Tuesday, 11 Dec 2018

Tariff Man tank car dispels confusion over US-Chinese trade

The ticket

He is the Fare man. They are the bears in stock. It's a dive in the market. Goo goo g'joob.

President Trump's repeated threats to raise tariffs in the absence of an agreement with Beijing – as senior government officials responded to the expectations of a breakthrough – contributed to falling inventories on Tuesday.

The Dow Jones Industrial Average posted its fourth worst-off day of the year on a percentage basis, losing 3.1%. The broader S & P 500 index fell 3.2%, falling below the 200-day moving average, a critical threshold for traders. And the technology-driven Nasdaq fell 3.8%. The declines have virtually canceled out gains since last Wednesday, when US Federal Reserve Chairman Jay Powell suggested that the central bank could moderate the pace of its interest rate hikes. This mini-gathering had gained momentum as the Trump administration appeared to declare a ceasefire in the trade war with China.

Investment managers said the Trump team's erraticism following the G-20 summit over the weekend had undermined confidence that a trade peace was coming. And confusion began at the top, with Trump starting his Tuesday by canceling his weekend statement that he had gotten "an incredible deal" in Buenos Aires. Instead, Trump said in a series of tweets, the coming weeks will reveal "If a TRUE agreement with China is really possible."

Trump doubled his threat a few hours after the market closed on Tuesday:

This happened even as the Chinese authorities broke the silence that followed the G20 to declare that they accepted the 90-day deadline of the Trump administration for a negotiation and were convinced that both parties could reach a deal. The announcement helped to contain the losses of Asian and European stocks that followed the Wall Street slips and US futures contracts showed a slight recovery.

A host of other developments have helped scare investors, as Bloomberg noted: The gap between the two and ten year treasuries has been reduced to its lowest point in more than a decade, which could trigger alarming fears in the event of a recession; British Prime Minister Theresa May's plan for Brexit suffered further defeats; and home builder Toll Brothers reiterated their concerns about the weakening of the housing market

But market observers agreed that trade concerns were the main cause of tank stocks. "The fact is that this market will be volatile as long as the rates are not clear and secure," said Jonathan Corpina, managing partner of Meridian Equity Partners.

Although investors now know that it is better to credit a single title or a presidential tweet led by Trump as the last word of a complex and evolving policy issue, Corpina said that algorithmic trading triggers a chain reaction. "The computer systems read the headlines, they trigger the exchange of programs and you get a snowball effect," he said. "The market is moving in a direction and then private and institutional investors are starting. So, the swings are much more amplified than they should be. "

Overall, the narrowing of the gap between short- and long-term interest rates on Treasuries may be more significant. A reverse yield curve means that short-term debt generates a higher return than long-term debt, as investors flock to longer-term bonds to protect against what they perceive as a long-term debt. deterioration in economic conditions.

The phenomenon has accurately predicted each of the nine recessions since 1955. And Trump's commercial turbulence could help make it a repeat now, says Nicholas Colas, co-founder of DataTrek Research. "Both are related," he says. "If you have more uncertainty because of trade and tariffs, the risk of recession is greater."

Colas pointed out that the link was direct: business leaders deciding whether to make major investments next year could be forced to wait if the trade war could worsen. "We are in the middle of the budget season, so it comes at an inconvenient time."

The Trump team did not help clarify the situation since the president's dinner with Xi.

White Hosue's chief economic advisor, Larry Kudlow, dramatically quashed Trump's statement Sunday night that China would cut tariffs on US auto imports. In fact, such a decision would be a good sign. "Also, [Treasury Secretary Steven] Mnuchin returned from Buenos Aires on Monday and said China has pledged to purchase $ 1.2 trillion worth of US goods and services – an equivalent of nine years of China's current purchases of US goods. "My colleagues Damian Paletta, David Lynch and Josh Dawsey report." Mnuchin conceded on Tuesday that the figure covered several years. "

One of the White House's top advisers said, "Nobody knows what's the deal."

"What's frustrating from my point of view of the one who manages other people's money is how much money is actually paid to a president who does not have a good idea of ​​what he's saying and the reaction of markets. " The market is not trading on fundamentals. He is negotiating tweets and worries that the trade war is going on, "said Scot Lance, managing director of Titus Wealth Management, based in San Mateo, California. "It's damaging to US and global GDP not just in the short term but in the long run."


More reaction to Tuesday's sale.

From Catherine Rampell of The Post:

Charlie Bilello, director of research at Pension Partners:

From Mohamed El-Erian, Senior Economic Advisor for Allianz:

From Luke Kawa of Bloomberg:

– New York Fed rate: more gradual rate increases are likely. Michael S. Derby of the WSJ: "A senior Federal Reserve official said that a strong economic outlook in the United States would most likely lead to a further increase in central bank interest rates over the course of the year. the next year or so, but he did not specify how much. The Fed is achieving its stable and low inflation targets and creating healthy jobs "about as well as ever," said Tuesday Fed Chairman in New York, John Williams, during a meeting. 39, an economic briefing. & # 39;I still believe that the economy is on a very, very dynamic path with a lot of dynamism, particularly with some of the headwinds in fiscal and [interest-rate] increases over the next year or so still meaning& # 39;

"His remarks reinforce the already strong expectations of the market that the Fed would increase its short-term key rate by a quarter of a point in the monetary policy meeting this month in a range of 2.25 % and 2.50%. He refrained from saying what he would like to do at the meeting and declined to weigh on the timing of future rate hikes. Mr. Williams is a close ally of [Powell], which triggered a market rally last week, signaling a new flexibility in how the central bank sets interest rates, after two years of tightening policy at a quarterly rate. "

Traders are starting to anticipate rate cuts in 2020. Liz McCormick and Edward Bolingbroke at Bloomberg News: "Treasury bonds have taken a leap forward, causing a wave of risk aversion and traders have begun to bet that the Federal Reserve will cut rates. Interest as early as 2020. Traders have reduced the expected pace of rate hikes since The main leaders of the central bank reported that growth was hampered by global growth and paved the way for a change of course. Accelerated on Tuesday, the swap market has picked up speed so that the upside cycle reaches its peak by the end of 2019 or At the beginning of 2020, the Fed's forecasts indicate that the tightening will continue and that the market point of view has accelerated this week. "

– Investors in the oil sector have confidence because supplies fear a decline. Bloomberg's Heesu Lee: "The oil has been heading for its biggest two-day advance since June, the concern over an overabundance of supply soothing the hope that the # 39, OPEC and its allies reach an agreement to stabilize the market. Futures in New York rose 1.5%, extending the 4% rise on Monday. An agreement between Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin over the weekend has suggested the possibility of an agreement on the results at the meeting of OPEC and its members. partners in Vienna on 6 December. Prices also rose after the announcement by the Canadian province of Alberta to reduce production by 325,000 barrels a day. Crude oil is rebounding after the worst monthly decline in the last decade, optimistic and convinced that the world's major oil exporters will tackle the risk of overabundance. "



China to buy soy and LNG. Bloomberg: "Chinese authorities are preparing to restart imports of US soybean and liquefied natural gas, the first sign of President Donald Trump and White House claims that China has agreed to start buying some US products. " According to two officials informed of the discussions, it was unclear whether the preparations would ensure that China abolished the retaliatory tariffs it imposed on these products or when the purchases would take place. "

And promises to crack down on intellectual property theft. More Bloomberg: "China has announced a set of sanctions likely to restrict the access of companies to the loan and financial support of the state in case of theft of intellectual property, a point of contact. 39, major stumbling block of its trade dispute with the United States … China has defined 38 different sanctions .. applies to intellectual property violations from this month … "I think this is potentially significant if implemented and lead to a reduction in intellectual property theft, "Scott Kennedy, a Chinese expert with the Washington Center for Strategic and International Studies, said," We have followed this path with China many times over. intellectual property. The attention paid by companies to intellectual property theft has increased significantly, and despite the great attention they receive, violations have increased. "

– Rates also increase the costs of public works projects. Mark Niquette to Bloomberg: "If Congress approves next year a national public works program proposed by the Democratic and Republican leaders, [Trump’s] The trade war could raise the price, which would cost taxpayers and construction companies several million dollars. . .

"It's unclear how much Trump's rates will add to the total US repair bill, but for every dollar spent on highway and bridge construction, 10 cents is spent on steel-related materials. . . Contractors are generally required to absorb price increases unless they work in one of the 13 states that allow price increases in contracts. . . The price of hot rolled coil in the United States, the benchmark of US steel, rose 20% in 2018, mainly because of tariffs. The US aluminum premium in the Midwest, plus shipping and handling costs, has more than doubled. "

– German leaders meet Trump. Jordan Fabian on the hill: "The leaders of three major German builders met [Trump] Tuesday at the White House, facing threats from the president to impose new tariffs on European cars. . . . Volkswagen Managing Director Herbert Diess, Daimler Chairman Dieter Zetsche and BMW Chief Financial Officer Nicolas Peter were among the leaders to meet Trump. . . .

White House Economic Adviser Larry Kudlow told reporters on Monday The meeting did not say that the Trump administration was "moving towards auto tariffs", but rather aimed at encouraging German builders to invest and manufacture more in the United States. Trump has threatened to lower tariffs on European cars after General Motors announced that it would close several factories and cut thousands of jobs in North America, citing slowing sales of cars and electric vehicles . "

– Mnuchin: Congress should pass the USMCA Trump pact without changing it. More on the Hill: "Treasury Secretary Steven Mnuchin on Tuesday rejected the bipartisan critique of the renegotiated North American trade pact of the Trump administration and urged Congress to agree the deal without change," said Mr. Mnuchin.Trump expects Congress to approve an updated version of the North American Free Trade Agreement (NAFTA) as written and terminate the original agreement if lawmakers refused . . . Although Trump and his key collaborators have boasted that they have completed an important agenda item, the agreement will not be official until it is approved by the legislatures. [the U.S., Mexico and Canada]. Democrats and a handful of Republicans have denounced the new North American Free Trade Agreement (NAFTA), threatening its chance of being passed by Congress. "



Jamie Dimon: A recession would not matter. JPMorgan Chase, CEO of Jamie Dimon, told CNBC on Tuesday: "I do not consider the recession a bad thing. I mean, it's bad for America. It's bad for unemployed people. this is usually an opportunity for JP Morgan. So, I'm not sitting there saying, "Oh my god, it's terrible. The gains will be down. I say, "OK, what are we going to do, to do even more than what we want to do." So, I think there will also be opportunities in times of economic downturn, which we hope to be prepared for. "

Activists follow Dimon in the United States. Michelle Davis and Bloomberg's Max Abelson: "JPMorgan is so big and profitable, and the billionaire has so much influence that it's followed in the US by a growing number of critics who want the bank to join them in fighting climate change. abuse of rights and private prisons. They tried to get his attention by climbing the Park Avenue flagpoles, blocking traffic in Seattle with teepees, organizing lectures and spreading sounds of crying children outside his apartment. "

From Julia Horowitz from CNN Business:

– Walmart hired robotic janitors to clean floors and collect data. Peter Holley, The Post: "The latest Walmart conservation tool may look like a mini Zamboni, but rather a Roomba, the sweeping robot on floors all over the world. This week, the big box retailer has announced plans to install 360 autonomous robots in Walmarts across the country by the end of January. Their job: clean the store's wide aisles and collect data. . . . Automation will allow workers to perform new tasks in certain sectors, but it will not prevent millions of people from having to change jobs or improve their skills in the coming years. "

– China's maneuvers to seize Boeing's top-secret satellite technology Brian Spegele and Kate O'Keeffe, WSJ: "Workers at a Boeing Co. plant in Los Angeles are about to complete the construction of a new satellite, which uses a limited technology on which the military American resort. It was commissioned by a local startup looking to improve web access in Africa. In reality, the satellite is funded by the Chinese state money, according to company records, court documents and people close to the project.

"About $ 200 million has been donated to the satellite project by a state-owned Chinese state-owned financial corporation as part of a complex deal involving foreign companies to transfer Chinese money to Boeing. . . Such technology would help China solve the puzzle that is missing as China seeks superpower status alongside the United States. This would strengthen China's burgeoning space program, as well as initiatives to dominate leading industries and expand its influence in developing countries. "

– You share more than you think when you use Venmo. WSJ again: "Venmo does what she's supposed to do: allow friends to exchange money quickly and easily. By default, it records these transactions in a social media feed: see who has shared meals and drinks with whom, and the emoticons they prefer, can make an otherwise boring and entertaining process. Theoretically, Venmo allows users to control who sees these published elements. But Venmo has an uneven history of privacy and confidentiality. "

– Stephen K. Bannon and a fugitive billionaire discover a common enemy in China. David Barboza, NYT: "Only a few months after being chased out of the White House, Stephen K. Bannon, [Trump’s] former chief strategist, met a Chinese billionaire on the run in a sequel to the luxurious Hay-Adams hotel in Washington. Billionaire Guo Wengui, also known as Miles Kwok, lived in New York and landed on the list of the most wanted people in China, accused of corruption, fraud and money laundering. He was also a dissident and a fierce critic of Beijing, asking for political asylum in the United States. And Mr. Bannon, increasingly obsessed with the emerging threat to China, was eager to talk about the Communist Party, corruption, and US naval operations in the South China Sea. Since their first discussion in October 2017, they have met dozens of times. . . . It is an unusual partnership between two political gadgets with a common goal, albeit too big, to end the Chinese Communist Party's disappearance. "

Money on the hill


How the Trump team has mastered the CFPB. Robert O. Harrow Jr., Shawn Boburg and Renae Merle: "One Year Later [Mick] After Mulvaney's arrival, he and his political advisors forced the agency to come in from the inside, realizing what the Conservatives of Capitol Hill had been unable to do for years, according to data from the agency and interviews with career managers. The enforcement measures announced publicly by the office have dropped about 75% from the average in recent years, while consumer complaints have reached new heights, according to an analysis of the office data carried out. by the Washington Post. In the past year, the agency's workforce has fallen by at least 129 employees as part of the largest exodus since its inception in 2010, according to agency data … "

Mulvaney recruited political figures to oversee each division, "some receiving salaries of up to $ 259,500.They had little experience in consumer protection or managing large groups of people," he says. However, many had a common profile, having worked for the financial sector Two others had also worked as Hensarling aides, one of them being a former financial lobbyist, depending on their resume, another lawyer, who had stated that the office was "unconstitutional" and represented a bank accused of deceptive practices., legal documents show. "

The Ministry of Justice demands 4 against the Panama Paper tax regime. Devlin Barrett, of the post, said: "The Justice Department on Tuesday accused four people of concealing tens of millions of dollars at the Internal Revenue Service – the first indictment. US for alleged tax fraud revealed in 2016 through Panama Papers.include a former investment manager, a former US resident, a US accountant and a Panamanian lawyer who previously worked for the firm at the center of the case, Mossack Fonseca.

"Panama Papers" is the name given to a treasure trove of more than 11 million documents from the firm Mossack Fonseca, which a consortium of journalists made public in April 2016, giving rise to criminal investigations throughout the country. Europe on possible tax evasion and money laundering. An unsealed indictment in New York to 11 counts marks the first time that the US government has accused anyone of tax offenses related to the firm – and the authorities have suggested that others can be charged. "

Trésor recommends reviewing postage rates, not just for Amazon. Siegel, Rachel Postgel: "A working group commissioned by [Trump] to evaluate the business model of the postal service, he recommends a series of options to make it more profitable. But it did not go so far as to say that the postal service, in financial difficulty, was losing money to Amazon, a company that outsources postal services and has always attracted Trump's anger. . Although the 70-page report does not specifically mention his contract with Amazon, he recommends a reassessment of pricing for ecommerce packages and non-essential mail sent by companies such as Amazon. "(The CEO of Amazon, Jeff Bezos, also owns The Post Office.)


Be there soon:


– Bruce Eric Kaplan of the New Yorker:


From the end of the show with Stephen Colbert: "The fare man may have been spoken too soon"

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