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Wednesday's News Items. (Re-send)
7 August 2019. By John Ellis.
1. Richard Preston: "The Kivu Ebola isn’t a single organism but, rather, an immense swarm of particles that jumps from victim to victim. Each particle in the swarm possesses a biological drive to copy itself. As the particles copy themselves, they compete with all the other particles for survival. Ebola particles copy themselves every eighteen hours. This is the generation time of the virus—the time it takes for a particle of Ebola to get inside a human cell and potentially create thousands of identical copies of itself in the cell. The copies then exit the infected cell and drift into the bloodstream, infecting more cells. By now, the Kivu Ebola swarm has been going through its eighteen-hour replication cycle in humans for more than a year. Some virologists wonder whether Kivu Ebola could start evolving, or whether it has already started to evolve, in a way that makes it more dangerous to people—perhaps by becoming more contagious, in which case it would get much harder to control. These questions introduce a new aspect to the international emergency."
2. The escalating trade war between the U.S. and China is nudging the world economy toward its first recession in a decade with investors demanding politicians and central bankers act fast to change course. In the U.S. alone, the recession risk is “much higher than it needs to be and much higher than it was two months ago,” Lawrence Summers, a former U.S. Treasury secretary and a White House economic adviser during the last downturn, told Bloomberg Television. “You can often play with fire and not have anything untoward happen, but if you do it too much you eventually get burned.” Mr. Summers, who teaches at Harvard University, still sees a less than 50/50 chance that the U.S. enters a recession in the next 12 months. Investors are much more bearish: A closely watched segment of the yield curve, the difference between 10-year and three-month notes, inverted the most since 2007, indicating bets on protracted weakness.
3. The volley-for-volley trade war between China and the U.S. is accelerating at a time when Chinese President Xi Jinping can ill afford to make concessions, raising the likelihood of a protracted struggle between the world’s two biggest economies. Mr. Xi is ordering a celebratory run-up to the 70th anniversary of the People’s Republic in October, an event that Communist Party watchers and media say will showcase him as a strong leader of a powerful nation. With his government struggling to rejuvenate a sluggish economy and quell antigovernment protests in Hong Kong, Mr. Xi has little leeway to take steps that would undercut his strongman image.
4. A cautious calm returned to stock markets on Wednesday as softer rhetoric from Washington on the U.S.-China trade war soothed investors, though demand for safe-haven assets underscored lingering anxiety. Europe’s STOXX 600 climbed 0.7%, recovering from a three-day sell-off as investors fled after an escalation in the trade war. MSCI’s world equity index, which tracks shares in 47 countries, rose 0.2%. But gold, the Japanese yen and government debt remained in high demand as investors remained wary of riskier assets. U.S. shares gained overnight after President Donald Trump downplayed worries of a lengthy trade war and senior adviser Larry Kudlow said Trump’s administration is planning to host a Chinese delegation for talks in September. Wall Street futures gauges also rose.
5. More than $200 billion in i.o.u.s — known in the dry world of finance as commercial acceptance bills — are floating around the Chinese financial system, according to government data. China is not running out of money. But Chinese banks are reluctant to lend to private businesses because they consider big, state-owned enterprises more reliable in paying off their debts. Alternative sources of money have dried up as regulators have cracked down in recent years on China’s shadowy world of unofficial lending. So a growing number of companies are issuing i.o.u.s to their suppliers. Some suppliers turn around and use the notes to pay another supplier. And then — in a sign of how desperate some Chinese companies have become for money — they sell the notes for less cash than they are worth.
6. US consumers are paying higher interest rates on their credit card balances than they have in more than a quarter-century, and the Federal Reserve’s rate cuts are no guarantee that they will receive much relief. The average rate on interest-bearing card accounts topped 17 per cent in May, according to Fed data, the highest in the 25 years that the central bank has been making the calculation. Weekly data based on a Creditcards.com survey of 100 national card issuers found an average rate of 17.8 per cent at the end of July, another multi-decade high.
7. Industrial production in Germany dropped a greater than expected 1.5 per cent in June, compounding fears that Europe’s biggest economy could be heading for its first recession in more than six years. The figures — branded as “devastating, with no silver lining” by one economist — highlight how a crisis in the car-making industry and an intensifying trade war between the US and China have turned Germany from being the powerhouse of the eurozone economy to one of its weakest performing members.
8. Oil investors are as worried about slowing demand as they are about excess supply, amid fresh concerns that the U.S.-China trade fight will hurt the global economy and curb fuel consumption. On Tuesday, the U.S. crude benchmark settled 1.9 % lower at $53.63 a barrel, while Brent, the global price, slid into a bear market after falling more than 20% from its April peak to $58.94.
9. One of the world’s biggest car-parts makers is saying goodbye to the internal combustion engine—the machine that has been at the heart of the auto industry for well over a century. In a major strategy shift, Continental today said that it would cut investment in conventional engine parts because of a faster-than-expected fall in demand as major auto makers accelerate their shift to electric vehicles.
10. The U.S. Farm Belt braced for deeper pain from the escalating trade battle between the world’s two biggest economies after China said it would suspend all imports of U.S. agricultural goods. China’s move will affect farmers raising fuzzy green soybean pods in Illinois, milking cows in California and feeding hogs in North Carolina, all of whom have seen business suffer as a result of tariffs that Chinese officials implemented last year.
11. Hong Kong is facing its worst crisis since it returned from British to Chinese rule in 1997, the head of China’s Hong Kong and Macau Affairs office said on Wednesday, as more anti-government protests rocked the Asian financial hub. “Hong Kong’s crisis ... has continued for 60 days, and is getting worse and worse,” Zhang Xiaoming, one of the most senior Chinese officials overseeing Hong Kong affairs, said during a meeting in the southern Chinese city of Shenzhen. “Violent activities are intensifying and the impact on society is spreading wider. It can be said that Hong Kong is now facing the most severe situation since its handover,” he said.
12. A car bomb exploded Wednesday outside a police station in the Afghan capital, killing at least 10 people and wounding nearly 100, officials and a security source said, heightening security concerns ahead of planned elections next month. Taliban insurgents claimed responsibility for the strike, which came a day after the militants and U.S. diplomats spoke of making "excellent progress" in peace talks in Qatar.
13. China will not “stand idly by” if the US deploys new missiles to the Asia-Pacific region, warning it would take action against any nation that agreed to host the weapons systems. The US pulled out of a Cold War treaty with Russia last week that prevented it from developing and deploying intermediate-range nuclear-capable missiles. The Pentagon now intends to test missiles and deploy them to the Asia-Pacific region within months.
14. Pakistan yesterday reacted with shock and anger to India’s sudden decree revoking a 65-year-old law that had granted limited political autonomy to the disputed Himalayan border region of Kashmir. Kashmir, long a flash point in contentious relations between the nuclear-armed neighbors, has seen 30 years of unrest, including guerrilla attacks, protests by Muslims and allegations of repression by Indian security forces. Now, Pakistani officials and others say they fear there is worse to come. Background on the contested province is here.
15. India's Monetary Policy Committee has cut its key interest rate to counter slowdowns in industrial growth, exports and consumption, joining other central banks in the Asia-Pacific region that have leaned on the monetary easing lever. The six-member committee, headed by Reserve Bank of India Gov. Shaktikanta Das, brought down the repo rate by 35 basis points to 5.4% on Thursday. The rate is now at its lowest level in nine years.
16. New Zealand's central bank today stunned markets by cutting the official cash rate (OCR) by a bigger-than-expected 50 basis points to a record-low 1.00%, and looked set to keep policy lower for longer in the face of growing economic risks. The surprise move by the Reserve Bank of New Zealand (RBNZ) sent the kiwi dollar tumbling to 10-month lows, and comes days after the Trump administration labelled China a currency manipulator in a dramatic escalation of the Sino-U.S. trade war.
17. Australia’s dollar dropped to its lowest in a decade on speculation the central bank will follow its New Zealand counterpart in delivering a bigger-than-expected interest-rate cut.
18. Indonesia has declared a state of emergency over fires raging in six provinces, raising fears that the region may be facing its worst air pollution disaster this century.
19. The lead U.S. military laboratory that studies some of the most dangerous pathogens has had to curtail its work because it failed a safety inspection last month. The U.S. Army Medical Research Institute of Infectious Diseases (USAMRIID) in Frederick, Maryland, studies the highly regulated “select agents” that cause Ebola, plague, tularemia, and other lethal diseases.
Quick Links: Beware of ‘Lehman-like’ aftershock to stocks, analyst warns. Unfunded liabilities: America’s pension funds fell short in 2019. China keeps official yuan rate just stronger than 7 per dollar. Essay of the week: Hong Kong vs. Beijing. Market turmoil pushes Japanese Bond yield below preferred range. The "carry trade" works, until it doesn't. Argentina seeks to replicate success of US shale boom. US ‘cord-cutting’ gathers pace as TV viewers abandon cable. Fox assets weigh on Disney’s profit. How ice flows from Antarctica to the sea.
Political Links: North Korea's Kim says missile launches are a warning to U.S., South Korea. US ‘will stop’ Erdogan from attacking Kurds in Syria. In Kashmir move, critics say, Modi is trying to make India a Hindu nation. Kashmir's loss of autonomy clouds Afghan peace efforts. Yemen truce efforts falter as regional rivalries intensify. Russia and Iran to hold joint naval exercises around the Strait of Hormuz. Labour and the SNP moved towards a pact last night that would seek to oust Boris Johnson. Italy's deputy prime minister Matteo Salvini channels his inner David Solomon. This poll says Warren is gaining on Biden. This poll says Warren reigned in second primary debates. This poll has Warren running third (behind Biden and Sanders). This poll has Biden in trouble in New Hampshire. Stan Greenberg argues that the immigration issue is hurting President Trump. Mr. Trump, among many others, disagrees. Trump warns he is 'watching Google very closely!' Trump attacks Obama for statement on shootings. Democrats’ frustration with the news media (!) boils over. Jon Huntsman to step down as ambassador to Russia. He is reportedly weighing another run for governor of Utah. Galveston police lead black man through town on a rope. Police chief apologizes. ‘Red Flag’ gun control bills pick up momentum with G.O.P. in Congress. The NRA leadership stories keep getting worse. The writer Toni Morrison has died. From The New York Times obituary: "Over the course of her long and exceptional literary career, which included the Nobel Prize in Literature in 1993, Morrison....brought a freight of news about black life in America (and about life, period) to millions of readers across the globe." Ms. Morrison was 88 years old.