Just days after Japanese PM Shinzo Abe leaves Washington (having stepped up his nation's military assertiveness), The Wall Street Journal reports that the US Secretary of Defense has asked staff for military options in the South China Sea (as we have detailed China's land reclamation efforts): U.S. MAY USE MILITARY TO CONFRONT CHINA IN SPRATLY ISLANDS DISPUTE: WSJ Having ironically commented on China's "bullying," it appears Nobel-Peace-Prize winner President Obama is preparing for an even bigger objective, amid China's rising threat to USD dominance (with Yuan liberalization and AIIB success).
As data on non-performing loans at Chinese banks shows the biggest sequential increase on record in Q1, Fitch wonders if perhaps the data actually obscures a far larger problem. Official figures on China's NPLs are obscured by a number of factors and may be grossly understated the ratings agency suggests. Furthermore, Fitch says "a protracted downturn in property markets could threaten the solvency of Chinese banks, given their modest loss-absorption capacity."
How five investment themes will evolve in the week ahead.
On the heels of last week's equity rout, China cuts interest rates for the third time since November. The move comes on the heels of last month's RRR cut and follows trade data that missed expectations (again) and a PPI print that betrayed persistent deflation risks. Perhaps more importantly, Chinese stocks fell last week amid still more rumors that tighter margin requirements are on the way.
A straightforward analysis of the near-term outlook for the dollar, oil, 10-year US and German yields and the S&P 500.
"It is clear that the correction in external trade cannot be easily explained by the CNY distortion factor. The exports would be more struggling from the soft demands from the major trade partners and deteriorating international competitiveness in the low end manufacturing sector."
While we are sure President Obama will find a way to comment on today's jobs number (focusing on the unemployment rate we suspect and not the quality of jobs or record number of people out of work), his main topic of discussion is how wonderful the ultra-secret "Trans-Pacific Partnership" deal is for Americans... and why congress must pass it asap.
In a remarkably unbalanced and lazy article on gold this month the Economist magazine attempts to dismantle the case for investors and others to own gold. Both from an investment point of view and also from an ethical point of view. The article is so laughably one sided that it resembles propaganda rather than journalism. Therefore, we take pleasure in dissecting the article misleading sentence by misleading sentence.
- Ed Miliband, Nick Clegg and Nigel Farage resign as Tories sweep to victory (Telegraph)
- Bonds and stocks rebound, sterling soars after UK election (Reuters)
- Cameron Set to Return With U.K. Majority as SNP Sweeps Scotland (BBG)
- Tory win brings marked EU exit risk (Reuters)
- Why did Labour lose this election? It never tried to win it (Telegraph)
- Stock Buybacks Hit New Records (WSJ)
- Hard Money Comes Easy as Wall Street Funds Home Flippers (BBG)
- Justice Department to Investigate Baltimore Police (WSJ)
- Saudi Arabia mulling land operations on Yemen border (Reuters)
Since robots entering the workforce is probably one of the most significant economic trends in the decades ahead, we should all start thinking about how to deal with what will be a major adjustment for hundreds of millions, if not billions, of people.
"China conducted trial runs for the planned launch of a yuan-denominated gold fix last month, in a sign the world's second-biggest bullion consumer was moving closer to creating a benchmark price," Reuters says, in yet another example of Beijing's rapidly expanding global influence.
"If you want to hear the details of the Trans-Pacific Partnership trade deal the Obama administration is hoping to pass, you’ve got to be a member of Congress, and you’ve got to go to classified briefings and leave your staff and cellphone at the door. If you’re a member who wants to read the text, you’ve got to go to a room in the basement of the Capitol Visitor Center and be handed it one section at a time, watched over as you read, and forced to hand over any notes you make before leaving. And no matter what, you can’t discuss the details of what you’ve read."
As a result of constant jawboning that the PBOC may not only cut rates even more but proceed to launch QE (which it will ultimately, just not for a while), both the Shanghai Composite has been trading at multi-year highs and oil has found a bid strong enough that in the past two months it has surged by some 50% on hopes that Chinese demand will finally come back once the local economy is so weak it leaves the PBOC no other choice. However, two things suggest that the great "reflation" trade is ending.
Here is more insight to the recent USD rally... And why nothing looks like it seems!
China, the world’s largest gold producer and buyer, feels its market weight should entitle it to be a price setter for gold bullion. It is asserting itself at a time when the established benchmark, the century-old London ‘gold fix’, is under scrutiny because of long-running allegations of price manipulation.