European Integration In Jeopardy: Italy "Willing To Temporarily Suspend Schengen" In Response To Refugee CrisisSubmitted by Tyler Durden on 09/02/2015 09:52 -0400
Europe's refugee crisis just took a dramatic turn for the worse, and strikes at the very hear of Europe's Shengen customs union which has allowed borderless travel within Europe for decades. As Bloomberg reports, the Italian Province of Bolzano in Northern Italy said in a statement that it agreed with the Italian government on request by German Federal State of Bavaria by "communicating a willingness to restore border controls at Brenner and temporarily suspend the Schengen agreement."
According to Western diplomats, a Russian expeditionary force has already arrived in Syria and set up camp in an Assad-controlled airbase. The base is said to be in area surrounding Damascus, and will serve, for all intents and purposes, as a Russian forward operating base. In the coming weeks thousands of Russian military personnel are set to touch down in Syria, including advisors, instructors, logistics personnel, technical personnel, members of the aerial protection division, and the pilots who will operate the aircraft.
First the good news: of the 28 global regions that have reported PMIs so far (the US Markit PMI is due later today), 18 posted a print of over 50, or indicating manufacturing expansion.
Now the bad news: more than two-thirds of PMIs in August deteriorated compared to July suggesting that while the global economy is not in a recession yet, absent some dramatic improvement, a global economic contraction is just around the corner.
It's a busy week for the market, and not to mention the Dow Jones-dependent Fed, which will have to parse through reports on Chicago PMI, Construction Spending, ISM (Mfg and Services), ADP, Productivity and Labor Costs, Factory Orders, Trade Balance, and the weekly highlight: Friday's Jobs reports.
The EU doesn’t seem to have any idea what’s causing the wave of refugees entering ‘its’ territory. When the refugees themselves state “we’re here because you destroyed our countries”, Brussels will simply say that is not true. That kind of admission is way beyond the consciousness of the ‘leadership’. But it’s a denial that won’t get them anywhere. The refugee issue can and will not be solved by the EU, or inside the EU apparatus, at least not in the way it should. Nor will the debt issue for which Greece was merely an ‘early contestant’. The EU structure does not allow for it. Nor does it allow for meaningful change to that structure. It would be good if people start to realize that, before the unholy Union brings more disgrace and misery and death upon its own citizens and on others.
The idea of a change towards a domestic consumption-driven economy is being revealed as a woeful disaster. You can’t magically turn into a consumer-based economy by blowing bubbles first in property and then in stocks, and hope people’s profits in both will make them spend. Because the whole endeavor was based from the get-go on huge increases in debt, the just as predictable outcome is, and will be even much more, that people count their losses and spend much less in the local economy. While those with remaining spending power purchase property in the US, Britain, Australia. And go live there too, where they feel safe(r). I fear for the Chinese citizen. Not so much for Xi and Li. They will get what they deserve.
- Global Stocks Struggle to Shrug Off China Fears (WSJ)
- Brief Respite Ends for European Stocks Amid Renewed Retreat (BBG)
- Stock futures rise after China injects $21.8 billion (Reuters)
- China turmoil needn't rattle BOJ, yen rise not a worry: Abe adviser (Reuters)
- Stock-Market Tumult Exposes Flaws in Modern Markets (WSJ)
- Dollar gains as stocks recover, lessens safe-haven bid for yen (Reuters)
Apparently, someone at the Pentagon thought that between the four-year civil war in Syria, the heightened violence in Turkey, the proxy war in Ukraine, and the threat of a new war in the Korean Peninsula, the geopolitical situation wasn’t unstable enough, because on Thursday the DoD issued a report entitled "Asia Pacific Maritime Security Strategy," in which a considerable amount of space is spent discussing China’s land reclamation efforts in the Spratlys.
As the great EM unwind continues unabated, we’ve noted that in some hard-hit countries, the terrible trio of falling commodity prices, decelerating Chinese demand, and looming Fed hike has been exacerbated by political turmoil. Now, we turn to Malaysia where an already tenuous situation just got worse as PM Najib Razak is now facing calls for a no-confidence vote amid allegations he embezzled some $700 million from the country's development fund.
Shockwaves from China’s devaluation have conspired with sluggish global demand and an attendant commodities slump to wreak havoc on developing market currencies the world over. On the heels of Kazakhstan's dramatic move to float the tenge, here's which currencies are next in line to tumble.
Courtesy of the following chart by BofA, we have the answer: while for the most part of 2015, the move in the price of oil was a combination of both supply and demand, the most recent plunge has been entirely a function of what now appears to be a global economic recession, one which will get far worse if the Fed indeed hikes rates as it has repeatedly threatened as it begins to undo 7 years of ultra easy monetary policy.
One of the big problems with China's FX move is that although they've "only" seen a 3% currency fall (in the onshore Yuan) since their announcement last week, as Deutsche's Jim Reid explains... others have subsequently followed suit either deliberately or via market pressure. Emerging Market FX has been falling for 9 straight weeks but the last 2 have seen a dramatic escalation in the carnage...
"I have learnt from history that it is very hard working out what the trigger is. In 2008, it was the collapse of Lehman Brothers that triggered a credit crunch. Now it could be a major event in Turkey or a default of the Brazilian oil company Petrobras or some event in Malaysia. But if I have to pick one I would say it is Turkey introducing capital controls. Such controls will mean that Turkey will not pay back principals amounting to 400 Bio. $ and the interests on it." - Russell Napier
Turkey Enters Bear Market As Erdogan Calls New Elections, Consumer Confidence Crashes To Six Year LowSubmitted by Tyler Durden on 08/21/2015 09:00 -0400
What began in early June with a surprisingly strong showing at the ballot box for the pro-Kurdish HDP has now ended precisely where many knew it would: with new elections.
Perhaps the biggest surprise about the overnight Chinese stock rout is which followed the lowest manufacturing PMI since March 2009, is that it happened despite repeat sellside pleas for a PBOC RRR cut as soon as this weekend: usually that alone would have been sufficient to push the market back into the green, and it almost worked when in the afternoon session stocks rebounded after dropping as much as 4.7% below the "hard" floor of 3500, but then a second bout of selling just before the close took Chinese stocks right back to the lows with the Shanghai Composite closing at 3,507, down 4.3% on the day, having wiped out the entire 18% rebound from July 8 when the PBOC first threatened both sellers and shorters with arrest.