David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Trump Ties Brazil, Argentina Steel Tariffs to U.S. Farm Woes

    This article by Brendan Murray and Joe Deaux for Bloomberg may be of interest to subscribers. Here is a section:

    Linking his trade agenda with his Fed criticism in an early morning tweet, he said the two South American countries “have been presiding over a massive devaluation of their currencies, which is not good for our farmers.”

    The president’s action amounts to retaliation against two nations that have become alternative suppliers of soybeans and other agricultural products to China, grabbing market share away from the U.S. Rural voters, including farmers, are a key constituency for Trump as he heads into the 2020 presidential elections.

    While the steel tariffs could crimp trade, the Latin American countries gain much more shipping crops to Chinese buyers. In the first 10 months of the year, Brazil has shipped $25.5 billion in farm products including soybeans and pork to China. That’s more than 10 times the value of steel and iron product sold to the U.S.

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    OPEC+ Gambles That U.S. Shale's Golden Age Is Over

    This article by Javier Blas for Bloomberg may be of interest to subscribers. Here is a section:

    Perhaps the biggest problem for OPEC isn’t American shale but rising output elsewhere. Brazilian and Norwegian production is increasing, and will increase further in 2020. After several years of low prices, engineers have made many projects cheaper, and the results are clear.

    Norway’s Johan Sverdrup oil field, the biggest development in decades in the North Sea, started up earlier this year, months ahead of schedule and several billion dollars under its original budget. And Guyana, a tiny country bordering Venezuela in Latin America, is about to pump oil for the first time.

    “For OPEC, it remains a difficult first half of 2020,” Russell Hardy, Vitol’s chief executive officer, said in an interview. “U.S. production is growing strongly this quarter and in the first half of next year we’ll add non-OPEC production from Norway, Brazil and Guyana.”

    The cartel knows well that’s taking a gamble. The group’s own estimates show that if it continues pumping as much as it has done over the last couple of months -- roughly 29.9 million barrels a day -- it would supply about 200,000 barrels more crude daily than the market needs on average next year. The oversupply would be concentrated in the first half, when OPEC estimates it needs to pump just 29 million barrels a day to prevent oil stocks building up.

    Still, OPEC officials, speaking privately, believe the world’s supply and demand balance could be tighter than many expect -- a big change from the past three years. They see non-OPEC output growth falling short of forecasts while global demand increases could be higher than expected.

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    Email of the day - on p&f charts

    I am very pleased to see you resurrecting point & figure charting in your weekly commentary. A graduate of the Spring 1990 Chart Seminar, I cut my teeth on David's p&f charts, and still find them to be an extremely useful tool for filtering out the non-essential, "noisy" price movements that can cloud our judgement. As you Brits say, "well done you!"

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    German Manufacturing Job Losses Top 100,000 With Daimler Cuts

    This article by Richard Weiss for Bloomberg may be of interest to subscribers. Here is a section:

    The full effect of the cuts -- which also affect units of German companies abroad --- may not be felt immediately. Labor laws and powerful unions make it difficult to fire workers, and many large companies have agreements banning forced dismissals, meaning job-cut programs have voluntary elements and sometimes run for years.

    Still, the deteriorating prospects for employment could turn into a headache for the German government, which has been considering following countries from China to the U.K. in beefing up investments to stimulate its economy.

    Here is a rundown of the main job cuts announced since the beginning of the year by German industrial companies. The tally includes foreign corporations that have announced cuts affecting staff in Europe’s biggest economy. It excludes the financial industry, cuts that remain unconfirmed, and programs where companies have not yet specified how many jobs will go.

     

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    China Financial Warning Signs Are Flashing Almost Everywhere

    This article from Bloomberg news may be of interest to subscribers. Here is a section:

    From rural bank runs to surging consumer indebtedness and an unprecedented bond restructuring, mounting signs of financial stress in China are putting the nation’s policy makers to the test.

    Xi Jinping’s government faces an increasingly difficult balancing act as it tries to support the world’s second-largest economy without encouraging moral hazard and reckless spending. While authorities have so far been reluctant to rescue troubled borrowers and ramp up stimulus, the costs of maintaining that stance are rising as defaults increase and China’s slowdown deepens.

    Policy makers are attempting to do the “minimum necessary to keep the economy on the rails,” Andrew Tilton, chief Asia-Pacific economist at Goldman Sachs Group Inc., said in a Bloomberg TV interview.

    Among China’s most vexing challenges is the deteriorating health of smaller lenders and regional state-owned companies, whose financial linkages risk triggering a downward spiral without support from Beijing. A landmark debt recast proposed this week by Tewoo Group, a state-owned commodities trader, has raised concerns about more financial turbulence in its home city of Tianjin.

    Concerns have popped up across the country in recent months, often centered around smaller banks. Confidence in these institutions has waned since May, when regulators seized control of a lender in Inner Mongolia and imposed losses on some creditors. Authorities have since intervened to quell at least two bank runs and orchestrated bailouts for two other lenders.

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    Gold Is New Obsession for East Europe's Nationalist Leaders

    This article by Andrea Dudik and Radoslav Tomek for Bloomberg may be of interest to subscribers. Here is a section:

     

    Instead, he said he wanted to demonstrate the strength of his nation’s $586 billion economy -- the largest in the EU’s east. Poland has doubled its gold holdings in the past two years and now has the region’s biggest stockpile.

    Hungary, though, has been an active buyer too. Gold reserves surged 10-fold last year, setting the clamor for the metal in the countries around it in motion. Serbia’s strongman leader Aleksandar Vucic took note, ordering the central bank to boost reserves and prompting the purchase of nine tons in October. Vucic said last week that more should be bought because “we see in which direction the crisis in the world is moving.”

    The biggest nation to emerge from the breakup of Yugoslavia still keeps some of its gold abroad, the central bank said by email. The region is buying more of the metal because of global uncertainty over trade and politics, Brexit and low interest rates, it said.

    Romania had also sought to relocate some of its gold reserves from the U.K., but those plans were put on hold when the government behind them was ousted in October.

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