China and Russia are sewing up whatever oil and gas fields and accompanying infrastructure that they can in Iran and Iraq, as Iraq tries to markedly up the pace of development on the fields it shares with Iran. Iraq only wants the U.S. for the Common Seawater Supply Project (CSSP) because ExxonMobil is the only firm that can do it properly and within a reasonable timeframe. ExxonMobil’s participation, though, is far from guaranteed.
Of all the key shared fields - Azadegan (Iran side)/Majnoon (Iraq side), Azar/Badra, Yadavaran/Sinbad, and Dehloran/Abu Ghurab, Naft Shahr/Khorramshahr – the first of these has been a priority for Iran since it was severely flooded in March. It is this field that was the focus of the announcement last week that two major new drilling contracts have been signed: one with China’s Hilong Oil Service & Engineering Company to drill 80 wells at a cost of US$54 million and the other with the Iraq Drilling Company to drill 43 wells at a cost of US$255 million.
According to senior oil and gas industry sources spoken to by OilPrice.com last week, it is China that will do all of the work and finance all of the drilling, with the headline ‘Iraq Drilling Company’ being on the contract simply to assuage the followers of Moqtada al-Sadr, the de facto leader of Iraq, and his Sairoon (‘Marching Towards Reform’) power bloc whose public message at the last election was that Iraq should not be beholden to any other country. OilPrice.com understands that al-Sadr privately has approved the project, otherwise, of course, it would not be going ahead.
Located around 60 kilometres to the north-east of the main southern export terminal of Basra, the supergiant Majnoon oilfield is one of the world’s largest, holding an estimated 38 billion barrels of oil in place. Rather literally, the field’s name means ‘insane’ in Arabic, derived from its possessing an ‘insanely’ large amount of oil. Discovered in 1975 by Brazil’s Braspetro (now part of Petrobras), it has been subject to a microcosm of the troubles that have affected the Iraq oil industry as a whole, with two U.S.-led wars, the war against Iran, and ongoing domestic security issues leading to the cancellation of various deals with international oil companies (IOCs) over the past 40 years. A major ongoing problem for development remains the substantial quantity of unexploded ordinance in and around the site that dates back to the 1980-1988 Iran Iraq War.
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DAILY BUSINESS REPORT - Financial Updates, International Markets and Business News
September 20, 2019
September 19, 2019
Rothschild Emerges From The Shadows For The Centenary Of The London Gold Fixing
This month in London marks the 100th anniversary of the first “London Gold Fixing”, the infamous daily meeting of a secretive cartel of bullion banks which has met since 1919 to set benchmark gold prices used throughout the international gold market, a meeting which continues to this day through its thinly disguised successor, the LBMA Gold Price auction.
London gold price benchmarks are critically important to the global gold market because they are used as a valuation source for everything from ISDA gold interest rate swap contracts to gold-backed Exchange Traded Funds (ETFs), and everything from OTC gold contracts to transaction reference prices used by physical bullion dealers when purchasing gold bars and gold coins from refineries and suppliers.
Since 2015, the London Gold Fixing has been known as the LBMA Gold Price following a rush by the London Bullion Market Association (LBMA) bullion banks to patch over the then scandalized ‘Fixing’ in a smoke and mirrors and circle the wagons relaunch and renaming exercise. The collusive Gold Fixing first formally came into existence on 12 September 1919 when the Bank of England tapped its favorite bankers N.M. Rothschild & Sons to be the daily Fixing’s permanent chairman. Rothschild and the Bank of England had been joined at the hip since the early 1800s and would continue to be so in the Gold Fixing throughout the next century.
The 1919 launch of the Gold Fixing by the Bank of England and Rothschild succeeded a more informal version of a gold fixing that had existed up to the outbreak of the First World War in 1914, which consisted of a meeting of four London gold brokers Mocatta & Goldsmid, Samuel Montagu, Sharps & Wilkins, and Pixley & Abell who between them set a daily gold price at the offices of Sharps & Wilkins.
Read the entire article
London gold price benchmarks are critically important to the global gold market because they are used as a valuation source for everything from ISDA gold interest rate swap contracts to gold-backed Exchange Traded Funds (ETFs), and everything from OTC gold contracts to transaction reference prices used by physical bullion dealers when purchasing gold bars and gold coins from refineries and suppliers.
Since 2015, the London Gold Fixing has been known as the LBMA Gold Price following a rush by the London Bullion Market Association (LBMA) bullion banks to patch over the then scandalized ‘Fixing’ in a smoke and mirrors and circle the wagons relaunch and renaming exercise. The collusive Gold Fixing first formally came into existence on 12 September 1919 when the Bank of England tapped its favorite bankers N.M. Rothschild & Sons to be the daily Fixing’s permanent chairman. Rothschild and the Bank of England had been joined at the hip since the early 1800s and would continue to be so in the Gold Fixing throughout the next century.
The 1919 launch of the Gold Fixing by the Bank of England and Rothschild succeeded a more informal version of a gold fixing that had existed up to the outbreak of the First World War in 1914, which consisted of a meeting of four London gold brokers Mocatta & Goldsmid, Samuel Montagu, Sharps & Wilkins, and Pixley & Abell who between them set a daily gold price at the offices of Sharps & Wilkins.
Read the entire article
September 18, 2019
EU's Growing Trade Deficit With China Bodes Poorly For The Future
While we read a great deal about the huge trade deficit America runs with China it is important to understand we are not the only one. Other countries also have this problem.
Europe as a whole runs a solid trade deficit with China. In some ways, this is balanced by the EU having a surplus with America. Still, in many ways, a growing trade deficit with China bodes poorly for the EU as they look down the road.
Reuters reports the European Union’s trade surplus in goods with the United States and its deficit with China both increased in the first seven months of 2019. Eurostat, the EU statistics office, reported the European Union’s surplus with the United States grew to 100.8 billion dollars in Jan-July 2019 from 88.6 billion in the same period of 2018. During that time the EU’s trade deficit with China expanded to 120.9 billion dollars from 109.2. This comes at a time that trade figures are adding extra strain to global tensions.
This brings up the importance of what countries buy and sell to each other. If a county's exports are not centered around products where they have a core advantage over time they can see them erode. I contend part of the problem the EU has going forward is that much of the EU is simply uncompetitive. This means unless it takes strong action to halt the importation of cheap Chinese consumer goods it will be flooded with them in coming years. Since Europe does not sell China much in the way of "raw goods" it has little to balance this trade.
Read the entire article
Europe as a whole runs a solid trade deficit with China. In some ways, this is balanced by the EU having a surplus with America. Still, in many ways, a growing trade deficit with China bodes poorly for the EU as they look down the road.
Reuters reports the European Union’s trade surplus in goods with the United States and its deficit with China both increased in the first seven months of 2019. Eurostat, the EU statistics office, reported the European Union’s surplus with the United States grew to 100.8 billion dollars in Jan-July 2019 from 88.6 billion in the same period of 2018. During that time the EU’s trade deficit with China expanded to 120.9 billion dollars from 109.2. This comes at a time that trade figures are adding extra strain to global tensions.
This brings up the importance of what countries buy and sell to each other. If a county's exports are not centered around products where they have a core advantage over time they can see them erode. I contend part of the problem the EU has going forward is that much of the EU is simply uncompetitive. This means unless it takes strong action to halt the importation of cheap Chinese consumer goods it will be flooded with them in coming years. Since Europe does not sell China much in the way of "raw goods" it has little to balance this trade.
Read the entire article
September 17, 2019
Exposing The ECB's Beggar-Thy-Trump Strategy
The European Central Bank's decision to cut interest rates still further and launch another round of quantitative easing raises serious concerns about its internal decision-making process. The ECB is pursuing an exchange-rate policy in all but name, thus putting Europe on a collision course with the Trump administration.
On September 12, the European Central Bank decided to launch yet another asset-purchase program, with plans to buy €20 billion ($22 billion) in new securities per month for an indefinite period of time, using the same structure as it has in the past. The decision was not made unanimously: the German, French, Dutch, Austrian, and Estonian members of the ECB council have all voiced fierce opposition to further quantitative easing (QE).
ECB President Mario Draghi claims that the majority in favor of further loosening was so large that it was unnecessary even to count the votes. Never mind that the countries opposing the decision hold 56% of the ECB’s paid-in equity capital and account for 60% of eurozone output. Counting their compatriots on the ECB Governing Council, however, they have only seven out of 25 potential votes (subject to a rotating limitation). Draghi did have a majority, then, but it represented a very clear minority of the ECB’s liable capital. This raises considerable concerns about the Governing Council’s decision-making process.
Such concerns are all the more justified considering that US President Donald Trump has been complaining loudly about the implied exchange-rate policy stemming from ECB asset purchases. He has a point. Draghi, of course, insists that the ECB does not “target” the exchange rate. While that may be true, it is beside the point. By purchasing long-term securities, eurozone central banks will once again trigger a currency devaluation. Indeed, it is precisely this effect that likely plays the dominant role in stimulating economic activity.icy in all but name, thus putting Europe on a collision course with the Trump administration.
Read the entire article
On September 12, the European Central Bank decided to launch yet another asset-purchase program, with plans to buy €20 billion ($22 billion) in new securities per month for an indefinite period of time, using the same structure as it has in the past. The decision was not made unanimously: the German, French, Dutch, Austrian, and Estonian members of the ECB council have all voiced fierce opposition to further quantitative easing (QE).
ECB President Mario Draghi claims that the majority in favor of further loosening was so large that it was unnecessary even to count the votes. Never mind that the countries opposing the decision hold 56% of the ECB’s paid-in equity capital and account for 60% of eurozone output. Counting their compatriots on the ECB Governing Council, however, they have only seven out of 25 potential votes (subject to a rotating limitation). Draghi did have a majority, then, but it represented a very clear minority of the ECB’s liable capital. This raises considerable concerns about the Governing Council’s decision-making process.
Such concerns are all the more justified considering that US President Donald Trump has been complaining loudly about the implied exchange-rate policy stemming from ECB asset purchases. He has a point. Draghi, of course, insists that the ECB does not “target” the exchange rate. While that may be true, it is beside the point. By purchasing long-term securities, eurozone central banks will once again trigger a currency devaluation. Indeed, it is precisely this effect that likely plays the dominant role in stimulating economic activity.icy in all but name, thus putting Europe on a collision course with the Trump administration.
Read the entire article
September 16, 2019
Our Energy And Debt Predicament In 2019
Many people are concerned that we have an oil problem. Or they are concerned about recession and the need to lower interest rates.
As I see the situation, we have a problem of a networked economy that is not functioning well. A big part of this problem is energy-related. Strange as it may seem, energy prices (including oil prices) are too low for producers. If debt levels were growing more rapidly, this low-price problem would go away.
The “standard way” of encouraging more debt-based purchases is by lowering interest rates. But we are running out of room to do this now. We also seem to be running out of economic investments to make with debt. If expected returns on investment were greater, interest rates would be higher.
Without economic investments, demand for commodities of all kinds, including energy products, tends to stay too low. This is the problem we have today. Our debt problem and our energy problem are really different aspects of a networked economy that is no longer generating enough total return. History suggests that these periods tend to end badly.
In the following sections, I will explain some of the issues involved.
Read the entire article
As I see the situation, we have a problem of a networked economy that is not functioning well. A big part of this problem is energy-related. Strange as it may seem, energy prices (including oil prices) are too low for producers. If debt levels were growing more rapidly, this low-price problem would go away.
The “standard way” of encouraging more debt-based purchases is by lowering interest rates. But we are running out of room to do this now. We also seem to be running out of economic investments to make with debt. If expected returns on investment were greater, interest rates would be higher.
Without economic investments, demand for commodities of all kinds, including energy products, tends to stay too low. This is the problem we have today. Our debt problem and our energy problem are really different aspects of a networked economy that is no longer generating enough total return. History suggests that these periods tend to end badly.
In the following sections, I will explain some of the issues involved.
Read the entire article
September 13, 2019
Bidding Wars For US Homes Collapse To Eight-Year Low
Bidding wars for homes in Seattle, San Jose, and San Francisco have crashed in the past year, reflecting an alarming national trend, according to a new report from Redfin.
The report found that the national bidding-war rate in August was 10.4%, down from 42% a year earlier. The rate printed at the lowest level since 2011.
At the start of 2018, the national bidding-war rate was 59%, then plunged as homebuyers became uncomfortable with sky-high housing prices, increasing mortgage rates, and economic uncertainty surrounding the trade war. The housing market started to cool in late 2018, as the competition among homebuyers collapsed by 4Q18, this is an ominous sign for the national housing market that could soon face a steep correction in price.
Even with eight months of declining mortgage rates in 2019, bidding-wars among homebuyers continue to drop. This is somewhat troubling because the government's narrative has been declining rates will boom housing, but as of Wednesday, mortgage applications continue to fall. Homebuyers aren't coming off the sidelines, and there's too much uncertainty surrounding the economy with recession risks at the highest levels in more than a decade.
Read the entire article
The report found that the national bidding-war rate in August was 10.4%, down from 42% a year earlier. The rate printed at the lowest level since 2011.
At the start of 2018, the national bidding-war rate was 59%, then plunged as homebuyers became uncomfortable with sky-high housing prices, increasing mortgage rates, and economic uncertainty surrounding the trade war. The housing market started to cool in late 2018, as the competition among homebuyers collapsed by 4Q18, this is an ominous sign for the national housing market that could soon face a steep correction in price.
Even with eight months of declining mortgage rates in 2019, bidding-wars among homebuyers continue to drop. This is somewhat troubling because the government's narrative has been declining rates will boom housing, but as of Wednesday, mortgage applications continue to fall. Homebuyers aren't coming off the sidelines, and there's too much uncertainty surrounding the economy with recession risks at the highest levels in more than a decade.
Read the entire article
September 12, 2019
Full ECB Preview: Draghi Parting Gift - A Bazooka Or A Water Pistol?
Tomorrow, at 13:45am CET (7:45am ET) the will unveil its Draghi "Swan Song" Monetary Policy Decision, with a press conference Due At 13:30BST, (08:30ET)
INTRODUCTION
Will outgoing ECB president Mario Draghi's "swan song" decision - the one in which he is widely expected to cut rates deeper into negative territory and resume sovereign and/or corporate QE - be a bazooka or a waster pistol? That's the question.
Markets currently fully price in a 10bps reduction in the deposit rate to -0.5% with just over a 40% chance of a deeper cut of 20bps.
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- Surveyed analysts look for the ECB to cut the deposit rate by 10bps with the Main Refi and Marginal Lending rates seen unchanged
- Markets currently price in around a 40% chance of a deeper cut to the deposit rate of 20bps
- Focus will be on any potential complimentary easing measures alongside expected rate reductions
- ECB staff economic projections will likely reflect the downbeat prospects for the Eurozone economy
INTRODUCTION
Will outgoing ECB president Mario Draghi's "swan song" decision - the one in which he is widely expected to cut rates deeper into negative territory and resume sovereign and/or corporate QE - be a bazooka or a waster pistol? That's the question.
Markets currently fully price in a 10bps reduction in the deposit rate to -0.5% with just over a 40% chance of a deeper cut of 20bps.
Read the entire article
September 11, 2019
60 Percent Of Americans Believe A Recession Is Coming – But Consumers Continue To Pile Up Debt At A Frightening Pace
We haven’t seen survey results like this since just before the last recession. Right now, 60 percent of Americans believe that a recession is “very or somewhat likely in the next year”, and the reason why that figure is so high is because there is already a tremendous amount of evidence that the economy is slowing down all around us. As I have been documenting repeatedly, U.S. economic performance has not been this dismal since 2008 and 2009, and the slowdown seems to be gaining pace as we move toward the end of 2019. So it really shouldn’t be a surprise that a solid majority of the country thinks that the next recession will officially begin very soon. The following comes from ABC News…
Ratings of the U.S. economy overall, 56% positive, are down from 65% last fall in this poll, produced for ABC by Langer Research Associates. Most ominously, 60% see a recession as very or somewhat likely in the next year. That’s within sight of the 69% who said so in November 2007, in advance of the Great Recession.
But at the same time, U.S. consumers continue to pile up more debt at a frightening pace.
According to NBC News, total revolving credit shot up at an 11.25 annual pace during the month of July…
Read the entire article
Ratings of the U.S. economy overall, 56% positive, are down from 65% last fall in this poll, produced for ABC by Langer Research Associates. Most ominously, 60% see a recession as very or somewhat likely in the next year. That’s within sight of the 69% who said so in November 2007, in advance of the Great Recession.
But at the same time, U.S. consumers continue to pile up more debt at a frightening pace.
According to NBC News, total revolving credit shot up at an 11.25 annual pace during the month of July…
Read the entire article
September 10, 2019
After $74BN Weekly Record, Bond Boom Continues With Another $14 Billion In New Debt Borrowing
Ever since a thunderous start to September's bond calendar, which saw a record 20 companies issue $26 billion in record cheap investment grade debt in a single day, corporate America has been on a historic bond selling spree to lock in ultra-low rates and refi existing debt (making Wall Street i-bankers quite happy in the process). For the entire week, companies borrowed a total of $75 billion in investment-grade paper, the most for any comparable period since records began in 1972. Since Tuesday, corporations including Coca-Cola, Walt Disney, and Apple sold notes as yields have dropped.
The frenzy isn’t letting up. According to Bloomberg and Bank of America, at least another $50 billion is projected for the rest of the month, with the activity expected to spill over to junk bonds and leveraged loans as well, and not even today's Ford downgrade to junk affecting $84 billion in debt, is expected to put a damper on the party.
The reason for the bond issuance frenzy? Rates have never been lower - according to Bloomberg Barclays index data, the average yield on bonds was 2.77% as of last week, effectively at all time lows, and almost 2% lower compared to late November, when that figure was above 4.3%. For a company selling $1 billion of debt, that amounts to $15.3 million of annual interest savings. Junk-bond yields have dropped too, with notes rated in the BB tier, the uppermost high-yield levels, paying a near record-low 4.07%.
"This is a great time for companies to refinance,” Christian Hoffmann, a portfolio manager at Thornburg Investment Management, told Bloomberg. "Financing costs are near all-time lows, so I would not be surprised to see better high-yield companies coming to market and treating debt capital markets like a cheap buffet."
As we noted last week, borrowers are taking advantage of the recent drop in rates to refinance their outstanding bonds at lower costs. As BofA noted last week, the new issuance "use of proceeds" has shifted from supporting re-leveraging activities to refinancing in the currently low interest rate environment.
Read the entire article
The frenzy isn’t letting up. According to Bloomberg and Bank of America, at least another $50 billion is projected for the rest of the month, with the activity expected to spill over to junk bonds and leveraged loans as well, and not even today's Ford downgrade to junk affecting $84 billion in debt, is expected to put a damper on the party.
The reason for the bond issuance frenzy? Rates have never been lower - according to Bloomberg Barclays index data, the average yield on bonds was 2.77% as of last week, effectively at all time lows, and almost 2% lower compared to late November, when that figure was above 4.3%. For a company selling $1 billion of debt, that amounts to $15.3 million of annual interest savings. Junk-bond yields have dropped too, with notes rated in the BB tier, the uppermost high-yield levels, paying a near record-low 4.07%.
"This is a great time for companies to refinance,” Christian Hoffmann, a portfolio manager at Thornburg Investment Management, told Bloomberg. "Financing costs are near all-time lows, so I would not be surprised to see better high-yield companies coming to market and treating debt capital markets like a cheap buffet."
As we noted last week, borrowers are taking advantage of the recent drop in rates to refinance their outstanding bonds at lower costs. As BofA noted last week, the new issuance "use of proceeds" has shifted from supporting re-leveraging activities to refinancing in the currently low interest rate environment.
Read the entire article
September 9, 2019
The Shale Boom Has Turned To Bust: Producers Slashing Budgets, Staff, & Production Goals
The collapse in the shale industry is continuing with no signs of stopping or even slowing down.
No sooner did we highlight how shale is doomed no matter what the industry does and how recent price movements have triggered chaos across the industry, than we find out that oil producers and their suppliers are now cutting budgets, staffs and production goals, according to Reuters.
The U.S. now has 904 working rigs, which is down 14% from a year ago. Harold Hamm, chief executive of shale producer Continental Resources, still thinks this could be too many.
Additionally, bankruptcy filings by U.S. energy producers through mid-August of this year have matched the total for all of 2018 already. Earl Reynolds, CEO of Chaparral Energy said:
"You’re going to see activity drop across the industry."
His firm has slashed its workforce by about 25% and cut spending by about 5%. It has also agreed to sell its headquarters and use some of the proceeds to pay off debt.
Read the entire article
No sooner did we highlight how shale is doomed no matter what the industry does and how recent price movements have triggered chaos across the industry, than we find out that oil producers and their suppliers are now cutting budgets, staffs and production goals, according to Reuters.
The U.S. now has 904 working rigs, which is down 14% from a year ago. Harold Hamm, chief executive of shale producer Continental Resources, still thinks this could be too many.
Additionally, bankruptcy filings by U.S. energy producers through mid-August of this year have matched the total for all of 2018 already. Earl Reynolds, CEO of Chaparral Energy said:
"You’re going to see activity drop across the industry."
His firm has slashed its workforce by about 25% and cut spending by about 5%. It has also agreed to sell its headquarters and use some of the proceeds to pay off debt.
Read the entire article
September 6, 2019
China Cuts Required Reserve Ratio Releasing $126BN In Liquidity; Yuan Surges
As had been widely previewed in China's official financial press in recent days, on Friday the PBOC announced it would cut the required reserve ratio (RRR) for all banks by 0.5% effective Sept. 16 (and by 1% for some city commercial banks, to take effect in two steps on Oct. 15 and Nov. 15), releasing 900 billion yuan ($126 billion) of liquidity, helping to offset the tightening impact of upcoming tax payments.
While today's rate cut was more than the previous cuts in January and May, which released 800 billion yuan and 280 billion yuan, respectively, the PBOC stated that “China won’t adopt flood-like monetary stimulus” and that they will continue “prudent” monetary policy to “keep liquidity at (a) reasonably ample level" and will "strengthen the counter-cyclical adjustment" which is basically gibberish for it will do whatever it sees appropriate.
With the Chinese economy slowing drastically in recent months, with various economic indicators at multi-decade lows, the RRR cut was aimed at supporting demand by funneling credit to small firms and echoes the earlier cuts this year. Indeed, as Bloomberg notes, China’s economy softened substantially in August after poor results in July, and will likely deteriorate further in the remainder of the year. Trade tension between China and the U.S. expanded onto the financial front recently after China allowed the currency to decline below 7 a dollar, prompting the U.S. to name it a currency manipulator.
Anticipating cries of foul play from Trump's twitter account which is just minutes away from unleashing hell at the Fed for not doing what China is doing, the cut "doesn’t reflect an aggressive easing," said Commerzbank economist Zhou Hao. "In fact, China has recently massively tightened property financing. Hence this is still a re-balancing - to lower the funding costs for the manufacturing sector but tighten liquidity in the property sector due to asset bubble concerns."
Read the entire article
While today's rate cut was more than the previous cuts in January and May, which released 800 billion yuan and 280 billion yuan, respectively, the PBOC stated that “China won’t adopt flood-like monetary stimulus” and that they will continue “prudent” monetary policy to “keep liquidity at (a) reasonably ample level" and will "strengthen the counter-cyclical adjustment" which is basically gibberish for it will do whatever it sees appropriate.
With the Chinese economy slowing drastically in recent months, with various economic indicators at multi-decade lows, the RRR cut was aimed at supporting demand by funneling credit to small firms and echoes the earlier cuts this year. Indeed, as Bloomberg notes, China’s economy softened substantially in August after poor results in July, and will likely deteriorate further in the remainder of the year. Trade tension between China and the U.S. expanded onto the financial front recently after China allowed the currency to decline below 7 a dollar, prompting the U.S. to name it a currency manipulator.
Anticipating cries of foul play from Trump's twitter account which is just minutes away from unleashing hell at the Fed for not doing what China is doing, the cut "doesn’t reflect an aggressive easing," said Commerzbank economist Zhou Hao. "In fact, China has recently massively tightened property financing. Hence this is still a re-balancing - to lower the funding costs for the manufacturing sector but tighten liquidity in the property sector due to asset bubble concerns."
Read the entire article
September 5, 2019
EU Bank Bosses Warn Of "Grave Consequences" If ECB Keeps Cutting Rates
The ECB's imposition of negative interest rates have created an "absurd situation" in which banks don't want to hold deposits, rages UBS CEO Sergio Ermotti, arguing that this policy is hurting social systems and savings rates.
Ermotti is not alone. As European bank bosses cast their eyes at their share prices, they are fighting back, some have said - biting the hand that feeds, in their attack on ECB policies, warning of severe consequences to asset prices and the broader economy.
As Bloomberg reports, Deutsche Bank CEO Christian Sewing warned that more monetary easing by the ECB, as widely expected next week, will have “grave side effects” for a region that has already lived with negative interest rates for half a decade.
“In the long run, negative rates ruin the financial system,” Sewing said at the event, organized by the Handelsblatt newspaper.
Another cut “may make refinancing cheaper for states, but has grave side effects.”
While incoming ECB head Christine Lagarde has claimed that the benefits of deeply negative rates outweigh the costs (stating just this week that “a highly accommodative policy is warranted for a prolonged period of time;" few economists believe another cut at this level would actually help the economy. According to Sewing, all it would achieve is to further divide society by lifting asset prices while punishing Europe’s savers who are already paying 160 billion euros ($176 billion) a year because of negative interest rates.
Read the entire article
Ermotti is not alone. As European bank bosses cast their eyes at their share prices, they are fighting back, some have said - biting the hand that feeds, in their attack on ECB policies, warning of severe consequences to asset prices and the broader economy.
As Bloomberg reports, Deutsche Bank CEO Christian Sewing warned that more monetary easing by the ECB, as widely expected next week, will have “grave side effects” for a region that has already lived with negative interest rates for half a decade.
“In the long run, negative rates ruin the financial system,” Sewing said at the event, organized by the Handelsblatt newspaper.
Another cut “may make refinancing cheaper for states, but has grave side effects.”
While incoming ECB head Christine Lagarde has claimed that the benefits of deeply negative rates outweigh the costs (stating just this week that “a highly accommodative policy is warranted for a prolonged period of time;" few economists believe another cut at this level would actually help the economy. According to Sewing, all it would achieve is to further divide society by lifting asset prices while punishing Europe’s savers who are already paying 160 billion euros ($176 billion) a year because of negative interest rates.
Read the entire article
September 4, 2019
Emerging Market Central Banks Panic With Most Rate Cuts Since Financial Crisis
The global growth outlook is the lowest since the last financial crisis, and central banks, especially ones in emerging markets, have already started to cut interest rates to make sure growth doesn't collapse.
Manufacturing across large parts of South America, Europe, Asia, and the Middle East are reeling from a global structural slowdown, amplified by the US and China trade war, have triggered emerging central banks to cut rates by the most in a decade, reported Reuters.
Emerging central banks took notice when major central banks including the US Federal Reserve and the European Central Bank started to cut interest rates this summer, all in an attempt to lessen the impact of a global synchronized slowdown.
Central banks across 37 emerging market economies recorded a net fourteen rate cuts in August, the most since policymakers dropped rates to zero after the global financial crash in 2008/09.
August marked the seventh straight month of net rate cuts followed by a tightening cycle that ended in early 2019. July recorded a net eight rate cuts. Cuts by Mexico and Thailand in August took markets by surprise.
After nine straight months of rate hikes in 2018, emerging central banks battled the fallout from a firm dollar, increasing inflation, and weaker local currencies.
Read the entire article
Manufacturing across large parts of South America, Europe, Asia, and the Middle East are reeling from a global structural slowdown, amplified by the US and China trade war, have triggered emerging central banks to cut rates by the most in a decade, reported Reuters.
Emerging central banks took notice when major central banks including the US Federal Reserve and the European Central Bank started to cut interest rates this summer, all in an attempt to lessen the impact of a global synchronized slowdown.
Central banks across 37 emerging market economies recorded a net fourteen rate cuts in August, the most since policymakers dropped rates to zero after the global financial crash in 2008/09.
August marked the seventh straight month of net rate cuts followed by a tightening cycle that ended in early 2019. July recorded a net eight rate cuts. Cuts by Mexico and Thailand in August took markets by surprise.
After nine straight months of rate hikes in 2018, emerging central banks battled the fallout from a firm dollar, increasing inflation, and weaker local currencies.
Read the entire article
September 3, 2019
28 Signs Of Economic Doom As The Pivotal Month Of September Begins
Since the end of the last recession, the outlook for the U.S. economy has never been as dire as it is right now. Everywhere you look, economic red flags are popping up, and the mainstream media is suddenly full of stories about “the coming recession”. After several years of relative economic stability, things appear to be changing dramatically for the U.S. economy and the global economy as a whole. Over and over again, we are seeing things happen that we have not witnessed since the last recession, and many analysts expect our troubles to accelerate as we head into the final months of 2019.
We should certainly hope that things will soon turn around, but at this point that does not appear likely. The following are 28 signs of economic doom as the pivotal month of September begins…
Read the entire article
We should certainly hope that things will soon turn around, but at this point that does not appear likely. The following are 28 signs of economic doom as the pivotal month of September begins…
Read the entire article
September 2, 2019
US Slaps New Tariffs On China; One Minute Later China Retaliates
The biggest reason for last week's torrid stock market rally was rekindled "optimism" that the escalating trade war between the US and China may be on the verge of another ceasefire following phone conversations, fake as they may have been, between the US and Chinese side. This translated into speculation that a new round of tariffs increases slated for this weekend may not take place or be delayed.
However, that did not happen, and with no trade deal in sight, at 12:00am on Sunday, the Trump administration slapped tariffs on $112 billion in Chinese imports, the latest escalation in a trade war that’s ground the global economy to a halt, sent Germany into a recession, and given the market an alibi to keep rising because, wait for it, "a trade deal is imminent."
Only, it isn't, and 1 minute later, at 12:01am EDT, China retaliated with higher tariffs being rolled out in stages on a total of about $75 billion of U.S. goods. The target list strikes at the heart of Trump’s political support - factories and farms across the Midwest and South at a time when the U.S. economy is showing signs of slowing down.
The 15% U.S. duty hit consumer goods ranging from footwear and apparel to home textiles and certain technology products like the Apple Watch. A separate batch of about $160 billion in Chinese goods - including laptops and cellphones - will be hit with 15% tariffs on Dec. 15. China, meanwhile, began applying tariffs of 5 to 10% on U.S. goods ranging from frozen sweet corn and pork liver to bicycle tires on Sunday.
The slated 15% U.S. tariffs on approximately $112 billion in Chinese goods may affect consumer prices for products ranging from shoes to sporting goods, the AP noted, and may mark a turning point in how the ongoing trade war directly affects consumers. Nearly 90% of clothing and textiles the U.S. buys from China will also be subjected to tariffs.
Read the entire article
However, that did not happen, and with no trade deal in sight, at 12:00am on Sunday, the Trump administration slapped tariffs on $112 billion in Chinese imports, the latest escalation in a trade war that’s ground the global economy to a halt, sent Germany into a recession, and given the market an alibi to keep rising because, wait for it, "a trade deal is imminent."
Only, it isn't, and 1 minute later, at 12:01am EDT, China retaliated with higher tariffs being rolled out in stages on a total of about $75 billion of U.S. goods. The target list strikes at the heart of Trump’s political support - factories and farms across the Midwest and South at a time when the U.S. economy is showing signs of slowing down.
The 15% U.S. duty hit consumer goods ranging from footwear and apparel to home textiles and certain technology products like the Apple Watch. A separate batch of about $160 billion in Chinese goods - including laptops and cellphones - will be hit with 15% tariffs on Dec. 15. China, meanwhile, began applying tariffs of 5 to 10% on U.S. goods ranging from frozen sweet corn and pork liver to bicycle tires on Sunday.
The slated 15% U.S. tariffs on approximately $112 billion in Chinese goods may affect consumer prices for products ranging from shoes to sporting goods, the AP noted, and may mark a turning point in how the ongoing trade war directly affects consumers. Nearly 90% of clothing and textiles the U.S. buys from China will also be subjected to tariffs.
Read the entire article
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