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

    Stocks Aren't Wild About Crazy-Like-a-Fox Leaders

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

    I originally used Occam’s Razor, and decided the likelier explanation lay in utter failure to understand the workings of currency markets and international trade. But it is just possible that Trump is being crazy like a fox.

    Either way, stock markets disliked the new tariffs, which spoiled the good cheer that had been spread by surprisingly good Chinese manufacturing data announced over the weekend. The dollar fell, and bond yields rose. Global stocks had one of their worst days in a while, dashing the chance for the MSCI All-World index to set its first record since the January 2018 high. The index reached within 0.12% of the landmark before slipping:

    On top of the Chinese news, there was also relatively encouraging news from the eurozone. Germany is particularly reliant on the auto sector, and on exports, and this has made it the most obvious victim of the trade war to date. But the latest Markit purchasing manager indexes for eurozone manufacturing show a pattern of clear recovery from a very low base. (As is usual, the indexes are set so that 50 should be the border between expansion and contraction):

    All of this was enough to help European stock markets open a tad higher, and should have been enough to bring world stocks to their record. Then came the presidential tariff-by-tweet, followed by some deeply disappointing U.S. manufacturing data. Thanks to the U.S. consumer, the American economy remains in good health, but the manufacturing sector looks more and more as though it is in recession. There are some idiosyncratic factors to explain this (the troubled aircraft-maker Boeing Co. being the greatest one), but the PMI is now at 48.1, and has been below 50 for four months in a row. So far, this manufacturing downturn is comparable to the one at the beginning of 2016, which also lasted four months and bottomed at 48. That one ended with Chinese stimulus and a recovery, without a recession.

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    Europe Set to Overhaul Its Entire Economy in Green Deal Push

    This article by Ewa Krukowska and Nikos Chrysoloras for Bloomberg may be of interest to subscribers. Here is a section:

    The EU plan, set to be approved as the high-profile United Nations summit in Madrid winds up, would put the bloc ahead of other major emitters. Countries including China, India and Japan have yet to translate voluntary pledges under the 2015 Paris climate accord into binding national measures. U.S. President Donald Trump has said he’ll pull the U.S. out of the Paris agreement.

    In a pitch of her Green Deal to member states and the European Parliament on Dec. 11, von der Leyen is set to promise a set of measures to reach the net-zero emissions target, affecting sectors from agriculture to energy production. It will include a thorough analysis on how to toughen the current 40% goal to reduce emissions by 2030 to 50% or even 55%, according to an EU document obtained by Bloomberg News.

    Make It Irreversible
    In the next step, the commission will propose an EU law in March that would “make the transition to climate neutrality irreversible,” von der Leyen told the UN meeting. She said the measure will include “a farm-to-fork strategy and a biodiversity strategy” and will extend the scope of emissions trading.

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    Email of the day on corruption in India:

    Thank you for your wonderful service once again. My day starts every morning with listening in to your Video Commentary of the Day along with my tea. All other comments and blogs are seen much later after I reach office.

    As I recall, from our first meeting in 2012 you have always had a strong positive view on governance in India. At a closer range the warts are more visible to us.

    You may find a different viewpoint from your stance on the going-ons in India. This is an article published in the Times of India, the foremost newspaper in India and traditionally and currently pro- the current regime. You may find it interesting.

    https://timesofindia.indiatimes.com/blogs/Swaminomics/how-bjp-is-fast-becoming-like-congress-in-graft/

    Hope all is well at your end.

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    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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