Gold dips as trade optimism benefits riskier assets trade deal doubts persist
November 25, 2019
“Gold edged down to a one-week low on Monday after the United States and China expressed willingness to sign an initial trade deal by year-end, boosting market sentiment and driving investors to higher-risk assets. Having fallen for the previous three sessions, spot gold was down 0.3% at $1,457.03 per ounce at 1201 GMT, after earlier touching its lowest since Nov. 18 at $1,455.90. U.S. gold futures were down 0.5% at $1,456.90. ‘The ultimate threat of a full escalation into a trade war, with bans and boycotts, is off the radar screen at least for the moment,’ Julius Baer analyst Carsten Menke said.
‘The markets are being comforted by recent (trade) developments. That’s why equities are high,’ he said, adding firmer stock markets are keeping gold prices range-bound between $1,450-$1,480. European shares rose for the second straight session following reports that Washington and Beijing were very close to an initial trade deal. Adding to the positive mood around the trade negotiations was the weekend announcement that China would seek to improve protections for intellectual property rights, a move seen to address a sticking point between the parties.”
MARKET WATCH/Emily Bary
Earnings recession to swallow all of 2019 after holiday forecasts disappoint
November 25, 2019
“The holiday season is no longer expected to pull corporate earnings out of a recession that has lasted the entire year. Earnings in the S&P 500 index are now projected to decline 1.51% in the fourth quarter from the year before, according to a FactSet computation of analysts’ average forecasts for individual companies. An earnings recession is defined as two quarters or more of consecutive year-over-year declines, and earnings for S&P 500 components dipped in the first two quarters of 2019 and are all but certain to do so again in the third quarter — with nearly 95% of calendar third-quarter reports posted, earnings have dropped 2.34%, the biggest decline this year.
The last time profits decreased for four quarters in a row was in the period beginning with the third quarter of 2015, FactSet’s senior earnings analyst John Butters told MarketWatch in an email.
Three-fourths of earnings recessions since World War II have morphed into economic recessions, said CFRA Chief Investment Strategist Sam Stovall, who told MarketWatch that he has been ‘scratching his head’ trying to reconcile analyst pessimism around earnings with continued stock-market rallies.”
Mexico’s Economy Suffered Slight Recession in First Half
November 25, 2019
“Mexico suffered a slight recession in the first half of the year, revised data showed, painting an even bleaker picture of a stagnant economy. The nation’s $1.2 trillion economy shrank 0.1% on a seasonally adjusted basis every quarter from the end of last year through the first half of 2019, according to data released by the national statistics institute on Monday. Previous figures had showed a flat economy in the second quarter of this year and a 0.1% expansion at the end of 2018. A technical recession is defined by two consecutive quarterly contractions.
Analysts forecast Mexico’s gross domestic product to grow just 0.2% this year, the least since 2009, amid low oil output, slumping construction and stalled services activity. President Andres Manuel Lopez Obrador had repeatedly denied that the nation was in recession and said that defining the economy’s success by GDP growth is an outdated neoliberal concept that doesn’t take into account happiness and well-being. Monday’s data also showed that the economy was flat in the third quarter in seasonally-adjusted terms, compared with a previous reading of 0.1% growth. Lopez Obrador has pledged to lift growth to 4%, but his decision to scrap a $13 billion airport project and a slump in construction have pummeled the country’s building industry. ‘Activity is just not growing, and we continue to get more evidence that consumption and household demand keep losing momentum,’ said Felipe Hernandez, a Latin America economist at Bloomberg.”
China’s slowdown is not the key problem for global growth — the trade war is
November 25, 2019
“China’s slowing growth rate should not be a worry but an unresolved trade war between the world’s two largest economies should be, Paul Gruenwald, chief economist at S&P Global Ratings, told CNBC. ‘We’ve been arguing for some time that China slowing from a 7-8% back then to a 5.5% is a broadly healthy development,’ Gruenwald said adding that China’s labor force is currently ‘either flat or shrinking,’ therefore the GDP per capita growth is still strong. In fact, the strained trade relationship is putting a greater dent on global growth than the direct impacts of tariffs. ‘All the uncertainty around U.S.-China (trade relationship) is putting a damper on investments. You don’t know where the world’s two largest economies are going and what the investment environment is going to be,’ he said.
As the trade war intensifies, many American companies are moving supply chain logistics out of China and into Southeast Asian nations, namely Vietnam and the United States’ southern neighbor, Mexico. But that supply chain reconfiguration between U.S. companies and Chinese manufacturers is not significant enough to move ‘the macro data,’ Gruenwald argued. What is affecting investment sentiment and long-term plans for companies is that they are uncertain about how to execute their five-year strategy plans, he said, and that is why companies are dialing back on spending.”
SOUTH CHINA MORNING POST/William Zheng and Echo Xie
China tries to brush off pro-democracy victory in Hong Kong election and blames ‘foreign forces’ for interfering
November 25, 2019
“Mainland China on Monday tried to brush aside the landslide defeat for the pro-establishment camp in Hong Kong’s district council elections with news of the results being heavily censored. State media preferred to focus on calls for law and order to be preserved and the accusation that Western countries had been instigating unrest. Official media outlets only ran brief reports on the vote, with state news agency Xinhua declining to report the results, in which the pro-democracy camp took control of 17 out of 18 councils.
‘According to the announcement by the Electoral Affairs Commission, all 452 district councillors of 18 districts have been elected,’ it said. The report continued: “In the past five months, violent rioters who wanted to turn Hong Kong upside down have colluded with foreign forces … non-stop social unrest has seriously disrupted the election process, and some troublemakers have harassed individual patriotic candidates on the election day. ‘At present, putting an end to the violence and restoring order remain the paramount tasks of Hong Kong.’ People’s Daily, the Communist Party’s mouthpiece, said in a commentary published on its Weibo account that Sunday’s elections had been held under the ‘shadow of black terror’ and praised the Hong Kong police for doing their best to ensure a ‘peaceful, safe and orderly’ poll.”
BUSINESS INSIDER-AOL/Akin Oyedele
‘We see a springtime recession’: Wall Street firm counting down to next crisis
November 24, 2019
“Mark your calendars: Spring 2020 is when the next recession will arrive, according to Société Générale. Many other firms, including Goldman Sachs, are taking the stock market’s return to all-time highs as a cue that the economy will rebound in the months ahead. But SocGen is unfazed, singling itself out as a contrarian on Wall Street with this call. It forecasts gross domestic product growth of 0.7% next year, which is well below the consensus expectation for 2.3%. If SocGen’s forecast is correct, a recession would unexpectedly end the record-long expansion, injure the bull market in equities and throw a wrench into the reelection campaign that President Trump has tightly hinged on his economic wins.”
“The general inability of economists to forecast recessions with precision is not lost on SocGen. After all, they originally expected a recession to arrive in 2018, only for tax cuts to keep the economy afloat.
However, their conviction has increased over time, and they now doubt that the stimuli needed to support the economy will be adequate going forward. They see limited scope for more fiscal support after the massive and politically divisive tax cuts. And the Federal Reserve has already offered a series of insurance rate cuts this year that returned its benchmark interest rate towards zero. Also this year, recession signals like the yield curve and probabilities measured by the New York Fed hit post-crisis milestones, indicating that all was not well. SocGen additionally sees ‘clear signs of weakness’ coming from business sentiment.”