Via Westpac: Though credit spreads in the US are off their lows, they have remained relatively impervious to the heightening global risks surrounding trade and geopolitics. This partly reflects the strength in the US economy which has continued to support corporate earnings. With credit spreads in the US and Australia tightly linked, our spreads have
And a million snowflakes cried out in the darkness, via Politico: CNN before love-making is not his idea of a turn-on. But she can hardly turn it off—engrossed as she is in the latest unnerving gyrations of Washington. Who else to blame but Donald Trump? A president who excites hot feelings in many quarters has
More on the US jobs market from Westpac’s Elliot Clarke today: The US labour market delivered again in September, as strong employment growth continued and the unemployment rate fell to a new low dating back to 1969. Despite this strength however, the wages data did little to rebut Chair Powell’s message of recent weeks that
Via CNN: The US Navy’s Pacific Fleet has drawn up a classified proposal to carry out a global show of force as a warning to China and to demonstrate the US is prepared to deter and counter their military actions, according to several US defense officials. The draft proposal from the Navy is recommending the
It’s NFP day again. From Calculated Risk: On Friday at 8:30 AM ET, the BLS will release the employment report for September. The consensus is for an increase of 180,000 non-farm payroll jobs in September (with a range of estimates between 150,000 to 195,000), and for the unemployment rate to decline to 3.8%. The BLS
Via Bloomie today: In 2015, Amazon.com Inc. began quietly evaluating a startup called Elemental Technologies, a potential acquisition to help with a major expansion of its streaming video service, known today as Amazon Prime Video. Based in Portland, Ore., Elemental made software for compressing massive video files and formatting them for different devices. Its technology
Via the WSJ comes the detail: Automaking The new three-country pact would require auto makers to build a greater portion of a car in North America and with higher-wage workers to avoid duties when a car crosses borders. That would be a relative win for Detroit’s Big Three auto makers, which rely heavily on factories
Via Zero Hedge comes JPM: Late last week, JPMorgan became the latest to drastically revise it outlook, and in a note from strategist John Normand writes that the bank has “adopted a new baseline that assumes a US-China endgame involving 25% US tariffs on all Chinese goods in 2019.” As a reminder of how methodically
Great stuff today from Ray Dalio at BS: The phases of the classic deflationary debt cycle. Dalio: There’s the early part of the cycle where debt is being used to create productivity incomes and then, it can be serviced well, asset prices go up, everything is great. And then, you come to the bubble phase
DXY and CNY eased last night. EUR firmed: AUD was mostly down: Gold bogged: Oil not: Base metals stalled: Big miners didn’t: EM stocks firmed: EM junk fell: Treasuries were hosed: Bunds too: Stocks were stable: Westpac has the wrap: Market Wrap Global market sentiment: US bond yields extended multi-week gains in anticipation of the
The Wall Street Journal suggests that they may have: I’m not seeing it yet in my data: I use Factset rather than the Bloomberg data used by the Wall Street Journal, and so maybe there is a timing issue. But Thomson Reuters data concur with Factset: Also, it is worth noting the fall in earnings in the
And guess where the rest went? Via FTAlphaville: The wave of money repatriated back by US companies, following Trump’s tax reforms implemented at the start of the year, is slowing to a ripple, according to new estimates from JPMorgan’s Flows and Liquidity team: Assuming the deceleration pattern between Q1 and Q2 continues over the coming
Via Axios: The Trump administration is planning to launch a major, “administration-wide,” broadside against China, according to two sources briefed on the sensitive internal discussions. These sources, who weren’t authorized to discuss the plans with the media, told me the effort is expected to launch in the next few weeks. The details: The broadside against China
Via Alan Kohler today: An alliance of the American military establishment and Republican trade hawks wants to break up the connections that have become embedded between US companies and China, as part of an attempt to prevent China gaining economic, geopolitical and technological predominance. …Beijing is digging in, settling in for a long siege because
Via an increasingly hysterical Ambrose Evans-Pritchard today: If Donald Trump and his close advisers think China’s economy is tottering on the brink and acutely vulnerable to pressure, they are sorely misinformed. …Construction is picking up after a slowdown earlier this year. Industrial profit margins are at a seven-year high of 7 per cent, despite a
If it is you wouldn’t know it. Via The Australian: Accounting firm KPMG suggested losses to the Australian economy from the new tariffs would reach about $2bn in the first year, rising to a maximum of about $5bn, or 0.3 per cent of GDP, by the early 2020s as commodity prices and export volumes suffered.
Via the FT: Donald Trump has moved to slap a 10 per cent tariff on about $200bn in Chinese imports beginning next week and threatened to increase the rate to 25 per cent in 2019 if no deal is reached to ease trade tensions between the US and China. …“I urge China’s leaders to take swift
Via Nouriel Roubini today at Project Syndicate: As we mark the decennial of the collapse of Lehman Brothers, there are still ongoing debates about the causes and consequences of the financial crisis, and whether the lessons needed to prepare for the next one have been absorbed. But looking ahead, the more relevant question is what
Some nice charts from the WSJ’s Daily Shot paint a terrific picture. JOLTS is red hot: Small business has its ears pinned back: Expect more wage rises ahead:
Via Westpac: The US economy delivered another strong employment gain in August, with nonfarm payrolls rising 201k. While that was a little above our expectation, the August report also cut 50k jobs from the prior two months. The 3-month average now stands at 185k – coincidentally the exact figure we forecast for August. Despite the
Via Moody’s: The U.S. economy and financial markets have been pulling away from the rest of the world. Of special importance is the lagging performance of emerging market economies, which, not too long ago, had been the primary driver of world economic growth. The combination of higher U.S. interest rates and the relatively stronger performance
Via Goldman: All of these variables are related. Tight labour markets are typically associated with higher inflation expectations. These, in turn, tend to tighten policy and weaken expectations of future growth. High valuations, at the same time, leave equities vulnerable to de-rating if growth expectations deteriorate or the discount rate rises, or, worse still, both
It wasn’t hard, via Shane Oliver: It’s been the norm for the US budget deficit to blow out when unemployment rises (as tax revenue falls and jobless claims go up) and decline when unemployment falls. Thanks to Trump’s fiscal stimulus it’s now blowing out when unemployment is collapsing and looks to be on its way
By Leith van Onselen With US real GDP expanding at an annualised rate of 4.2% in the second quarter, partly on the back of the sugar hit from the Trump Administration’s massive corporate tax cuts: A new bill from Democrat Senators Chuck Schumer and Martin Heinrich are demanding a new measure of economic growth that
Via the Federal Reserve: Information in the Yield Curve about Future Recessions Michael D. Bauer and Thomas M. Mertens The ability of the Treasury yield curve to predict future recessions has recently received a great deal of public attention. An inversion of the yield curve—when short-term interest rates are higher than long-term rates—has been a
On Friday night, DXY fell, CNY and EUR jumped: Markets are now moving short EUR: The Aussie dollar climbed against DMs: And EMs: Shorts eased last week: Gold launched: Oil too: And base metals: Plus big miners: EM stocks gained: EM high yield not so much: The Treasury curve was crushed: Bunds sold: And stocks
Via Moody’s: Significant Differences, Erie Similarities The U.S. business cycle has entered its boom phase. This is a period that typically comes closer to the end of the cycle, just prior to a recession. It is characterized by robust economic growth, tightening labor and product markets, intensifying wage and price pressures, monetary tightening, and higher
By Leith van Onselen When former Treasurer Peter Costello halved the rate of capital gains tax (CGT) in 1999, it was done on the assumption that a lower rate of CGT would help boost business investment. The result was anything but, with money instead flowing into established investment properties, at a cost of billions to
Investment markets are late in the economic cycle, the issue being that you never know when the end will come. However, there are some signs that it is not here yet for US equities at least – and there is the potential that US equities will hold the rest of the world out of the abyss
Via Oddschecker: A spike in bets have followed the guilty plea of Michael Cohen. Michael Cohen yesterday pleaded guilty to violating campaign finance laws during the 2017 presidential run and that has caused pressure to build on Trump’s administration. That admission relates to hush money paid to Mr Trump’s lovers and has seen the 72-year-old’s
