Here's our wrap of what's happened overnight.
Markets around the world are in a sea of red - once again as trade war talk escalates. Today’s jitters stem from reports the US is looking to restrict firms that are at least a quarter Chinese-owned from investing in US tech companies. The US Treasury Secretary has taken to Twitter to say any restrictions would apply to all countries trying to “steal” the US’s technology, not just China.
The S&P 500 is down -1.72%, Dow -1.67%, Nasdaq -2.50% and Shanghai Composite -1.05%.
Harley-Davidson shares have plunged as the American motorcycle manufacturer says it will start shifting some production overseas to offset the impact of retaliatory EU tariffs on certain US goods. The company’s move shows President Donald Trump’s actions are having the complete opposite effect to what he intended.
China and the European Union are teaming up against Trump. Following a meeting between their key officials in Shanghai, one of China’s top economic advisers has warned protectionism could spark a “recession”.
China’s central bank has committed to cutting the amount of cash some lenders must hold as reserves, as it seeks to control leverage and support smaller companies. The change will unlock about 700 billion yuan (US$108 billion) of liquidity. It will take effect on July 5 - the day before the US and China are scheduled to impose tariffs on each other. Analysts expect the bank to keep easing policy to soften the impacts of a slowing economy and crackdown on shadow banking.
The Commonwealth Bank of Australia (ASB’s parent) will sever ties with its scandal-prone wealth management arm. It has announced plans to create a new sharemarket-listed company to house its superannuation, financial advice, funds management and mortgage broking businesses that produce A$500 million-a-year in profits. Having been hammered in Australia’s financial services royal commission, CBA says the bank wants to become "simpler”. It last year sold its life insurance business, which saw AIA agree to buy New Zealand’s Sovereign.
The UST 10yr yield has fallen overnight to 2.87%.
Gold is stable at US$1,267/oz.
The US crude oil price is up slightly since this time yesterday to US$68/bbl. The Brent benchmark is down to US$75/bbl.
The New Zealand dollar is weaker at 69.0 USc and 58.9 euro cents, but stronger at 93.2 AUc. The TWI-5 is down to 72.2.
Bitcoin has made some gains after a weekend drop. It's at US$6,262.
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27 Comments
2400 years ago Plato wrote about how democracy could be exploited and descend into tyranny when voter ignorance and prejudiced were exploited by a "demagogue".
We've seen it happen many times across the globe since then and yet, we stumble into it with fresh naivety every time, as if we have learned nothing.
@printer8 , nonsense , its not just about rednecks and trailer -trash , its about ordinary workers that work on mines and in trades like printers or factories making widgets .
The US has allowed its industries to be gutted by foreigners who receive export subsidies in their home countries , and the net result is a massive trade imbalance.
China does 3 things , its gives subsidies AND fixes its exchange rate , AND it earns US$ for its exports and pays its workers in paper money that has no external exchange value outside China at all .
Little wonder it has more US$ RESERVES than the rest of the world combined , they simply dont use them up.
In short China IS CHEATING and breaking ever rule in the WTO with impunity and thats why China has not lodged an objection with the WTO
At some point , someone was going to have to either put a stop to the deterioration in the US , or end up a bankrupt or failed state
On a road trip in the US a few years ago , I was horrified to see how many middle America towns were in a terrible state, empty factories all over the place, unemployment, and a generally run-down look and feel to them .
This unemployment leads to all manner of social ills , such as opioid abuse , crime , family violence, racial intolerance , gun violence , gangs to name a few
It's also interesting that people appear to believe that Trump controls every part of government, like a modern day "superman'. In reality there are consultants and advisors in every industry represented in Washington, very clever people working for government who have been watching the country be looted while they sat helplessly on the sideline. I bet there is even someone who Twitters for the POTUS.
The USA has not recovered from the 7-9 million job losses from 2000-2006. Those industries where packed up and shipped to China so the CEO's could make outstanding profits and bonuses.
Even today companies like Toys R Us have been looted by Wall street.
"TRU is buckling under $5.2 billion in debt that its private-equity owners – Bain Capital, Kohlberg Kravis Roberts, and Vornado Realty Trust – piled on it after the leveraged buyout in 2005, and it did not invest sufficiently in creating a powerful online presence able to beat Amazon off its territory."
They bankrupted the company with 5 billion of debt and costing 33,000 jobs. It's a disgrace.
TRU has nothing to do with Trump and his policies. TRU is just Wall Street. Trump has a win at any cost mentality and the cost is to the American worker - an example of which is Harley Davison and their reaction. It reminds me of the quote from the Vietnam War "It became necessary to destroy the town to save it' . Trump seems hell bent on destroying America by not facing reality and re-fighting lost trade "battles".
Just wait till all those workers find out their pensions have been looted.
On Harley
http://www.motorcycle-usa.com/2010/12/article/harley-davidson-loaned-2-…
https://www.businessinsider.com.au/the-most-surprising-things-about-the…
I think the effect you are talking about is just what happens in any advanced economy no matter what trade tariffs are put in place. As the country produces more high value goods, wages increase, and the cost of living increases. The cost increases make it difficult to competitively produce low value goods and hence low skilled manufacturing workers lose their jobs. Low skilled workers in well located areas can generally get jobs in tourism, retail, etc, but those in nowheresville are screwed.
What was the alternative? More of the same that got them in their current position which they clearly aren't happy about. My impression is this was a vote to move away from the status quo not a red neck, sexist rebellion that people tend to denigrate it to.
And how does using social media marginalize thinking people? They get someone in their own words and more or less in context as opposed to through a generally biased moderator. I know which I as a thinking person would prefer.
What happened to all that central bank liquidity?
"This Was Not Supposed To Happen": Nomura Reveals "The Market Risk That Should Have Everyone Worried"
https://www.zerohedge.com/news/2018-06-25/was-not-supposed-happen-nomur…
"As a Chinese bank, where do you get these dollars? Even if you are doing nothing more than relending them to China’s corporate sector, they must be obtained from global (offshore) dollar markets. Like all banks you borrow them as cheaply as possible meaning in the shortest terms. Thus, you are now “short” the dollar; really eurodollar:'\
The “short” is not really dollars so much as funding liabilities. It’s the same way as other global banks are “short” the same things; the “short” relates to the funding mismatch (maturity) between short-term interbank borrowing (globally) on the liability side supporting and maintaining longer duration loan or security assets. Once you create those “dollar” assets, you are on the hook for funding them, in “dollars”, until they are disposed of – voluntarily or not.
It leaves the internal Chinese system with a further process mismatch, whereby the central bank is synthetically long “dollars” while the private banks are synthetically short them. The PBOC still accumulates the vast majority of “reserves” given its role in regulating internal versus external liquidity.
http://www.alhambrapartners.com/2018/06/25/revisiting-china-and-devalua…
Weird, buried in Sputnik, of all places.
As free trade negotiations begin between New Zealand and the EU, internal political turmoil is brewing within the island nation due to some dissent amongst its center-right opposition parties.
https://sputniknews.com/business/201806211065641478-eu-new-zealand-free…
From your link ""Despite employing a mere 120,000 people (23% of whom are women), the tech and innovation sector is already the third-largest contributor to the country’s economy and, by 2025, the government aims to make it the second-largest earner.""
Doesn't sound likely to me unless you wrap up agriculture as 1st, manufacturing as 2nd and ignore all finance and public service. Is it a question of the definition of 'innovation sector'? Could that include Fonterra? Can anyone explain?
My own experience is Kiwi computer programmers/analysts are cheaper than American, UK and Australia but more expensive than most Asian equivalents. It certainly makes sense for the govt to invest in the IT sector but mainly as a service for our significant export businesses so we don't fall behind other countries. Thinks like semi-intelligent drones for shepherds.
Inflation bonds and breakevens
https://croakingcassandra.com/2018/06/25/inflation-bonds-and-breakevens/
A (Very) Bad Day to Be Long Wall Street's 'Synchronized Global Recovery'
https://app.hedgeye.com/insights/68555-a-very-bad-day-to-be-long-wall-s…
China, Korea (both), Russia - the rare earths find in DRNK may be behind the 'thaw'
● China’s exports to the US come to almost 4% of its GDP, while US exports to China equal only 0.7% of its GDP. As consultants the Lindsey Group point out: “A tit-for-tat trade war has an impact on China that is six times that on America.”
● The US economy is in rude health, while China is in the throes of an effort to reduce a huge debt overhang that is beginning to stifle its growth. That creates “a strain on the top leadership as it tries to fend off a trade war with the US”, says Diana Choyleva, chief economist with the London-based consultancy Enodo Economics.
● China is having difficulty finding US stuff to penalise. It has exempted liquefied natural gas (LNG) from tariffs because it desperately needs imports from the US to fuel its economy. If it cancels orders now with Boeing, it will have a five-year wait to get on the books of Airbus. Tariffs on US agricultural products drive up food costs in China.
https://www.thetimes.co.uk/article/irwin-stelzer-china-will-fold-if-it-…
I've been waiting for this moment for 20 years. Someone had to do something. I thought it might have back fired ten years ago but I tell you what, they bankrupted many to save a nation, so I just hope they've got enough in the tank to take the dragon down now. They've been screwing the world (including themselves) for far too long. It's going to hurt. Make no mistake. It's going to hurt. But it has to happen. I'm sorry, but it does.
Trump will go down in history as one of the greatest US Presidents ever. The US has always been somewhat alienated. I've been hearing anti US rhetoric all my life.
China and the EU are such hypocrites. It's long past time the US stopped treating them as charity cases or bulwarks against Russia.
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