Tuesday's News Items.
13 August 2019. By John Ellis.
1. Argentina is once again on the cusp of a full-blown financial crisis. In the wake of President Mauricio Macri’s stunning rout in primary elections over the weekend, investors dumped its stocks, bonds and currency en masse, leaving much of Wall Street wondering whether the country was headed for yet another default. The upset, widely seen as a preview of October’s presidential vote, threw the doors open to the very real possibility a more protectionist government will take power come December and unravel the hard-won gains that Macri made to regain the trust of the international markets. It deepened worries his populist opponent, Alberto Fernandez, and running mate, former president Cristina Fernandez de Kirchner, will try to renegotiate its debts as well as its agreements with the International Monetary Fund. The country has billions in foreign-currency debt due over the coming year.
2. Argentina’s President Mauricio Macri has put financial market fears of a return to a populist Peronist government at the heart of his campaign to claw back support before elections in October, as a slump in the value of the peso threatened to wreck the country’s ability to avoid a debt default. The centre-right leader predicted that his government eventually would be re-elected, allowing his reformist project to continue, after an unexpectedly large electoral defeat in the primary at the weekend — a pre-election test of voter sentiment — took markets by surprise and dealt a heavy blow to Argentine asset prices.
3. The US yield curve, considered by investors to be a predictor of a recession, on Monday flattened to levels not seen since before the financial crisis as concerns about the trade war and geopolitical uncertainty continued to unnerve markets and helped fuel a rally in Treasuries. The difference between the yield on 2-year Treasury bills and that on the 10-year, narrowed to 5.605 basis points at the worst — the flattest since June 2007.
4. The U.S. fiscal deficit has already exceeded the full-year figure for last year, as spending growth outpaces revenue. The gap grew to $866.8 billion in the first 10 months of the fiscal year, up 27% from the same period a year earlier, the Treasury Department said in its monthly budget report on Monday. That’s wider than last fiscal year’s shortfall of $779 billion -- which was the largest federal deficit since 2012.
5. Recession fears are spreading among investors at a time when valuations across major assets are looking dangerously stretched following years of monetary stimulus, the latest Bank of America Corp. survey shows. About a third of asset managers polled believe a global recession is likely in the next 12 months, the highest probability since 2011 -- when Europe was engulfed by a sovereign-debt crisis. Trade war concerns rose, topping the list of the biggest tail risks, followed by the fear of monetary policy impotence, according to Bank of America’s report.
6. Hong Kong’s airport cancelled all remaining departures for a second straight day, as embattled local leader Carrie Lam warned that the city risked sliding into an “abyss.” Hundreds of black-shirted protesters staged a sit-in at the departures hall at Hong Kong International Airport, preventing checked-in passengers from reaching their planes and eventually forcing the closure of both main departure gates.
7. Boris Johnson has the support of more than half of the public to deliver Brexit by any means, including suspending Parliament, according to a poll. The ComRes survey for The Telegraph found that 54 per cent of British adults think Parliament should be prorogued to prevent MPs stopping a no-deal Brexit. The poll suggested the Prime Minister is more in tune with the public’s views on Brexit than MPs, following his promise to deliver Brexit by October 31 “do or die."
8. The United States will enthusiastically back a no-deal Brexit and work with Britain immediately on sector-by-sector trade agreements, President Trump’s national security adviser said yesterday. John Bolton, the hawkish White House aide, promised that such a fast-track approach would achieve progress more quickly than a comprehensive agreement. “We are with you,” Mr Bolton said after meeting Boris Johnson.
9. The mood among German investors plummeted far more than expected in August, a survey showed on Tuesday, and the ZEW institute blamed trade disputes and higher chances of a no-deal Brexit for a worsening outlook in Europe’s biggest economy. ZEW said its monthly survey showed economic sentiment among investors fell to -44.1 from -24.5 in July, its lowest level since December 2011. Economists polled by Reuters had expected a drop to -28.5.
10. Right-wing League leader Matteo Salvini’s drive for early elections in Italy hit a road bump yesterday with parliamentary party leaders failing to decide when the Senate should debate his no-confidence motion in the government. The deeply divided parliamentary chiefs ordered the full upper house Senate to break its summer recess on Tuesday to decide for itself on when to hold the vote, which looks set to trigger the downfall of Prime Minister Giuseppe Conte. Mr. Salvini, now interior minister in a year-old coalition with the anti-establishment 5-Star Movement, wants to capitalize on his surging popularity in the opinion polls and hold a new election that could see him crowned as prime minister.
11. A Gallup poll, published in April, made headlines in Russia with the revelation that a record 20 percent of the population wanted to leave their country. Among younger Russians, the figure was far higher: For 15- to 29-year-olds, a staggering 44 percent indicated that they would like to migrate. Where did they hope to go? Germany (15 percent) and the United States (12 percent) were the most popular destinations mentioned in the poll. Migration intentions do not equal actual immigration, of course, but these numbers illustrate the widespread dissatisfaction in Russia with the country’s current state of affairs.
12. Inquiries from Hongkongers about property in Portugal, the homeland of football superstar Cristiano Ronaldo, have seen an upswing in recent months as wealthy residents and investors clamor for an alternative residency amid escalating political tensions in the city, analysts said.
13. Chinese banks have reported an increase in bad debts and a decline in capital adequacy ratio in the second quarter, as the year-long trade war has hit the country’s economy hard. Total non-performing loans in the mainland’s banking system rose to 2.235 trillion yuan (US$316.6 billion) during the three months to June, up 78.1 billion yuan, or 3.6 per cent from the first quarter of this year.
14. President Trump on Monday broadened his assault on the nation’s immigration system, issuing a new rule targeting legal immigrants who want to remain in the United States but whose lack of financial resources are judged likely to make them a burden on taxpayers. The new regulation is aimed at hundreds of thousands of immigrants who enter the country legally every year and then apply to become permanent residents. Starting in October, the government’s decision will be based on an aggressive wealth test to determine whether those immigrants have the means to support themselves.
15. Radiation levels in the Russian city of Severodvinsk rose by up to 16 times on August 8th after an accident that authorities said involved a rocket test on a sea platform, Russia’s state weather agency said on Tuesday, the TASS news agency reported. The defense ministry initially said background radiation had remained normal after the incident on Thursday, but city authorities in Severodvinsk in northern Russia said there had been a brief spike in radiation levels. Greenpeace has said radiation levels rose by 20 times.
16. Researchers have been able to coax human breast cancer cells to turn into fat cells in a new proof-of-concept study in mice. To achieve this feat, the team exploited a weird pathway that metastasizing cancer cells have; their results are just a first step, but it's a truly promising approach.
17. Two studies led by the Garvan Institute of Medical Research have revealed that nitrogen-bisphosphonates, drugs commonly prescribed for osteoporosis, reduced the risk of premature mortality by 34% in a cohort of over 6,000 individuals. This reduction in early mortality risk was significantly associated with a reduction in bone loss compared with no treatment.
18. Colombia has declared a national state of emergency following confirmation that a dread fungus has appeared in the country’s banana plantations. The 8 August declaration marks the first time that Fusarium wilt tropical race 4 (TR4), which has devastated crops in Asia, has been confirmed in Latin America, the world’s largest exporter of bananas. Signs of the fungus were first spotted in June in northern Colombia, putting the region on high alert.
19. Furious monsoon rains pounded India and Pakistan over the weekend, wiping away entire villages, submerging cities and leaving civilians desperately crouching on rooftops and, in one instance, frantically clutching onto a construction crane for rescue. In the south Indian state of Kerala, nearly 290,000 people were displaced from their homes from Thursday to Sunday morning, with 76 people killed, 32 injured and 58 missing, according to the local government, which expects the toll to increase. At least 97 people died in flooding in three other states in India.
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