Ian Reynolds
Sleight of Hand
Don't let the war theatrics fool you, there is a global economic and cybersecurity war out there. Countries have learnt from the Ukraine / Russia war (now a war) that unless you go nuclear then it's really difficult to get an advantage. Easier to collapse economies / currencies. Especially when some countries seem to be doing it to themselves anyway.
Biden triples tariffs on Chinese steel and aluminium, denies trade war[AFR]
Janet Yellen Missed the First ‘China Shock.’ Can She Stop the Second? [Wall St Journal]
Yellen says it is important to unlock value of Russian assets to aid Ukraine [FT]
Christine Lagarde says US plan to raise debt against Russian assets carries legal risk
'Surprising' Intensity Of Houthi Attacks Push French Warship To Exit Red Sea [Zerohedge]
Central Bank Intervention
40 years ago G5 leaders met in the Plaza Hotel in New York to sign an agreement by which the G5 nations (France, Germany, UK, Japan and the US would sell the $US against the Yen and the Deutschmark to address the trade imbalances. $US depreciated 25% against these currencies over 2 years.
However it was the start of 40 years of sluggish growth and deflation for Japan
At least there are some real leaders above.
Political heat prods Japan, South Korea to team up on weak currencies [Reuters]
China central bank governor meets with Fed chair [Yahoo Finance]
With the massive debt pile and a 2$UST budget deficit the last thing the US needs is a strong dollar. Equally other countries don't want a weak currency, a little weaker but not a lot weaker.
In fact a burgeoning $US is a wrecking ball for financial markets.
USD / YEN Monthly Since 1981
Markets always take the path of maximum pain.
Precious metals have been sniffing out macroeconomic danger
Metals Whipsawed as Sanctions on New Russian Supplies Rattle LME
Short Squeeze Fears Grip Tin as LME Says It’s Watching Market [Bloomberg]
One Bank [Finally] Says Quiet Part Out Loud On Gold Manipulation [Zerohedge]
US Economy
Chair Powell walks back interest rate cuts
Is the FED losing credibility and does anyone care ?
Powell Signals Rate-Cut Delay After Run of Inflation Surprises [Bloomberg]
US Retail Sales March 2024
Resilient retail sales show the consumer can still get credit, maybe via BNPL schemes.
BofA Stock Slammed As Humans Actually Read Earnings Report, Notice Soaring Charge-offs [Zerohedge]
Tesla layoffs include 14% of Buffalo workers, WARN notice shows [Reuters]
The stagnant housing market is beginning to have an effect on construction and the lumber chart, which was vertical upwards after COVID, is now falling out of bed.
US Housing Starts March 2024
Lumber Futures Daily
US Fiscal Debt
The IMF warned this week again about the current debt path.
IMF Steps Up Its Warning to US Over Spending and Ballooning Debt [Bloomberg]
And also that some actors are now endangering market liquidity
Some Hedge Funds Too Big to Fail for Bond Market, IMF Says [Bloomberg]
America’s Bonds Are Getting Harder to Sell [Microsoft]
There was a bright spot for bonds this week though
Stellar 20Y Auction Sends Yields Sliding To Session Lows [Zerohedge]
A low size auction, with the new Treasury mandate to buy back 20 year bonds in the background, gave the Treasury a much needed result.
BlackRock’s Kapito Says Stocks Are Primed for a Comeback [Bloomberg]
In The Background
China
China Loosens Grip on Yuan by Weakening Fix Amid Dollar Strength [Bloomberg]
China GDP Q1 2024
China Developers Slash Prices by 40% at Luxury Hong Kong Apartment Project [Bloomberg]
Vanke Says It’s Addressing Liquidity Pressure, Denies Travel Ban [Bloomberg]
China’s Private Builders Face $553 Billion Gap to Complete Homes [Bloomberg]
Japan
Japan Trade Balance March 2024
Tax
For once tax is in focus. Everyone's favourite topic.
For the last 20 years every G 7 / 8 / 20 meeting has discussed how tax revenues are falling behind against government spending. 20 years later and massive debt everywhere here come the tax hikes. Canada first, Canada being in the most desperate situation.
Tax Fairness for Every Generation [Canada Govt]
In the US fights broke out at tax offices as the public rushed to fill in their tax returns, expecting refunds in due course.
Houston IRS office closes early because of fighting [Fox26 Houston]
And at Atlanta [X]
Australia
Business bankruptcies are at a 25-year high and that’s very bad news [AFR]
Australia Unemployment March 2024
What's Next
BoJ on Friday is key. Higher Japanese rates possible. Does that mean the "wall of money" that could flow back to Japan with higher rates will eventuate.
Given that the Yen keeps getting weaker and UST yields going higher, would indicate that the carry trade is getting even better !
This Week's Important Economic Indicators [London time]
