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22 August 2019. By John Ellis.
1. A surge in support for the far-right Alternative for Germany (AfD) party before regional elections next month in two former communist eastern states threatens to wreck Chancellor Angela Merkel’s unwieldy right-left coalition government. Merkel’s conservatives and the center-left Social Democrats (SPD) jointly run the state of Saxony, mirroring their coalition at the national level in Berlin. In neighboring Brandenburg, the SPD governs along with the radical Left Party. Opinion polls suggest the anti-immigrant AfD could come first in both states in the Sept. 1 elections, in what would be a humiliating outcome for Merkel’s party and the SPD, which have ruled Germany together for 10 of her past 14 years in power.
2. German manufacturers are reinforcing concern that Europe’s largest economy is headed into a recession. A nationwide gauge showed orders at factories and services companies are dropping at the fastest pace in six years, and more companies now expect output to fall than rise over the next 12 months. That’s the first time that’s happened since 2014, according to the Purchasing Managers’ Index from IHS Markit.
3. After debating for days whether the U.S. is going into an economic downturn, Washington policy makers and Wall Street investors on Wednesday barreled into an even more difficult problem: There are few good options to deal with one if it happens. With short-term interest rates already low, the Federal Reserve has little room to cut borrowing costs to spur spending and investment as it usually does in a slowdown. Meantime, the federal debt is exploding, which could hamstring any efforts to boost growth with tax cuts or spending increases.
4. The federal budget deficit is growing faster than expected as President Trump’s spending and tax cut policies force the United States to borrow increasing sums of money. The deficit — the gap between what the government takes in through taxes and other sources of revenue and what it spends — will reach $960 billion for the 2019 fiscal year, which ends Sept. 30. That gap will widen to $1 trillion for the 2020 fiscal year, the Congressional Budget Office said in updated forecasts released on Wednesday.
5. More than a decade after home loans triggered the worst financial crisis in a generation, the strict lending requirements put in place during its aftermath are starting to erode. Home buyers with low credit scores or high debt levels as well as those lacking traditional employment are finding it easier to get credit. The loans have been rebranded. Largely gone are the monikers subprime and Alt-A, a type of mortgage that earned the nickname “liar loan” because so many borrowers faked their income and assets. Now they are called non-qualified, or non-QM, because they don’t comply with post-crisis standards set by the Consumer Financial Protection Bureau for preventing borrowers from getting loans they can’t afford.
6. Sales of previously owned U.S. homes picked up in July, a sign that lower mortgage rates may be finally starting to drive sales after a weak spring selling season. July marked the first year-over-year uptick in 17 months and economists have been somewhat puzzled why the lowest mortgage rates in nearly 50 years, strong employment and wages edging higher have failed to spark more home buying. The July activity was one of the few signs that these forces may be starting to translate into more sales.
7. U.S. corporations are repurchasing their own shares at the slowest pace in 18 months, a potential sign of more volatility as the buyback bonanza from the corporate-tax overhaul wanes. Companies in the S&P 500 repurchased about $166 billion of their own stock in the second quarter, S&P Dow Jones Indices projects, down from $205.8 billion in the first quarter and $190.6 billion in the same period a year ago. That marks the lowest total since the fourth quarter of 2017 and the second consecutive quarter of contraction.
8. France’s private sector unexpectedly gained speed in August as solid performance in services was complemented by a return to growth in manufacturing. IHS Markit’s Purchasing Managers’ Index rose to 52.7 from 51.9 in July, defying economists’ predictions for a slight weakening. The increase was driven by a broad-based pickup in demand, with new orders expanding at the fastest pace since November.
9. Angela Merkel suggested last night that it was still possible to avoid a no-deal Brexit, challenging Boris Johnson to come up with an alternative to the Irish backstop within 30 days. The German chancellor said that the time had come for Britain to put its proposals forward and pledged to “put our all” into solving the impasse.
10. If Italy’s usually politically dexterous nationalist leader Matteo Salvini failed to anticipate one thing, it was that his political rivals would overcome their mutual animosity to join forces and stop him. But after triggering Tuesday’s collapse of the government with his call for early elections that he almost certainly would win, that’s exactly what seems to be happening.
11. President Trump on Wednesday thanked a conspiracy theorist for saying Jews in Israel love the president “like he’s the King of Israel” and doubled down on his efforts to pit American Jews against one another, accusing Jewish voters of disloyalty if they voted for Democrats. “If you want to vote Democrat, you are being very disloyal to Jewish people and very disloyal to Israel,” Mr. Trump said Wednesday at the White House.
12. The Israeli military said it carried airstrikes in several locations in Gaza on Wednesday overnight, including a Hamas naval post in the northern Strip, in response to a rocket launched from the Strip. Shortly after the air force strike, a second projectile was launched at Israel, and the Israeli military said it responded again with airstrikes against Hamas targets.
13. Iranian-backed militias in Iraq warned Wednesday that foreign aircraft flying over the country may be treated as “hostile” amid growing suspicions that Israel is responsible for mysterious explosions at militia bases. The warning came in a statement issued by the deputy commander of the powerful coalition of Shiite Muslim militias known as Hashd al-Shaabi, or Popular Mobilization Forces (PMF), which includes paramilitary groups that owe allegiance to Iran. The statement blamed Israeli drones for four big blasts at militia bases over the past month, all of them at warehouses storing ammunition and weapons, and accused the U.S. military of aiding the strikes by allowing Israel to use U.S. bases in Iraq.
14. Prime Minister Imran Khan of Pakistan intensified his criticism of India on Wednesday over its Kashmir crackdown, saying he would no longer seek dialogue with Indian officials and raising the threat of a military escalation between the nuclear-armed neighbors. In an interview with The New York Times, Mr. Khan complained bitterly about what he described as repeated rebuffs from Prime Minister Narendra Modi of India at his entreaties for communication, both before and after the Aug. 5 crackdown on the disputed territory of Kashmir.
15. South Korea said it would withdraw from an intelligence-sharing agreement with Japan, extending their feud over trade measures and historical grievances into security cooperation. South Korea will file a notice to withdraw from the three-year-old framework for exchanging classified military information with its neighbor, Deputy National Security Director Kim You-geun said. The move came despite the urging of U.S. officials including President Donald Trump for the two allies to work together amid shared security challenges from China and North Korea.
16. Two of the Russian specialists killed by the explosion at a White Sea missile testing range died not of traumatic injuries from the blast itself but of radiation sickness before they could be taken to Moscow for treatment, the independent newspaper Novaya Gazeta reported Wednesday. The paper cited an unnamed medical worker who was involved in their care. “Two of the patients did not make it to the airport and died,” the person said. “The radiation dose was very high, and symptoms of radiation sickness grew every hour.”
17. Vast fires, many of them set by loggers, are ravaging the Amazon at a rate not seen in years, sending plumes of smoke that darken skies over Brazilian cities at a time when there is international pushback against President Jair Bolsonaro ’s environmental policies. Smoke from the Amazon, as well as blazes across Brazil’s western savanna, has spread over swaths of the country, with darkness descending on São Paulo by midafternoon Monday, two hours earlier than normal.
18. The U.S. produces more garbage than any other nation in the world per capita. Scrappers are turning that waste into a $32 billion business.
19. Amazon.com today opened its largest campus building globally in the south Indian city of Hyderabad as it prepares for a furious expansion and battle with nemesis Walmart Inc. in one of the world’s fastest-growing retail markets. Amazon is making an ambitious push in India, the last major retail frontier still primarily reliant on small-scale neighborhood and mom-and-pop stores. “E-commerce is so small in India relative to the total consumption, less than 3%,” said Amit Agarwal, Amazon’s country manager for India.
20. Indian tycoons including Ajay Piramal and Pallonji Mistry are grappling with a prolonged realty slump that’s adding to the shadow banking crisis, showing that even the nation’s richest can’t escape widening cracks in the debt market. “The deteriorating credit profiles of tycoons will have far-reaching implications in terms of ratings and lending,” said Sandeep Upadhyay, managing director of Centrum Infrastructure Advisory Ltd., which focuses on real estate and infrastructure.The weak performance of property businesses and an acute liquidity crunch were cited as key reasons for rating downgrades.
21. In the parallel universe of Facebook, The Western Journal has been among the most popular and influential right-wing publications in America, shaping the political beliefs of more than 36 million deeply loyal readers and followers. In the three years ending in March, according to a New York Times analysis, Western Journal’s Facebook posts earned three-quarters of a billion shares, likes and comments, almost as many as the combined tally of 10 leading American news organizations that together employ thousands of reporters and editors.
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