April 2019 Update

Brexit just won’t break!  March 29th and April 12th came and went and now the deadline has been extended to October 31, 2019.  Will Parliament make a decision between now and then, will it be a soft/negotiated Brexit, or a hard Brexit which would be an automatic ejection from the European market? Will another extension be given?   Anything could happen and there is no way of predicting the outcome.  If the UK capitulates, its days as a world economic power are over and it is very unlikely that any nation will ever challenge the EU again because, if the UK failed, how could anyone else resist them?  If the UK resists and retains their sovereignty, the other EU nations may do the same and the EU’s ability to intimidate and control its members will begin to diminish with more of their members likely exiting.

 

EU Leaders Agree to Delay Brexit Until Oct. 31 (4.10.19) WSJ  https://www.wsj.com/articles/eu-prepares-to-push-brexit-into-next-year-11554900794?mod=hp_lead_pos6

Brexit Betrayal – Treachery or Treason? (3.24.19) https://www.youtube.com/watch?v=q8hw-X3V9Jo&feature=youtu.be

May’s Brexit Deal Is Rejected for a Third Time by Lawmakers (3.29.19) WSJ https://www.wsj.com/articles/mays-brexit-deal-is-rejected-for-a-third-time-by-lawmakers-11553870628

Theresa May Vows to Resign to Get Brexit Deal Through Parliament (3.27.19) WSJ https://www.wsj.com/articles/theresa-may-vows-to-quit-to-get-brexit-deal-through-parliament-11553708350?mod=hp_lead_pos1

 

Central Banks & Currency

In the first three months of this year, the Fed has gone from arguing about how much and how often interest rates should be raised to arguing about whether or not to lower them.  When compared to the EU, Japanese or Chinese central banks, the Federal Reserve looks pretty good at the moment; however, the Fed’s balance sheet plans have too many assets.  US debt is too high, and too much qualitative easing for too long has put the Fed between a rock and hard place.  The Feds are not alone; however, as most of the central banks of the world are in a similar place.  James Skinner wrote:

The Pound remains the best performing currency in the G10 universe for 2019 but the British currency has much further to rise, according to analysts at Morgan Stanley, who’ve recently told clients to buy the British currency.  The U.S. Federal Funds rate of 2.5% is substantially higher than the BoE’s 0.75% but markets are already speculating the Federal Reserve could cut its interest rate next year so if the BoE were to lift Bank Rate the Pound-to-Dollar rate differential would move in favour of Sterling.  It is a gradual increase in market bets on BoE rate hikes that Redeker says will drive the Pound-to-Dollar rate up to Morgan Stanley’s forecast of 1.52 by year-end.”

Reuters reported that Saudi Arabia is threatening to sell its oil in currencies other than the US Dollar if Washington passes a bill exposing OPEC members to US antitrust lawsuits, three sources familiar with Saudi energy policy said.  The bill called NOPEC has been purposed a number of times but has never gotten any traction.  According to the WSJ:

India’s central bank cut its main lending rate for the second time this year as recent low inflation rates gave it the freedom to try to bolster economic growth.  The Reserve Bank of India’s monetary-policy committee, headed by Gov. Shaktikanta Das, on Thursday lowered the repurchase rate to 6% from 6.25%. All 10 economists polled by The Wall Street Journal had predicted a quarter-percentage-point rate cut.”

Growth Stumbling, but Central Bank Arsenals are Near Empty (4.12.19) Reuters https://www.reuters.com/article/us-global-economy/growth-stumbling-but-central-bank-arsenals-are-near-empty-idUSKCN1RO1KS

India’s Central Bank Cuts Key Lending Rate to 6.0% (4.4.19) WSJ                                            https://www.wsj.com/articles/indias-central-bank-cuts-key-lending-rate-to-6-0-11554372112

Things are Only Getting Tougher for Chair Jerome Powell and his all Over the Place Fed (4.3.19) CNBC  https://www.cnbc.com/2019/04/01/things-are-only-getting-tougher-for-fed-chair-jerome-powell.html

The British Pound is a Buy says Morgan Stanley (3.28.19) https://www.poundsterlinglive.com/gbp-live-today/11090-the-british-pound-is-a-buy-says-morgan-stanley

Saudi Arabia Threatens to Ditch Dollar Oil Trades to Stop NOPEC (4.4.19) Reuters https://www.reuters.com/article/us-saudi-usa-oil-exclusive/exclusive-saudi-arabia-threatens-to-ditch-dollar-oil-trades-to-stop-nopec-sources-idUSKCN1RH008

 

Debt

Fox News reported that, “last month, the national debtOpens a New Window. surpassed $22 trillion — or nearly $180,000 per taxpayer. That figure will roughly double within three decades, since spending on Social SecurityOpens a New Window., Medicare and Medicaid will balloon as America’s population ages.  Unfortunately, it’s too late for a “grand bargain” now.”  A slowing world economy, tighter credit and rising debt are creating problems for China as well.   CNBC said, “According to experts, defaults for Chinese corporate bonds — issued in both U.S. dollars and the Chinese yuan — soared last year, according to numbers from two banks.  Yuan-denominated debt rose to an unprecedented 119.6 billion yuan ($17.8 billion) — four times more than 2017, according to a February report by Singapore bank DBS.  Japanese bank Nomura’s estimates, provided to CNBC, were even higher, putting the size of defaults in onshore bonds — or yuan-denominated bonds — at 159.6 billion yuan ($23.8 billion) last year. That number is roughly four times more than its 2017 estimate.”

Chinese Companies Are Defaulting on Their Debts at an Unprecedented Level (3.20.19) CNBC  https://www.cnbc.com/2019/03/20/chinese-companies-had-record-amount-of-corporate-bond-defaults-in-2018.html

The Federal Government Should Default on its Debt (3.19.19) Fox News https://www.foxbusiness.com/economy/the-federal-government-should-default-on-its-debt

 

Political Unrest & Elections

The battle between globalism and nationalism continues to playout across the globe.  Finland’s Social Democrats look to have edged a victory for the first time since 1999, barely beating the nationalist Finns Party 17.7% to 17.5%.  Israeli Prime Minister Netanyahu won a 5th term and gained seats in the Knesset strengthening his position, and Australia’s prime minister has just called for new elections, hoping to expand the number of seats in his party’s control.

Immigration continues to create political unrest, as another migrant horde has broken through Mexico’s southern border and attacked Mexican border police on their way to the US border.  There are complaints that the bottle necked ports and borders are costing shippers millions.  President Trump has threatened to close the US-Mexican border if Mexico does not stop the stream of immigrants on their end.

Chinese fishing boats invaded Philippine sovereign territory, as China continues to push at the borders of international waters.  The WSJ reported that “Chinese fishing vessels have swarmed the waters around a Philippine-controlled island in the South China Sea in recent months—sparking fears in Manila that Beijing is trying to assert greater control in a disputed area.  Since January, at least 275 Chinese boats functioning as part of a maritime militia have gathered for varying lengths of time near Thitu Island, according to the Philippines’ military. Their tactics raise concerns about their “role in support of coercive objectives.”

The WSJ reported problems in both Libya and Turkey, as a renegade Libyan military commander, reportedly supported by Saudi Arabia, launched an assault on the Tripoli capital, risking returning the country to a full-blown civil war.  Turkey’s Erdogan decided to purchase an air-defense system from Russia despite US warnings that using the equipment would jeopardize Ankara’s role within the North Atlantic Treaty Organization.  Vice President Pence called Erdogan’s decision reckless.  The US declared Iran’s Revolutionary Guard a terrorist organization, subjugating it to all the penalties that go with such a designation. It is unusual to brand a branch of a nation’s military a terrorist group, but Iran’s support of terrorism is clear, and the Revolutionary Guard are a complicit party.  Facebook and CEO Mark Zuckerberg are also stirring up international unrest by continuing to anger individuals and governments around the world by their reckless disregard for people’s privacy, the rule of law of various nations, and the imposition of their bias views and removal  of people and groups from Facebook with whom they disagree with.

Social Democrats Set to Win Close Legislative Election in Finland (4.14.19) WSJ https://www.wsj.com/articles/social-democrats-set-to-win-close-legislative-election-in-finland-11555278024

Netanyahu Rode Israel’s Rightward Shift to Successful Election Result (4.10.19) WSJ https://www.wsj.com/articles/benjamin-netanyahu-appears-to-set-to-lead-israel-in-record-fifth-term-11554888521?mod=hp_lista_pos1

Australia to Pick Its Next Leader—With an Election (4.11.19) WSJ https://www.wsj.com/articles/australias-embattled-conservatives-call-new-election-11554937191

Saudi Arabia Promised Support to Libyan Warlord (4.12.19) WSJ https://www.wsj.com/articles/saudi-arabia-promised-support-to-libyan-warlord-in-push-to-seize-tripoli-11555077600

Libyan Warlord Launches Assault on Country’s Capital (4.5.19) WSJ https://www.wsj.com/articles/libyan-warlord-launches-assault-on-capital-11554474313?mod=hp_lead_pos7

US Designates Iran’s Islamic Revolutionary Guard Corps a Foreign Terrorist Org. (4.8.19) WSJ https://www.wsj.com/articles/u-s-designates-irans-islamic-revolutionary-guard-corps-a-foreign-terrorist-organization-11554733155?mod=hp_lead_pos1

Erdogan Vows to Buy Russian Missiles Despite U.S. Warnings (4.8.18) WSJ  https://www.wsj.com/articles/erdogan-vows-to-buy-russian-missiles-despite-u-s-warnings-11554754854

U.S. Clashes With Turkey Over Russian Air-Defense System (4.3.19) WSJ https://www.wsj.com/articles/nato-chief-tells-congress-alliance-remains-urgently-needed-11554309999

China’s Fishing Militia Swarms Philippine Island, Seeking Edge in Sea Dispute (4.4.19) WSJ https://www.wsj.com/articles/chinas-fishing-militia-swarms-philippine-island-seeking-edge-in-sea-dispute-11554391301

Hostile Migrants Break Border Gate to Enter Mexico, Then Attack Police & They’re Headed North https://www.theblaze.com/news/migrants-break-border-fence-mexico?utm_source=Sailthru&utm_medium=email&utm_campaign=Daily-Newsletter__PM-Final%202019-04-14&utm_term=TheBlaze%20Daily%20PM%20-%20last%20270%20days

U.S. Shift on Mexican Border Triggers Trade Bottleneck (4.3.19) WSJ https://www.wsj.com/articles/u-s-action-on-mexico-border-triggers-trade-havoc-11554325826

 

World Economies & Market

The WSJ reported that “The International Monetary Fund cut its outlook for global growth to the lowest since the financial crisis amid a bleaker outlook in most major advanced economies and signs that higher tariffs are weighing on trade.  It’s the third time the IMF has downgraded its outlook in six months.”  The report goes on to say that the IMF raised its forecast for Chinese growth, while lowering it for the US, the euro area, Japan and India.  The UK economy grew in February, in spite of the Brexit uncertainty.  Italy’s populist government conceded it won’t hit the budget-deficit target agreed on with European Union authorities, setting the stage for renewed tensions with Brussels.  Currently world stock markets are continuing to grow, even as the outlook for world economies is beginning to diminish.  Trade wars and negotiations continue between the US and China, but it looks as though they may have made a little progress with a trade deal enforcement accord and discussions on currency manipulation over the past month.  In the second week of April the EU prepared tariffs against the US, but two days later, changed their minds and paved a way for trade pact talks. Many of the EU nation economies continue to struggle, including Germany.

 

Global Stock Rally Defies Dimming Outlook for World Economy (4.14.19) WSJ https://www.wsj.com/articles/global-stock-rally-defies-dimming-economic-outlook-11555239600

European Union Paves Way for U.S. Trade-Pact Talks (4.14.19) WSJ https://www.wsj.com/articles/european-union-paves-way-for-u-s-trade-pact-talks-11555014335

EU Prepares Tariffs Against U.S. Amid WTO Battle (4.12.19) WSJ https://www.wsj.com/articles/eu-prepares-tariffs-against-u-s-amid-wto-battle-11555100352

U.S.-China Trade Pact Takes Aim at Currency Manipulation (4.12.19) WSJ https://www.wsj.com/articles/u-s-china-trade-pact-takes-aim-at-currency-manipulation-11555074003?mod=searchresults&page=1&pos=5

U.S., China Reach Accord on Trade-Deal Enforcement, Mnuchin Says (4.10.19) WSJ https://www.wsj.com/articles/u-s-china-reach-accord-on-trade-deal-enforcement-mnuchin-says-11554922623?mod=searchresults&page=1&pos=9

UK Economy Grew Steadily in February (4.10.19) WSJ                   http://www.wsj.com/articles/uk-economy-grew-steadily-in-february-151554885698

IMF Cuts Global Growth Outlook to Lowest Pace Since Crisis (4.9.19) Bloomberg https://www.bloomberg.com/news/articles/2019-04-09/imf-cuts-global-growth-outlook-to-lowest-since-financial-crisis?srnd=premium

Italy Warns of Bigger Budget Deficit (4. .19) WSJ  https://www.wsj.com/articles/italy-warns-of-bigger-budget-deficit-11554842380?mod=hp_listc_pos2

Japan’s Business Confidence Hits Two-Year Low as Trade War Stings (3.31.19) Reuters https://www.reuters.com/article/us-japan-economy-tankan/japans-business-mood-hits-two-year-low-as-trade-war-stings-idUSKCN1RD0ZF?il=0

German Manufacturing Slump Piques Fears Over Europe’s Flagship Economy (4.4.9) WSJ https://www.wsj.com/articles/german-manufacturing-slump-piques-fears-over-europes-flagship-economy-11554385603

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