News Items.
26 July 2019. by John Ellis.
1. German industry is in the deepest slump since the global financial crisis and threatens to push Europe’s powerhouse economy into full-blown recession. The darkening outlook is forcing the European Central Bank to contemplate ever more perilous measures. The influential Ifo Institute in Munich said its business climate indicator for manufacturing went into “free fall” in July as the delayed damage from global trade conflict takes its toll and confidence wilts. It goes far beyond the woes of the car industry. More than 80 percent of Germany’s factories are in outright contraction.
2. The European Central Bank signaled Thursday that it is preparing to cut short-term interest rates for the first time since 2016 and restart a giant bond-buying program, in a significant policy shift that aims to insulate the wobbling eurozone economy from global headwinds ranging from trade tensions to Brexit.
3. Negative-yielding bonds make up about a quarter of the investment-grade debt tracked by the Bloomberg Barclays Global-Aggregate Index. Investors have to pay to own more than 80% of Germany’s federal and regional government bonds; almost the entire Danish government market is negative. The U.S. is one of a dwindling number of nations with no negative-yielding sovereign debt.
4. Bob Michele (JPMorgan Asset Management): "Ten-year US Treasury yields could be headed to zero. This is not a forecast. This is not a bold prediction. This is not something that we hope happens. This is an observation of what is unfolding in the markets right in front of us. The 10-year yield peaked at 3.25 per cent in November last year and has fallen relentlessly, to as low as 1.93 per cent earlier this month. Today, about one-third of the global government bond market and one quarter of the global aggregate bond market have negative yields. We should consider it a warning: that this is the path the US market is on unless there is an adequate policy response."
5. Investors are piling into safe-haven bonds at a record pace, a sign that caution remains despite stocks pushing toward records. Mutual funds and exchange-traded funds tracking bonds posted $12.1 billion of inflows for the week ended July 17, the 28th consecutive week of inflows. That brings the total so far this year to $254 billion, on pace for a record $455 billion on an annualized basis in 2019, according to a Bank of America Merrill Lynch analysis of EPFR Global data. That compares with $1.7 trillion in bond inflows over the past 10 years, the bank said.
6. The latest move downwards in global bond yields, fanned by expectations of the first cut in interest rates from the Federal Reserve for more than a decade, is raising concerns among some investors who fear that monetary policy easing will encourage companies to take on more debt than they can handle. “It’s a recipe for disaster in the longer term,” said John McClain, a portfolio manager at Diamond Hill Capital Management in Columbus, Ohio. “As an investor, it means you are lending to fairly risky companies at fairly low rates at the end of the cycle. It might not be three months from now or six months from now, but at some point these bonds are going to be pretty challenged.”
7. U.S. senators are gearing up for a battle over how to fix the pensions of about 1.3 million retirees and workers in trucking, mining and other industries. These workers are covered by what are known as multi-employer pension funds, which are maintained under collective-bargaining agreements between a union and several different employers. The plans in the worst financial condition are short an estimated $100 billion to pay out retirees. Failing to address the shortfall this year would trigger “an economic tsunami for retirees, employers and the U.S. taxpayer,” said Michael Scott, executive director of the National Coordinating Committee for Multiemployer Plans, a group of employers, pension funds, unions and workers. Read the whole thing.
8. A divided House on Thursday passed a two-year budget deal that would raise spending by hundreds of billions of dollars over existing caps and allow the government to keep borrowing to cover its debts, amid grumbling from fiscal conservatives over the measure’s effect on the federal deficit. Only 65 Republicans joined the Democratic majority in the 284-to-149 vote, with 132 Republicans voting against the bill, despite President Trump’s endorsement and pressure from some outside groups, including the Chamber of Commerce, to avoid a potentially catastrophic default on the government’s debt.
9. Chris Hughes used to huddle with Mark Zuckerberg in a Harvard dorm room building Facebook from scratch. Now, he’s huddling with regulators to explain why Facebook needs to be broken up. In recent weeks, Mr. Hughes has joined two leading antitrust academics, Scott Hemphill of New York University and Tim Wu of Columbia University, in meetings with the Federal Trade Commission, the Justice Department and state attorneys general. In those meetings, the three have laid out a potential antitrust case against Facebook, Mr. Wu and Mr. Hemphill said.
10. Apple and Goldman Sachs’s hotly anticipated new credit card is now just weeks away from launch, according to a person familiar with the companies. The release will be the culmination of an intense, high-stakes development process for the Silicon Valley giant and the Wall Street stalwart. The closely watched collaboration between Apple and Goldman Sachs represents one of the most ambitious ever attempted between an old-world finance titan and a tech company.
11.Temperatures hit record highs in Europe on Thursday, worsening a years-long drought that has triggered a rare water emergency across the continent—parching crops, sapping rivers and forcing governments from Spain to the Netherlands to enact conservation measures. The heat—and two consecutive summers of low rainfall—has pushed Europe into a continent-wide effort to conserve water more typical in water-stressed regions, like the Western U.S.
12. New research could be key to our understanding of how the aging process works. The findings potentially pave the way for better cancer treatments and revolutionary new drugs that could vastly improve human health in the twilight years.
13. How fast does warm ocean water melt glaciers that terminate in the sea? That question is central to understanding how fast ice sheets may lose mass, and thus how fast sea level will rise, in response to global warming, but there are few data about the process. A team of scientists used repeat multi-beam sonar surveys to observe an Alaskan subsurface tidewater glacier face to create a time series of its melting and calving patterns. They observed melt rates up to a hundred times larger than those predicted by theory.
14. Iran fired a Shahab-3 medium-range missile on Wednesday, a United States military official said, playing it down by saying that it did not pose a threat to American or other Western shipping or military bases in the region. The missile was launched from the southern coast of Iran and landed east of Tehran, the official said on Thursday, adding that it flew about 1,100 kilometers, or about 680 miles, and stayed inside Iran for the entire flight.
--------
Quick Links: Hardhats have replaced umbrellas as the symbol of Hong Kong’s protests. Ukraine seizes Russian tanker that it says blockaded a disputed Strait. France plans lasers to blind enemy satellites. The Jetsons come to Saudi Arabia. Saudi Arabia debates allowing shopping to eclipse prayer. Softbank rolls out second tech mega-fund, with Apple among the top investors. Huawei set to beat Apple with world's top chip despite US ban. Google beats. Starbucks is back. Amazon misses. “It’s clear Amazon is in investment mode." This new liquid is magnetic, and mesmerizing. Ford profit drops sharply. DeepMind is helping Waymo evolve better self-driving AI algorithms. How scientists built a ‘living drug’ to beat cancer. How our brains flush out their waste and toxins. Jeffrey Epstein stories: How he used Lesley Wexner. How he burrowed into the lives of the rich and made a fortune. He's now back in his cell at the MCC. Woodstock 50 Festival moves to Maryland. Gunmen dressed as police steal £24 million of gold destined for New York and Zurich from Sao Paulo airport.
Political Links: Tom Edsall: "The Democratic Party is actually three parties." Fox News poll: Biden bounces back. Elizabeth Warren has a radical plan to beat Trump at his own game. Elizabeth Warren is siding with Google and Amazon when it comes to digital payments. Ohio Sen. Sherrod Brown Is the only Democrat in America not running for president. Tulsi Gabbard, Democratic presidential candidate, sues Google for $50 million. Democrats struggle to figure out next move after Mueller hearing. Russia targeted election systems in all 50 states in 2016. Spain’s Pedro Sánchez fails to form government as talks collapse. The betrayal of the Kurds. Puerto Rico in a nutshell: “The government is bankrupt, the economy collapsing and everybody’s leaving.” Wall Street will be the next US-China battleground. All the news is bad.