Tag Archives: Trade war

The ECB lowered the interest rate to -0,5% and Trump wants to do the same

What a day. A very important day for Europe and the rest of the world. The ECB left its main refinancing operations rate unchanged and lowered the deposit interest rate by 10bps to -0,5 percent. Not only that; policymakers also approved a new round of bond purchases at a monthly pace of €20 billion as from November 1st.

They do this because we have Brexit and trade war with China and the plan is to boost growth. At the same time, the ECB lowered its GDP forecasts to 1,1 percent this year. Inflation expectations were also slashed to 1,2 percent in 2019.

President Trump attacked the FED, calling Fed Chair Jerome Powell and other members «boneheads» for not driving the U.S interest rates down to zero, or less. Trump explained that he wanted negatie rates in order to refinance the outstanding $22 trillion in government debt and lengthen the term.

Right now, there is a $16 trillion in negative yielding debt around the globe. What a number! Historically, negative rates have been used as an anti-recession tool to boost growth when the economy is weak.

But negative interest rate have now become much more common. Just take a look at the value of the negative-yielding debt over the world. It has shot up to $16 trillion, according to BofA.

If you have your money in your bank, it means you have to pay your bank to lend them your money. Crazy right? Normally, you will get paid from the bank if you have your money there, but with negaive interest rate, it is turned up side down.

Similarly, with government-issued debt, global investors also pay money to hold a bond with negative yields because the premium that they initially paid for it exceeds the total interest they receive over the life of the bond.

Switzerland have negative interest rate at -0,75 percent. Denmark; -0,65 percent. Sweden; -0,25 percent and Japan; -0,10 percent.

Other countries in Europe are near negative interest rate. All these countries have zero interest rate; Spain, Slovakia, Slovenia, Portugal, Netherlands, Malta, Luxemburg, Latvia, Italy, Ireland, Greece, Germany, France, Finland, Euro Area, Estonia, Cyprus, Bulgaria, Belgium and Austria.

In comparison; the U.K have 0,75 percent interest rate and the U.S have 2,25 percent. The U.S lowered the rate for the first time in July for the first time since the financial crisis, as inflation remains subdued amid hightened concerns about the economic outlook and ongoing trade tensions with China.

The U.S economy is good, but the global economy is slowing, notably in Germany and China. There are also growing possibility of a hard Brexit, rising tension in Hong Kong, and dissolution of the Italian government. Fed Chair Jerome Powell have a great challenge.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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Stocks plummet on China tariffs and Trump tweets

Trump escalates the trade fight between the U.S and China and rips Federal Reserve President Jay Powell. Trump tweeted earlier today that «Starting on October 1st, the 250 Billion dollars of goods and products from China, currently being taxed at 25%, will be taxed at 30%.

…..Additionally, the remaining 300 Billion dollars og goods and products from China, that was being taxed from September 1st at 10%, will now be taxed at 15%. And all that led to a Market chaos on Friday.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Xi Jinping has been elevated to the same level as Mao Zedong

The largest political event of the year in China is «two sessions.» The National Peoples Congress (NPC) is the national legislature of the Peoples Republic of China. The party have 2,980 members (2018) and it is the largest parliamentary body in the world.

As the NPC and the Peoples Political Consultative Conference (CPPCC) are the main deliberative bodies of China, they are often referred to as the Lianghui (two sessions). Its annual meetings provide an opportunity for the officers of state to review past policies and to present future plans to the nation.

 

In theory, the NPC is the highest organ of state power in China, and all four PRC constitutions have vested it with great lawmaking powers. In practice, however, it usually acts a rubber stamp for decisions already made by the state`s executive organs and the Communist Party of China.

One of its members, Hu Xiaoyan, told BBC in 2009 that she has no power to help he constituents. She was quoted as saying; «As a parliamentary representative, I don`t have any real power.» But the Chinese leader Xi Jinping have.

The parliament is expected to rubberstamp major constitutional changes that will elevate the power of President Xi Jinping which means Xi Jinping has been elevated to the same level as Mao Zedong.

It will also confirm dropping China`s two-term presidential limit which means Xi could stay in power for life, leading China according to his new ideological guidelines, known as «Xi Jinping Thought».

Lianghui last between one or two weeks and this year the CPPCC started on 3 March and the NPC started on 5 March. The Chinese premier Li Kequang said that people in China must be fully prepared for a tough struggle. He warned that there will be greater risks ahead for China.

«Two sessions» comes amid tariff tensions with the U.S which is Chinas largest trading partner. As you may know, the U.S have placed huge pressure on Chinas economy and financial markets. Therefore, Li said that the growth target for 2019 will be 6,0 to 6,5 percent.

This years growth is in line with economists’ expectations. Last year, the Chinese economy grew at its slowest pace since 1990, expanding by 6,6 percent in 2018.

Last year, President Trump announced additional tariffs on $250 billion worth of goods from China and Li warned that the trade war with the U.S has so far had a negative impact on business activities in China.

But the tariff battle could soon ease while the two largest economies in the world are in the final stages of the trade deal that could end this month. Li reiterated Beijing`s commitment to «safeguarding economic glabalization» and pledged to promote China-U.S trade negotiations while advancing negotiations on other trade agreements.

Retail sales in China have slumped and as a result of that they are doing what President Trump did; they will cut the taxes and boost the growth.

Li told the NPC that China would aim to deliver nearly 2 trillion yuan ($4298bn) of cuts in taxes and other company fees. It plans to boost spending and increase foreign firms’ access to its markets.

China will also increase its military budget by 7,5 percent to 1,2 trillion yuan. The country`s defence spending is closely watched for any signals as to its military intentions.

A slower growth in China is not good news for the West. A slower growth in China means that they will buy less from the West while it accounts for one-third of the global growth.

But take official growth figures from China with a pinch of salt. For all I know, I could be as low as 5 percent, but tax cuts could push the growth up again. In the longer run, the growth will continue to decline.

The richer China get, the slower the growth will be.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Wilbur Ross said China is running out of bullets in trade dispute

Wibur Ross said China is running out of bullets in trade dispute. The U.S made a great deal with Mexico and Canada have a few days left to make a new deal. In the meantime, the tariffs on China is now 10 percent, or $200 billion on Chinese exports.

The U.S exports less to China than China exports to the U.S. Therefore, this trade war will hurt China more than the U.S, and President Trump`s regulations and tax cuts is whats really driving the U.S economy right now.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

 

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Alibaba is doing it well but the stock is declining while we are witnessing a divergence in EM and US tech

Alibaba is a great company. A chinese e-commerce giant I have collaborated with many year before it went public in the U.S. The firm have a strong fundamentals, but despite that, Alibaba has declined about 20 percent in the last 8 weeks.

This is very interesting because Alibaba grew revenues by nearly 60 percent, and I don`t think it will stop here at all. Nor is it expensive if we measure it with forward earnings which is about 32,4 right now. There must be something going on here.

Like we saw in Kohls a few days ago, maybe there is some profit taking here. Kohls has skyrocketed last 12 months. Up about 100 percent. But Alibaba has declined about 20 percent last two months.

I think it can be the fear of the coming trade war. There has been a carnage in the Chinese tech sector recently. We saw a collapse in Tencent. A company that lost more than Facebook`s drop. We also saw a big drop in JD.com following poor earnings.

What we are witnessing is a divergence in EM and US tech. Since June, the EM tech sector has accounted for about 40 percent in the value of EM equities. Both, the EM and the US tech sector has jumped about 50 percent to the end of June, but since then, the US tech sector is up by 5 percent, while the EM tech sector is down 6 percent.

This is very bad news for EM tech investors. JPM`s quant guru, Marko Kolanovic also spotted this bizarre phenomenon, and in a note he said that “the recent divergence in the performance of US Equities vs the rest of the world is unprecedented in history.”

Kolanovic also looks at price momentum which he finds is «positive for US stocks and negative for Europe and Emerging markets across all relevant look back windows, and this has never happened before.»

As Kolanovic summarizes: “buybacks are creating a shortage of US stocks, the Fed is creating a shortage of US dollars, and Trump`s trade wars and sanctions are further boosting the USD.”

You can clearly see how Alibaba reached an all-time high in the mid June, trading above $210, and then, alongside other Chinese tech stocks that has declined. The stock is also following the divergence trend.

All this is happening despite the fact that the firm is doing it well. The Amazon of China, are also operating three main sites like Taobao, Tmall and Alibaba. In addition, they have a cloud computing firm, and they grabbed 4 percent of the cloud computing market share last quarter.

Thats far beyond Amazon and Microsoft, but near IBM with 8 percent and Google with 6 percent, according to Synergy Research Group. Alibaba stock is up about 170 percent over the last three-year, but some investor fear that Alibaba can be negatively impacted by the ongoing trade dispute between the worlds two largest economies, which is reportedly starting to hit China harder than anticipated.

Alibaba stock is up about 170 percent over the last three years, which outpaced its industrys 96 percent.climb and the S&P 500s 50 percent jump. But the trade war can hit Alibaba more than we like to think. On top of that, the Chinese economy is slowing. The stock is up only 2,3 percent last 12 months, while S&P 500 is up 17 percent and its industry gained 37 percent.

Investors will await data on Alibabas cloud business, which is expected to nearly double YoY growth for its June quarter. Customer management revenue for Alibabas China Commerce Retail segment, which is driven by ads shown on Taobao and Tmall, rose 35 percent last quarter. The segment`s commisssion revenue, which is driven by Tmall, rose 39 percent.

Jack Ma must have done something right with its intime department stores and innovative Hema supermarkets, as well as Ele.me, which is set to merge with Alibaba`s Koubei local services JV and its Tmall Direct Import online store.

Alibabas China Commerce Retail segment rose more than 10-fold annually in June quarter. Cainiao is also contributing to Alibabas revenue growth.

«We belive the future of New Retail will be a harmonious integration of online and offline, and Hema is a prime example of this evolution that`s taking place,» Daniel Zhang, CEO of Alibaba Group said. «Hema is a showcase of the new business opportunities that emerge from online-offline integration.»

Alibaba Group Holding Limited is expected to report earnings on Thursday 23, 2018, before market open. The report will be for the fiscal Quarter ending June 2018, and the consensus EPS forecast for the quarter is $0,75 vs $0,94 for the same quarter last year.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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