Global Macro

14

Blame Brexit on the Euro

by Chris Becker At the end of March this year, or in less than 90 days, the UK is set to leave the European Union. The EU and UK’s Prime Minister Theresa May have struck a deal, but it needs to be voted on in Parliament before such a deal is ratified. The exit from

1

Moody’s: bonds need to rally for stocks to stabilize

From Moodys: The world is now incapable of shouldering a 10-year Treasury yield above 3%. A remedial decline by the U.S.’ benchmark interest rates will be critical to rejuvenating global business activity and stabilizing financial markets. Otherwise, the corporate earnings outlook might deteriorate by enough to sink the market value of U.S. common stock by

19

Global debt reaches new record highs: IMF

by Chris Becker Just in time for the New Year crash, here comes some stellar news from the IMF (my emphasis added): Global debt has reached an all-time high of $184 trillion in nominal terms, the equivalent of 225 percent of GDP in 2017. On average, the world’s debt now exceeds $86,000 in per capita terms,

44

It’s all about Apple as it blames China

by Chris Becker Looks like we’re reliving the GFC all over again with interconnectedness so high that global currency and stock markets are going to crash because some single Chinese youths are not buying as many iPhones as they should. Apple announced a near 10% reduction in its forward guidance, releasing this report: While we

86

Australian dollar crashing

by Chris Becker Some epic volatility in the FX market at the moment with Yen moving both Aussie and USD around: This is very troubling indeed, with the lack of liquidity as key levels are taken out really showing how volatile and dangerous the FX world really is – and why most traders don’t hold

1

The future does not belong to emerging markets

Via Capital Economics: The conventional view of the long-term prospects for the global economy can be summarised as: EMs good, DMs bad. Like most things, however, we suspect that the conventional view is likely to be wrong. Last week we published our first Long Term Global Economic Outlook, which sets out forecasts for the major

1

How “late cycle” is the global economy?

Via FTAlphaville: With roughly six months to go until the US expansion becomes the longest on record, there has been growing concern that the global economy more broadly is running on late-cycle fumes. Lofty valuations, soaring profit margins, a flattening yield curve and a Federal Reserve tightening in the face of (admittedly muted) inflationary pressures

0

The economic impact of falling oil

Via Capital Economics: The sharp fall in oil prices over the past month or so has led to several questions about the implications for the global economy. We’ve written lots on this subject, including how central banks might respond and why the major oil producers are now better positioned to weather a fall in prices than they were a

3

Secretive China-led mega-trade deal stalls

By Leith van Onselen At the beginning of the year, the Turnbull Government revealed that Australia would head into a new secretive 16-member mega trade pact called the Regional Comprehensive Economic Partnership (RCEP), which was expected to be concluded by year’s end. The RCEP is backed by China and also includes the ASEAN countries along

9

Is the stock market panic over?

Some nice charts from Damien Bey as Credit Suisse give us context: Credit Suisse’s proprietary measure of risk appetite very briefly entered panic in mid-August 2018. It has since staged a modest recovery to less negative levels. 2. Past cycles show that after risk appetite enters panic, small caps tend to outperform in the following

5

What will cause the next global recession?

Via Capital Economics today: Our view that the world economy will undergo a reasonably sharp slowdown over the next couple of years stands in contrast to the relatively rosy consensus. (See Chart 1.) And it has led several clients to ask the obvious question: what causes the downturn in our forecast that others may be

10

Global stocks smoked

DXY took off last night. EUR was down and looks precarious. CNY firmed: AUD was hit against the USD but held up against the tumbling EUR: EMs were mixed: Gold held on aided by worries over EUR: Oil fell: Base metals were OK: Big miners tumbled anyway: EM stocks were smoked: Junk was dragged in

30

Trump wants China to “feel more pain”

Via Axios which has good sources on this stuff: President Trump has no intention of easing his tariffs on China, according to three sources with knowledge of his private conversations. Instead, these sources say he wants the Chinese leaders to feel more pain from his tariffs — which he believes need more time to fully

6

US-Saudi tensions erupt at the wrong moment

Via Bloomie, this is not what the market needed: Saudi Arabia threatened on Sunday to use its economic clout to retaliate against any punitive measures, hitting back after U.S. President Donald Trump said he could take action against the world’s largest oil-exporter over the disappearance of a government critic. “The kingdom emphasizes that it will

3

Macquarie: EMs still in the gun

Via the excellent Viktor Schvets at Macquarie: EMs in the crosshairs: Between war games, fake news and bonds From military exercises to trade wars, the fury is intensifying. At the same time, global liquidity is compressing while rates are rising. Growing uncertainty, contracting liquidity & rising cost of capital will continue to place non-US assets

15

World hates Trump but fears China

Via Pew: America’s global image plummeted following the election of President Donald Trump, amid widespread opposition to his administration’s policies and a widely shared lack of confidence in his leadership. Now, as the second anniversary of Trump’s election approaches, a new 25-nation Pew Research Center survey finds that Trump’s international image remains poor, while ratings for the

37

The US/China Cold War erupts

The US/China Cold War is here and how. It’s brinkmanship at sea, via The Australian: Australia has warned Beijing that the use of “intimidation or ­aggressive tactics” was “destabilising and potentially dangerous” following reports a Chinese navy destroyer launched an “unsafe” challenge to a US warship in the South China Sea. In the latest conflict

126

Laugh at Donald Trump if you want but he’s POTUS and you’re not

The Guardian, along with much of the world’s press, had a sneerfest at Donald Trump’s expense yesterday: For the rest of the world, President Donald Trump’s America is a laughingstock, not a leader. That was the takeaway from Trump’s speech to the 2018 United Nations general assembly. Trump opened his speech the same way he

24

Donald Trump to lose the trade war in twelve months?

Donald Trump, America’s first Jacksonian president in the modern era, launched a new broadside on China at the UN last night: America’s policy of principled realism means that we will not be held hostage to old, discredited ideology and experts that have been proven wrong over the years. This is true, not only in matters

2

AEP goes all-in on GFC 2.0

Via Ambrose Evans-Pritchard (h/t Researchtime): (i) “When the next recession comes, it is going to be deeper and last longer than in the past. We don’t have any strategy to deal with it,”… a bleak scenario more akin to the depressions of the 1870s or the 1930s than anything experienced in the post-War era… a