading to problematic self-reinforcing destruction of marketplace liquidity.
As inflationism has demonstrated throughout history, QE was always going to be a most slippery slope. The notion of inflating risk asset markets with central bank liquidity has to be the most dangerous policy prescription in the sordid history of central banking. And, importantly, the longer central bankers held to this policy course the deeper were market structural distortions. Rather than attempting to rectify crucial flaws in contemporary finance, central bankers chose inflationism and market backstops as stabilization expedients. This was a monumental mistake.
The expansion of central bank balance sheets ensured a parallel expansion in global speculative leverage. Over time, there was an increasing multiplier effect on each new dollar/yen/euro/etc. of central bank “money.” The original Fed QE “money” program basically accommodated speculative deleveraging. In contrast, the past few years (in particular) incited an aggressive expansion of speculative leverage throughout global securities and asset markets.
In addition, the parabolic increase in central bank liquidity over recent years was instrumental in the parabolic ballooning of ETF assets and passive investment funds more generally. While not “leverage” in the conventional sense, the enormous growth in ETF/passive funds and associated risk misperceptions have amounted to a historic market distortion. Trillions flowed into risky stocks, bonds, corporate Credit, EM assets and derivative structures believing that these fund shares were a liquid store of (nominal) value. The phenomenon of perceived money-like ETF shares was integral to the global risk market speculative blow-off.
The problem with speculative blow-offs is that they inevitably reverse. Upon the reversal, the seriousness of the problem is proportional to the amount of underlying leverage, the degree of market misperceptions and the scope of associated market and economic structural maladjustment. The world now confronts one hell of a problem.
The unfolding de-risking/deleveraging dynamic is extraordinarily problematic from a liquidity standpoint. A powerful “risk off” dynamic – having unfolded following a global speculative blow-off instigated by massive central bank liquidity injections - leaves global “system” liquidity acutely vulnerable. Faltering global liquidity will now expose the misperception of “moneyness” for ETF and passive index products. As such, global markets are now at high risk to global de-risking/deleveraging fomenting a transformative change in risk perceptions. Past risk reassessments (that seem minor compared to what is now unfolding) have led to panic and dislocation.
Flawed central bank policies are directly responsible for both a decade-long global Bubble and the more recent speculative blow-off. Markets, meanwhile, cling to the belief that central bankers remain fully committed to doing “whatever it takes” to hold bear markets, recessions and crises at bay. There’s a disconnect. The harsh reality is that “whatever it takes” has failed. It was built on fallacious notions of inflationism, markets and finance, more generally. Most regrettably, a tremendous amount of market hopes, dreams and capitalization have been built on little more than fallacy.
Total global Credit growth has slowed dramatically. I would argue speculative (securities and derivative-related) Credit, having evolved into a key marginal source of total global Credit, is now in significant self-reinforcing contraction. This portends liquidity issues for markets, faltering asset values and trouble for economies. In the markets, Fear is supplanting greed. Risk aversion and waning liquidity now spawn powerful Contagion across markets.
December 14 – Bloomberg (Lisa Lee): “Funds exiting the U.S. leveraged loan market at a record pace are clobbering sentiment as they go. History suggests that the record $2.5 billion yanked from funds in the past week could mean more short-term loan price pain. Earlier this year, investors flocked to leveraged loan funds in pursuit of floating-rate assets as the Fed sounded hawkish… The loan market has only suffered two bouts of such outflows exceeding $2 billion… Both times, loan prices sank and took months to recover. In August 2011, when the loan market was roughly half its current $1.3 trillion size, loan funds saw $2.1 billion of outflows… In December 2015, they lost $2.04 billion.”
QE previously bailed out the leveraged loan market twice, along the way solidifying the perception of “moneyness” for leveraged loan fund shares. What was not to like about owning assets with above-market yields that would reset higher as the Fed raised rates? And as “money” flooded into leveraged lending, liquidity and recession risks were about the furthest things from investors’/speculators’ minds.
The Bubble has burst – the greater global Bubble, the Bubble in leveraged lending, and Bubbles across asset classes around the globe. In the case of leveraged loans, I don’t expect another bout of QE to resuscitate Bubble Dynamics. Excess within this market, similar to so many, went to parabolic extremes. Risk misperceptions went to extremes; lending terms to extremes; and speculation to extremes. Now the downside.
December 14 – CNBC (Angelica LaVito): “Johnson & Johnson knew for decades that its baby powder contained asbestos, Reuters said in a new report that drove the company’s shares down more than 10% Friday. Reuters based its report on a review of documents and deposition and trial testimony. It said the review showed that from 1971 to the early 2000s, J&J executives, mine managers, doctors and lawyers were aware the company’s raw talc and finished powders sometimes tested positive for small amounts of asbestos. Those involved discussed the problem but they did not disclose it to regulators or the public, Reuters’ examination found. The company released a statement Friday calling the Reuters article ‘one-sided, false and inflammatory.’”
Company denials and positive analyst comments didn’t stop a double-digit Friday drubbing in Johnson & Johnson’s stock. It’s worth noting that the Healthcare SPDR (XLV) sank 3.4% in Friday trading. Prior to Friday’s drop, the XLV had enjoyed a y-t-d return of 12.6%, trading near all-time highs just seven sessions earlier. The index was up over 53% from 2016 lows (J&J up almost 60%).
It was a timely reminder of how deeply Bubble Dynamics have permeated the marketplace. I would argue that some of the greatest excesses have unfolded in perceived low-risk sectors and strategies, certainly including the “defensive” healthcare space. Perceived low risk became a risky Crowded Trade. In the unfolding bear market, there will likely be few places to hide.
What only weeks ago appeared a rather straightforward meeting is now a pivotal juncture for the Federal Open Market Committee. With low unemployment and relatively robust household and business expenditures, the Fed has been widely expected to raise rates next Wednesday. It may now be a close call. But, then again, the Fed may not yet appreciate the seriousness of what is unfolding in the markets. They’re in a real predicament, along with central bankers around the world. They all waited way too long to begin normalizing monetary policy. Today, normalization has barely even commenced, and yet the Bubble they nurtured has already begun to deflate.
December 11 – Reuters (Stella Qiu and Kevin Yao): “China’s banks extended more new loans than expected in November after a sharp drop the previous month… Chinese banks extended 1.25 trillion yuan ($182bn) in net new yuan loans in November, slightly more than analysts had expected and up from the previous month… Total social financing (TSF), a broad measure of liquidity and credit in the economy, jumped to 1.52 trillion yuan in November from 728.8 billion yuan in October, also beating expectations. But growth of outstanding TSF slowed to a new all-time low of 9.9% from 10.2% in October, as regulators continued to crack down on riskier types of financing…”
We’ll continue to closely monitor Chinese Credit data. Credit growth bounced back strongly in November. Total Social Financing (TSF) rose from a weak October’s $84 billion (weakest since October ’15) to $198 billion. This was still 15% below growth from November ’17. This puts y-t-d TSF expansion at $2.129 TN, down 20% from comparable 2017. This slowdown is explained by contractions in key categories of “shadow” lending.
As noted above, Chinese Bank Loans expanded strongly in November. At $182 billion, new loans were 12% above November ’17. Bank Loans have expanded $2.186 TN y-t-d, running 17% above comparable 2017. At $95 billion, Consumer Loans were 6% above November ’17. Indicative of a booming year of mortgage lending, y-t-d growth in Consumer Loans is running 18% above last year. In numbers that illuminate the scope of China’s mortgage finance Bubble, Consumer Loans increased 44% in two years, 78% in three years and 141% in five years.
I don’t want to imply that resurgent Chinese Credit growth and/or even a more dovish Fed wouldn’t matter. I just believe at this point the bursting global Bubble is increasingly beyond resuscitation. A bold statement, I fully appreciate. But Fear is rapidly supplanting greed in “Core” U.S. securities markets. The “Core” has seen de-risking/deleveraging dynamics attain important momentum. Latent “Core” fragilities are being exposed. And the further the global Bubble deflates, the greater the scope of monetary stimulus required to re-energize broad-based securities market inflation. I fully expect more QE. But it will come in a crisis backdrop. I’ll presume the first few Trillion or so will, at best, accommodate deleveraging.
For the Week:
The S&P500 declined 1.3% (down 2.8% y-t-d), and the Dow fell 1.2% (down 2.5%). The Utilities added 0.5% (up 6.1%). The Banks dropped 5.5% (down 17.4%), and the Broker/Dealers declined 2.6% (down 9.4%). The Transports sank 4.4% (down 10.3%). The S&P 400 Midcaps fell 2.7% (down 8.8%), and the small cap Russell 2000 dropped 2.6% (down 8.1%). The Nasdaq100 slipped 0.3% (up 3.1%). The Semiconductors rallied 1.7% (down 6.0%). The Biotechs declined 1.0% (up 4.8%). With bullion down $10, the HUI gold index dipped 0.8% (down 20.6%).
Three-month Treasury bill rates ended the week at 2.36%. Two-year government yields added two bps to 2.73% (up 85bps y-t-d). Five-year T-note yields rose four bps to 2.73% (up 52bps). Ten-year Treasury yields gained four bps to 2.89% (up 49bps). Long bond yields were unchanged at 3.14% (up 40bps). Benchmark Fannie Mae MBS yields rose four bps to 3.75% (up 76bps).
Greek 10-year yields added a basis point to 4.22% (up 15bps y-t-d). Ten-year Portuguese yields dropped 14 bps to 1.66% (down 28bps). Italian 10-year yields sank 19 bps to 2.94% (up 92bps). Spain's 10-year yields fell four bps to 1.41% (down 16bps). German bund yields were little changed at 0.25% (down 18bps). French yields gained two bps to 0.71% (down 7bps). The French to German 10-year bond spread widened two to 46 bps. U.K. 10-year gilt yields declined two bps to 1.24% (up 5bps). U.K.'s FTSE equities index recovered 1.0% (down 11.0%).
Japan's Nikkei 225 equities index declined 1.4% (down 6.1% y-t-d). Japanese 10-year "JGB" yields declined two bps to 0.035% (down 1bp). France's CAC40 gained 0.8% (down 8.6%). The German DAX equities index increased 0.7% (down 15.9%). Spain's IBEX 35 equities index rose 0.8% (down 11.5%). Italy's FTSE MIB index rallied 0.9% (down 13.5%). EM equities were mostly lower. Brazil's Bovespa index slipped 0.8% (up 14.5%), and Mexico's Bolsa declined 1.3% (down 16.3%). South Korea's Kospi index dipped 0.3% (down 16.1%). India's Sensex equities index gained 0.8% (up 5.6%). China's Shanghai Exchange declined 0.5% (down 21.6%). Turkey's Borsa Istanbul National 100 index dropped 3.4% (down 21.5%). Russia's MICEX equities index fell 2.7% (up 12.1%).
Investment-grade bond funds saw outflows of $3.719 billion, and junk bond funds posted outflows of $2.060 billion (from Lipper).
Freddie Mac 30-year fixed mortgage rates dropped 12 bps to a four-month low 4.63% (up 70bps y-o-y). Fifteen-year rates sank 14 bps to 4.07% (up 71bps). Five-year hybrid ARM rates slipped three bps to 4.04% (up 68bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-yr fixed rates down four bps to 4.56% (up 41bps).
Federal Reserve Credit last week increased $0.8bn to $4.049 TN. Over the past year, Fed Credit contracted $352bn, or 8.0%. Fed Credit inflated $1.238 TN, or 44%, over the past 318 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt dropped $19.4bn last week to $3.385 TN. "Custody holdings" were little changed y-o-y.
M2 (narrow) "money" supply jumped $55.7bn last week to a record $14.395 TN. "Narrow money" gained $584bn, or 4.2%, over the past year. For the week, Currency increased $1.3bn. Total Checkable Deposits surged $131bn, while Savings Deposits dropped $96.3bn. Small Time Deposits gained $6.3bn. Retail Money Funds rose $13.6bn.
Total money market fund assets surged $93.5bn to $3.003 TN. Money Funds gained $162bn y-o-y, or 5.7%.
Total Commercial Paper rose $14.9bn to $1.090 TN. CP rose $40bn y-o-y, or 3.8%.
Currency Watch:
The U.S. dollar index gained 1.0% to 97.443 (up 5.8% y-t-d). For the week on the upside, the Mexican peso increased 0.1%. For the week on the downside, the South African rand declined 1.6%, the Norwegian krone 1.3%, the British pound 1.1%, the New Zealand dollar 1.0%, the South Korean won 1.0%, the euro 0.6%, the Japanese yen 0.6%, the Swiss franc 0.6%, the Australian dollar 0.5%, the Singapore dollar 0.5%, the Canadian dollar 0.5%, the Swedish krona 0.2%, and the Brazilian real 0.1%. The Chinese renminbi declined 0.48% versus the dollar this week (down 5.8% y-t-d).
Commodities Watch:
December 10 – Financial Times (Henry Sanderson): “China’s imports of key commodities from copper to iron ore and soyabeans fell in November, in the latest sign of a slowdown in the world’s second-largest economy… China’s imports of soyabeans fell to their lowest level in two years, down 38% from a year earlier, following China’s impositions of tariffs on US imports in June… The lower copper imports point to a more worrying trend and reflect the slowdown in key consumer sectors in China such as air conditioning, housing and autos, according to analysts at Citi. China’s imports of copper fell by 3% from a year earlier in November, data released on Monday show. Copper prices have fallen 15% this year…”
The Goldman Sachs Commodities Index dropped 2.4% (down 8.2% y-t-d). Spot Gold slipped $9.90 to $1,238 (down 5.0%). Silver declined 0.4% to $14.637 (down 14.6%). Crude dropped another $1.41 to $51.20 (down 15%). Gasoline fell 3.5% (down 20%), and Natural Gas sank 14.7% (up 30%). Copper was little changed (down 16%). Wheat slipped 0.2% (up 24%). Corn declined 0.2% (up 10%).
Market Dislocation Watch:
December 13 – Reuters (Trevor Hunnicutt): “Record cash streamed out of U.S.-based stock funds and billions more fled bonds in a week of apparently escalated caution, Lipper data showed… More than $46 billion thundered out of U.S. stock mutual funds and exchange-traded funds (ETFs), the most ever, while a near-record $13 billion poured from bonds, according to the research service. Relatively low-risk money market funds pulled in $81 billion, also the most recorded…”
December 11 – Wall Street Journal (Gunjan Banerji and Telis Demos): “Wild trading is straining the plumbing that powers global markets. In November, natural-gas futures surged 18% in one day, the biggest jump in more than a decade, only to plunge nearly 17% the following day. That caused some contracts tied to the fuel to breach central clearinghouse margin limits. And that was just one instance in one market of such breaches. At least 49 times this year, major derivatives contracts globally—including on U.S. Treasurys and the S&P 500—have seen price moves that exceeded margin limits, according to… JPMorgan… These breaches essentially mean that the amount of money traders put up to cover potential losses on trades was insufficient, one of several incidents putting a spotlight on how prepared clearinghouses are for the return of volatility.”
Trump Administration Watch:
December 9 – Reuters (Howard Schneider and Ben Blanchard): “Unless U.S.-China trade talks wrap up successfully by March 1, new tariffs will be imposed, U.S. Trade Representative Robert Lighthizer said on Sunday, clarifying there is a ‘hard deadline’ after a week of seeming confusion among President Donald Trump and his advisers. ‘As far as I am concerned it is a hard deadline. When I talk to the president of the United States he is not talking about going beyond March,” Lighthizer said… ‘The way this is set up is that at the end of 90 days, these tariffs will be raised…’”
December 11 – Reuters (Deirdre Bosa, Kate Fazzini and Sara Salinas): “A Vancouver judge set a $10 million CAD bail ($7.5 million) for Huawei Chief Financial Officer Meng Wanzhou Tuesday, capping a week of increasing trade tensions and strong market reactions around the dispute between the Department of Justice and one of China’s largest hardware companies. The United States had asked the Vancouver court to deny bail for Meng, whose father is a billionaire and a founder of Huawei, calling her a flight risk. Canada has been expected to extradite Meng to the United States over charges that the company improperly took payments from Iran in violation of sanctions against the country.”
December 11 – Reuters (Jeff Mason and Steve Holland): “U.S. President Donald Trump said… he would intervene in the Justice Department’s case against a top executive at China’s Huawei Technologies if it would serve national security interests or help close a trade deal with China… When asked if he would intervene with the Justice Department in her case, Trump said…: ‘Whatever’s good for this country, I would do.’ ‘If I think it’s good for what will be certainly the largest trade deal ever made – which is a very important thing – what’s good for national security – I would certainly intervene if I thought it was necessary,’ Trump said.”
December 11 – CBS News (Kathryn Watson): “An Oval Office meeting between President Trump and Democratic leaders Sen. Chuck Schumer and Rep. Nancy Pelosi spiraled out of control over funding for the border wall…, devolving into what Schumer called a Trump ‘temper tantrum.’ With a potential government shutdown looming less than two weeks away, Pelosi, the presumptive soon-to-be speaker of the House, told Mr. Trump, ‘you will not win’ on the border wall. The president demanded border wall funding — and said he's not afraid the shut down the government over it. In fact, he said, he's proud to do so, and will take credit for it. ‘I am proud to shut down the government for border security, Chuck,’ the president said. ‘So I will take the mantle. I will be the one to shut it down. I’m not gonna blame you for it. The last time you shut it down it didn't work. I will take the mantle of shutting down. And I’m gonna shut it down for border security.’”
December 12 – Financial Times (Nic Fildes and Louise Lucas): “A leaked memo, apparently written by a senior National Security Council official, revealed as far back as the start of this year exactly how worried the US is about Huawei. The rise of the Chinese company to become the world’s biggest supplier of telecoms equipment has given China a huge boost over the US in the race to introduce and develop 5G, the next generation of mobile communications, the memo complained. ‘We are losing,’ it said. ‘Whoever leads in technology and market share for 5G deployment will have a tremendous advantage towards [ . . .] commanding the heights of the information domain.’ Eleven months on, those fears have mushroomed into open conflict between Washington and Beijing, with American officials pushing allied countries to ban Huawei from building their 5G networks, citing concerns over security and the company’s unclear links to the Chinese state.”
December 9 – Financial Times (Emily Feng): “The arrest of Meng Wanzhou, the daughter of the founder of Huawei, in Vancouver this month raises the chance that the telecoms equipment maker could become a new victim in the trade war between the US and China. This year, China’s other big telecoms equipment company, ZTE, took a big hit when the US banned American companies from doing business with it, severely restricting its supply chain. Huawei would be less vulnerable if it faced a similar restriction, but its continued reliance on US-made components, especially in semiconductor chips, means such an export ban would be a big setback for Huawei’s ambitions to be a global leader in the next generation of 5G mobile communication.”
December 9 – Wall Street Journal (Dan Strumpf): “American companies have been crucial in helping Huawei Technologies Co. become the world’s dominant telecommunications player. Silicon Valley giants from Intel Corp. to Broadcom Inc. and Qualcomm Inc. are top suppliers of Huawei, which buys their components to make equipment such as base stations and routers and Huawei mobile phones. By one estimate, Huawei will buy up to $10 billion of components from American companies this year—roughly the value of China’s automobile imports from the U.S. Qualcomm and Intel are also working with Huawei on its development of next-generation 5G technologies, a field in which the Chinese company’s aim to be a global leader has alarmed some in Washington.”
December 12 – Reuters (Roberta Rampton and Jeff Mason): “President Donald Trump said… it would be a mistake if the Federal Reserve raises interest rates when it meets next week, as it is expected to do, continuing his criticism of the U.S. central bank. ‘I think that would be foolish, but what can I say?’ Trump told Reuters… Trump said he needed the flexibility of lower interest rates to support the broader U.S. economy as he fights a growing trade battle against China, and potentially other countries. ‘You have to understand, we’re fighting some trade battles and we’re winning. But I need accommodation too,’ he said.”
Federal Reserve Watch:
December 10 – Reuters (Jonathan Spicer): “A sharp tightening of financial conditions convinced Goldman Sachs’ chief economist that the Federal Reserve is now more likely to pause its interest-rate hikes in March, before continuing with three more policy tightenings later in 2019. Goldman had previously predicted four rate hikes, one more than median Fed forecasts from September - but far more than recent market expectations. ‘We think the probability of a move in March has now fallen to slightly below 50%,’ Goldman’s Jan Hatzius wrote… But ‘we see a return to quarterly hikes in June that last through the end of 2019.’”
December 11 – CNBC (Steve Liesman): “Former Federal Reserve Chair Janet Yellen told a New York audience she fears there could be another financial crisis because banking regulators have seen reductions in their authority to address panics and because of the current push to deregulate. ‘I think things have improved, but then I think there are gigantic holes in the system,’ Yellen said… ‘The tools that are available to deal with emerging problems are not great in the United States.’ Yellen cited leverage loans as an area of concern, something also mentioned by the current Fed leadership.”
U.S. Bubble Watch:
December 11 – The Hill (Niv Elis): “The country’s budget deficit in the first two months of fiscal 2019, which began Oct. 1, was 50% higher than in the same period the previous year, according to the Congressional Budget Office (CBO), though the figure was inflated by timing. In October and November, the federal government spent $303 billion more than it took in, compared to $202 billion in the same period of fiscal 2018… Tax revenues were just 3 percentage points higher than the previous year, largely because of the GOP tax law, while spending surged 18%.”
December 12 – Bloomberg (Alexandre Tanzi): “Total public debt outstanding has jumped by $1.36 trillion, or 6.6%, since the start of 2018, and by $1.9 trillion since President Donald Trump took office… If this year’s growth rate is sustained through the end of the year, it would be the biggest jump in percentage terms since the last year of President Barack Obama’s first term, at a time when the economy needed fiscal stimulus in the aftermath of the financial crisis. As of Monday, the nation’s debt stood at a record $21.9 trillion. The borrowing is needed to cover a budget deficit that expanded by an estimated $779 billion in Trump’s first full fiscal year as president, the widest fiscal gap in six years. By the end of Trump’s first term, the debt is expected to rise by $4.4 trillion despite historically low unemployment, and relatively low interest rates and robust growth.”
December 11 – Reuters (Lucia Mutikani): “U.S. producer prices unexpectedly rose in November as increases in the costs for services offset a sharp decline for energy products, but the overall momentum in wholesale inflation appears to be slowing… The Labor Department… producer price index for final demand edged up 0.1% last month after jumping 0.6% in October. In the 12 months through November, the PPI rose 2.5%, slowing from October’s 2.9% surge.”
December 9 – Financial Times (Sam Fleming): “The US is likely to feel the effects of sharply slowing growth elsewhere in the world, the International Monetary Fund’s chief economist has said amid signs of a loss of momentum in a broadening range of economies. …Maurice Obstfeld said that he is not expecting a recession in the US, but he expects growth to progressively slow in 2019 and 2020 as the effect of tax cuts and spending hikes diminishes. ‘For the rest of the world there seems to be some air coming out of the balloon. That will come back and also affect the US,’ he predicted.”
December 10 – Reuters (Caroline Valetkevitch): “The growing ranks of stock market Eeyores now have another reason to stay glum: Next year’s profit picture is darkening fast… Wall Street analysts have slammed the brakes on estimates for profit growth for S&P 500 companies, which had accelerated for much of the year. Two months ago, 2019 profit growth was pegged at 10.2%; it is now seen at 8.2%, and growing ranks of doubters reckon growth could slow to half that rate or less.”
December 11 – Financial Times (John Gapper): “Think of an industry in which three big companies have used technology and economies of scale to become oligopolies and wield power over other enterprises. It hails not from Silicon Valley but the US east coast. The industry in question is passive investment management, in which computers take the role of human stock pickers and money is channelled into index and exchange traded funds. The Big Three of the US industry — BlackRock, Vanguard and State Street — have gained such size and efficiency that they control 80% of the money invested in US index funds. Even Jack Bogle, founder of Vanguard and pioneer of the modern US index fund industry, is alarmed by their success. He has warned that, ‘if historical trends continue, a handful of giant institutional investors will one day hold voting control of virtually every large US corporation’.”
December 10 – CNBC (Diana Olick): “Homeowners in most places are still seeing their nest eggs get a little bigger, but the gains are shrinking quickly. The average homeowner with a mortgage saw a gain of $12,400 in home equity between the third quarter of last year and this year, according to CoreLogic. That includes price appreciation and paying down the mortgage. That is down from $16,000 in annual gains in the second quarter, and the smallest gain in two years. States in the West did see bigger gains: Home equity increased by $36,500 in California and by $32,600 in Nevada. Home equity actually fell in North Dakota, Louisiana and Connecticut.”
December 9 – Wall Street Journal (Ben Eisen): “The pace of real-estate speculation is slowing, a sign of the darkening outlook in the U.S. housing market. Small-time investors who flooded into real estate in the past decade to take advantage of low borrowing costs and rising home values are starting to cut back. The moves indicate that the market’s short-term risk-takers see limited upside—and possible turbulence—ahead. The number of new home loans issued with terms of three years or less, typically used by investors looking to make a quick profit, dropped by 11% in the July-to-September period from a year earlier. It was the smallest amount since the second quarter of 2015, according to Attom Data Solutions…”
December 12 – Reuters (Lucia Mutikani): “U.S. consumer prices were unchanged in November, held back by a sharp decline in the price of gasoline, but underlying inflation pressures remained firm amid rising rents and healthcare costs… November’s flat reading in the Consumer Price Index… followed a 0.3% increase in October. In the 12 months through November, the CPI rose 2.2%, the smallest gain since February, after advancing 2.5% in October. Excluding the volatile food and energy components, the CPI climbed 0.2%... That lifted the year-on-year increase in the so-called core CPI to 2.2% from 2.1% in October.”
December 13 – Reuters (Lucia Mutikani): “U.S. import prices fell by the most in more than three years in November as the cost of petroleum products tumbled and a strong dollar weighed on prices of other goods, pointing to subdued imported inflation in the near term. The Labor Department said… import prices dropped 1.6% last month…”
December 7 – Wall Street Journal (Greg Bensinger and Maureen Farrell): “Uber… filed paperwork confidentially this week for its initial public offering, according to people familiar with the matter, as it races with smaller rival Lyft Inc. to be the first to market. The S-1 filing with the Securities and Exchange Commission puts Uber neck-and-neck with Lyft. Both planned IPOs are shaping up to be among the biggest in a spate of offerings aimed for 2019. Lyft said Thursday it had filed its S-1, and people familiar with the matter have said it is aiming to debut in March or April. Uber’s filing indicates it could go public as soon as the first quarter… That would be sooner than many observers had expected.”
December 13 – Wall Street Journal (Katherine Blunt and Rebecca Smith): “Already paying some of the highest electricity prices in the country, customers of California’s largest utility, PG&E Corp., could soon face massive rate hikes due to the state’s catastrophic wildfires. While the exact scope of PG&E’s fire-related liability remains uncertain, the utility potentially faces tens of billions of dollars in claims. That would amount to an average power-bill increase of as much as 17% if the full total were passed on to ratepayers, according to one analyst’s estimate. That burden is more likely to be spread between shareholders and ratepayers, but could weigh on the economy of a state that already has high living costs.”
December 12 – Reuters (Richard Leong): “U.S. borrowers filed the most loan requests to buy a home and to refinance one in two months as most lending costs declined to their lowest levels since September, the Mortgage Bankers Association said… In the third quarter, monthly mortgage payments for first-time U.S. homebuyers grew by 15% year-over-year, according to a report from Genworth Mortgage Insurance…”
China Watch:
December 11 – Wall Street Journal (Bob Davis and Lingling Wei): “Beijing sought to ease tensions with Washington as its top trade negotiator told U.S. officials that China was planning to reduce auto tariffs and boost purchases of soybeans and other crops, according to people in both capitals… The two sides held a teleconference involving Treasury Secretary Steven Mnuchin, U.S. Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He, the first session since the two sides had reached a 90-day trade truce… The… talks came amid rising U.S. demands on its economic rival, including calls for China to protect U.S. intellectual property, and to end pressure on U.S. firms to hand over valuable technology to their U.S. partners.”
December 12 – Wall Street Journal (Lingling Wei and Bob Davis): “China plans to replace an industrial policy savaged by the Trump administration as protectionist with a new program promising greater access for foreign companies, people briefed on the matter said, in a move to resolve trade tensions with the U.S. China’s top planning agency and senior policy advisers are drafting the replacement for Made in China 2025—President Xi Jinping’s blueprint to make the country a leader in high-tech industries including robotics, information and clean-energy cars. The revised plan would play down China’s bid to dominate manufacturing and be more open to participation by foreign companies…”
December 9 – Financial Times (Tom Hancock, Kathrin Hille and Demetri Sevastopulo): “China has summoned the US ambassador in Beijing to demand the cancellation of an arrest warrant for Meng Wanzhou, chief financial officer of Chinese telecoms company Huawei, in the latest sign that her detention is souring relations between the two powers. Beijing also threatened Canada with ‘serious consequences’ following the arrest of Ms Meng in Vancouver, highlighting how the stand-off is spilling over into other countries’ relations with China.”
December 12 – Bloomberg (Gregor Stuart Hunter): “Default risk for Chinese companies has climbed to the highest in 13 years as Beijing seeks to rein in its post-crisis construction boom, according to Moody’s Analytics. The research group’s measure of expected default frequency has risen above early-warning levels for about 25% of corporate borrowers. Moody’s Analytics… uses the gauge to isolate companies and sectors that merit further investigation for financial distress. ‘This share has been rising steadily for the past two years and now sits near the highs last seen in 2005,’ Glenn Levine, a senior research analyst, wrote… China has already seen a record pace of bond defaults this year, a consequence in part of policy makers’ efforts to reduce leverage in the financial system.”
December 13 – Bloomberg: “The Chinese government’s ‘Made in China 2025’ plan was introduced as a blueprint for transforming the country into an advanced manufacturing economy. It’s come to represent what international competitors, notably the U.S. under President Donald Trump, dislike about how China plays in the global marketplace. Tariffs imposed by Trump took aim at many of the industries highlighted in the plan… The plan, released in 2015, identified 10 industries in which China aspired to become globally competitive by 2025 and globally dominant during this century. Those industries: robotics, new-energy vehicles, biotechnology, aerospace, high-end shipping, advanced rail equipment, electric power equipment, agricultural machinery, new materials (such as those used in screens and solar cells) and new generation information technology and software…”
December 8 – Reuters: “China’s trade surplus with the United States widened to $35.55 billion in November, compared with $31.78 billion in October… For January-November, China’s trade surplus with the United States was $293.52 billion, compared with about $251.26 billion in the same period last year.”
December 8 – Reuters (Lusha Zhang, Stella Qiu and Ryan Woo): “China reported far weaker than expected November exports and imports, showing slower global and domestic demand… November exports only rose 5.4% from a year earlier…, the weakest performance since a 3% contraction in March, and well short of the 10% forecast…”
December 10 – Bloomberg: “Economic data for China released over the weekend signal a further weakening of both domestic and international demand in November. Factory inflation and the consumer price index slowed, while import growth slumped… The producer price index climbed 2.7% in November from a year earlier, the slowest pace in more than two years. The consumer price index rose 2.2%, slower than estimated… Exports in dollar terms rose 5.4% in November, the customs administration said Saturday, missing estimates. Imports grew 3%, widening China’s trade surplus to $44.7 billion from $34.8 billion. That was the highest this year.”
December 14 – Bloomberg (Annie Lee): “Taiwan’s banks, voracious lenders to Chinese companies in recent years, are starting to cool their appetite as they contemplate the longer-term consequences of the U.S.-China trade war. Faced with low interest rates at home, Taiwanese lenders -- renowned for their clout in Asia’s syndicated loan market -- poured across into the mainland, so much so that the local regulator capped the amounts they could extend. Some have used up most of their quotas, Financial Supervisory Commission data show. On average, China made up 54% of the total book value of Taiwanese banks’ assets last quarter, up from 50% at start of 2017.”
December 8 – Reuters (Stella Qiu and Ryan Woo): “China’s banking and insurance regulator is calling for banks to meet credit demand from private firms ‘to the greatest possible extent’, a top journal of China’s ruling Communist Party said. Chinese banks are wary of a fresh spike in bad loans after years of pressure from regulators to reduce riskier lending and an some entrepreneurs have begun questioning the effectiveness of Beijing’s policies. ‘(Banks) should satisfy the effective credit demand from enterprises to the maximum extent,’ the party committee of the regulator wrote in the ideological journal Qiushi, or Seeking Truth…”
December 13 – Bloomberg (Jinshan Hong): “Wealthy Chinese are rushing to shelter assets and income in overseas trusts before new tax rules go into effect next month, including provisions that target offshore holdings. The Bank of Singapore has seen a 35% surge in Chinese clients interested in offshore trusts since the second half of 2018… The rate of inquiries leading to the establishment of a trust, which offers ‘tax-planning opportunities’ by giving ownership to third-party trustees, has doubled since August, he said.”
Brexit Watch:
December 12 – CNBC (Holly Ellyatt): “U.K. Prime Minister Theresa May has won a crucial vote of confidence in her leadership on Wednesday evening. May won the leadership challenge by 200 votes to 117 votes against her in the ballot of Conservative members of parliament (MPs).”
EM Watch:
December 10 – Financial Times (Steven Bernard and Amy Kazmin): “Arvind Kumar, a chest surgeon at New Delhi’s Sir Ganga Ram Hospital, has a ringside view of the toll that northern India’s deteriorating air quality is taking on its residents. When he started practising 30 years ago, some 80 to 90% of his lung cancer patients were smokers, mostly men, aged typically in their 50s or 60s. But in the past six years, half of Dr Kumar’s lung cancer patients have been non-smokers, about 40% of them women. Patients are younger too, with 8% in their 30s and 40s. To Dr Kumar, the dramatic shift in the profiles of lung cancer patients has a clear cause: air fouled by dirty diesel exhaust fumes, construction dust, rising industrial emissions and crop burning… Even in teenage lungs, Dr Kumar sees black deposits that would have been almost unthinkable 30 years ago.”
Central Bank Watch:
December 13 – Financial Times (Claire Jones): “The European Central Bank has called time on its contentious four-year experiment in stimulating the eurozone economy, confirming on Thursday it will halt the expansion of its €2.6tn bond-buying programme this month. Mario Draghi… hailed the impact of so-called quantitative easing in helping to restore the eurozone to economic health, saying that at times it had been ‘the only driver of this recovery’. In a widely expected decision on its QE policy, the governing council said net purchases under the programme would end this month, almost four years after it started buying bonds as a means of trying to reinvigorate the eurozone’s economy after a long financial crisis. But Mr Draghi acknowledged fears over the economic environment, saying risks were ‘moving to the downside’ because of protectionist fears, geopolitical turbulence, emerging market vulnerability and volatility in financial markets.”
December 11 – Financial Times (Claire Jones): “After four years and a €2.6tn bond-buying spree, the European Central Bank’s experiment in trying to rescue the eurozone economy by bloating its balance sheet is about to come to an end. Few policies have been so contentious during Mario Draghi’s stewardship of the ECB as ‘quantitative easing’ — its massive programme of bond purchases aimed at overcoming economic stagnation. An echo of unorthodox moves by other big central banks such as the US Federal Reserve and the Bank of England, it was hotly debated within the eurozone, where fiscally prudent northern member states did not want to take on the political risks associated with weaker southern counterparts. Mr Draghi overcame the complaints of ECB hawks to impose QE… On Thursday, in Frankfurt, the ECB president is expected to confirm what the bank has been flagging for months — that QE’s time is over.”
December 9 – Financial Times (Chris Giles and Sam Fleming): “The technocratic tribe of central bankers is facing political scrutiny of an intensity not seen in decades. President Donald Trump ramped up his war of words with the US Federal Reserve, accusing it of having ‘gone crazy’ by raising interest rates and expressing public regrets over his choice of Jay Powell as its chairman. The Reserve Bank of India has been under intense pressure to ease lending conditions, while Hungary has tussled with the EU over measures impinging on its central bank’s independence. Turkish president Recep Tayyip Erdogan has shaken market faith in his country by leaning on its central bank to keep rates low. Even the normal brotherhood of central bankers is fracturing with Mervyn King, former Bank of England governor, accusing his successor, Mark Carney, of ‘unnecessarily’ pandering to the British government’s desires over Brexit.”
December 10 – Reuters (Anirban Nag and Subhadip Sircar): “Urjit Patel’s shock exit as governor of the Reserve Bank of India roiled financial markets already nervous about early election results showing Prime Minister Narendra Modi’s ruling party losing support in key states. The rupee dropped… Tuesday, reacting to Patel’s decision to quit nine months before the end of his three-year term for ‘personal reasons.’ … Patel’s RBI had been at loggerheads with the government for weeks, fending off pressure to ease lending restrictions and transfer more of its excess capital to the state. A board meeting had been scheduled for Friday, at which government representatives were expected to seek changes to the central bank’s governance structure.”
December 12 – Wall Street Journal (Tom Fairless and Brian Blackstone): “The European Central Bank is nearing a landmark decision to wind down its $3 trillion bond-buying program, closing a chapter on a policy the U.S. used to help restore its growth but one that had mixed results in Europe. ECB officials are expected to confirm plans to end new bond buying, known as quantitative easing, at their meeting on Thursday. The ECB will thus become the third leading central bank to wind down QE, after the Federal Reserve and Bank of England. Japan’s central bank is still buying bonds. The ECB’s journey was complicated by the bloc’s unique setup: 19 countries, each with their own tax and spending policies, sharing a single currency. That made it hard to design a one-size-fits-all response to falling consumer prices and high unemployment in some parts of Europe. Using freshly created money to buy government debt drew the ECB into Europe’s political battles.”
Europe Watch:
December 11 – Reuters (Abhinav Ramnarayan): “France’s 10-year borrowing costs climbed to their highest level compared with Germany’s in a year and a half on Tuesday, as President Emmanuel Macron announced spending measures after weeks of violent protests. Macron announced wage rises for the poorest workers and tax cuts for pensioners late on Monday, which are expected to increase public spending by 8-10 billion euros.”
December 12 – Reuters (Tom Sims): “Germany is holding high-level talks to facilitate a possible merger of the nation’s two largest private banks - Deutsche Bank and Commerzbank - Bloomberg reported… Bloomberg, citing unnamed sources, said that discussions included German Finance Minister Olaf Scholz and Deutsche Bank Chief Executive Christian Sewing.”
December 9 – Reuters (Ardee Napolitano): “The ‘yellow vest’ protest movement will have a severe impact on the French economy, Finance Minister Bruno Le Maire said… ‘We must expect a new slowdown of economic growth at year-end due to the ‘yellow vest’ protests,’ Le Maire told Reuters television as he visited shops and restaurants that had been vandalized on Saturday.”
Italy Watch:
December 11 – Reuters (Giuseppe Fonte): “Italy’s coalition parties are resisting any major reduction to next year’s deficit target, complicating efforts to avoid EU disciplinary action over the 2019 budget, a government source said… The European Commission has rejected Rome’s budget, which predicts the deficit will rise to 2.4% of gross domestic product in 2019 from 1.8% this year, saying it will not cut Italy’s large public debt as the rules require.”
December 9 – Reuters (Crispian Balmer): “Italy’s Deputy Prime Minister Matteo Salvini said… President Emmanuel Macron was to blame for the ‘yellow vest’ protests that have rattled France and urged Brussels to take heed of what was happening. ‘History will probably show that if (Macron) had focused more on the French and less on Salvini and Italy, he would have a few less problems today,’ Salvini, flush from the success of a mass rally in Rome on Saturday, told Rai 3 TV.”
Japan Watch:
December 9 – Reuters (Tetsushi Kajimoto): “The Japanese economy contracted the most in over four years in the third quarter as companies slashed spending, threatening to chill the investment outlook in 2019 as the export-reliant nation grapples with slowing global growth and trade frictions. The slump in the world’s third-biggest economy adds to signs elsewhere in Asia and Europe of weakening momentum, with recent data in China and Australia showing a slowdown in growth and stoking concerns about the wider impact of the Sino-U.S trade war. Japan’s gross domestic product shrank at an annualized rate of 2.5% in the July-September quarter - the worst downturn since the second quarter of 2014 - from 2.8% growth in the second quarter…”
Global Bubble Watch:
December 11 – Reuters (Marc Jones): “One of the International Monetary Fund’s top officials warned… that storm clouds were gathering over the global economy and that governments and central banks might not be well- equipped to cope. The fund had been urging governments to ‘fix the roof’ during a sunny last two years for the world economy, IMF First Deputy Managing Director David Lipton said. ‘But like many of you, I see storm clouds building, and fear the work on crisis prevention is incomplete,’ he said…”
December 10 – Bloomberg (Narae Kim): “China’s technology sector. Chinese tech firms have posted the biggest losses this year among the nation’s investment-grade dollar bond names, down 3.2%. ‘The industry has already been under pressure following the tightening oversight by the Chinese authorities, and now there’s also the intensifying tension between China and U.S., following the incidents involving ZTE and Huawei,’ said Angus To, deputy head of research at ICBC... ‘The uncertainties are set to continue and market sentiment on tech names would remain cautious,’ he added.”
December 9 – Financial Times (Chris Flood): “One of the longest-running mysteries of financial markets is surrendering its secrets. The true scale of trading activity across Europe’s $782bn exchange traded fund sector has been a subject of speculation and debate. Most ETF dealing in Europe takes place via private over-the-counter transactions that were not required to be reported until the start of this year… The value of reported ETF trading has quadrupled in 2018 to about $2tn compared with last year when the visible liquidity was limited to about $500bn.”
December 12 – Reuters (Fergal Smith): “Canadian home prices fell in November for the second consecutive month as declines were seen across much of the country… The Teranet-National Bank Composite House Price Index, which measures changes for repeat sales of single-family homes, showed prices fell 0.3% in November from October… On a year-over-year basis, the index climbed 3.1%...”
Fixed Income Bubble Watch:
December 9 – Financial Times (Adam Samson): “Storm clouds are gathering around the corporate debt market, with investors eyeing higher borrowing costs, deteriorating credit quality and fraught trade conditions. In the US, about a quarter of junk-rated issuers are now rated at B minus or lower, up from 17% four years ago and the highest level since 2009, according to data from S&P… In another sign of the potential cracks in the credit market, Cantor Fitzgerald, the investment bank, has said a third of the US investment grade market has leverage ratios, a measure of a company’s ability to pay its debt, that would otherwise be considered as high yield. ‘Leverage in corporate credit markets overall has increased to an extreme level since the Great Recession,’ said Peter Cecchini, chief market strategist at Cantor.”
December 12 – Bloomberg (Katherine Greifeld and John Gittelsohn): “Ballooning U.S. debt issuance is capping gains in the Treasuries market even amid stock ‘carnage’ that would typically boost bond prices, according to Jeffrey Gundlach, chief investment officer of DoubleLine Capital. A global equity sell-off that’s seen major U.S. stock indexes erase 2018 gains has pushed benchmark 10-year Treasury yields to 2.88%, close to the lowest level since August. While that rally should be stronger given the magnitude of the equity-market turmoil, crisis-era debt supply levels are making it difficult for yields to fall much lower, according to Gundlach.”
December 11 – Wall Street Journal (Sam Goldfarb): “Speculative-grade loans, a rare bright spot in the fixed-income world for most of the year, have hit a rough patch, posing challenges for businesses that have relied on the market. Investors have pulled $5.4 billion from loan-focused mutual funds since mid-October, including $4.1 billion in the past three weeks alone, according to… Lipper. That’s quite the turnaround: Investors had poured nearly $12 billion into loan-focused mutual funds in the year up to mid-October, even as they withdrew more than $22 billion from high-yield bond funds…”
December 12 – Reuters (Kristen Haunss): “Issuance of US Collateralized Loan Obligations (CLOs) has set a new annual record, even as spreads on the funds’ most senior tranches widen and regulatory scrutiny of their underlying assets increase. There has been US$124.6bn of US CLOs raised this year through December 7, topping the previous record of US$123.6bn set in 2014, according to LPC Collateral data. Another US$149.6bn of deals have been refinanced, reset or reissued in 2018.”
December 13 – Bloomberg (Allan Lopez): “Companies may sell fewer bonds next year as higher costs force corporations to pull back on financing and trade concerns slow the pace of mergers and acquisitions, according to research firm CreditSights. Investment-grade bond issuance should drop by about 6.5% to $1.1 trillion in 2019 from this year, with industrials and utilities leading the decline, analysts Erin Lyons and Jeff Khasin wrote… That’s in the wake of an expected slide of around 12% in 2018 from the previous year.”
Leveraged Speculation Watch:
December 11 – Bloomberg (Alan Mirabella): “Hedge fund returns fell 0.35% in November as equity hedge and multi-strategy managers struggled. For the year, the industry is down 3.62%, according to… the Bloomberg Hedge Fund Database. Portfolio managers are being stymied by an array of challenges, most notably churning volatility driven by U.S. political and economic concerns. Those difficulties have caused the industry to lag behind the broader market. In November, the S&P 500 Index rose 1.8%. This month likely won’t be much better for hedge funds. The measure is down 4.4% through yesterday.”
Friday, December 14, 2018
Friday Afternoon Links
[Reuters] Wall St. tumbles on global growth worries, J&J decline
[CNBC] J&J shares plunge 11% after report that the company knew for decades about asbestos in baby powder
[Reuters] J&J knew for decades that asbestos lurked in its Baby Powder: Reuters
[BloombergQ] China’s Seizure of Two Canadians ‘Not Acceptable,’ Trudeau Says
[CNBC] J&J shares plunge 11% after report that the company knew for decades about asbestos in baby powder
[Reuters] J&J knew for decades that asbestos lurked in its Baby Powder: Reuters
[BloombergQ] China’s Seizure of Two Canadians ‘Not Acceptable,’ Trudeau Says
Thursday, December 13, 2018
Friday's News Links
[Reuters] Weak economic data send world stocks tumbling
[BloombergQ] Global Stock Sell-Off Resumes as Growth Signs Flag: Markets Wrap
[Reuters] U.S. core retail sales surge in November
[Reuters] China says to halt additional tariffs on U.S.-made cars from Jan. 1
[Reuters] China says on track to hit 2018 GDP growth target, faces more uncertainties next year
[BloombergQ] China Debt Scrutinized More by Taiwan Banks Eyeing Trade War
[BloombergQ] U.S. Leveraged Loan Funds Lose Cash at Fastest Pace Ever
[Reuters] Protests plunge French business activity into contraction: PMI
[Reuters] The price of progress in China: 'We traded our lives for development'
[BloombergQ] Bitcoin Sinks Nearer to $3,000 Level as December Losses Mount
[WSJ] Brexit Disarray Sends a Shiver Through the Financial Sector
[WSJ] Companies Ramp Up Stock Buybacks as Market Swoon Continues
[WSJ] Beijing’s Answer to Property Sector’s Debt: Keep On Borrowing
[FT] Japan’s new year faces a painful reckoning for markets
[FT] Wall Street banks turn skittish on leveraged loans
[FT] Investors signal concerns with leveraged loans
[FT] Chinese elites reel from shock of Huawei arrest
[FT] Central banks assess next steps as ECB joins retreat from QE
[FT] Sydney’s house prices face a falling tide
[BloombergSub] Leveraged Loans Are Sinking, Even as Junk Bonds Find Support
[BloombergQ] Global Stock Sell-Off Resumes as Growth Signs Flag: Markets Wrap
[Reuters] U.S. core retail sales surge in November
[Reuters] China says to halt additional tariffs on U.S.-made cars from Jan. 1
[Reuters] China says on track to hit 2018 GDP growth target, faces more uncertainties next year
[BloombergQ] China Debt Scrutinized More by Taiwan Banks Eyeing Trade War
[BloombergQ] U.S. Leveraged Loan Funds Lose Cash at Fastest Pace Ever
[Reuters] Protests plunge French business activity into contraction: PMI
[Reuters] The price of progress in China: 'We traded our lives for development'
[BloombergQ] Bitcoin Sinks Nearer to $3,000 Level as December Losses Mount
[WSJ] Brexit Disarray Sends a Shiver Through the Financial Sector
[WSJ] Companies Ramp Up Stock Buybacks as Market Swoon Continues
[WSJ] Beijing’s Answer to Property Sector’s Debt: Keep On Borrowing
[FT] Japan’s new year faces a painful reckoning for markets
[FT] Wall Street banks turn skittish on leveraged loans
[FT] Investors signal concerns with leveraged loans
[FT] Chinese elites reel from shock of Huawei arrest
[FT] Central banks assess next steps as ECB joins retreat from QE
[FT] Sydney’s house prices face a falling tide
[BloombergSub] Leveraged Loans Are Sinking, Even as Junk Bonds Find Support
Thursday Evening Links
[Reuters] Asian shares wobbly, euro steady after ECB ends QE
[Reuters] Record $46 billion pulled from U.S.-based stock funds in latest week: Lipper
[Reuters] Japan business mood steady but outlook sours: BOJ tankan
[Reuters] S&P 500 ends choppy session little changed
[BloombergQ] Oil Jumps as Saudis Target American Refiners for Supply Cuts
[MarketWatch] U.S. budget deficit jumps to $205 billion in November
[CNBC] Goldman says US-China not likely to reach trade deal by March and more tariffs are coming
[Reuters] U.S. labor market tightening; inflation pressures muted
[BloombergQ] The Fed’s Job Just Got More Complicated
[Reuters] Italy's lower deficit goal: a politically useful fudge
[BloombergQ] Draghi Says Euro’s 20th Birthday Is Time for ‘Candid’ Reflection
[NYT] Europe’s Central Bank Ends One of the Biggest Money-Printing Programs Ever
[WSJ] Las Vegas Housing Weakness Signals the Slowdown Is Spreading
[FT] Bolton accuses China and Russia of ‘predatory practices’ in Africa
[Reuters] Record $46 billion pulled from U.S.-based stock funds in latest week: Lipper
[Reuters] Japan business mood steady but outlook sours: BOJ tankan
[Reuters] S&P 500 ends choppy session little changed
[BloombergQ] Oil Jumps as Saudis Target American Refiners for Supply Cuts
[MarketWatch] U.S. budget deficit jumps to $205 billion in November
[CNBC] Goldman says US-China not likely to reach trade deal by March and more tariffs are coming
[Reuters] U.S. labor market tightening; inflation pressures muted
[BloombergQ] The Fed’s Job Just Got More Complicated
[Reuters] Italy's lower deficit goal: a politically useful fudge
[BloombergQ] Draghi Says Euro’s 20th Birthday Is Time for ‘Candid’ Reflection
[NYT] Europe’s Central Bank Ends One of the Biggest Money-Printing Programs Ever
[WSJ] Las Vegas Housing Weakness Signals the Slowdown Is Spreading
[FT] Bolton accuses China and Russia of ‘predatory practices’ in Africa
Wednesday, December 12, 2018
Thursday's News Links
[BloombergQ] U.S., Europe Stocks Recover as Euro Slips: Markets Wrap
[Reuters] Euro slips, bond yields fall as ECB trims growth, inflation forecasts
[BloombergQ] Chinese Stocks Jump as Annual Policy Meeting Fuels Easing Bets
[Reuters] Oil prices rise as Sino-U.S. trade tensions show signs of easing
[BloombergQ] ECB Ends Historic Stimulus Push in Bet Economic Growth to Endure
[Reuters] ECB stops its printing presses even as growth concerns rise
[Reuters] U.S import prices post biggest drop in more than three years
[BloombergQ] How ‘Made in China 2025’ Frames Trump's Trade Gripes
[Reuters] Weakened May turns to Brussels for Brexit help, but EU cautious
[BloombergQ] Rich Homebuyers Are Now ‘Test-Driving’ Multimillion-Dollar Mansions
[NYT] A Weakened China Tries a Different Approach With the U.S.: Treading Lightly
[WSJ] California Girds for Higher Power Prices From PG&E After Fires
[FT] ECB to halt expansion of €2.6tn QE programme
[FT] What to look for from the ECB as QE winds down
[FT] Huawei spat comes as China races ahead in 5G
[Reuters] Euro slips, bond yields fall as ECB trims growth, inflation forecasts
[BloombergQ] Chinese Stocks Jump as Annual Policy Meeting Fuels Easing Bets
[Reuters] Oil prices rise as Sino-U.S. trade tensions show signs of easing
[BloombergQ] ECB Ends Historic Stimulus Push in Bet Economic Growth to Endure
[Reuters] ECB stops its printing presses even as growth concerns rise
[Reuters] U.S import prices post biggest drop in more than three years
[BloombergQ] How ‘Made in China 2025’ Frames Trump's Trade Gripes
[Reuters] Weakened May turns to Brussels for Brexit help, but EU cautious
[BloombergQ] Rich Homebuyers Are Now ‘Test-Driving’ Multimillion-Dollar Mansions
[NYT] A Weakened China Tries a Different Approach With the U.S.: Treading Lightly
[WSJ] California Girds for Higher Power Prices From PG&E After Fires
[FT] ECB to halt expansion of €2.6tn QE programme
[FT] What to look for from the ECB as QE winds down
[FT] Huawei spat comes as China races ahead in 5G
Wednesday Evening Links
[CNBC] UK Prime Minister Theresa May wins confidence vote
[Reuters] Wall Street rises on U.S.-China trade optimism
[Reuters] Treasuries-Yields rise as stocks rally on U.S.-China trade optimism
[CNBC] China readying plan to widen foreign access to its economy: WSJ
[BloombergQ] National Debt Under Trump Is Surging at Its Fastest Pace Since 2012
[Reuters] Breakingviews - Challenge to Theresa May clarifies Brexit endgames
[Reuters] U.S. mortgage activity hits 2-month high as interest rates fall: MBA
[Reuters] US CLO issuance sets new record with more than US$124bn of volume
[Reuters] Germany seeks to assist potential bank merger: Bloomberg
[Reuters] Wall Street rises on U.S.-China trade optimism
[Reuters] Treasuries-Yields rise as stocks rally on U.S.-China trade optimism
[CNBC] China readying plan to widen foreign access to its economy: WSJ
[BloombergQ] National Debt Under Trump Is Surging at Its Fastest Pace Since 2012
[Reuters] Breakingviews - Challenge to Theresa May clarifies Brexit endgames
[Reuters] U.S. mortgage activity hits 2-month high as interest rates fall: MBA
[Reuters] US CLO issuance sets new record with more than US$124bn of volume
[Reuters] Germany seeks to assist potential bank merger: Bloomberg
Tuesday, December 11, 2018
Wednesday's News Links
[Reuters] Stocks cheered by Trump trade talk; sterling claws off lows
[BloombergQ] Stocks Rally on Renewed Trade Hopes; Pound Climbs: Markets Wrap
[Reuters] Oil rises more than 1 percent on OPEC-led supply cuts, trade talk hopes
[Reuters] U.S. consumer prices unchanged; underlying inflation firm
[CNBC] UK prime minister to face no-confidence vote as Brexit hangs in the balance
[Reuters] Exclusive: Trump says Fed shouldn't hike rates, but calls Powell 'a good man'
[BloombergQ] Trump Says Fed `Would Be Foolish' to Raise Rates This Month
[BloombergQ] China Default-Risk Jumps to 2005 High, Says Moody's Analytics
[Reuters] Canada home prices fall in November for second straight month: Teranet
[BloombergQ] El-Erian: Huawei Case Will Split Nations Between U.S. and China
[BloombergQ] Gundlach Says the Bond Market Thinks Rate Hikes Are Unlikely in 2019-2020
[Reuters] Time's 'Person of Year' goes to journalists, including Reuters pair
[WSJ] China Is Preparing to Increase Access for Foreign Companies
[WSJ] Trade Deals With China—Done the Chinese Way
[WSJ] ECB Stimulus’s Mixed Legacy: Economic Success, Political Fiasco
[WSJ] Around the World, Climate Goals Clash With Reality
[FT] Draghi set to guide ECB gently through the QE exit
[FT] Index fund managers are too big for comfort
[BloombergQ] Stocks Rally on Renewed Trade Hopes; Pound Climbs: Markets Wrap
[Reuters] Oil rises more than 1 percent on OPEC-led supply cuts, trade talk hopes
[Reuters] U.S. consumer prices unchanged; underlying inflation firm
[CNBC] UK prime minister to face no-confidence vote as Brexit hangs in the balance
[Reuters] Exclusive: Trump says Fed shouldn't hike rates, but calls Powell 'a good man'
[BloombergQ] Trump Says Fed `Would Be Foolish' to Raise Rates This Month
[BloombergQ] China Default-Risk Jumps to 2005 High, Says Moody's Analytics
[Reuters] Canada home prices fall in November for second straight month: Teranet
[BloombergQ] El-Erian: Huawei Case Will Split Nations Between U.S. and China
[BloombergQ] Gundlach Says the Bond Market Thinks Rate Hikes Are Unlikely in 2019-2020
[Reuters] Time's 'Person of Year' goes to journalists, including Reuters pair
[WSJ] China Is Preparing to Increase Access for Foreign Companies
[WSJ] Trade Deals With China—Done the Chinese Way
[WSJ] ECB Stimulus’s Mixed Legacy: Economic Success, Political Fiasco
[WSJ] Around the World, Climate Goals Clash With Reality
[FT] Draghi set to guide ECB gently through the QE exit
[FT] Index fund managers are too big for comfort
Tuesday Evening Links
[Reuters] Exclusive: Trump says he could intervene in U.S. case against Huawei CFO
[CNBC] Canada grants bail for arrested Huawei CFO who faces US extradition
[BloombergQ] U.S. Stocks End a Volatile Day Where They Started: Markets Wrap
[CBS] "I am proud to shut down the government for border security," Trump says in Oval Office sparring with Schumer, Pelosi
[Reuters] Trump argues with top Democrats over border wall funding
[Reuters] U.S. to use sanctions, indictments over China hacking, economic espionage: report
[Reuters] China detains former Canadian diplomat as Huawei CFO returns to court
[Reuters] China November loans top forecasts but other credit gauges at record lows
[Reuters] U.S. lawmakers propose bill to ban sales to Chinese sanctions violators
[MarketWatch] Hawkish former Dallas Fed president says he doesn’t understand doves like Kashkari
[Reuters] French borrowing costs jump on Macron wage rises, tax cuts
[Reuters] Italy coalition parties resisting major changes to deficit target: government source
[WSJ] China Moves to Address U.S. Economic Concerns
[WSJ] Trump Clashes With Democrats Over Spending Bill, Threatens Government Shutdown
[CNBC] Canada grants bail for arrested Huawei CFO who faces US extradition
[BloombergQ] U.S. Stocks End a Volatile Day Where They Started: Markets Wrap
[CBS] "I am proud to shut down the government for border security," Trump says in Oval Office sparring with Schumer, Pelosi
[Reuters] Trump argues with top Democrats over border wall funding
[Reuters] U.S. to use sanctions, indictments over China hacking, economic espionage: report
[Reuters] China detains former Canadian diplomat as Huawei CFO returns to court
[Reuters] China November loans top forecasts but other credit gauges at record lows
[Reuters] U.S. lawmakers propose bill to ban sales to Chinese sanctions violators
[MarketWatch] Hawkish former Dallas Fed president says he doesn’t understand doves like Kashkari
[Reuters] French borrowing costs jump on Macron wage rises, tax cuts
[Reuters] Italy coalition parties resisting major changes to deficit target: government source
[WSJ] China Moves to Address U.S. Economic Concerns
[WSJ] Trump Clashes With Democrats Over Spending Bill, Threatens Government Shutdown
Monday, December 10, 2018
Tuesday's News Links
[Reuters] Trade détente bounce masks unease over Brexit and growth
[Reuters] Indian markets slide after c.bank chief quits; state vote outcome in focus
[CNBC] Trump teases ‘important announcements’ as he touts ‘very productive’ China trade talks
[Reuters] China, U.S. discuss road map for next stage of trade talks
[BloombergQ] China Moves on U.S. Car Tariff Cut Trump Tweeted About
[Reuters] Automakers rise on report of China moving to cut U.S. car tariffs
[Reuters] Huawei CFO back in Canada court as bail hearing set to wrap
[Reuters] Services lift U.S. producer prices in November
[Reuters] EU rules out Brexit renegotiation as May seeks help from Merkel
[Reuters] Former Canadian diplomat detained in China: sources
[Reuters] IMF warns storm clouds gathering for global economy
[CNBC] Yellen warns of another potential financial crisis: ‘Gigantic holes in the system’
[CNBC] Fear of interest rate hikes is fading as next Fed meeting approaches
[The Hill] Budget deficit soars in first two months of fiscal year
[BloombergQ] China's Tech Bonds Are Top Losers in 2018 Amid Trade War
[WSJ] U.S., China Kick Off a New Round of Trade Talks
[WSJ] Now Loan Investors Are Heading for the Exits
[WSJ] Market Volatility Leads to Fresh Focus on Machinery Beneath Trading
[WSJ] Fear Gauge Warns That This Selloff Is Different
[WSJ] The Debt Threat to the Economy
[WSJ] Across Europe, a Political Landscape Defined by Deep Divisions
[FT] Dirty air: how India became the most polluted country on earth
[Reuters] Indian markets slide after c.bank chief quits; state vote outcome in focus
[CNBC] Trump teases ‘important announcements’ as he touts ‘very productive’ China trade talks
[Reuters] China, U.S. discuss road map for next stage of trade talks
[BloombergQ] China Moves on U.S. Car Tariff Cut Trump Tweeted About
[Reuters] Automakers rise on report of China moving to cut U.S. car tariffs
[Reuters] Huawei CFO back in Canada court as bail hearing set to wrap
[Reuters] Services lift U.S. producer prices in November
[Reuters] EU rules out Brexit renegotiation as May seeks help from Merkel
[Reuters] Former Canadian diplomat detained in China: sources
[Reuters] IMF warns storm clouds gathering for global economy
[CNBC] Yellen warns of another potential financial crisis: ‘Gigantic holes in the system’
[CNBC] Fear of interest rate hikes is fading as next Fed meeting approaches
[The Hill] Budget deficit soars in first two months of fiscal year
[BloombergQ] China's Tech Bonds Are Top Losers in 2018 Amid Trade War
[WSJ] U.S., China Kick Off a New Round of Trade Talks
[WSJ] Now Loan Investors Are Heading for the Exits
[WSJ] Market Volatility Leads to Fresh Focus on Machinery Beneath Trading
[WSJ] Fear Gauge Warns That This Selloff Is Different
[WSJ] The Debt Threat to the Economy
[WSJ] Across Europe, a Political Landscape Defined by Deep Divisions
[FT] Dirty air: how India became the most polluted country on earth
Monday Evening links
[Reuters] Sterling sinks on Brexit vote delay, Asian shares dither
[Reuters] Wall St. ends choppy session higher; tech a boost
[CNBC] Dow erases 500-point drop and closes higher in another wild session on Wall Street
[Reuters] Pound tumbles to 20-month low after Britain's May aborts Brexit vote
[BloombergQ] Oil Slides Most in Two Weeks as Traders Doubt OPEC+ Supply Cuts
[Reuters] Brexit in turmoil as UK PM May pulls vote on her EU divorce deal
[Reuters] EU warns Italy time short to avoid budget disciplinary action
[Reuters] Goldman cuts 2019 Fed rate-hike forecast to three
[CNBC] Homeowners are seeing the smallest equity gains in two years
[Reuters] The next worry for U.S. stocks: shrinking profit forecasts
[WSJ] Arrest of Huawei CFO Hinges on an Offshore Puzzle
[Reuters] Wall St. ends choppy session higher; tech a boost
[CNBC] Dow erases 500-point drop and closes higher in another wild session on Wall Street
[Reuters] Pound tumbles to 20-month low after Britain's May aborts Brexit vote
[BloombergQ] Oil Slides Most in Two Weeks as Traders Doubt OPEC+ Supply Cuts
[Reuters] Brexit in turmoil as UK PM May pulls vote on her EU divorce deal
[Reuters] EU warns Italy time short to avoid budget disciplinary action
[Reuters] Goldman cuts 2019 Fed rate-hike forecast to three
[CNBC] Homeowners are seeing the smallest equity gains in two years
[Reuters] The next worry for U.S. stocks: shrinking profit forecasts
[WSJ] Arrest of Huawei CFO Hinges on an Offshore Puzzle
Sunday, December 9, 2018
Monday's News Links
[BloombergQ] Stocks Fall on Heightened Trade Worry; Dollar Dips: Markets Wrap
[BloombergQ] Rising U.S.-China Tensions Roil U.S. Stock-Index Futures
[Reuters] Dollar little changed after biggest weekly loss in three months
[Reuters] May pulls vote on her divorce deal, thrusting Brexit into the unknown
[Reuters] Chinese state media distance Huawei arrest from U.S. trade talks
[BloombergQ] Huawei's CEO Built an Empire. Trump Could Tear it Down
[BloombergQ] China's Weekend Data Signal Weakening Demand at Home and Abroad
[Reuters] May is said to withdraw parliamentary vote on her Brexit deal
[Reuters] Qualcomm wins import ban against several Apple iPhones in China
[BloombergQ] India Central Bank Head Quits Amid Rift With Government
[BloombergQ] Hedge Funds Have Stocks to Dump, in Bad Sign for Sell-off
[MarketWatch] A bruised stock market looks to the Fed for relief
[NYT] Wall St. Faces Stomach-Churning Swings as Economic Uncertainty Grows
[WSJ] Housing Slowdown Unnerves the Fix-and-Flip Crowd
[WSJ] Climbdowns and compromises on long road to a botched Brexit
[FT] China’s commodities imports falls highlighting economic weakness
[FT] Markets data shed light on extent of ETF trading
[FT] Huawei’s 5G ambitions threatened by US export ban
[BloombergQ] Rising U.S.-China Tensions Roil U.S. Stock-Index Futures
[Reuters] Dollar little changed after biggest weekly loss in three months
[Reuters] May pulls vote on her divorce deal, thrusting Brexit into the unknown
[Reuters] Chinese state media distance Huawei arrest from U.S. trade talks
[BloombergQ] Huawei's CEO Built an Empire. Trump Could Tear it Down
[BloombergQ] China's Weekend Data Signal Weakening Demand at Home and Abroad
[Reuters] May is said to withdraw parliamentary vote on her Brexit deal
[Reuters] Qualcomm wins import ban against several Apple iPhones in China
[BloombergQ] India Central Bank Head Quits Amid Rift With Government
[BloombergQ] Hedge Funds Have Stocks to Dump, in Bad Sign for Sell-off
[MarketWatch] A bruised stock market looks to the Fed for relief
[NYT] Wall St. Faces Stomach-Churning Swings as Economic Uncertainty Grows
[WSJ] Housing Slowdown Unnerves the Fix-and-Flip Crowd
[WSJ] Climbdowns and compromises on long road to a botched Brexit
[FT] China’s commodities imports falls highlighting economic weakness
[FT] Markets data shed light on extent of ETF trading
[FT] Huawei’s 5G ambitions threatened by US export ban
Sunday Evening Links
[Reuters] Stocks extend decline as trade woes batter sentiment
[CNBC] Dow futures drop nearly 200 points as sell-off looks set to continue in new week
[Reuters] U.S. says March 1 'hard deadline' for trade deal with China
[Reuters] Japan third quarter GDP contracts at fastest pace since 2014, trade war dims outlook
[CNBC] Steven Mnuchin is under consideration to become Trump’s next chief of staff, but he has indicated he feels better suited at Treasury
[BloombergQ] Stock Carnage Evokes Hope of 2016-Style Rebound. A Lot's Changed
[CNBC] The bear market is here, and stocks will plunge at least 20 percent, Ned Davis Research warns
[BloombergQ] Italy Government to Discuss Budget Analysis Before EU Talks
[Reuters] Macron to blame for French protests, Italy's Salvini says
[WSJ] Huawei Offensive Is Acceleration of Yearslong Endeavor
[FT] Global political backlash spreads against central banks
[FT] US economy set to slow, says IMF chief economist
[FT] Davies: New year, new Federal Reserve
[CNBC] Dow futures drop nearly 200 points as sell-off looks set to continue in new week
[Reuters] U.S. says March 1 'hard deadline' for trade deal with China
[Reuters] Japan third quarter GDP contracts at fastest pace since 2014, trade war dims outlook
[CNBC] Steven Mnuchin is under consideration to become Trump’s next chief of staff, but he has indicated he feels better suited at Treasury
[BloombergQ] Stock Carnage Evokes Hope of 2016-Style Rebound. A Lot's Changed
[CNBC] The bear market is here, and stocks will plunge at least 20 percent, Ned Davis Research warns
[BloombergQ] Italy Government to Discuss Budget Analysis Before EU Talks
[Reuters] Macron to blame for French protests, Italy's Salvini says
[WSJ] Huawei Offensive Is Acceleration of Yearslong Endeavor
[FT] Global political backlash spreads against central banks
[FT] US economy set to slow, says IMF chief economist
[FT] Davies: New year, new Federal Reserve
Sunday's News Links
[Reuters] China summons US ambassador to lodge ‘strong protest’ over Huawei arrest
[Reuters] China says U.S. should withdraw arrest warrant for Huawei executive
[BloombergQ] Fed Wants You to Know: It’s Shifting to More Cautious Rate Path
[Reuters] Yellow vest protest to have severe impact on economy: Le Maire
[WSJ] Details Emerge in U.S.’s Trade Truce With China
[WSJ] Silicon Valley Helped Build Huawei. Washington Could Dismantle It.
[WSJ] The Market’s Latest Problem: Hesitation to Buy the Dip
[FT] Cracks in corporate debt market begin to show
[FT] China sees ‘serious consequences’ for Canada for Huawei episode
[Reuters] China says U.S. should withdraw arrest warrant for Huawei executive
[BloombergQ] Fed Wants You to Know: It’s Shifting to More Cautious Rate Path
[Reuters] Yellow vest protest to have severe impact on economy: Le Maire
[WSJ] Details Emerge in U.S.’s Trade Truce With China
[WSJ] Silicon Valley Helped Build Huawei. Washington Could Dismantle It.
[WSJ] The Market’s Latest Problem: Hesitation to Buy the Dip
[FT] Cracks in corporate debt market begin to show
[FT] China sees ‘serious consequences’ for Canada for Huawei episode
Saturday, December 8, 2018
Saturday's News Links
[Reuters] China calls on Canada to free Huawei CFO or face consequences
[Reuters] China's November export, import growth shrinks, showing weak demand
[Reuters] China's November trade surplus with U.S. widens to $35.55 billion
[Reuters] China watchdog calls for banks to meet private sector credit demand: China Party journal
[BloombergQ] Federal Reserve Officials Search for the Elusive ‘Neutral’ Interest Rate
[Reuters] Police clash with 'yellow vest' protesters in Paris
[BBC] Yellow vest movement: Paris police detain hundreds of protesters
[WSJ] Huawei Executive’s Arrest Stirs Fears About Corporate Travel
[WSJ] Uber Joins Lyft in Race to Tap Investors
[Reuters] China's November export, import growth shrinks, showing weak demand
[Reuters] China's November trade surplus with U.S. widens to $35.55 billion
[Reuters] China watchdog calls for banks to meet private sector credit demand: China Party journal
[BloombergQ] Federal Reserve Officials Search for the Elusive ‘Neutral’ Interest Rate
[Reuters] Police clash with 'yellow vest' protesters in Paris
[BBC] Yellow vest movement: Paris police detain hundreds of protesters
[WSJ] Huawei Executive’s Arrest Stirs Fears About Corporate Travel
[WSJ] Uber Joins Lyft in Race to Tap Investors
Friday, December 7, 2018
Weekly Commentary: Q3 2018 Z.1 and THE Cycle Peak
Total Non-Financial Debt (NFD) expanded at a 4.4% annual rate during Q3 to a record $51.324 TN. Since the end of 2008, NFD has increased $16.3 TN, or 46%. Q3’s NFD growth rate was down from Q2’s 5.2% and Q1’s 6.3% - and lower as well than Q3 2017’s 4.9%. Total Household borrowings accelerated to 3.4% growth from Q2’s 2.9%, led by a jump in Consumer Credit growth (5.4% from 3.7%). Household Mortgages expanded at a 3.1% pace, up from Q2’s 2.7% and the year ago 2.9%.
Evidence of tighter financial conditions, Total Business borrowings slowed markedly. After Q2’s 6.9% rate (strongest since Q1 ’16), Total Business debt growth slowed to 3.9%. The expansion of Corporate (a component of Business) borrowings slowed markedly, from 7.2% to 4.1%. State & Local government debt contracted at a 1.4% pace (Q2 -0.38%). Winning the Piggy Borrower contest, perennially, was our federal government. Federal borrowings expanded at a 6.8% pace, down slightly from Q2.
Yet percentage growth rates don’t do justice late in a Credit Cycle. Outstanding Treasuries expanded $1.187 TN over the past four quarters (7.3%) and $1.774 TN over eight quarters (11.3%). On a seasonally-adjusted and annualized rate basis (SAAR), Q3 federal borrowings expanded $1.180 TN, almost the same as Q2. So far in 2018, federal debt has expanded the most since 2010.
It’s also worth noting that Federal borrowings this year have accounted for in excess of half of Total Non-Financial Debt growth (Q3 SAAR $1.180 TN of SAAR $2.228 TN). Total Household borrowings expanded SAAR $516 billion (mortgage SAAR $314 billion and Consumer Credit SAAR $210 billion) during Q3. Total Business borrowings expanded SAAR $575 billion, with Corporate borrowings increasing SAAR $389 billion. Foreign U.S. borrowings grew SAAR $292 billion.
Outstanding Treasury Securities ended Q3 at $17.419 TN, having now inflated 188% ($11.367TN) since the end of 2007. Treasuries ended the quarter at 84% of GDP, up from 41% at the conclusion of ’07. And let’s not overlook the government-sponsored enterprises (GSEs). Outstanding Agency Securities (debt and MBS) surpassed $9.0 TN for the first time during Q3, expanding $263 billion, or 3.0%, over the past year. Total Treasuries and Agency Securities ended the quarter at a record $26.439 TN (up $1.450TN y-o-y), or 128% of GDP.
Total outstanding Debt Securities jumped nominal $433 billion during the quarter to a record $44.455 TN, with one-year growth of $1.850 TN. Debt Securities ended Q3 at 215% of GDP, up from 200% and 157% to end 2007 and 1999. Equities Securities increased nominal $2.269 TN during Q3 to a record $50.602 TN (one-year growth $5.493TN). Equities Securities ended the quarter at a record 245% of GDP versus 172% at the end of 2007 ('99=202%). Total (Debt and Equities) Securities increased nominal $2.701 TN during Q3, and $7.344 TN in four quarters, to a record $95.057 TN. Total Securities ended the quarter at a record 460% of GDP. This compares to previous cycle peaks 379% (Q3 ’07) and 359% (Q1 ’00).
Securities market inflation continued to inflate Household Assets during the quarter, while the Bubble in Household Net Worth remains fundamental to the U.S. Bubble Economy. Household Assets increased nominal $2.238 TN during Q3 to a record $124.934 TN. Household Assets increased $8.810 TN (7.6%) over the past year. Household Liabilities gained $167 billion during the quarter ($539bn y-o-y) to a record $15.895 TN.
Household Net Worth (Assets less Liabilities) expanded $2.070 TN during the quarter ($8.271 TN y-o-y) to a record $109.039 TN. It’s worth noting that Net Worth surged $15.795 TN, or 16.9%, over two years (Assets up $16.810 TN, or 15.5%, less Liabilities up $1.015 TN, or 6.8%). Household Net Worth ended the quarter at a record 528% of GDP, up from the year ago 514% and Q3 2016’s 498%. Household Net Worth to GDP set previous cycle peaks at 484% (Q1 ‘07) and 435% (Q4 ‘99).
Still, most would dismissively ask, where’s the Bubble? Well, Household Net Worth has inflated $50 TN (85%) since the end of 2008, which certainly has supported elevated confidence, spending and economic activity. And it’s clear that booming securities markets have been integral to the record expansion in Household perceived wealth. So, what have been the driving forces behind bubbling markets?
Rest of World (ROW) holdings of U.S. Financial Assets jumped nominal $558 billion during Q3 to a record $28.087 TN. ROW holdings were up $1.598 TN over the past year and $3.830 TN over seven quarters. ROW holdings increased to a record 136% of GDP, up from 100% ($14.646 TN) to end 2007 and 57% ($5.639 TN) to conclude 1999. Where in the world has all this “money” been coming from? Sustainable? Reversible?
ROW holdings of U.S. Debt Securities increased nominal $44 billion during Q3 to $11.218 TN, following contractions in Q2 (nominal -$113bn) and Q1 (nominal -$120bn). Treasury holdings added nominal $11 billion and Agencies $20 billion. U.S. Corporate Bonds gained nominal $13 billion. In contrast, ROW holdings of Total U.S. Equities (Corporate Equities and Mutual Fund Shares) jumped nominal $529 billion during the quarter and $1.426 TN over the past year – to a record $8.343 TN (vs. previous cycle peak $3.225 TN in Q4 ’07).
The jump in Equities holdings masks a pivotal slowdown in ROW purchases of U.S. Debt Securities. Though purchases were positive during Q3, ROW holdings of U.S. Debt Securities actually contracted nominal $190 billion during the first three quarters of 2018. This contraction in ROW U.S. Debt Securities holdings is in stark contrast to 2017’s gain of $747 billion and the $324 billion increase in 2016.
The y-t-d contraction in ROW U.S. Debt Securities is largely explained by a $174 billion contraction in U.S. Corporate Bonds. To put this into perspective, ROW increased Corporate Bond holdings by $442 billion in 2017 and $348 billion in 2016. Indeed, ROW U.S. Corporate Bond holdings surged $1.383 TN in the six years 2012 through 2017. It’s worth noting as well that after increasing $282 billion in 2017, ROW Treasury holdings contracted $62 billion in the first three quarters of 2018.
I would posit that tightening global finance – in particular, the de-risking/deleveraging dynamic that took hold in the speculator community – contributed to waning international demand for U.S. Corporate Bonds. At the same time, EM outflows and pressure on EM central banks to support faltering currencies led to sharply lower international demand for Treasuries (not to mention geopolitical frictions). Overall, it points to an important inflection point in international financial flows into U.S. securities markets. For much of the year, major flows into outperforming U.S. equities helped to conceal adverse repercussions. With U.S. equities succumbing to de-risking/deleveraging, markets generally will now confront momentous changes in the liquidity backdrop.
If the market liquidity environment has indeed transitioned, the lackluster growth in U.S. Bank credit now becomes a more pressing issue. Bank (“Private Depository Institutions”) Loans expanded nominal $96.5 billion during Q3, down from Q2’s $174 billion and Q3 2017’s $112 billion. On a SAAR basis, Bank Loans increased $393 billion during Q3 (only two weaker quarters in the past five years). Mortgage loans expanded SAAR $153 billion, the slowest growth in four years, and down from Q2’s SAAR $193 billion, Q1’s SAAR $204 billion, and Q4 ‘17’s SAAR $224 billion. Bank’s Consumer Credit continued to swell, expanding SAAR $127 billion. Non-mortgage and consumer Loans “Not Elsewhere Classified” expanded SAAR $114 billion, a notable drop from Q2’s SAAR $279 billion.
Security Broker/Dealer holdings increased nominal $56 billion to $3.194 TN, up from Q2’s $47 billion increase and the strongest growth since Q2 ’17. Most of the gain was explained by increases in Security Repurchase Agreements and Miscellaneous Assets. Debt Securities holdings actually contracted nominal $11 billion (Treasuries down $30bn).
The confluence of the powerful global tightening of financial conditions, a significant decline in ROW debt purchases, the slowdown in bank lending and the now tenuous backdrop in the equities marketplace creates an extraordinarily fragile backdrop. Moreover, the current quarter has experienced a sharp slowdown in junk bond issuance and leveraged lending. What’s more, significant deleveraging has commenced in U.S. equities. Overall, it points to a troubling liquidity backdrop for both the markets and the U.S. economy, more generally.
I’ll add that “Periphery to Core Crisis Dynamics” are coming home to roost. Keep in mind that the initial faltering Global Bubble phase – de-risking/deleveraging at the “Periphery” – worked to exacerbated flows to - and speculative excess at - the “Core.” The huge increase in ROW Equities holdings is emblematic of speculative “blow-off” dynamics right in the face of rapidly deteriorating fundamental prospects. It recalls heightened systemic fragilities created by dysfunctional market dynamics in early-2000 and, even more so, in the second-half of 2007.
At this point, I’ll posit a (not unlikely) possible scenario. De-risking/deleveraging exposes problematic underlying speculative leverage in both equities and corporate Credit. A sharp tightening of corporate Credit conditions weighs on debt issuance and business borrowing more generally. Tighter finance and sinking equities prices engender some reassessment regarding the rationale for aggressive stock buyback programs. Further weighing on inflated market valuations, the rapidly deteriorating backdrop will also provoke some overdue rethink on the M&A front.
Meanwhile, the vast chasm between elevated consumer confidence and fading economic prospects will have to narrow. Household Net Worth has inflated $20 TN, or about 100% of GDP, in just the past three years ($50 TN since the end of ’08!). This surge in perceived wealth spurred consumption and boosted auto and home purchases (along with boats, campers, timeshares, cruises, etc.) After stoking discretionary and luxury spending, it’s reasonable to begin anticipating a problematic change in spending patterns.
There are many aspects of the unfolding downturn that go unappreciated. I worry about deep economic structural maladjustment. How many thousands of uneconomic enterprises have propagated from all the easy finance and surging asset prices? I have deep concern for Silicon Valley. If the unfolding trade and cold war with China wasn’t enough, they’re about to get the rug pulled out from under them by the financial markets. How much perceived wealth will be lost in a bursting Bubble of inflated technology shares and private business equity, compounded by a deflating Bubble in wildly inflated real estate prices surrounding the tech hubs? I fear a complete lack of understanding and preparation.
It’s difficult not to see the arrest of a top Huawei executive on the same day as the Trump/Xi summit as an ominous development. The CFO and daughter of the founder of one of China’s most powerful international technology conglomerates faces fraud charges and possible extradition to the U.S. In China, outrage. Sure, there was a weird level of ambiguity regarding the true gains from Saturday’s U.S./China trade meeting. But to see global markets convulse on the arrest of a Chinese executive rather starkly illuminates the acute fragilities the world now confronts.
Ten-year Treasury yields dropped 14 bps this week to 2.85%. German bund yields fell six bps to 0.25%. Not to be outdone, 10-year Japanese JGB yields declined three bps to 0.06%. No signs of confidence in the soundness of the global financial system from those three. Safe havens showed a pulse this week. Gold jumped $26 to an almost five-month high $1,248. The Japanese yen gained 0.8% and the Swiss franc increased 0.6%.
It was curious to see the U.S. dollar under some selling pressure (dollar index down 0.7% this week). But, then again… If our asset markets (i.e. stocks, fixed-income, real estate…) are as vulnerable as I believe and the American economy as maladjusted, there’s a credible bear case against the U.S. currency to ponder. We’ve certainly done our level best to swamp the world with dollars over recent decades.
A dollar break would really catch the speculator community (and investors) positioned poorly. It’s reached the point that NOTHING can be taken for granted in these chaotic financial markets. Which portends something really important: ongoing pressure to de-risk and deleverage. Why do I have the feeling I’ll be using Q3 2018 Z.1 data for Household Net Worth (along with both Equities and Total Securities to GDP, etc.) as THE Cycle Peak for years (decades?) to come?
Evidence of tighter financial conditions, Total Business borrowings slowed markedly. After Q2’s 6.9% rate (strongest since Q1 ’16), Total Business debt growth slowed to 3.9%. The expansion of Corporate (a component of Business) borrowings slowed markedly, from 7.2% to 4.1%. State & Local government debt contracted at a 1.4% pace (Q2 -0.38%). Winning the Piggy Borrower contest, perennially, was our federal government. Federal borrowings expanded at a 6.8% pace, down slightly from Q2.
Yet percentage growth rates don’t do justice late in a Credit Cycle. Outstanding Treasuries expanded $1.187 TN over the past four quarters (7.3%) and $1.774 TN over eight quarters (11.3%). On a seasonally-adjusted and annualized rate basis (SAAR), Q3 federal borrowings expanded $1.180 TN, almost the same as Q2. So far in 2018, federal debt has expanded the most since 2010.
It’s also worth noting that Federal borrowings this year have accounted for in excess of half of Total Non-Financial Debt growth (Q3 SAAR $1.180 TN of SAAR $2.228 TN). Total Household borrowings expanded SAAR $516 billion (mortgage SAAR $314 billion and Consumer Credit SAAR $210 billion) during Q3. Total Business borrowings expanded SAAR $575 billion, with Corporate borrowings increasing SAAR $389 billion. Foreign U.S. borrowings grew SAAR $292 billion.
Outstanding Treasury Securities ended Q3 at $17.419 TN, having now inflated 188% ($11.367TN) since the end of 2007. Treasuries ended the quarter at 84% of GDP, up from 41% at the conclusion of ’07. And let’s not overlook the government-sponsored enterprises (GSEs). Outstanding Agency Securities (debt and MBS) surpassed $9.0 TN for the first time during Q3, expanding $263 billion, or 3.0%, over the past year. Total Treasuries and Agency Securities ended the quarter at a record $26.439 TN (up $1.450TN y-o-y), or 128% of GDP.
Total outstanding Debt Securities jumped nominal $433 billion during the quarter to a record $44.455 TN, with one-year growth of $1.850 TN. Debt Securities ended Q3 at 215% of GDP, up from 200% and 157% to end 2007 and 1999. Equities Securities increased nominal $2.269 TN during Q3 to a record $50.602 TN (one-year growth $5.493TN). Equities Securities ended the quarter at a record 245% of GDP versus 172% at the end of 2007 ('99=202%). Total (Debt and Equities) Securities increased nominal $2.701 TN during Q3, and $7.344 TN in four quarters, to a record $95.057 TN. Total Securities ended the quarter at a record 460% of GDP. This compares to previous cycle peaks 379% (Q3 ’07) and 359% (Q1 ’00).
Securities market inflation continued to inflate Household Assets during the quarter, while the Bubble in Household Net Worth remains fundamental to the U.S. Bubble Economy. Household Assets increased nominal $2.238 TN during Q3 to a record $124.934 TN. Household Assets increased $8.810 TN (7.6%) over the past year. Household Liabilities gained $167 billion during the quarter ($539bn y-o-y) to a record $15.895 TN.
Household Net Worth (Assets less Liabilities) expanded $2.070 TN during the quarter ($8.271 TN y-o-y) to a record $109.039 TN. It’s worth noting that Net Worth surged $15.795 TN, or 16.9%, over two years (Assets up $16.810 TN, or 15.5%, less Liabilities up $1.015 TN, or 6.8%). Household Net Worth ended the quarter at a record 528% of GDP, up from the year ago 514% and Q3 2016’s 498%. Household Net Worth to GDP set previous cycle peaks at 484% (Q1 ‘07) and 435% (Q4 ‘99).
Still, most would dismissively ask, where’s the Bubble? Well, Household Net Worth has inflated $50 TN (85%) since the end of 2008, which certainly has supported elevated confidence, spending and economic activity. And it’s clear that booming securities markets have been integral to the record expansion in Household perceived wealth. So, what have been the driving forces behind bubbling markets?
Rest of World (ROW) holdings of U.S. Financial Assets jumped nominal $558 billion during Q3 to a record $28.087 TN. ROW holdings were up $1.598 TN over the past year and $3.830 TN over seven quarters. ROW holdings increased to a record 136% of GDP, up from 100% ($14.646 TN) to end 2007 and 57% ($5.639 TN) to conclude 1999. Where in the world has all this “money” been coming from? Sustainable? Reversible?
ROW holdings of U.S. Debt Securities increased nominal $44 billion during Q3 to $11.218 TN, following contractions in Q2 (nominal -$113bn) and Q1 (nominal -$120bn). Treasury holdings added nominal $11 billion and Agencies $20 billion. U.S. Corporate Bonds gained nominal $13 billion. In contrast, ROW holdings of Total U.S. Equities (Corporate Equities and Mutual Fund Shares) jumped nominal $529 billion during the quarter and $1.426 TN over the past year – to a record $8.343 TN (vs. previous cycle peak $3.225 TN in Q4 ’07).
The jump in Equities holdings masks a pivotal slowdown in ROW purchases of U.S. Debt Securities. Though purchases were positive during Q3, ROW holdings of U.S. Debt Securities actually contracted nominal $190 billion during the first three quarters of 2018. This contraction in ROW U.S. Debt Securities holdings is in stark contrast to 2017’s gain of $747 billion and the $324 billion increase in 2016.
The y-t-d contraction in ROW U.S. Debt Securities is largely explained by a $174 billion contraction in U.S. Corporate Bonds. To put this into perspective, ROW increased Corporate Bond holdings by $442 billion in 2017 and $348 billion in 2016. Indeed, ROW U.S. Corporate Bond holdings surged $1.383 TN in the six years 2012 through 2017. It’s worth noting as well that after increasing $282 billion in 2017, ROW Treasury holdings contracted $62 billion in the first three quarters of 2018.
I would posit that tightening global finance – in particular, the de-risking/deleveraging dynamic that took hold in the speculator community – contributed to waning international demand for U.S. Corporate Bonds. At the same time, EM outflows and pressure on EM central banks to support faltering currencies led to sharply lower international demand for Treasuries (not to mention geopolitical frictions). Overall, it points to an important inflection point in international financial flows into U.S. securities markets. For much of the year, major flows into outperforming U.S. equities helped to conceal adverse repercussions. With U.S. equities succumbing to de-risking/deleveraging, markets generally will now confront momentous changes in the liquidity backdrop.
If the market liquidity environment has indeed transitioned, the lackluster growth in U.S. Bank credit now becomes a more pressing issue. Bank (“Private Depository Institutions”) Loans expanded nominal $96.5 billion during Q3, down from Q2’s $174 billion and Q3 2017’s $112 billion. On a SAAR basis, Bank Loans increased $393 billion during Q3 (only two weaker quarters in the past five years). Mortgage loans expanded SAAR $153 billion, the slowest growth in four years, and down from Q2’s SAAR $193 billion, Q1’s SAAR $204 billion, and Q4 ‘17’s SAAR $224 billion. Bank’s Consumer Credit continued to swell, expanding SAAR $127 billion. Non-mortgage and consumer Loans “Not Elsewhere Classified” expanded SAAR $114 billion, a notable drop from Q2’s SAAR $279 billion.
Security Broker/Dealer holdings increased nominal $56 billion to $3.194 TN, up from Q2’s $47 billion increase and the strongest growth since Q2 ’17. Most of the gain was explained by increases in Security Repurchase Agreements and Miscellaneous Assets. Debt Securities holdings actually contracted nominal $11 billion (Treasuries down $30bn).
The confluence of the powerful global tightening of financial conditions, a significant decline in ROW debt purchases, the slowdown in bank lending and the now tenuous backdrop in the equities marketplace creates an extraordinarily fragile backdrop. Moreover, the current quarter has experienced a sharp slowdown in junk bond issuance and leveraged lending. What’s more, significant deleveraging has commenced in U.S. equities. Overall, it points to a troubling liquidity backdrop for both the markets and the U.S. economy, more generally.
I’ll add that “Periphery to Core Crisis Dynamics” are coming home to roost. Keep in mind that the initial faltering Global Bubble phase – de-risking/deleveraging at the “Periphery” – worked to exacerbated flows to - and speculative excess at - the “Core.” The huge increase in ROW Equities holdings is emblematic of speculative “blow-off” dynamics right in the face of rapidly deteriorating fundamental prospects. It recalls heightened systemic fragilities created by dysfunctional market dynamics in early-2000 and, even more so, in the second-half of 2007.
At this point, I’ll posit a (not unlikely) possible scenario. De-risking/deleveraging exposes problematic underlying speculative leverage in both equities and corporate Credit. A sharp tightening of corporate Credit conditions weighs on debt issuance and business borrowing more generally. Tighter finance and sinking equities prices engender some reassessment regarding the rationale for aggressive stock buyback programs. Further weighing on inflated market valuations, the rapidly deteriorating backdrop will also provoke some overdue rethink on the M&A front.
Meanwhile, the vast chasm between elevated consumer confidence and fading economic prospects will have to narrow. Household Net Worth has inflated $20 TN, or about 100% of GDP, in just the past three years ($50 TN since the end of ’08!). This surge in perceived wealth spurred consumption and boosted auto and home purchases (along with boats, campers, timeshares, cruises, etc.) After stoking discretionary and luxury spending, it’s reasonable to begin anticipating a problematic change in spending patterns.
There are many aspects of the unfolding downturn that go unappreciated. I worry about deep economic structural maladjustment. How many thousands of uneconomic enterprises have propagated from all the easy finance and surging asset prices? I have deep concern for Silicon Valley. If the unfolding trade and cold war with China wasn’t enough, they’re about to get the rug pulled out from under them by the financial markets. How much perceived wealth will be lost in a bursting Bubble of inflated technology shares and private business equity, compounded by a deflating Bubble in wildly inflated real estate prices surrounding the tech hubs? I fear a complete lack of understanding and preparation.
It’s difficult not to see the arrest of a top Huawei executive on the same day as the Trump/Xi summit as an ominous development. The CFO and daughter of the founder of one of China’s most powerful international technology conglomerates faces fraud charges and possible extradition to the U.S. In China, outrage. Sure, there was a weird level of ambiguity regarding the true gains from Saturday’s U.S./China trade meeting. But to see global markets convulse on the arrest of a Chinese executive rather starkly illuminates the acute fragilities the world now confronts.
Ten-year Treasury yields dropped 14 bps this week to 2.85%. German bund yields fell six bps to 0.25%. Not to be outdone, 10-year Japanese JGB yields declined three bps to 0.06%. No signs of confidence in the soundness of the global financial system from those three. Safe havens showed a pulse this week. Gold jumped $26 to an almost five-month high $1,248. The Japanese yen gained 0.8% and the Swiss franc increased 0.6%.
It was curious to see the U.S. dollar under some selling pressure (dollar index down 0.7% this week). But, then again… If our asset markets (i.e. stocks, fixed-income, real estate…) are as vulnerable as I believe and the American economy as maladjusted, there’s a credible bear case against the U.S. currency to ponder. We’ve certainly done our level best to swamp the world with dollars over recent decades.
A dollar break would really catch the speculator community (and investors) positioned poorly. It’s reached the point that NOTHING can be taken for granted in these chaotic financial markets. Which portends something really important: ongoing pressure to de-risk and deleverage. Why do I have the feeling I’ll be using Q3 2018 Z.1 data for Household Net Worth (along with both Equities and Total Securities to GDP, etc.) as THE Cycle Peak for years (decades?) to come?
For the Week:
The S&P500 sank 4.6% (down 1.5% y-t-d), and the Dow fell 4.5% (down 1.3%). The Utilities gained 1.2% (up 5.6%). The Banks sank 8.2% (down 12.6%), and the Broker/Dealers were hit 6.0% (down 6.9%). The Transports were hammered 8.0% (down 6.2%). The S&P 400 Midcaps dropped 5.2% (down 6.3%), and the small cap Russell 2000 fell 5.6% (down 5.7%). The Nasdaq100 dropped 4.8% (up 3.4%). The Semiconductors lost 6.6% (down 7.6%). The Biotechs fell 6.0% (up 5.8%). With bullion jumping $26, the HUI gold index rallied 6.1% (down 20%).
Three-month Treasury bill rates ended the week at 2.34%. Two-year government yields declined seven bps to 2.71% (up 83bps y-t-d). Five-year T-note yields dropped 12 bps to 2.69% (up 48bps). Ten-year Treasury yields sank 14 bps to 2.85% (up 44bps). Long bond yields fell 15 bps to 3.14% (up 40bps). Benchmark Fannie Mae MBS yields sank 15 bps to 3.71% (up 71bps).
Greek 10-year yields declined four bps to 4.21% (up 14bps y-t-d). Ten-year Portuguese yields dipped three bps to 1.80% (down 14bps). Italian 10-year yields dropped eight bps to 3.13% (up 112bps). Spain's 10-year yields declined five bps to 1.45% (down 12bps). German bund yields fell six bps to 0.25% (down 18bps). French yields were unchanged at 0.69% (down 10bps). The French to German 10-year bond spread widened six to 44 bps. U.K. 10-year gilt yields sank 10 bps to 1.27% (up 8bps). U.K.'s FTSE equities index fell 2.9% (down 11.8%).
Japan's Nikkei 225 equities index dropped 3.0% (down 4.8% y-t-d). Japanese 10-year "JGB" yields declined three bps to 0.06% (up 1bp). France's CAC40 sank 3.8% (down 9.4%). The German DAX equities index dropped 4.2% (down 16.5%). Spain's IBEX 35 equities index lost 2.9% (down 12.2%). Italy's FTSE MIB index declined 2.3% (down 14.2%). EM equities generally outperformed "developed" markets. Brazil's Bovespa index declined 1.6% (up 15.3%), while Mexico's Bolsa recovered 0.3% (down 15.2%). South Korea's Kospi index fell 1.0% (down 15.9%). India's Sensex equities index slipped 1.4% (up 4.7%). China's Shanghai Exchange gained 0.7% (down 21.2%). Turkey's Borsa Istanbul National 100 index fell 1.8% (down 18.8%). Russia's MICEX equities index rose 1.6% (up 15.2%).
Investment-grade bond funds saw outflows of $1.268 billion, and junk bond funds posted outflows of $829 million (from Lipper).
Freddie Mac 30-year fixed mortgage rates fell six bps to 4.75% (up 81bps y-o-y). Fifteen-year rates declined four bps to 4.21% (up 85bps). Five-year hybrid ARM rates fell five bps to 4.07% (up 72bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-yr fixed rates down eight bps to 4.60% (up 45bps).
Federal Reserve Credit last week declined $16.1bn to $4.048 TN. Over the past year, Fed Credit contracted $349bn, or 7.9%. Fed Credit inflated $1.237 TN, or 44%, over the past 317 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt increased $2.1bn last week to $3.404 TN. "Custody holdings" were up $13.8bn y-o-y, or 0.4%.
M2 (narrow) "money" supply rose $19.8bn last week to a record $14.334 TN. "Narrow money" gained $523bn, or 3.8%, over the past year. For the week, Currency increased $1.4bn. Total Checkable Deposits were little changed, while Savings Deposits gained $13.1bn. Small Time Deposits added $2.2bn. Retail Money Funds increased $3.4bn.
Total money market fund assets dropped $34.5bn to $2.909 TN. Money Funds gained $102bn y-o-y, or 3.6%.
Total Commercial Paper fell $15.5bn to $1.075 TN. CP rose $22.5bn y-o-y, or 2.1%.
Currency Watch:
The U.S. dollar index declined 0.7% to 96.514 (up 4.8% y-t-d). For the week on the upside, the Norwegian krone increased 1.3%, the Japanese yen 0.8%, the Swedish krona 0.7%, the Swiss franc 0.6%, the euro 0.6%, the Mexican peso 0.5%, the Singapore dollar 0.2% and the South Korean won 0.1%. For the week on the downside, the South African rand declined 2.1%, the Australian dollar 1.3%, the Brazilian real 1.1%, the Canadian dollar 0.2%, the British pound 0.2% and the New Zealand dollar 0.1%. The Chinese renminbi rallied 1.25% versus the dollar this week (down 5.35% y-t-d).
Commodities Watch:
The Goldman Sachs Commodities Index rallied 2.0% (down 5.9% y-t-d). Spot Gold surged $26 to $1,248 (down 4.2%). Silver jumped 3.1% to $14.696 (down 14.3%). Crude recovered $1.89 to $52.61 (down 13%). Gasoline surged 6.2% (down 17%), while Natural Gas fell 3.3% (up 52%). Copper declined 1.2% (down 16%). Wheat jumped 3.0% (up 24%). Corn gained 2.1% (up 10%).
Market Dislocation Watch:
December 4 – Bloomberg (Stephen Spratt and Edward Bolingbroke): “The rally in Treasuries went into overdrive Tuesday, threatening to upend the legion of investors who are betting against longer-maturity bonds. Thirty-year futures rose as much as 2 15/32 and outperformed on the curve, sending yields plunging as much as 12 bps. Open interest in the contract dropped for a fourth day Monday, suggesting traders who had taken bearish directional bets were already feeling the jitters before the latest plunge in stocks.”
December 6 – Bloomberg (Marcus Ashworth): “Falling yields on German government debt is the sign of a classic ‘risk-off’ mentality. As fear grows, investors plump for safety. But where’s the crisis in Europe? Yields on 10-year bunds have fallen steadily by 30 bps in the past two months. And German notes out to eight years are now in negative territory.”
December 5 – Bloomberg (Katherine Burton and Hema Parmar): “Billionaires Ken Griffin, Izzy Englander and Steve Cohen posted monthly losses in November that rank among their worst ever as stock hedge funds dumped holdings at a rate not seen since the financial crisis. Griffin’s Citadel lost about 3% last month, its poorest showing since the first quarter of 2016. Englander’s Millennium Management slid 2.8%, its third-worst month on record. Cohen’s Point72 Asset Management dropped about 5%, largely wiping out its 2018 gains… These firms market themselves as steady money makers because their stock managers tend to run portfolios with a roughly equal weighting of longs and shorts, or small net exposure in either a bullish or bearish direction… To control risk, individual portfolio managers are typically forced to sell positions after relatively small losses. To make money under those constraints, the firms employ heavy leverage. Citadel, Point72 and Millennium together hold less than $100 billion in net assets, but that sum swells to almost half a trillion dollars when borrowed money is included.”
November 30 – Financial Times (Adam Samson and Robin Wigglesworth): “Investors pulled more than $5bn from funds investing in corporate bonds in the past week, as the credit market heads for its worst year since the financial crisis a decade ago and concerns mount over the outlook for 2019.”
December 5 – Bloomberg (Elena Popina): “Market statisticians are falling over each other in 2018 to describe the pain being felt across asset classes. One venerable shop frames it this way: Things haven’t been this bad since Richard Nixon’s presidency. Ned Davis Research puts markets into eight big asset classes — everything from bonds to U.S. and international stocks to commodities. And not a single one of them is on track to post a return this year of more than 5%, a phenomenon last observed in 1972, according to Ed Clissold, a strategist at the firm.”
Trump Administration Watch:
December 2 – CNBC (David Reid): “President Donald Trump has told reporters on Air Force One that a trade deal brokered with China is one of the largest ever made. After meeting at the G-20 summit in Argentina, Trump and Chinese President Xi Jinping have agreed a temporary stop to their bilateral trade disagreement, striking a deal to hold off on any additional tariffs on each other’s goods after January 1. ‘It’s an incredible deal. It goes down, certainly, if it happens, it goes down as one of the largest deals ever made,’ Trump said…”
December 5 – Bloomberg (Editorial Board): “On the same day Donald Trump and Xi Jinping struck a trade war truce in Argentina, some 7,000 miles away Canadian authorities made an arrest that now threatens to make the U.S.-China conflict much worse. The U.S. is seeking the extradition of Wanzhou Meng, chief financial officer of Huawei Technologies Co., after convincing Canada to arrest her on Dec. 1. Canada confirmed she was in custody shortly after the Globe and Mail reported she had been arrested in connection with violating sanctions against Iran. China promptly reacted with outrage after the news broke, demanding that both countries move to free Meng. Later, the foreign ministry said it was waiting for details on why she was arrested, and said trade talks should continue.”
December 5 – CNBC (Huileng Tan): “The arrest of Huawei’s global chief financial officer in Canada, reportedly related to a violation of U.S. sanctions, will corrode trade negotiations between Washington and Beijing, risk consultancy Eurasia Group said… ‘Beijing is likely to react angrily to this latest arrest of a Chinese citizen in a third country for violating U.S. law,’ Eurasia analysts wrote. In fact, Global Times — a hyper-nationalistic tabloid tied to the Chinese Communist Party — responded to the arrest by posting on Twitter a statement about trade war escalation it attributed to an expert ‘close to the Chinese Ministry of Commerce.’ ‘China should be fully prepared for an escalation in the #tradewar with the US, as the US will not ease its stance on China, and the recent arrest of the senior executive of #Huawei is a vivid example,’ said the statement, paired with a photo of opposing fists with Chinese and American flags superimposed upon them.”
December 3 – Reuters (David Lawder): “U.S. Trade Representative Robert Lighthizer will lead negotiations with China over tariffs, market access and structural changes to intellectual property practices over the next 90 days…, potentially signaling a harder U.S. line… Lighthizer leading the talks marks a shift from the administration’s previous approach to China trade talks that had been largely led by U.S. Treasury Secretary Steven Mnuchin. Lighthizer, an experienced trade negotiator and having just completed a new agreement with Canada and Mexico, is one of the administration’s most vocal China critics.”
December 2 – CNBC (Evelyn Cheng): “While both the U.S. and China called this weekend’s meeting on trade very successful, many Chinese-language state media left out references to a 90-day condition for both sides to agree on issues such as technology transfer. While it’s typical for there to be some daylight between governments’ spin about bilateral meetings, a host of differences between the Chinese and the American version of events points to a potentially challenging road ahead for any negotiations. Another apparent discrepancy comes from Chinese Foreign Minister Wang Yi, who remarked that the two countries will work toward eliminating tariffs. A White House Press Secretary statement…, for its part, did not include that point.”
December 3 – Financial Times (Courtney Weaver): “Steven Mnuchin… has warned China to avoid ‘soft commitments’ in a new round of trade talks expected to follow a ceasefire deal reached at the weekend between presidents Donald Trump and Xi Jinping. In a telephone interview with the Financial Times after the truce was sealed…, Mr Mnuchin urged Beijing to flesh out pledges made in Buenos Aires in negotiations over the next three months. ‘There’s a 100% unanimous view on our economic team that this needs to be a real agreement… These can’t be soft commitments from China. There need to be specific dates, specific action items,” he added.”
December 4 – Reuters (Doina Chiacu): “U.S. President Donald Trump on Tuesday held out the possibility of an extension of the 90-day trade truce with China but warned he would revert to tariffs if the two sides could not resolve their differences. Trump said his team of trade advisers led by China trade hawk U.S. Trade Representative Robert Lighthizer would determine whether a ‘REAL deal’ with Beijing was possible. ‘If it is, we will get it done,’ Trump wrote in a Twitter post. ‘But if not remember, I am a Tariff Man.’”
December 4 – CNBC (Yen Nee Lee): “U.S. President Donald Trump, in a Twitter post on Tuesday evening, said America is going to have a ‘REAL DEAL’ or ‘no deal at all’ with China. Trump said if the two countries cannot agree on a deal, the U.S. will proceed with ‘major Tariffs’ against Chinese products. ‘Ultimately, I believe, we will be making a deal — either now or into the future,’ the president said.”
December 4 – Bloomberg (Shawn Donnan): “President Donald Trump’s advisers are scrambling to explain a trade deal he claimed he’d struck with China to reduce tariffs on U.S. cars exported to the country -- an agreement that doesn’t exist on paper and still hasn’t been confirmed in Beijing. In the day after Trump announced the deal in a two-sentence Twitter post, the White House provided no additional information. Meanwhile, China hasn’t formulated its response because bureaucrats are awaiting the return home of President Xi Jinping, according to three officials who were briefed but declined to be named as the matter isn’t public. Questioned about the agreement on Monday, Treasury Secretary Steven Mnuchin and Trump’s top economic adviser, Larry Kudlow, dialed back expectations and added qualifiers.”
December 4 – Wall Street Journal (Vivian Salama): “Trump administration officials said they planned to take a tough stand in their 90-day trade negotiations with China or impose further tariffs, as optimism over a truce gave way to uncertainties about how the two sides could find agreement on a wide range of issues. Having emphasized last weekend the possibilities for a wide-ranging deal, President Trump and other officials switched their focus to issues they want to see addressed and the consequences of not reaching an accord in a time frame that China initially didn’t acknowledge. Mr. Trump, in a series of tweets Tuesday morning, said he expected to see China start buying more U.S. agricultural exports immediately…”
December 3 – Reuters (Jeff Mason and David Shepardson): “White House economic adviser Larry Kudlow said… the Trump administration wants to end subsidies for electric cars and other items, including renewable energy sources… ‘As a matter of our policy, we want to end all of those subsidies,’ Kudlow said. ‘And by the way, other subsidies that were imposed during the Obama administration, we are ending, whether it’s for renewables and so forth.’”
December 6 – Bloomberg (Sarah Ponczek): “Stocks go south and President Donald Trump goes quiet. Since his election, Trump has tweeted about the stock market more than 35 times. Yet since Nov. 12, his social media account has been mum on the wild vacillations in U.S. equities.”
Federal Reserve Watch:
December 3 – Bloomberg (Christopher Condon and Jeanna Smialek): “Federal Reserve Vice Chairman Richard Clarida said the U.S. central bank will defend both sides of its inflation target and cautioned investors against thinking the Fed would act to halt a sharp market decline. ‘I don’t really think of it as a useful way to describe what the current Federal Reserve is doing,’ he said… when asked about the concept of a ‘Powell Put’ in an interview with Tom Keene on Bloomberg Television.”
December 4 – MarketWatch (Greg Robb): “The U.S. economy will stay strong in 2019 and inflation will tick up above 2% and so the U.S. central bank should continue to raise interest rates gradually, New York Fed President John Williams said… ‘Given this outlook of strong growth, strong labor market and inflation near our goal and taking account all the various risks around the outlook, I do expect further gradual increases in interest rates will best sponsor a sustained economic expansion,’ Williams said… The Fed’s last policy statement used the word ‘strong’ five times in describing the U.S. economy, he noted.”
December 3 – Reuters (Howard Schneider): “Federal Reserve vice chairman Randal Quarles said the Fed’s increasing ‘data dependence’ does not mean it will react to every rise or fall in economic statistics or markets, but only to ‘significant changes in direction.’ …’We should be data dependent but not reacting to every wavering of the needle across the dial...We have described in all the communications tools a path that is pretty clear,’ Quarles said. ‘We are following a strategy and taking account of data over time as it comes in and in response to significant changes in direction.’”
December 3 – Financial Times (Courtney Weaver): “President Donald Trump was taking a ‘dangerous’ path by attacking Jay Powell and legislation might be needed to protect the Federal Reserve chairman, a bipartisan pair of US senators has warned. Republican Jeff Flake… and Democrat Chris Coons… said… that the US president could attempt to take a similar approach to Mr Powell as he did to former attorney-general Jeff Sessions, whom he sacked after the midterm elections. The pair floated the idea of legislation to preserve the Fed’s independence after Mr Trump complained that he was not being ‘accommodated’ by Mr Powell and that he was ‘unhappy’ with his selection of chairman.”
U.S. Bubble Watch:
December 6 – Financial Times (Matthew Rocco): “The US trade deficit hit its widest level in a decade in October as the nation registered a record amount of imports and a decline in exports to China. The… gap between US imports and exports grew 1.7% month-over-month to $55.5bn, the most since October 2008 and the fifth straight month of deficit expansion.”
December 5 – Reuters (Jason Lange, Howard Schneider and by Ann Saphir): “Tariff-driven price increases have spread more broadly through the U.S. economy, though on balance inflation has risen at a modest pace in most parts of the country, the Federal Reserve said… The U.S. central bank’s ‘Beige Book’ report… also said that the economy appeared to be growing modestly to moderately. While a wide range of businesses cited concerns about the effects of a trade war between the United States and China, firms continued to hire and reported bumping up benefits and pay to compete for an increasingly scarce labor pool.”
December 6 – Reuters (Lucia Mutikani): “New orders for U.S.-made goods recorded their biggest drop in more than a year in October and business spending on equipment appeared to be softening, suggesting a slowdown in activity in the manufacturing sector. Factory goods orders fell 2.1% amid a decline in demand for a range of goods…”
December 4 – Wall Street Journal (Esther Fung): “Chinese investors unloaded more than $1 billion in U.S. real estate in the third quarter, extending their recent retreat from hotels, office buildings and other foreign property under pressure from Beijing to reduce debt and curb money sent abroad… That was the second straight quarter in which Chinese were net sellers of U.S. commercial real estate. The second quarter marked the first time these investors sold more U.S. property than they bought during a quarter since 2008.”
China Watch:
December 5 – Financial Times (Tom Mitchell): “Beijing and Washington on Wednesday sought to reassure shaken financial markets their trade ceasefire could lead to a lasting peace after a global sell-off exposed widespread investor fears that a G20 deal lacked any substantive agreement. In its first comments since the weekend truce between Xi Jinping, the Chinese president, and Donald Trump, his US counterpart, China’s government said it was ‘confident’ a comprehensive agreement could be reached before a tariff freeze expires in three months. Mr Trump hailed the ‘very strong signals’ from Beijing, and sought to pin the days-long silence from Chinese leaders, which helped spook markets, to ‘their long trip, including stops’ from the G20 in Argentina. ‘Not to sound naive or anything, but I believe President Xi meant every word of what he said at our long and hopefully historic meeting,’ Mr Trump wrote on Twitter.”
December 4 – CNBC (Kate Rooney): “China is reportedly confused by the Trump administration’s version of what happened in Buenos Aires. After the key meeting between President Donald Trump and Chinese President Xi Jinping, officials from Beijing are ‘puzzled and irritated’ by the Trump administration’s behavior, The Washington Post reported…, citing a former U.S. government official who has been in contact with the Chinese officials. ‘You don’t do this with the Chinese. You don’t triumphantly proclaim all their concessions in public. It’s just madness,’ the former official, who asked for anonymity to describe confidential discussions, told the Post.”
December 3 – Financial Times (Emily Feng and Kathrin Hille): “Xi Jinping, the Chinese president, visited a memory chip plant in the city of Wuhan earlier this year. In a white lab coat, he made an unexpectedly sentimental remark, comparing a computer chip to a human heart: ‘No matter how big a person is, he or she can never be strong without a sound and strong heart’. China’s ambitions to be a leader in next-generation technology, such as artificial intelligence, rest on whether or not it can design and manufacture cutting-edge chips, and Mr Xi has pledged $150bn to build up the sector. But China’s plan has alarmed the US, and chips… have become the central battlefield in the trade war… And it is a battle in which China has a very visible Achilles heel… The $412bn global semiconductor industry rests on the shoulders of just six equipment companies, three of them US-based. Together, the companies make nearly all of the crucial hardware and software tools needed to manufacture chips, meaning an American export ban would choke off China’s access to the basic tools needed to make their latest chip designs. ‘You cannot build a semiconductor facility without using the big major equipment companies, none of which are Chinese,’ said Brett Simpson, the founder of Arete Research… ‘If you fight a war with no guns you’re going to lose. And they don’t have the guns.’”
December 2 – Financial Times (James Kynge): “One of the motivations behind China’s historic decision to open its economy 40 years ago was the need to attract foreign direct investment. Strong inflows followed and helped transform the Chinese economy. But these are now starting to be eclipsed by a newer font of capital that is surging into the country’s financial markets. The shift in focus from direct investment into factories and offices towards portfolio flows into stocks and bonds reveals much about how China is changing — and how it is starting to exert greater influence over the world’s financial system… Foreign asset managers, sovereign wealth funds and central banks have increased their total holdings of Chinese domestic stocks and bonds — denominated in renminbi — to $462.2bn at the end of September, up by $122.5bn from a year ago…”
December 5 – Bloomberg: “China’s escalating crackdown on peer-to-peer lending could hardly have come at a worse time for the country’s slumping car market. P2P platforms, many of which are likely to wind down under a Chinese plan to shrink the industry, facilitated 248 billion yuan ($36bn) of auto loans in 2017, or more than a fifth of the total… P2P auto lending dropped 20% in the first half of this year…, and may shrink even further as policy makers push small- and medium-sized operators to close.”
December 4 – Bloomberg (Anjani Trivedi): “As compelling as the $1.4 trillion pile of distressed assets in China looks, there are few reasons to think foreign investors will walk away with substantial winnings. Prices are falling again after a blockbuster 2017, when a wave of domestic institutional money pushed distressed debt values to almost 80 cents on the dollar from 30. This partly reflects new supply and partly a crackdown on the shadow-banking system that previously allowed investors to finance purchases of nonperforming loans, according to Dinny McMahon of Macro Polo… of the Paulson Institute. About 3,000 local investment funds, well versed in the ground rules of Chinese nonperforming assets, have backed off for now. Returns on distressed assets have fallen as their quality deteriorates.”
Brexit Watch:
December 4 – BBC: “Theresa May has suffered three Brexit defeats in the Commons as she set out to sell her EU deal to sceptical MPs. Ministers have agreed to publish the government’s full legal advice on the deal after MPs found them in contempt of Parliament for issuing a summary. And MPs backed calls for the Commons to have a direct say in what happens if the PM's deal is rejected next Tuesday. Mrs May said MPs had a duty to deliver on the 2016 Brexit vote and the deal on offer was an ‘honourable compromise’. She was addressing the Commons at the start of a five-day debate on her proposed agreement on the terms of the UK's withdrawal and future relations with the EU. The agreement has been endorsed by EU leaders but must also be backed by the UK Parliament if it is to come into force. MPs will decide whether to reject or accept it on Tuesday 11 December.”
December 5 – Reuters (William James and Elizabeth Piper): “Prime Minister Theresa May’s Brexit deal came under fire from allies and opponents alike on Wednesday after the government was forced to publish legal advice showing the United Kingdom could be locked indefinitely in the European Union’s orbit. After a string of humiliating parliamentary defeats for May the day before cast new doubt over her ability to get a deal approved, U.S. investment bank J.P. Morgan said the chances of Britain calling off Brexit altogether had increased.”
EM Watch:
December 1 – Reuters (Sharay Angulo and Anthony Esposito): “Veteran leftist Andres Manuel Lopez Obrador took office as Mexican president…, vowing to see off a ‘rapacious’ elite in a country struggling with corruption, chronic poverty and gang violence on the doorstep of the United States. Backed by a gigantic Mexican flag, the 65-year-old took the oath of office in the lower house of Congress, pledging to bring about a ‘radical’ rebirth of Mexico to overturn what he called a disastrous legacy of decades of ‘neo-liberal’ governments. ‘The government will no longer be a committee at the service of a rapacious minority,’ said the new president… Nor would the government, he said, be a ‘simple facilitator of pillaging, as it has been.’”
December 1 – Bloomberg (Jose Orozco): “Venezuela devalued its Dicom foreign exchange rate by more than 40% to 171.67 sovereign bolivars per dollar from 96.84 in an auction on Friday, one day after President Nicolas Maduro ordered a minimum wage increase… Maduro ordered a 150% increase in the monthly minimum wage, the sixth hike this year… Maduro has raised the minimum wage 25 times since he took office in 2013…”
Central Bank Watch:
December 4 – Reuters (Francesco Canepa and Balazs Koranyi): “European Central Bank policymakers are debating ways to wean the euro zone off years of easy money, floating ideas such as a new kind of multi-year loans and staggered increases in interest rates… The ECB will have a difficult task over the next couple of years: dialing back its unprecedented stimulus without hurting a banking sector still deeply divided along national lines. Conversations with five sources on or close to the ECB’s policymaking body showed rate-setters were beginning to come up with ideas to ease the transition, including raising only the interest rate on bank deposits at first and offering multi-year loans at floating rates on a permanent basis.”
December 4 – Bloomberg (Piotr Skolimowski and Jana Randow): “The European Central Bank shouldn’t waste any time in normalizing monetary policy if the economic situation in the euro area allows for it, according to Bundesbank President Jens Weidmann. …Weidmann warned that maintaining very loose monetary conditions carries risks and could lead to excesses in the financial system. The end of net asset purchases -- which economists expect to be announced at the ECB’s Dec. 13 meeting -- is only the first step on a long road of paring back stimulus, he said. ‘It’s clear that the next steps in normalization will depend on how the data develops,’ Weidmann said. ‘But I am convinced that we shouldn’t lose time unnecessarily.’”
Italy Watch:
December 4 – Financial Times (Kate Allen): “Italian companies and banks are on track to sell the smallest amount of debt in a year since the financial crisis, underlining how ructions in the country’s sovereign bonds have rippled out across the private sector. As the capital markets wind down into the end of the year, companies and banks domiciled in Italy have sold $77bn of bonds in 2018… That is the lowest amount raised in the first 11 months of the year since 2008 and down more than a quarter on the same period last year. This week, rating agency Standard & Poor’s warned that continued wrangling between Brussels and Rome over the budget proposed by Italy’s populist government ‘could result in higher funding costs for the private sector, including banks’ and ‘constrain banks’ progress in their recovery, which is just halfway through’.”
December 4 – Reuters (Valentina Za): “Italian Economy Minister Giovanni Tria is considering resigning once parliament approved the 2019 budget… Citing people in direct contact with the minister, Corriere said Tria had not made up his mind yet and could stay on despite his increasing isolation within the government.”
Global Bubble Watch:
December 2 – Financial Times (Kate Allen): “The amount of dollar-denominated debt sold by companies and banks has hit its lowest level in two-and-a-half years as the impact of the currency’s appreciation ripples through the bond markets. Dollar-denominated bond sales by companies and financial institutions in developed economies dipped to $1.4tn in the six months to October, down 14% on the previous six-month period to their lowest level since April 2016… Investors had previously benefited from the favourable arbitrage available by swapping the dollar back into other currencies, but the greenback’s strengthening over the course of this year has eroded its relative attractiveness, undermining bond sellers’ incentive to price in dollars.”
December 1 – Bloomberg (Raymond Colitt, Josh Wingrove and Jennifer Epstein): “Leaders of the world’s largest economies agreed the global system of rules that’s underpinned trade for decades is flawed, in a post-summit statement… that the White House quickly claimed as a win for Donald Trump’s protectionist agenda. The Group of 20 communique was the culmination of days of round-the-clock talks. Some officials said just having a statement was a good result, given intense wrangling over issues like trade, migration and climate. Still, the watered-down language suggests further tests ahead for advocates of globalization and institutions like the World Trade Organization.”
December 1 – New York Times (Peter S. Goodman): “Only a few months ago, the world’s fortunes appeared increasingly robust. For the first time since the wealth-destroying agony of the global financial crisis, every major economy was growing in unison. So much for all that. The global economy is now palpably weakening, even as most countries are still grappling with the damage from that last downturn. Many nations are mired in stagnation or sliding that way. Oil prices are falling and factory orders are diminishing… Companies are warning of disappointing profits, sending stock markets into a frenetic bout of selling that reinforces the slowdown. Germany and Japan have both contracted in recent months. China is slowing more than experts anticipated.”
December 2 – Reuters (Jonathan Cable and Leika Kihara): “Global economic prospects appear gloomy as year-end approaches after factory activity and export orders weakened in November, prompting analysts to predict no quick rebound amid persistent global trade tensions. In a sign that corporate sentiment is taking a hit from the worries over protectionism, manufacturing activity slipped in November in countries as varied as France, Germany, Indonesia and South Korea, IHS Markit Purchasing Managers’ Indexes showed…”
December 2 – Financial Times (Hudson Lockett): “A drop in new orders helped push South Korea’s manufacturing sector into contraction after just two months of expansion, according to an industry survey. The Nikkei-Markit manufacturing purchasing managers’ index for South Korea dropped to 48.6 in November…”
December 2 – Financial Times (Edward White): “A gauge of activity in Taiwan’s manufacturing sector fell to its lowest level in three years last month amid a worsening outlook for the country’s exports. The Nikkei Taiwan Manufacturing purchasing managers’ index was 48.4 in November, down from 48.7 in October…”
December 6 – Bloomberg (Edward Bolingbroke): “Aggressive bull-flattening move across the eurodollar strip produces record volumes in the December 2019 contract, surpassing previous levels reached in May. Shortly after 12pm ET, a total of 1.202 million EDZ9 contracts have changed hands vs. around 600k in EDH9, the next most traded; volumes across EDZ9 up to 12pm ET ran at around 270% of 10-day average…”
Fixed Income Bubble Watch:
December 6 – Bloomberg (Kelsey Butler, Davide Scigliuzzo and Jeannine Amodeo): “JPMorgan… sold a loan tied to the takeover of a provider of private jet flights at one of the U.S. credit market’s steepest discounts this year after struggling to unload the debt. The $210 million term loan -- to fund Vista Global Holding Ltd.’s purchase of XOJET Inc. -- had gone unsold since it was first marketed to investors in the middle of October, forcing Vista Global and its bank JPMorgan to cut the size and sweeten terms... The sale priced Tuesday at a discount of 93 cents on the dollar, down from initial talk of 99.5 cents.”
Leveraged Speculation Watch:
December 1 – Financial Times (Jennifer Thompson and Laurence Fletcher): “Buoyed by growing interest from institutional investors, 2018 was supposed to be the comeback year for hedge funds. It has not worked out that way. Stalling global equity markets, compounded by sharp sell-offs in February and October, have thrown the $3.31tn sector off course. Investors pulled a net $10.1bn from hedge funds in the year to October, according to eVestment…”
December 5 – Financial Times (Laurence Fletcher and Lindsay Fortado): “Some of the hedge fund industry’s biggest names, including Millennium Management and Steve Cohen’s Point72 Asset Management, suffered sharp losses in November, even as equity markets bounced back. While the S&P 500 index rose 2.9% last month after October’s 7.9% fall, some hedge funds fared worse in the face of wild swings in energy markets and big moves in equity market sectors such as technology… The losses cap a bruising period for hedge funds, which on average were down 4.9% this year to the end of November, according to the data group HFR.”
December 4 – Bloomberg (Bei Hu): “Last year’s boom has turned to bust for Asia-focused hedge funds. Eleven percent of funds tracked by Eurekahedge Pte. lost at least 20% in the first 10 months of the year. And almost 72% of those that posted double-digit gains in 2017 -- the best year for regional funds since 2009 -- are in the red this year. The sudden reversal of fortune is making it harder for Asian hedge funds to shake off their image as beta-chasers -- those that can only make money in a rising market. The stock-heavy nature of the industry – 64% of assets are controlled by equity-focused managers -- hasn’t helped as rising interest rates and trade and political tensions sparked widespread selloffs.”
Geopolitics Watch:
December 4 – CNBC (Amanda Macias): “Secretary of State Mike Pompeo announced… that the United States is prepared to withdraw from a crucial weapons treaty signed by the world’s two biggest nuclear powers. Pompeo offered Russia an ultimatum: come into compliance in 60 days or the United States will leave the Intermediate-Range Nuclear Forces, or INF, Treaty. Russia, Pompeo said, has developed ‘multiple battalions of the SSC-8 missiles,’ a move that falls outside of the Cold War-era arms agreement.”
December 5 – Bloomberg (Hal Brands): “Sometimes a handshake can mean quite a lot. Richard Nixon’s outstretched hand to Zhou Enlai in 1972 marked the end of a quarter-century of Chinese-American estrangement. The decidedly bro-ey handshake between Russia’s Vladimir Putin and Saudi Arabia’s Mohammad bin Salman at the G-20 summit last week was also laden with symbolism. That handshake was, no doubt, a pointed reminder to Washington that the Saudis are willing to explore other geopolitical options if the U.S. gets tough in response to the assassination of the journalist Jamal Khashoggi. Yet it was also indicative of a broader trend that is reshaping global politics. Day by day, it becomes increasingly clear that a central fault line… in world affairs is the struggle between liberal and illiberal forms of government. And as this happens, geopolitical alignments are shifting in subtle but momentous ways. In particular, the bonds between the U.S. and many of its authoritarian allies are weakening, as those countries find that they have less in common ideologically with America than with its revisionist rivals.”
December 5 – Reuters (Christopher Bing): “Hackers behind a massive breach at hotel group Marriott International Inc left clues suggesting they were working for a Chinese government intelligence gathering operation, according to sources familiar with the matter. Marriott said last week that a hack that began four years ago had exposed the records of up to 500 million customers in its Starwood hotels reservation system.”
The S&P500 sank 4.6% (down 1.5% y-t-d), and the Dow fell 4.5% (down 1.3%). The Utilities gained 1.2% (up 5.6%). The Banks sank 8.2% (down 12.6%), and the Broker/Dealers were hit 6.0% (down 6.9%). The Transports were hammered 8.0% (down 6.2%). The S&P 400 Midcaps dropped 5.2% (down 6.3%), and the small cap Russell 2000 fell 5.6% (down 5.7%). The Nasdaq100 dropped 4.8% (up 3.4%). The Semiconductors lost 6.6% (down 7.6%). The Biotechs fell 6.0% (up 5.8%). With bullion jumping $26, the HUI gold index rallied 6.1% (down 20%).
Three-month Treasury bill rates ended the week at 2.34%. Two-year government yields declined seven bps to 2.71% (up 83bps y-t-d). Five-year T-note yields dropped 12 bps to 2.69% (up 48bps). Ten-year Treasury yields sank 14 bps to 2.85% (up 44bps). Long bond yields fell 15 bps to 3.14% (up 40bps). Benchmark Fannie Mae MBS yields sank 15 bps to 3.71% (up 71bps).
Greek 10-year yields declined four bps to 4.21% (up 14bps y-t-d). Ten-year Portuguese yields dipped three bps to 1.80% (down 14bps). Italian 10-year yields dropped eight bps to 3.13% (up 112bps). Spain's 10-year yields declined five bps to 1.45% (down 12bps). German bund yields fell six bps to 0.25% (down 18bps). French yields were unchanged at 0.69% (down 10bps). The French to German 10-year bond spread widened six to 44 bps. U.K. 10-year gilt yields sank 10 bps to 1.27% (up 8bps). U.K.'s FTSE equities index fell 2.9% (down 11.8%).
Japan's Nikkei 225 equities index dropped 3.0% (down 4.8% y-t-d). Japanese 10-year "JGB" yields declined three bps to 0.06% (up 1bp). France's CAC40 sank 3.8% (down 9.4%). The German DAX equities index dropped 4.2% (down 16.5%). Spain's IBEX 35 equities index lost 2.9% (down 12.2%). Italy's FTSE MIB index declined 2.3% (down 14.2%). EM equities generally outperformed "developed" markets. Brazil's Bovespa index declined 1.6% (up 15.3%), while Mexico's Bolsa recovered 0.3% (down 15.2%). South Korea's Kospi index fell 1.0% (down 15.9%). India's Sensex equities index slipped 1.4% (up 4.7%). China's Shanghai Exchange gained 0.7% (down 21.2%). Turkey's Borsa Istanbul National 100 index fell 1.8% (down 18.8%). Russia's MICEX equities index rose 1.6% (up 15.2%).
Investment-grade bond funds saw outflows of $1.268 billion, and junk bond funds posted outflows of $829 million (from Lipper).
Freddie Mac 30-year fixed mortgage rates fell six bps to 4.75% (up 81bps y-o-y). Fifteen-year rates declined four bps to 4.21% (up 85bps). Five-year hybrid ARM rates fell five bps to 4.07% (up 72bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-yr fixed rates down eight bps to 4.60% (up 45bps).
Federal Reserve Credit last week declined $16.1bn to $4.048 TN. Over the past year, Fed Credit contracted $349bn, or 7.9%. Fed Credit inflated $1.237 TN, or 44%, over the past 317 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt increased $2.1bn last week to $3.404 TN. "Custody holdings" were up $13.8bn y-o-y, or 0.4%.
M2 (narrow) "money" supply rose $19.8bn last week to a record $14.334 TN. "Narrow money" gained $523bn, or 3.8%, over the past year. For the week, Currency increased $1.4bn. Total Checkable Deposits were little changed, while Savings Deposits gained $13.1bn. Small Time Deposits added $2.2bn. Retail Money Funds increased $3.4bn.
Total money market fund assets dropped $34.5bn to $2.909 TN. Money Funds gained $102bn y-o-y, or 3.6%.
Total Commercial Paper fell $15.5bn to $1.075 TN. CP rose $22.5bn y-o-y, or 2.1%.
Currency Watch:
The U.S. dollar index declined 0.7% to 96.514 (up 4.8% y-t-d). For the week on the upside, the Norwegian krone increased 1.3%, the Japanese yen 0.8%, the Swedish krona 0.7%, the Swiss franc 0.6%, the euro 0.6%, the Mexican peso 0.5%, the Singapore dollar 0.2% and the South Korean won 0.1%. For the week on the downside, the South African rand declined 2.1%, the Australian dollar 1.3%, the Brazilian real 1.1%, the Canadian dollar 0.2%, the British pound 0.2% and the New Zealand dollar 0.1%. The Chinese renminbi rallied 1.25% versus the dollar this week (down 5.35% y-t-d).
Commodities Watch:
The Goldman Sachs Commodities Index rallied 2.0% (down 5.9% y-t-d). Spot Gold surged $26 to $1,248 (down 4.2%). Silver jumped 3.1% to $14.696 (down 14.3%). Crude recovered $1.89 to $52.61 (down 13%). Gasoline surged 6.2% (down 17%), while Natural Gas fell 3.3% (up 52%). Copper declined 1.2% (down 16%). Wheat jumped 3.0% (up 24%). Corn gained 2.1% (up 10%).
Market Dislocation Watch:
December 4 – Bloomberg (Stephen Spratt and Edward Bolingbroke): “The rally in Treasuries went into overdrive Tuesday, threatening to upend the legion of investors who are betting against longer-maturity bonds. Thirty-year futures rose as much as 2 15/32 and outperformed on the curve, sending yields plunging as much as 12 bps. Open interest in the contract dropped for a fourth day Monday, suggesting traders who had taken bearish directional bets were already feeling the jitters before the latest plunge in stocks.”
December 6 – Bloomberg (Marcus Ashworth): “Falling yields on German government debt is the sign of a classic ‘risk-off’ mentality. As fear grows, investors plump for safety. But where’s the crisis in Europe? Yields on 10-year bunds have fallen steadily by 30 bps in the past two months. And German notes out to eight years are now in negative territory.”
December 5 – Bloomberg (Katherine Burton and Hema Parmar): “Billionaires Ken Griffin, Izzy Englander and Steve Cohen posted monthly losses in November that rank among their worst ever as stock hedge funds dumped holdings at a rate not seen since the financial crisis. Griffin’s Citadel lost about 3% last month, its poorest showing since the first quarter of 2016. Englander’s Millennium Management slid 2.8%, its third-worst month on record. Cohen’s Point72 Asset Management dropped about 5%, largely wiping out its 2018 gains… These firms market themselves as steady money makers because their stock managers tend to run portfolios with a roughly equal weighting of longs and shorts, or small net exposure in either a bullish or bearish direction… To control risk, individual portfolio managers are typically forced to sell positions after relatively small losses. To make money under those constraints, the firms employ heavy leverage. Citadel, Point72 and Millennium together hold less than $100 billion in net assets, but that sum swells to almost half a trillion dollars when borrowed money is included.”
November 30 – Financial Times (Adam Samson and Robin Wigglesworth): “Investors pulled more than $5bn from funds investing in corporate bonds in the past week, as the credit market heads for its worst year since the financial crisis a decade ago and concerns mount over the outlook for 2019.”
December 5 – Bloomberg (Elena Popina): “Market statisticians are falling over each other in 2018 to describe the pain being felt across asset classes. One venerable shop frames it this way: Things haven’t been this bad since Richard Nixon’s presidency. Ned Davis Research puts markets into eight big asset classes — everything from bonds to U.S. and international stocks to commodities. And not a single one of them is on track to post a return this year of more than 5%, a phenomenon last observed in 1972, according to Ed Clissold, a strategist at the firm.”
Trump Administration Watch:
December 2 – CNBC (David Reid): “President Donald Trump has told reporters on Air Force One that a trade deal brokered with China is one of the largest ever made. After meeting at the G-20 summit in Argentina, Trump and Chinese President Xi Jinping have agreed a temporary stop to their bilateral trade disagreement, striking a deal to hold off on any additional tariffs on each other’s goods after January 1. ‘It’s an incredible deal. It goes down, certainly, if it happens, it goes down as one of the largest deals ever made,’ Trump said…”
December 5 – Bloomberg (Editorial Board): “On the same day Donald Trump and Xi Jinping struck a trade war truce in Argentina, some 7,000 miles away Canadian authorities made an arrest that now threatens to make the U.S.-China conflict much worse. The U.S. is seeking the extradition of Wanzhou Meng, chief financial officer of Huawei Technologies Co., after convincing Canada to arrest her on Dec. 1. Canada confirmed she was in custody shortly after the Globe and Mail reported she had been arrested in connection with violating sanctions against Iran. China promptly reacted with outrage after the news broke, demanding that both countries move to free Meng. Later, the foreign ministry said it was waiting for details on why she was arrested, and said trade talks should continue.”
December 5 – CNBC (Huileng Tan): “The arrest of Huawei’s global chief financial officer in Canada, reportedly related to a violation of U.S. sanctions, will corrode trade negotiations between Washington and Beijing, risk consultancy Eurasia Group said… ‘Beijing is likely to react angrily to this latest arrest of a Chinese citizen in a third country for violating U.S. law,’ Eurasia analysts wrote. In fact, Global Times — a hyper-nationalistic tabloid tied to the Chinese Communist Party — responded to the arrest by posting on Twitter a statement about trade war escalation it attributed to an expert ‘close to the Chinese Ministry of Commerce.’ ‘China should be fully prepared for an escalation in the #tradewar with the US, as the US will not ease its stance on China, and the recent arrest of the senior executive of #Huawei is a vivid example,’ said the statement, paired with a photo of opposing fists with Chinese and American flags superimposed upon them.”
December 3 – Reuters (David Lawder): “U.S. Trade Representative Robert Lighthizer will lead negotiations with China over tariffs, market access and structural changes to intellectual property practices over the next 90 days…, potentially signaling a harder U.S. line… Lighthizer leading the talks marks a shift from the administration’s previous approach to China trade talks that had been largely led by U.S. Treasury Secretary Steven Mnuchin. Lighthizer, an experienced trade negotiator and having just completed a new agreement with Canada and Mexico, is one of the administration’s most vocal China critics.”
December 2 – CNBC (Evelyn Cheng): “While both the U.S. and China called this weekend’s meeting on trade very successful, many Chinese-language state media left out references to a 90-day condition for both sides to agree on issues such as technology transfer. While it’s typical for there to be some daylight between governments’ spin about bilateral meetings, a host of differences between the Chinese and the American version of events points to a potentially challenging road ahead for any negotiations. Another apparent discrepancy comes from Chinese Foreign Minister Wang Yi, who remarked that the two countries will work toward eliminating tariffs. A White House Press Secretary statement…, for its part, did not include that point.”
December 3 – Financial Times (Courtney Weaver): “Steven Mnuchin… has warned China to avoid ‘soft commitments’ in a new round of trade talks expected to follow a ceasefire deal reached at the weekend between presidents Donald Trump and Xi Jinping. In a telephone interview with the Financial Times after the truce was sealed…, Mr Mnuchin urged Beijing to flesh out pledges made in Buenos Aires in negotiations over the next three months. ‘There’s a 100% unanimous view on our economic team that this needs to be a real agreement… These can’t be soft commitments from China. There need to be specific dates, specific action items,” he added.”
December 4 – Reuters (Doina Chiacu): “U.S. President Donald Trump on Tuesday held out the possibility of an extension of the 90-day trade truce with China but warned he would revert to tariffs if the two sides could not resolve their differences. Trump said his team of trade advisers led by China trade hawk U.S. Trade Representative Robert Lighthizer would determine whether a ‘REAL deal’ with Beijing was possible. ‘If it is, we will get it done,’ Trump wrote in a Twitter post. ‘But if not remember, I am a Tariff Man.’”
December 4 – CNBC (Yen Nee Lee): “U.S. President Donald Trump, in a Twitter post on Tuesday evening, said America is going to have a ‘REAL DEAL’ or ‘no deal at all’ with China. Trump said if the two countries cannot agree on a deal, the U.S. will proceed with ‘major Tariffs’ against Chinese products. ‘Ultimately, I believe, we will be making a deal — either now or into the future,’ the president said.”
December 4 – Bloomberg (Shawn Donnan): “President Donald Trump’s advisers are scrambling to explain a trade deal he claimed he’d struck with China to reduce tariffs on U.S. cars exported to the country -- an agreement that doesn’t exist on paper and still hasn’t been confirmed in Beijing. In the day after Trump announced the deal in a two-sentence Twitter post, the White House provided no additional information. Meanwhile, China hasn’t formulated its response because bureaucrats are awaiting the return home of President Xi Jinping, according to three officials who were briefed but declined to be named as the matter isn’t public. Questioned about the agreement on Monday, Treasury Secretary Steven Mnuchin and Trump’s top economic adviser, Larry Kudlow, dialed back expectations and added qualifiers.”
December 4 – Wall Street Journal (Vivian Salama): “Trump administration officials said they planned to take a tough stand in their 90-day trade negotiations with China or impose further tariffs, as optimism over a truce gave way to uncertainties about how the two sides could find agreement on a wide range of issues. Having emphasized last weekend the possibilities for a wide-ranging deal, President Trump and other officials switched their focus to issues they want to see addressed and the consequences of not reaching an accord in a time frame that China initially didn’t acknowledge. Mr. Trump, in a series of tweets Tuesday morning, said he expected to see China start buying more U.S. agricultural exports immediately…”
December 3 – Reuters (Jeff Mason and David Shepardson): “White House economic adviser Larry Kudlow said… the Trump administration wants to end subsidies for electric cars and other items, including renewable energy sources… ‘As a matter of our policy, we want to end all of those subsidies,’ Kudlow said. ‘And by the way, other subsidies that were imposed during the Obama administration, we are ending, whether it’s for renewables and so forth.’”
December 6 – Bloomberg (Sarah Ponczek): “Stocks go south and President Donald Trump goes quiet. Since his election, Trump has tweeted about the stock market more than 35 times. Yet since Nov. 12, his social media account has been mum on the wild vacillations in U.S. equities.”
Federal Reserve Watch:
December 3 – Bloomberg (Christopher Condon and Jeanna Smialek): “Federal Reserve Vice Chairman Richard Clarida said the U.S. central bank will defend both sides of its inflation target and cautioned investors against thinking the Fed would act to halt a sharp market decline. ‘I don’t really think of it as a useful way to describe what the current Federal Reserve is doing,’ he said… when asked about the concept of a ‘Powell Put’ in an interview with Tom Keene on Bloomberg Television.”
December 4 – MarketWatch (Greg Robb): “The U.S. economy will stay strong in 2019 and inflation will tick up above 2% and so the U.S. central bank should continue to raise interest rates gradually, New York Fed President John Williams said… ‘Given this outlook of strong growth, strong labor market and inflation near our goal and taking account all the various risks around the outlook, I do expect further gradual increases in interest rates will best sponsor a sustained economic expansion,’ Williams said… The Fed’s last policy statement used the word ‘strong’ five times in describing the U.S. economy, he noted.”
December 3 – Reuters (Howard Schneider): “Federal Reserve vice chairman Randal Quarles said the Fed’s increasing ‘data dependence’ does not mean it will react to every rise or fall in economic statistics or markets, but only to ‘significant changes in direction.’ …’We should be data dependent but not reacting to every wavering of the needle across the dial...We have described in all the communications tools a path that is pretty clear,’ Quarles said. ‘We are following a strategy and taking account of data over time as it comes in and in response to significant changes in direction.’”
December 3 – Financial Times (Courtney Weaver): “President Donald Trump was taking a ‘dangerous’ path by attacking Jay Powell and legislation might be needed to protect the Federal Reserve chairman, a bipartisan pair of US senators has warned. Republican Jeff Flake… and Democrat Chris Coons… said… that the US president could attempt to take a similar approach to Mr Powell as he did to former attorney-general Jeff Sessions, whom he sacked after the midterm elections. The pair floated the idea of legislation to preserve the Fed’s independence after Mr Trump complained that he was not being ‘accommodated’ by Mr Powell and that he was ‘unhappy’ with his selection of chairman.”
U.S. Bubble Watch:
December 6 – Financial Times (Matthew Rocco): “The US trade deficit hit its widest level in a decade in October as the nation registered a record amount of imports and a decline in exports to China. The… gap between US imports and exports grew 1.7% month-over-month to $55.5bn, the most since October 2008 and the fifth straight month of deficit expansion.”
December 5 – Reuters (Jason Lange, Howard Schneider and by Ann Saphir): “Tariff-driven price increases have spread more broadly through the U.S. economy, though on balance inflation has risen at a modest pace in most parts of the country, the Federal Reserve said… The U.S. central bank’s ‘Beige Book’ report… also said that the economy appeared to be growing modestly to moderately. While a wide range of businesses cited concerns about the effects of a trade war between the United States and China, firms continued to hire and reported bumping up benefits and pay to compete for an increasingly scarce labor pool.”
December 6 – Reuters (Lucia Mutikani): “New orders for U.S.-made goods recorded their biggest drop in more than a year in October and business spending on equipment appeared to be softening, suggesting a slowdown in activity in the manufacturing sector. Factory goods orders fell 2.1% amid a decline in demand for a range of goods…”
December 4 – Wall Street Journal (Esther Fung): “Chinese investors unloaded more than $1 billion in U.S. real estate in the third quarter, extending their recent retreat from hotels, office buildings and other foreign property under pressure from Beijing to reduce debt and curb money sent abroad… That was the second straight quarter in which Chinese were net sellers of U.S. commercial real estate. The second quarter marked the first time these investors sold more U.S. property than they bought during a quarter since 2008.”
China Watch:
December 5 – Financial Times (Tom Mitchell): “Beijing and Washington on Wednesday sought to reassure shaken financial markets their trade ceasefire could lead to a lasting peace after a global sell-off exposed widespread investor fears that a G20 deal lacked any substantive agreement. In its first comments since the weekend truce between Xi Jinping, the Chinese president, and Donald Trump, his US counterpart, China’s government said it was ‘confident’ a comprehensive agreement could be reached before a tariff freeze expires in three months. Mr Trump hailed the ‘very strong signals’ from Beijing, and sought to pin the days-long silence from Chinese leaders, which helped spook markets, to ‘their long trip, including stops’ from the G20 in Argentina. ‘Not to sound naive or anything, but I believe President Xi meant every word of what he said at our long and hopefully historic meeting,’ Mr Trump wrote on Twitter.”
December 4 – CNBC (Kate Rooney): “China is reportedly confused by the Trump administration’s version of what happened in Buenos Aires. After the key meeting between President Donald Trump and Chinese President Xi Jinping, officials from Beijing are ‘puzzled and irritated’ by the Trump administration’s behavior, The Washington Post reported…, citing a former U.S. government official who has been in contact with the Chinese officials. ‘You don’t do this with the Chinese. You don’t triumphantly proclaim all their concessions in public. It’s just madness,’ the former official, who asked for anonymity to describe confidential discussions, told the Post.”
December 3 – Financial Times (Emily Feng and Kathrin Hille): “Xi Jinping, the Chinese president, visited a memory chip plant in the city of Wuhan earlier this year. In a white lab coat, he made an unexpectedly sentimental remark, comparing a computer chip to a human heart: ‘No matter how big a person is, he or she can never be strong without a sound and strong heart’. China’s ambitions to be a leader in next-generation technology, such as artificial intelligence, rest on whether or not it can design and manufacture cutting-edge chips, and Mr Xi has pledged $150bn to build up the sector. But China’s plan has alarmed the US, and chips… have become the central battlefield in the trade war… And it is a battle in which China has a very visible Achilles heel… The $412bn global semiconductor industry rests on the shoulders of just six equipment companies, three of them US-based. Together, the companies make nearly all of the crucial hardware and software tools needed to manufacture chips, meaning an American export ban would choke off China’s access to the basic tools needed to make their latest chip designs. ‘You cannot build a semiconductor facility without using the big major equipment companies, none of which are Chinese,’ said Brett Simpson, the founder of Arete Research… ‘If you fight a war with no guns you’re going to lose. And they don’t have the guns.’”
December 2 – Financial Times (James Kynge): “One of the motivations behind China’s historic decision to open its economy 40 years ago was the need to attract foreign direct investment. Strong inflows followed and helped transform the Chinese economy. But these are now starting to be eclipsed by a newer font of capital that is surging into the country’s financial markets. The shift in focus from direct investment into factories and offices towards portfolio flows into stocks and bonds reveals much about how China is changing — and how it is starting to exert greater influence over the world’s financial system… Foreign asset managers, sovereign wealth funds and central banks have increased their total holdings of Chinese domestic stocks and bonds — denominated in renminbi — to $462.2bn at the end of September, up by $122.5bn from a year ago…”
December 5 – Bloomberg: “China’s escalating crackdown on peer-to-peer lending could hardly have come at a worse time for the country’s slumping car market. P2P platforms, many of which are likely to wind down under a Chinese plan to shrink the industry, facilitated 248 billion yuan ($36bn) of auto loans in 2017, or more than a fifth of the total… P2P auto lending dropped 20% in the first half of this year…, and may shrink even further as policy makers push small- and medium-sized operators to close.”
December 4 – Bloomberg (Anjani Trivedi): “As compelling as the $1.4 trillion pile of distressed assets in China looks, there are few reasons to think foreign investors will walk away with substantial winnings. Prices are falling again after a blockbuster 2017, when a wave of domestic institutional money pushed distressed debt values to almost 80 cents on the dollar from 30. This partly reflects new supply and partly a crackdown on the shadow-banking system that previously allowed investors to finance purchases of nonperforming loans, according to Dinny McMahon of Macro Polo… of the Paulson Institute. About 3,000 local investment funds, well versed in the ground rules of Chinese nonperforming assets, have backed off for now. Returns on distressed assets have fallen as their quality deteriorates.”
Brexit Watch:
December 4 – BBC: “Theresa May has suffered three Brexit defeats in the Commons as she set out to sell her EU deal to sceptical MPs. Ministers have agreed to publish the government’s full legal advice on the deal after MPs found them in contempt of Parliament for issuing a summary. And MPs backed calls for the Commons to have a direct say in what happens if the PM's deal is rejected next Tuesday. Mrs May said MPs had a duty to deliver on the 2016 Brexit vote and the deal on offer was an ‘honourable compromise’. She was addressing the Commons at the start of a five-day debate on her proposed agreement on the terms of the UK's withdrawal and future relations with the EU. The agreement has been endorsed by EU leaders but must also be backed by the UK Parliament if it is to come into force. MPs will decide whether to reject or accept it on Tuesday 11 December.”
December 5 – Reuters (William James and Elizabeth Piper): “Prime Minister Theresa May’s Brexit deal came under fire from allies and opponents alike on Wednesday after the government was forced to publish legal advice showing the United Kingdom could be locked indefinitely in the European Union’s orbit. After a string of humiliating parliamentary defeats for May the day before cast new doubt over her ability to get a deal approved, U.S. investment bank J.P. Morgan said the chances of Britain calling off Brexit altogether had increased.”
EM Watch:
December 1 – Reuters (Sharay Angulo and Anthony Esposito): “Veteran leftist Andres Manuel Lopez Obrador took office as Mexican president…, vowing to see off a ‘rapacious’ elite in a country struggling with corruption, chronic poverty and gang violence on the doorstep of the United States. Backed by a gigantic Mexican flag, the 65-year-old took the oath of office in the lower house of Congress, pledging to bring about a ‘radical’ rebirth of Mexico to overturn what he called a disastrous legacy of decades of ‘neo-liberal’ governments. ‘The government will no longer be a committee at the service of a rapacious minority,’ said the new president… Nor would the government, he said, be a ‘simple facilitator of pillaging, as it has been.’”
December 1 – Bloomberg (Jose Orozco): “Venezuela devalued its Dicom foreign exchange rate by more than 40% to 171.67 sovereign bolivars per dollar from 96.84 in an auction on Friday, one day after President Nicolas Maduro ordered a minimum wage increase… Maduro ordered a 150% increase in the monthly minimum wage, the sixth hike this year… Maduro has raised the minimum wage 25 times since he took office in 2013…”
Central Bank Watch:
December 4 – Reuters (Francesco Canepa and Balazs Koranyi): “European Central Bank policymakers are debating ways to wean the euro zone off years of easy money, floating ideas such as a new kind of multi-year loans and staggered increases in interest rates… The ECB will have a difficult task over the next couple of years: dialing back its unprecedented stimulus without hurting a banking sector still deeply divided along national lines. Conversations with five sources on or close to the ECB’s policymaking body showed rate-setters were beginning to come up with ideas to ease the transition, including raising only the interest rate on bank deposits at first and offering multi-year loans at floating rates on a permanent basis.”
December 4 – Bloomberg (Piotr Skolimowski and Jana Randow): “The European Central Bank shouldn’t waste any time in normalizing monetary policy if the economic situation in the euro area allows for it, according to Bundesbank President Jens Weidmann. …Weidmann warned that maintaining very loose monetary conditions carries risks and could lead to excesses in the financial system. The end of net asset purchases -- which economists expect to be announced at the ECB’s Dec. 13 meeting -- is only the first step on a long road of paring back stimulus, he said. ‘It’s clear that the next steps in normalization will depend on how the data develops,’ Weidmann said. ‘But I am convinced that we shouldn’t lose time unnecessarily.’”
Italy Watch:
December 4 – Financial Times (Kate Allen): “Italian companies and banks are on track to sell the smallest amount of debt in a year since the financial crisis, underlining how ructions in the country’s sovereign bonds have rippled out across the private sector. As the capital markets wind down into the end of the year, companies and banks domiciled in Italy have sold $77bn of bonds in 2018… That is the lowest amount raised in the first 11 months of the year since 2008 and down more than a quarter on the same period last year. This week, rating agency Standard & Poor’s warned that continued wrangling between Brussels and Rome over the budget proposed by Italy’s populist government ‘could result in higher funding costs for the private sector, including banks’ and ‘constrain banks’ progress in their recovery, which is just halfway through’.”
December 4 – Reuters (Valentina Za): “Italian Economy Minister Giovanni Tria is considering resigning once parliament approved the 2019 budget… Citing people in direct contact with the minister, Corriere said Tria had not made up his mind yet and could stay on despite his increasing isolation within the government.”
Global Bubble Watch:
December 2 – Financial Times (Kate Allen): “The amount of dollar-denominated debt sold by companies and banks has hit its lowest level in two-and-a-half years as the impact of the currency’s appreciation ripples through the bond markets. Dollar-denominated bond sales by companies and financial institutions in developed economies dipped to $1.4tn in the six months to October, down 14% on the previous six-month period to their lowest level since April 2016… Investors had previously benefited from the favourable arbitrage available by swapping the dollar back into other currencies, but the greenback’s strengthening over the course of this year has eroded its relative attractiveness, undermining bond sellers’ incentive to price in dollars.”
December 1 – Bloomberg (Raymond Colitt, Josh Wingrove and Jennifer Epstein): “Leaders of the world’s largest economies agreed the global system of rules that’s underpinned trade for decades is flawed, in a post-summit statement… that the White House quickly claimed as a win for Donald Trump’s protectionist agenda. The Group of 20 communique was the culmination of days of round-the-clock talks. Some officials said just having a statement was a good result, given intense wrangling over issues like trade, migration and climate. Still, the watered-down language suggests further tests ahead for advocates of globalization and institutions like the World Trade Organization.”
December 1 – New York Times (Peter S. Goodman): “Only a few months ago, the world’s fortunes appeared increasingly robust. For the first time since the wealth-destroying agony of the global financial crisis, every major economy was growing in unison. So much for all that. The global economy is now palpably weakening, even as most countries are still grappling with the damage from that last downturn. Many nations are mired in stagnation or sliding that way. Oil prices are falling and factory orders are diminishing… Companies are warning of disappointing profits, sending stock markets into a frenetic bout of selling that reinforces the slowdown. Germany and Japan have both contracted in recent months. China is slowing more than experts anticipated.”
December 2 – Reuters (Jonathan Cable and Leika Kihara): “Global economic prospects appear gloomy as year-end approaches after factory activity and export orders weakened in November, prompting analysts to predict no quick rebound amid persistent global trade tensions. In a sign that corporate sentiment is taking a hit from the worries over protectionism, manufacturing activity slipped in November in countries as varied as France, Germany, Indonesia and South Korea, IHS Markit Purchasing Managers’ Indexes showed…”
December 2 – Financial Times (Hudson Lockett): “A drop in new orders helped push South Korea’s manufacturing sector into contraction after just two months of expansion, according to an industry survey. The Nikkei-Markit manufacturing purchasing managers’ index for South Korea dropped to 48.6 in November…”
December 2 – Financial Times (Edward White): “A gauge of activity in Taiwan’s manufacturing sector fell to its lowest level in three years last month amid a worsening outlook for the country’s exports. The Nikkei Taiwan Manufacturing purchasing managers’ index was 48.4 in November, down from 48.7 in October…”
December 6 – Bloomberg (Edward Bolingbroke): “Aggressive bull-flattening move across the eurodollar strip produces record volumes in the December 2019 contract, surpassing previous levels reached in May. Shortly after 12pm ET, a total of 1.202 million EDZ9 contracts have changed hands vs. around 600k in EDH9, the next most traded; volumes across EDZ9 up to 12pm ET ran at around 270% of 10-day average…”
Fixed Income Bubble Watch:
December 6 – Bloomberg (Kelsey Butler, Davide Scigliuzzo and Jeannine Amodeo): “JPMorgan… sold a loan tied to the takeover of a provider of private jet flights at one of the U.S. credit market’s steepest discounts this year after struggling to unload the debt. The $210 million term loan -- to fund Vista Global Holding Ltd.’s purchase of XOJET Inc. -- had gone unsold since it was first marketed to investors in the middle of October, forcing Vista Global and its bank JPMorgan to cut the size and sweeten terms... The sale priced Tuesday at a discount of 93 cents on the dollar, down from initial talk of 99.5 cents.”
Leveraged Speculation Watch:
December 1 – Financial Times (Jennifer Thompson and Laurence Fletcher): “Buoyed by growing interest from institutional investors, 2018 was supposed to be the comeback year for hedge funds. It has not worked out that way. Stalling global equity markets, compounded by sharp sell-offs in February and October, have thrown the $3.31tn sector off course. Investors pulled a net $10.1bn from hedge funds in the year to October, according to eVestment…”
December 5 – Financial Times (Laurence Fletcher and Lindsay Fortado): “Some of the hedge fund industry’s biggest names, including Millennium Management and Steve Cohen’s Point72 Asset Management, suffered sharp losses in November, even as equity markets bounced back. While the S&P 500 index rose 2.9% last month after October’s 7.9% fall, some hedge funds fared worse in the face of wild swings in energy markets and big moves in equity market sectors such as technology… The losses cap a bruising period for hedge funds, which on average were down 4.9% this year to the end of November, according to the data group HFR.”
December 4 – Bloomberg (Bei Hu): “Last year’s boom has turned to bust for Asia-focused hedge funds. Eleven percent of funds tracked by Eurekahedge Pte. lost at least 20% in the first 10 months of the year. And almost 72% of those that posted double-digit gains in 2017 -- the best year for regional funds since 2009 -- are in the red this year. The sudden reversal of fortune is making it harder for Asian hedge funds to shake off their image as beta-chasers -- those that can only make money in a rising market. The stock-heavy nature of the industry – 64% of assets are controlled by equity-focused managers -- hasn’t helped as rising interest rates and trade and political tensions sparked widespread selloffs.”
Geopolitics Watch:
December 4 – CNBC (Amanda Macias): “Secretary of State Mike Pompeo announced… that the United States is prepared to withdraw from a crucial weapons treaty signed by the world’s two biggest nuclear powers. Pompeo offered Russia an ultimatum: come into compliance in 60 days or the United States will leave the Intermediate-Range Nuclear Forces, or INF, Treaty. Russia, Pompeo said, has developed ‘multiple battalions of the SSC-8 missiles,’ a move that falls outside of the Cold War-era arms agreement.”
December 5 – Bloomberg (Hal Brands): “Sometimes a handshake can mean quite a lot. Richard Nixon’s outstretched hand to Zhou Enlai in 1972 marked the end of a quarter-century of Chinese-American estrangement. The decidedly bro-ey handshake between Russia’s Vladimir Putin and Saudi Arabia’s Mohammad bin Salman at the G-20 summit last week was also laden with symbolism. That handshake was, no doubt, a pointed reminder to Washington that the Saudis are willing to explore other geopolitical options if the U.S. gets tough in response to the assassination of the journalist Jamal Khashoggi. Yet it was also indicative of a broader trend that is reshaping global politics. Day by day, it becomes increasingly clear that a central fault line… in world affairs is the struggle between liberal and illiberal forms of government. And as this happens, geopolitical alignments are shifting in subtle but momentous ways. In particular, the bonds between the U.S. and many of its authoritarian allies are weakening, as those countries find that they have less in common ideologically with America than with its revisionist rivals.”
December 5 – Reuters (Christopher Bing): “Hackers behind a massive breach at hotel group Marriott International Inc left clues suggesting they were working for a Chinese government intelligence gathering operation, according to sources familiar with the matter. Marriott said last week that a hack that began four years ago had exposed the records of up to 500 million customers in its Starwood hotels reservation system.”
Friday Evening Links
[BloombergQ] U.S. Stocks Tumble With Tech Sinking on Trade Woes: Markets Wrap
[Reuters] Gold hits 5-month peak as U.S. jobs data tempers rate hike views
[CNBC] Huawei executive’s arrest puts more pressure on Trump and Xi as they grapple over the global order
[Reuters] Fed policymakers signal turning point on U.S. rate-hike path
[BloombergQ] Kudlow Says He Expects Fed Pause for ‘Quite Some Time’ After December Hike
[Reuters] Trump praises China talks; aides downplay friction over Huawei arrest
[Reuters] As Brexit crunch nears, campaign for new referendum gathers pace
[WSJ] American Entrepreneurs Who Flocked to China Are Heading Home, Disillusioned
[Reuters] Gold hits 5-month peak as U.S. jobs data tempers rate hike views
[CNBC] Huawei executive’s arrest puts more pressure on Trump and Xi as they grapple over the global order
[Reuters] Fed policymakers signal turning point on U.S. rate-hike path
[BloombergQ] Kudlow Says He Expects Fed Pause for ‘Quite Some Time’ After December Hike
[Reuters] Trump praises China talks; aides downplay friction over Huawei arrest
[Reuters] As Brexit crunch nears, campaign for new referendum gathers pace
[WSJ] American Entrepreneurs Who Flocked to China Are Heading Home, Disillusioned
Thursday, December 6, 2018
Friday's News Links
[Reuters] Tech stocks pull Wall St. lower, offseting jobs data bump
[BloombergQ] Oil Rises as Much as 5.4 Percent as OPEC+ Is Said to Agree Cuts
[Reuters] U.S. job growth slows; monthly wage gains miss expectations
[Reuters] Huawei CFO to appear in Canada court as Chinese media slam arrest
[SCMP] China separates arrest of Huawei executive Sabrina Meng Wanzhou from US trade talks
[BloombergQ] China State Media Calls Huawei Arrest a ‘Despicable Rogue’ Act
[BloombergQ] Powell Says U.S. Labor Market ‘Very Strong’ by Many Measures
[Reuters] Tariffs have hit confidence, to slow US economy, says Fed’s Williams
[Reuters] Japan said to plan to bar Huawei, ZTE from government procurement contracts
[BloombergQ] China Needs Bailout, Capital Plans for Crisis Event: PBOC's Ma
[Reuters] China should tolerate bigger budget deficit in 2019 to boost economy: state media
[BloombergQ] Biggest Worry for Traders? They Don't Know Why Stocks Are Moving
[NYT] With the Economy Uncertain, Tech ‘Unicorns’ Rush Toward I.P.O.
[WSJ] U.S. Companies Feel the Pinch as Tariff Costs Start to Mount
[WSJ] U.S. Takes Aim at Huawei
[WSJ] Bear Markets March Across the Globe
[FT] The America hawks circling Beijing
[FT] Chinese and US executives worry after Huawei CFO’s arrest
[BloombergQ] Oil Rises as Much as 5.4 Percent as OPEC+ Is Said to Agree Cuts
[Reuters] U.S. job growth slows; monthly wage gains miss expectations
[Reuters] Huawei CFO to appear in Canada court as Chinese media slam arrest
[SCMP] China separates arrest of Huawei executive Sabrina Meng Wanzhou from US trade talks
[BloombergQ] China State Media Calls Huawei Arrest a ‘Despicable Rogue’ Act
[BloombergQ] Powell Says U.S. Labor Market ‘Very Strong’ by Many Measures
[Reuters] Tariffs have hit confidence, to slow US economy, says Fed’s Williams
[Reuters] Japan said to plan to bar Huawei, ZTE from government procurement contracts
[BloombergQ] China Needs Bailout, Capital Plans for Crisis Event: PBOC's Ma
[Reuters] China should tolerate bigger budget deficit in 2019 to boost economy: state media
[BloombergQ] Biggest Worry for Traders? They Don't Know Why Stocks Are Moving
[NYT] With the Economy Uncertain, Tech ‘Unicorns’ Rush Toward I.P.O.
[WSJ] U.S. Companies Feel the Pinch as Tariff Costs Start to Mount
[WSJ] U.S. Takes Aim at Huawei
[WSJ] Bear Markets March Across the Globe
[FT] The America hawks circling Beijing
[FT] Chinese and US executives worry after Huawei CFO’s arrest
Thursday Evening Links
[Reuters] Battered Asia shares try to rally on talk of Fed pause
[Reuters] S&P 500, Dow slip on trade worries, but end off of lows
[CNBC] 10-year Treasury yield falls to 2.83% amid stock sell-off, was above 3% at the start of the week
[Reuters] Oil dives 4 percent after OPEC delays output decision
[BloombergQ] U.S. Said to Seek Extradition in China Crackdown: Huawei Update
[Reuters] U.S. household net worth rises to $109 trillion ahead of stock rout
[Reuters] U.S. fund investors pull most cash from bonds in five weeks: Lipper
[BloombergQ] Traders Starting to Doubt Fed Will Raise Rates Even Once in 2019
[CNBC] The market is tanking this week: Here’s what you need to know
[BloombergQ] Something Weird Is Going on With German Debt
[BloombergQ] Hedge Funds Pivot Back to Stocks, Raising Leverage From 2018 Low
[BloombergQ] Trump Hasn’t Tweeted About the Stock Market Since Nov. 12
[WSJ] Fed Weighs Wait-and-See Approach on Future Rate Increases
[WSJ] Senior Huawei Executive’s Arrest Steps Up U.S.-China Confrontation
[WSJ] House Passes Temporary Spending Bill
[FT] China and the US: trade war or cold war?
[FT] US trade deficit at widest level in 10 years
[FT] China demands release of Huawei CFO held on US charges
[Reuters] S&P 500, Dow slip on trade worries, but end off of lows
[CNBC] 10-year Treasury yield falls to 2.83% amid stock sell-off, was above 3% at the start of the week
[Reuters] Oil dives 4 percent after OPEC delays output decision
[BloombergQ] U.S. Said to Seek Extradition in China Crackdown: Huawei Update
[Reuters] U.S. household net worth rises to $109 trillion ahead of stock rout
[Reuters] U.S. fund investors pull most cash from bonds in five weeks: Lipper
[BloombergQ] Traders Starting to Doubt Fed Will Raise Rates Even Once in 2019
[CNBC] The market is tanking this week: Here’s what you need to know
[BloombergQ] Something Weird Is Going on With German Debt
[BloombergQ] Hedge Funds Pivot Back to Stocks, Raising Leverage From 2018 Low
[BloombergQ] Trump Hasn’t Tweeted About the Stock Market Since Nov. 12
[WSJ] Fed Weighs Wait-and-See Approach on Future Rate Increases
[WSJ] Senior Huawei Executive’s Arrest Steps Up U.S.-China Confrontation
[WSJ] House Passes Temporary Spending Bill
[FT] China and the US: trade war or cold war?
[FT] US trade deficit at widest level in 10 years
[FT] China demands release of Huawei CFO held on US charges
Subscribe to:
Posts (Atom)