S&P Futures Jump To Five Month High, Dollar Spikes In Bullish Start To New Month

S&P Futures Jump To Five Month High, Dollar Spikes In Bullish Start To New Month Tyler Durden Mon, 08/03/2020 – 08:19

World stocks rose and US futures jumped to the highest level since late February even as U.S. lawmakers struggled to agree on the next round of coronavirus aid while Covid cases around the globe continued to rise, while a squeeze on crowded short positions left the dollar clinging to a tentative bounce.

S&P 500 futures turned higher, reversing earlier losses with Microsoft rising in pre-market trading as it tried to salvage a deal for the U.S. operations of TikTok. Marathon Petroleum jumped after agreeing to sell its gasoline-station business for $ 21 billion. Still, investors remained jittery amid the lack of a progress on the stimulus package and White House Chief of Staff Mark Meadows not optimistic about a deal.

“Three months to go until the U.S. Presidential election! Surely Congress will want to get something over the line regarding new stimulus in the U.S. driven more by politics than necessarily economics,” said Chris Bailey, European strategist at Raymond James.

On Friday, Fitch Ratings cut the outlook on the United States’ triple-A credit rating to negative from stable and said the direction of fiscal policy depends in part on the November election and the resulting makeup of Congress, cautioning that policy gridlock could continue. However, as Reuters notes, those concerns have hardly hit the U.S. technology sector, evident in Friday’s record highs, with Apple overtaking Saudi Aramco to become the world’s most valuable company.

In Europe, stocks were up over 1% with all but four sector indexes advancing, with gains led by automakers, technology and chemicals sub- indexes, which are all up at least 1.7%. Travel and leisure stocks are the worst performers. Technology stocks rallied on positive read-across from peers on the other side of the Atlantic, while automobile shares jumped after the euro area recorded its first manufacturing expansion in one-and-a-half years when the final Eurozone mfg PMI printed at 51.8, above the 51.1 expected.

Spanish stocks, meanwhile, declined on Monday as the country saw the biggest jump in coronavirus cases since a national lockdown was lifted in June, while data showed international tourist arrivals to the country fell 98% year on year in June.  “Second wave virus concerns are building in Australia, Europe etc. but no huge risk-aversion move,” said Bailey.

European gains were also limited by a selloff in big banks’ shares, with index heavyweight HSBC falling 5% to a fresh 11 year low after it warned that its bad debt charges could surge to as much as $ 13 billion, and France’s Societe Generale reported a 1.26 billion euro ($ 1.48 billion) second-quarter loss.

Earlier in the session, Asian stocks also gained, led by communications and health care, after falling in the last session. Most markets in the region were down, with Jakarta Composite dropping 2.8% and Singapore’s Straits Times Index falling 1.9%, while Japan’s Topix Index gained 1.8%. The Topix gained 1.8%, with ISB and ITmedia rising the most. The Shanghai Composite Index rose 1.8%, with Raytron Technology and Piesat Information Technology Co Ltd posting the biggest advances as investor margin debt resumed its climb.

Factory activity data from China showed the fastest pace of expansion in nearly a decade.

That helped China’s blue chips rally 1.6%, offsetting worries about U.S.-China relations. Japan’s Nikkei meanwhile added 2.2%, courtesy of a pullback in the yen.

“There is going to be a recovery — we shouldn’t lose track of that as we go through this period,” Anne Anderson, head of fixed income at UBS Asset Management Australia, said on Bloomberg TV. “But returning to where we were before we started is going to be a real challenge and is going to require ongoing monetary and fiscal support. It’s a long way out of here.”

Meanwhile, tension between the U.S. and China emerged as another threat to risk appetite. The Trump administration will announce measures shortly against “a broad array” of Chinese-owned software deemed to pose national-security risks, U.S. Secretary of State Michael Pompeo said. Even so, shares advanced in Japan and China, where mainland-listed technology stocks surged on expectations of support from Beijing in response to U.S. moves against Chinese-owned software companies.

In FX, Dollar bears also took some profits as short positions hit an 11 year high, with the Bloomberg Dollar Spot Index heading for its biggest two-day gain in seven weeks, with the greenback rising against all Group-of-10 peers except the Swedish krona and the yen.

but any further gains were capped by the slowing U.S. economic recovery from COVID-19 and real rates breaking below -1% for the first time. 

The real 10Y rate hit a record low amid a marked flattening of the yield curve as investors wager on more accommodation from the Federal Reserve.

The euro and the pound were down only slightly with the dollar at $ 1.1755 per euro and $ 1.3065 per pound. Both the currencies recorded their best monthly gain in nearly a decade in July.

“Amid improvements in business sentiment, signals are emerging that the initial boost from pent-up demand is fading and consumer confidence is slipping lower,” economists at Barclays wrote in a note. “Together with concerns about labour market and virus developments, this clouds the outlook and could be exacerbated if U.S. fiscal support is not renewed in time.

In rates, 10-year Treasury yields were higher at 0.5576% after touching the lowest level since March last week. German government bond yields rose slightly to -0.527%. Treasuries bear steepened as month-end support came out of the market and investors looked ahead to Wednesday’s supply announcement where record sales of notes and bonds are expected.  Yields higher by up to 3bp across long-end of the curve with front-end broadly anchored, steepening 2s10s, 5s30s by ~1.5bp each; 10-year yields around 0.545%, cheaper by 1.5bp vs. Friday close while bunds, gilts outperform by ~2bp each. Yields on 30-year U.S. Treasuries are set for the biggest daily increase since June 30 as U.S. equity futures advance and the bond curve bear-steepens.  As Bloomberg adds, a busy week of IG corporate issuance also expected, adding to downside pressure on Treasuries along with delta hedging large option package.

The recent decline in the dollar combined with super-low real bond yields has been a boon for gold, which hit $ 1,984 an ounce on Monday and seemed on track to take out $ 2,000 soon.

In other commodities, oil prices eased on concerns about oversupply as OPEC and its allies are due to pull back from production cuts in August while an increase in COVID-19 cases raised fears of slower pick-up in fuel demand. Brent crude futures dipped 46 cents to $ 43.06 a barrel, while U.S. crude eased 51 cents to $ 39.76.

On today’s calendar, economic data include ISM and Markit manufacturing data. Ferrari is among today’s scheduled earnings.

Market Snapshot

  • S&P 500 futures down 0.1% to 3,260.50
  • STOXX Europe 600 up 0.4% to 357.57
  • MXAP up 0.3% to 165.11
  • MXAPJ down 0.4% to 549.24
  • Nikkei up 2.2% to 22,195.38
  • Topix up 1.8% to 1,522.64
  • Hang Seng Index down 0.6% to 24,458.13
  • Shanghai Composite up 1.8% to 3,367.97
  • Sensex down 1.7% to 36,967.20
  • Australia S&P/ASX 200 down 0.03% to 5,926.09
  • Kospi up 0.07% to 2,251.04
  • Brent Futures down 0.6% to $ 43.24/bbl
  • Gold spot down 0.2% to $ 1,972.89
  • U.S. Dollar Index up 0.1% to 93.44
  • German 10Y yield rose 0.4 bps to -0.52%
  • Euro down 0.03% to $ 1.1775
  • Brent Futures down 0.6% to $ 43.24/bbl
  • Italian 10Y yield rose 4.2 bps to 0.887%
  • Spanish 10Y yield rose 0.2 bps to 0.342%

Top Overnight News from Bloomberg

  • Factories across the euro area saw a stronger return to growth in July than initially reported, marking the region’s first manufacturing expansion in one-and-a-half years while economies from Germany to Italy beat expectations. In the U.K., although numbers were slightly below flash estimates, manufacturing grew at the fastest pace in almost three years as the nation’s lockdown eased
  • Gold’s spot and futures prices opened the week by hitting records, with the metal for immediate delivery closing in on $ 2,000 an ounce as the search for haven assets continues amid the coronavirus pandemic
  • Microsoft chief executive Satya Nadella attempted to salvage a deal for the U.S. operations of TikTok by speaking with President Donald Trump by phone
  • Oil edged below $ 40 a barrel in New York as OPEC and allied producers started to unwind output cuts even as many countries are still struggling to contain the virus

Asian equity markets began the new trading month mixed after last Friday’s positive close on Wall St where the tech sector rallied following earnings from the industry giants including Apple which rose to a fresh record high, but with upside in the region restricted ahead of this week’s risk events and after continued stalemate in US coronavirus relief discussions. ASX 200 (flat) was subdued as gains in commodity related sectors were offset by underperformance in the top weighted financials and with trade hampered by reduced liquidity due to bank holiday in New South Wales, while risk appetite was also weighed by a state of disaster declaration in Victoria with the state capital of Melbourne to be subjected to tougher restrictions including a curfew through to at least September 13th. Nikkei 225 (+2.2%) was the stellar performer as it coat-tailed on recent favourable currency flows and after Q1 Final GDP topped estimates, although there were some notable losses seen in Shinsei Bank and Mazda post earnings, as well as Seven & I on news it is to acquire Speedway convenience stores from Marathon Petroleum in a deal valued around USD 18.9bln. Hang Seng (-0.6%) and Shanghai Comp. (+1.8%) were mixed after PBoC inaction resulted to a CNY 100bln liquidity drain and as participants digested a more than 50% drop in HSBC HY profits, as well as the highest Chinese Caixin Manufacturing PMI reading since 2011. There was also plenty of focus around tech after reports that President Trump is to allow 45 days for ByteDance to negotiate the sale of TikTok to Microsoft and will reportedly take action on Chinese software companies that threaten national security in the approaching days. Finally, 10yr JGBs were lower amid a surge in Japanese stocks and with the BoJ present in the market for JPY 450bln of JGBs predominantly focused on 1yr-3yr maturities, while the central bank recently announced its buying intentions for August in which it maintained the current pace of purchases for all maturities.

Top Asian News

  • Why Investors Keep Losing Money Betting Against the Hong Kong Dollar Peg
  • Goldman, BofA Left Off Ant IPO for Work With Alibaba Rivals
  • SoftBank, Naver to Start Joint Tender Offer for Line on Aug. 4

Mixed trade in the European equity sphere (Euro Stoxx 50 +0.6%) after a similar lead from APAC markets, as participants remain on standby for this week’s key risk events – including US ISM and labour market report alongside any updates on fiscal stimulus talks. Core EU bourses saw some upside in the run-up to the Final Manufacturing PMIs, potentially on optimism for higher revisions, but indices have since remained contained. UK’s FTSE 100 lags the core markets on currency dynamics, and with the Financial sector hit on the back of dismal earnings from HSBC (-5.1%) where Q2 profit slumped and loan loss provisions rose almost seven-fold. Furthermore, SocGen (-3.1%) adds to the woes in the sector after posting a surprise loss due to pandemic impact on equity trading. Energy names have also lost steam amid price action in the complex, but overall European sectors remain mixed with no clear risk tone to be derived. The sectoral breakdown sees Travel and Leisure at the bottom as second wave fears materialise in the sector. Elsewhere of note, AI company Shanghai Zhizhen Network Technology is suing Apple for around USD 1.4bln over virtual assistant patent violations, WSJ reported.

Top European News

  • U.K. Manufacturing Grows as Sector Starts Long Road to Recovery
  • Euro-Area Factories Returned to Growth Amid Severe Jobs Cuts
  • Real Estate Stocks Fall on Lockdown Concerns, Negative Sentiment

In FX, mixed macro impulses for the Franc as Swiss CPI was considerably firmer than forecast, but the manufacturing PMI fell short of expectations and the key 50.0 mark to leave Usd/Chf eyeing 0.9200 and Eur/Chf even closer to 1.0800 following yet another rise in weekly bank sight deposits. Moreover, the cross has rebounded amidst Eurozone manufacturing PMIs that beat consensus and underpinned EU stocks alongside economic recovery hopes. Conversely, the COVID-19 escalation in Melbourne, Victoria has prompted a state of disaster amidst tougher restrictions and a curfew in the capital until September 13, at the earliest, on the eve of the RBA policy meeting – full preview of the event available on the headline feed – to the detriment of the Aussie that is holding just above 0.7100 vs the Greenback compared to last Friday’s 0.7200+ new ytd peak.

  • USD – The Dollar has handed back some of its pre-month end gains after the DXY rebounded further from fresh 2020 lows (92.546) to 93.708 and is now pivoting 93.500, with additional support coming via M&A flows due to deals amounting to Usd 16.4 bn and Usd 21 bn for US companies from German and Japanese rivals respectively. Ahead, the final Markit manufacturing PMI, ISM equivalent and construction spending before a duo of Fed speakers (Bullard and Evans).
  • JPY/GBP/NZD – All intiailly firmer against the Buck, or off worst levels to be more precise, as the Yen regains composure following its aggressive reversal from the low 104.00 area to 106.40+, while Sterling revisited 1.3100 from not far off 1.3050 even though the final UK manufacturing PMI was revised down a tad and the coronavirus outbreak in Northern England has reached ‘major incident’ proportions in Greater Manchester. Elsewhere, the Kiwi is benefiting from the aforementioned Aussie travails to an extent given Aud/Nzd pulling back below 1.0750 to keep Nzd/Usd more buoyant on the 0.6600 handle despite reports that hedge funds are implementing bearish positions ahead of the RNBZ later in August.
  • EUR/CAD/SEK/NOK – Some traction for the Euro within 1.1796-42 parameters vs the Greenback in wake of the better than prelim/anticipated Eurozone manufacturing PMIs, but no confirmed breach of resistance in the form of the 100 HMA (1.1779), while the Loonie is sub-1.3400 amidst another downturn in crude prices that is also hampering the Norwegian Krona relative to its Swedish counterpart after the manufacturing PMI reclaimed 50.0+ status and retail sales picked up pace. Indeed, Eur/Nok is hovering around 10.7500 in contrast to Eur/Sek testing 10.3100 vs highs of 10.7860 and 10.3515 respectively.
  • EM – The Yuan is keeping its head above 7.0000 on the back of China’s Caixin manufacturing PMI exceeding forecast at 52.8 for the strongest print since January 2011 and the Rouble is consolidating off recent lows circa 74.0000 awaiting the latest CBR MPR, but the Rand is lagging near 17.3000 after a steep decline in SA tax receipts for the fy through end July.

In commodities, WTI and Brent front-month futures remain subdued in early European trade with little by way of fresh fundamental catalysts, but with that being said, OPEC+ are poised to ease the magnitude of the agreed-upon cuts this month which will see an additional 1.9mln BPD of supply entering the market – this was reflected by the Russian oil and gas condensate output for the first half of August. It is also worth bearing in mind that the extra supply comes against the backdrop of rising second-wave fears which have prompted some cities to re-enter lockdown, whilst others deferred their reopening plans. Elsewhere, spot gold remains uneventful after testing support at USD 1970/oz (vs. fresh high 1987.94), with the yellow metal decoupled from Dollar dynamics (for now) as prices remain near record highs. Spot silver sees similar lacklustre action sub 24.50/oz. Turning to base metals, Dalian iron ore futures rose in excess of 4% to hit 12-month highs on a firm demand outlook. Conversely, copper touched a three-week low despite the strong Chinese factory data, with some citing second wave fears.

US Event Calendar

  • 9:45am: Markit US Manufacturing PMI, est. 51.3, prior 51.3
  • 10am: ISM Manufacturing, est. 53.5, prior 52.6
  • 10am: Construction Spending MoM, est. 1.0%, prior -2.1%
  • Wards Total Vehicle Sales, est. 14m, prior 13.1m

DB’s Jim Reid concludes the overnight wrap

A happy August to you all. This morning’s EMR is brought to you by the powers of paracetamol and ibuprofen as I played my one and only game of cricket this season over the weekend. It was President’s Day and I’m the President of my club so I couldn’t really avoid coming out of semi-retirement for a game I played pretty much every summer weekend from around 1983 to 2011. Running, diving, throwing, bowling, eating a big tea all took a big toll out of me.

My performance certainly wasn’t as good as markets were in July, unless the dollar was my benchmark. Craig (who is still in a state of shock after Arsenal won the FA Cup final on Saturday) has already published July’s performance review this morning (link here) where the highlights were a bumper month for Silver and Gold and a poor month for the dollar. Silver (c.+35%) had its best month since December 1979 and the dollar the worse for a decade. US equities had a good month in spite of rising virus caseloads due to a strong earnings season relative to expectations, especially in tech towards the end of the month. YTD Silver, Gold and the NASDAQ have been the three best performers while at the bottom of the leaderboard Brent, WTI and European Banks are all down at least 30%.

In terms of how August is faring so far, it’s been a mixed start in Asia with the Nikkei (+1.95%) and Shanghai Comp (+1.08%) both posting decent gains, the Hang Seng (-0.95%) down and the Kospi and ASX little changed. Meanwhile, yields on 10yr USTs are up +1.3bps and futures on the S&P 500 are down -0.08%. In terms of data releases, China’s June Caixin manufacturing PMI came in at 52.8 (vs. 51.1 expected) which was the highest reading since Jan 2011 while Japan’s final manufacturing PMI reading was confirmed at 45.2 (vs. 42.6 in preliminary read). We also got Japan’s final annualized 1Q GDP print this morning, printing at -2.2% qoq (vs. -2.8% qoq expected).

In terms of weekend news, US Secretary of State Michael Pompeo has said that the White House will announce measures against “a broad array” of Chinese-owned software deemed to pose national-security risks. This follows President Trump saying on Friday that he intends to ban music-video app TikTok from the US. Meanwhile, on the fiscal stimulus negotiations in the US, there are reports that Democrats and Republicans continue to remain far apart on the plan to restore a $ 600-per-week jobless benefit that expired last week. Negotiations will continue today.

Looking at coronavirus numbers for the weekend, growth rates for new cases slowed in the US to an average of 1.13% per day (vs. average growth of 1.70% over last 5 weekends). The same was true for the most populous states like Texas, Florida, California and Arizona. The fatalities growth rate also slowed in Texas (1.35% vs. 1.89%) and Arizona (0.96% vs. 2.45%) but continues to remain high in Florida (1.75% vs. 1.34%) and California (1.13% vs. 0.73%). Meanwhile, the White House coronavirus task force head Deborah Birx said the pandemic is in a “new phase” as it spreads across U.S. rural and urban areas. In Asia, Australia’s Victoria state declared a state of disaster and has ordered Melbourne’s residents to stay home except for work, medical care, provisions or exercise. The city is now under curfew between 8 p.m. and 5 a.m and the new restrictions will be in force for six weeks. The state reported 671 new cases in the past 24 hours. Please see the regular case and fatalities table in the PDF for more. Finally, the latest on a possible vaccine is that the Serum Institute of India received approval for conducting phase two and three clinical trials of the Covid-19 vaccine candidate developed by the University of Oxford and AstraZeneca in the country.

Looking ahead to this week now, the release of PMIs from around the world (today and Wednesday mostly) will set the tone, before the July US jobs report on Friday rounds out the week. On the central bank front, we will hear the monetary policy decision from the Bank of England and Governor Bailey’s ensuing press conference on Thursday. The market also enters the second half of Q2 earnings season, which has already seen a record number of beats in the S&P 500.

Going through in more detail now, the majority of manufacturing PMIs are out on today, before services and composite PMIs come out on Wednesday for the most part. There’ll also be the ISM manufacturing index from the US (today). The key here will be to see how differentiated PMIs are given that some governments around the world are cautiously easing restrictions with others needing to tighten. For the countries where we already have a flash PMI reading, they generally showed that the recovery has more momentum in Europe than in the US. Many of the flash European levels were the strongest in at least two years, while both manufacturing and services PMIs in the US failed to meet expectations. As ever caution is required as these are diffusion indices which simply monitor whether activity is better or worse than the previous month. Remember that the US was never as shutdown as Europe so momentum was always likely to be more in the latter’s favour regardless of the recent rise in cases.

In terms of payrolls on Friday, markets are generally expecting a third straight month of gains, though likely at a slower rate than we saw in June. DB are looking for a further +900k gain in the headline, below consensus estimates at +1.578m. This follows last month’s blowout +4.8m increase. Our economists also see the unemployment rate falling to 10.5% from 11.1%, in line with the median estimate. This data will give some insight into how the renewed spread of the coronavirus through the US, especially in the South and West have affected the US economy. The rest of the key data can be found in the day by day week ahead guide at the end.

On the central bank front, one highlight will be the Bank of England meeting and Governor Bailey’s ensuing press conference on Thursday. While our DB economists are not expecting any change to the policy rate this meeting, there is a chance for a dovish surprise on the overall commentary and tone. Focus will be on the central bank’s economic projections, the ongoing review of the effective lower bound, and the path of QE. See their preview here .

Elsewhere in central banks, India and Brazil are also releasing their policy decisions on Wednesday and Thursday, respectively. The two countries have the highest confirmed coronavirus caseloads outside the US, and are expected to lower interest rates in light of the continued economic impact of the pandemic. Following the FOMC last week and the lifting of the blackout period, we will hear from the Fed’s Bullard, Evans, Mester and Kaplan.

Earnings will continue to be in focus, with 133 companies reporting from the S&P 500 and a further 95 from the STOXX 600. Among the releases include HSBC, Heineken, Siemens, Berkshire Hathaway, and Ferrari today. Then tomorrow markets will hear from Bayer, Diageo, Fidelity, BP, Walt Disney and Activision Blizzard. Wednesday will see Deutsche Post, Allianz, Humana, Bayerische Motoren, Regeneron Pharmaceuticals, CVS Health, MetLife and Fiserv release earnings. Following that, Thursday includes Merck, AXA, Siemens, adidas, Bristol-Myers Squibb, Novo Nordisk, Becton Dickinson & Co, Zoetis, T-Mobile, Illumina. Finally on Friday, Standard Life Aberdeen, Norwegian Cruise Line, Royal Caribbean Cruises and Ventas. So another busy week.

To review last week now, global equity markets were bifurcated with US stocks outperforming after beating low earning expectations, particularly in tech. The S&P 500 rose +1.73% (+0.77% Friday) led primarily by the mega cap tech stocks which reported towards the end of last week. With Apple, Facebook, and Amazon in particular surprising on earnings, the tech-focused Nasdaq outperformed this week as the index rose +3.69% (+1.49% Friday). Over 60% of the S&P have now reported and the index has seen a record of just under 85% of companies beat EPS estimates. Remember that the issue with this earnings season was that analysts didn’t increase their estimates in June as macro surprises beat. This left a great set up for earnings versus expectations.

Risk assets in Europe did not fare as well with European equities down -2.98% (-0.89%) over the 5 days, pushing the index down -1.11% for July. It was the first monthly loss since March as cyclical sectors led the declines following more concerns on the economic outlook and small rises in cases across the continent.

Even as US equities rose, core sovereign bonds fell with US 10yr Treasury yields falling -6.1bps (-1.8bps Friday) to a record closing low of 0.528%. Similarly, UK 10yr gilts rose +1.6bps on Friday to be just off Thursday’s all-time closing lows to fall -4.0bps overall on the week to 0.10%. German bunds fell -7.6bps to -0.52%, while a souring risk appetite saw wider peripheral spreads to bunds in Italy (+9.2bps), Spain (+6.3bps), Portugal (+7.1bps) and Greece (+9.7bps). The dollar fell over -1.0% on the week for the second week in a row, and has not seen a weekly rise since mid-June when economic data and US cases started getting worse again. With yields and the greenback falling, gold continued its breakneck rally. The metal rose +3.88% (+0.98% Friday) to another all-time record of $ 1975.86/oz.

On Friday, we received Q2 GDP data from the majority of Europe. This came following Thursday’s data out of the US, Germany and China. We learned that Euro Area quarterly GDP fell by -12.1%, right in-line with estimates and the largest decline on record. France GDP shrank -13.8% (vs. -15.2% expected), with the construction sector seeming to be hit the hardest after falling about -24% in the second quarter. Italy similarly showed a slightly ‘better’ GDP print than expected, coming in at -12.4% (vs. -15.5%). Unlike France and Italy, Spain’s data came in under projections with the economy contracting -18.5% (vs. -16.6% expected). In other data, German retail sales fell -1.6% MoM, better than the expected -3.3% drop, but somewhat expected given the +12.7% rise last month. In the US, July MNI Chicago PMI surprised by rising into expansionary territory at 51.9 vs 36.6 last month and well above the 44.0 estimate. Finally, the preliminary July University of Michigan survey showed sentiment fall -0.7pts to 72.5, just below estimates of 72.9. The slight drop in sentiment was driven by a -2.7pt move lower in current conditions even in light of a slight rise in expectations.

ZeroHedge News

HSBC Crashes To 11 Year Low As Profit Plunges And Loss Reserves Soar

HSBC Crashes To 11 Year Low As Profit Plunges And Loss Reserves Soar Tyler Durden Mon, 08/03/2020 – 07:30

HSBC Holdings shares tumbled 6.4% Monday morning, hitting 11 year lows not seen since the 2008-09 financial crisis, following the bank’s latest earnings report that warned the virus-induced global downturn might trigger $ 13 billion in loan losses. 

Investors were spooked after HSBC increased the range of loan losses to $ 8 billion-$ 13 billion from $ 7 billion-$ 11 illion, reflecting a challenging second quarter and even more challenging, well, future quarters.  Bloomberg Intelligence said the new credit loss guidance for 2020 was $ 2 billion more at the top end, while Jefferies said the bank’s management “unhelpfully” increased the range of credit loss guidance.

“What we have seen this quarter is quite a sharp shift in the economic outlook for the global economy, the famous ‘V’ has got a lot sharper, and as a result, we have materially increased our provisions,” CFO Ewen Stevenson told Reuters.

For the current quarter, the bank reported a pre-tax profit of $ 4.32 billion in 1H20, down from $ 12.41 billion a year ago, which missed the average of analysts’ forecasts of $ 5.67 billion.  Morgan Stanley’s Magdalena Stoklosa wrote in a note that pretax profit missed consensus by 12%, driven mostly by provision. 

The bank’s revenue fell 9% to $ 26.7 billion over the first half, slightly above analysts’ expectations of $ 26.41 billion.

Stevenson said HSBC’s business in the U.K. was hit hard, took a $ 1.5 billion charge against expected credit losses.

CEO Noel Quinn wrote in the earnings update that HSBC was severely “impacted by the Covid-19 pandemic, falling interest rates, increased geopolitical risk, and heightened levels of market volatility.”

“The first six months of 2020 have been some of the most challenging in living memory. Due to the Covid-19 pandemic, much of the global economy slowed significantly, and some sectors drew to a near-total halt,” Quinn said.

He cited tensions between China and the U.S. that challenged banking operations:

“Current tensions between China and the U.S. inevitably create challenging situations for an organization with HSBC’s footprint. We will face any political challenges that arise with a focus on the long-term needs of our customers and the best interests of our investors.”

Quinn expects to “accelerate implementation” of a restructuring plan announced earlier this year will allow it to pivot away from Europe and the U.S. to focus on the Chinese market.

RBC analyst Benjamin Toms said the results reflect a “bleak outlook” for the bank… 

ZeroHedge News

US Announces New Action Against “Array” Of Chinese Software Companies

US Announces New Action Against “Array” Of Chinese Software Companies Tyler Durden Sun, 08/02/2020 – 18:53

Update (1850ET): The SCMP is reporting that WeChat, a popular chat app developed and run by Chinese tech giant Tencent, will also be targeted by the Trump administration along with TikTok.

* * *

As the White House teased in a media trial balloon yesterday, the administration has just announced its latest initiative to hector Beijing, and the Chinese technology sector, as the Trump Administration ratchets up the retaliatory pressure in a burst of election-year fervor.

The Trump administration will announce measures shortly against “a broad array” of Chinese-owned software that pose a “national security risk”, according to Mike Pompeo, Trump’s Secretary of State.

Ever since President Trump said late Friday that a ban on the popular social media app TikTok was “imminent”, talks between ByteDance, the owner of TikTok and a separate app called “Douyin” – (equivalent to “TikTok” in English) which is similar to TikTok in many ways, but is a different app built to operate on the Chinese Internet – have apparently collapsed. Media reports claimed that, after being courted by a group of VC firms, ByteDance was in advanced talks to sell TikTok to Microsoft.

But those talks have apparently stalled. Treasury Secretary Steven Mnuchin said earlier that the app must either be “sold or blocked”, and it appears that Beijing has soured on the optics of appearing to kowtow to Trump just before the election – god forbid President Xi be accused of intervening on Trump’s behalf.

Pompeo signaled he expects a Trump announcement “shortly.” He added that Chinese software companies doing business in the US are working with Chinese State Security: “whether it’s TikTok or WeChat, there are countless more,” Pompeo said during an interview on Fox New’s “Sunday Morning Futures” program.

Trump “will take action in the coming days with respect to a broad array of national-security risks that are presented by software connected to the Chinese Communist Party,” Pompeo added.

From placing new restrictions and pressures on Huawei – including successfully pressing allies like the UK to walk back their earlier support for allowing Huawei parts to be incorporated into “non-core” parts of their 5G networks – as well as taking shots at foreign students studying in the US, among other things.

ZeroHedge News

Stockman Slams “Lockdown Lunacy” – Your Government Ordered Depression Has Arrived

Stockman Slams “Lockdown Lunacy” – Your Government Ordered Depression Has Arrived Tyler Durden Sun, 08/02/2020 – 19:30

Authored by David Stockman via Contra Corner blog,

Well, the Virus Patrol sure has done it. In a fit of reckless overkill they have managed to vaporize six years of economic growth during the last 90 days. And that’s just by the mechanical reckoning of the GDP accounts, where total output in Q2 weighed in at essentially the same level as Q4 2014.

The real damage is far deeper, however, and is reflected in millions of small businesses permanently destroyed, tens of millions of households wiped-out financially and the vicious daisy chain of delinquencies, deferrals and defaults just beginning to rip through the $ 78 trillion edifice of debt which entombs the US economy.

Real GDP Level

Of course, most of the Wall Street talking heads were nonplussed by this week’s release because, well, Q2 results are claimed to be ancient history: Reality is purportedly the “V”-shaped recovery on their spreadsheets, which really can’t fail to happen because it’s always two quarters out regardless of conditions at the moment.

So let’s get something straight. What is happening is an economic catastrophe the likes of which we have never seen before, even during the Great Depression of the 1930s.

In fact, the worst annual decline back then was a 14.8 percent drop in 1932, while the entire peak-to-trough real GDP decline between 1929 and the 1933 bottom was 30.5 percent.

So it would be fair to say that measured at an annualized rate, the idiotic Dr. Fauci and his Virus Patrol have now delivered a 32.9 percent GDP plunge, which single-handedly tops the entire contraction of the Great Depression.

Needless to say, the Q2 result also leaves the recessionary drops since 1950 way back in the dust. Even the auto industry induced plunge of Q1 1958 didn’t make the double-digit threshold. It clocked in at a 9.986 percent annualized decline or less than one-third of today’s cliff dive.

What was especially notable, however, was the vaporization of personal consumption spending on services, which ordinarily accounts for upwards of 70 percent of total PCE; and which is also ballyhooed by the paint-by-the-numbers Wall Street economist as the ballast the keeps GDP moving ever higher.

Not this time!

Services spending literally fell through the trapdoor, contracting at a 43.4 percent annualized rate. That compares with the 11 recessions since 1950 where real spending on services never went negative, save for the pinprick decline of -1.6 percent annualized during the Q1 2009 bottom of the Great Recession.

By every account, the economic plunge in the winter of 2008-2009 was the worst since the 1930s, but this week the Commerce Department reported a PCE-services drop that was 28X deeper!

Our purpose here is not to marshal scary numbers, even as they surely are.

Rather, our point is that what is coursing through the Q2 numbers is not anything that resembles a normal chain-of-reactions macroeconomic cycle. For instance, where job losses cascade through to shrinking incomes, thereby causing consumer confidence and spending wherewithal to diminish and household spending to be curtailed.

To the contrary, what is depicted below is essentially economic martial law. Agencies of the state commanded airports, restaurants, bars, hair salons, gyms, movies, dentist offices, theme parks, sporting events etc. to close or operate at drastically reduced capacity, which meant, in turn, that day-in-and-day out commerce and economic output vanished instantly.

Stated differently, this 43 percent plunge in services spending didn’t happen for the ordinary reason that people were short on cash. As we show below, personal income during the quarter – thanks to the massive flow of free stuff from Washington (aka government transfer payments) – clocked in at a record level!

Consequently, there will be no rebound in the plunging red line below no matter how much fiscal and monetary “stimulus” Washington pumps into the main street economy.

The services sector accounts for nearly 66 percent of total PCE, which, in turn, accounts for 68 percent of measured GDP. So the latter will not recover until the Virus Patrol gets its foot off the neck of what we call the social congregation activities of daily economic life; and also until it and its MSM collaborationist desist from fanning the false claim that the Covid is the equivalent of the Black Plague, thereby causing people to voluntarily quarantine out of misplaced fear.

Of course, you don’t have to listen to Dr. Fauci and the Scarf Lady for long – yes, they have not yet been locked up in padded cells where they belong – to realize that the Virus Patrol is on a once-in-a lifetime power trip.

In ultra-busy body/Nanny State fashion they are virtually regimenting the comings and goings of a $ 20 trillion economy – even as they keep the US economy on indefinite idle waiting for the vaccines and antivirals from their allies in Big Pharma and the Gates Complex to ride to the (mandatory) rescue.

Annualized Change In Personal Consumption Expenditures, Services, 1950-2020

We don’t expect the Virus Patrol to be put out of business any time soon because the Donald is too confused and weak to shut them down.

Moreover, if he keeps shooting himself in the kneecaps via tweets like this week’s “lets-postpone-the-election” numbskullery, he will guarantee an even worse scenario: Namely, that while Sleepy Joe is being oxygenated and propped-up behind the Resolute Desk for daily Oval Office photo ops, the left-wing health Nazis who surround him will really go to town on Lockdown Nation.

Nor is that any kind of unhinged trashing of the camarilla of out-and-out statists who will form the core of the Biden Administration. The fact is, the Donald’s malpacticing doctors, the MSM and the Blue State mayors and governors have now unleashed a full-on public hysteria that is self-fueling.

It is now transforming ordinary sheeples into obedient and unquestioning brown-shirts. Even in the purportedly enlightened, socialist republic of Aspen, where we are sheltering for the duration, we see them “mask-up” even with no one in sight, while pumping strenuously up the mountain side on a fat-tired bike.

One manifestation of the Covid-Hysteria is the soaring level of “testing” going on as people either try to get a hall pass in order to return to work or just plain run to the nearest testing station every time the media sends off new alarm bells.

During April, for instance, which was the very worst month of the contagion in terms of serious illnesses and deaths, 5.2 million new tests were reported or 175,000 per day.

By contrast, in July to date (thru the 29th), there have been 21.5 million new tests reported or an average of 745,000 per day.

In a population that has been thoroughly exposed to the virus after five months, it is a given that with the number of tests soaring, the number of positive cases will rise proportionately. But that’s a misdirection because the real issue is the true medical severity of the new cases, and that has dropped precipitously.

The death rate has dropped from 1,800 per day in April to 780 in July; and whereas 15-20 percent of new cases were being hospitalized in most states during April, that figure has now fallen to 2-4 percent.

That is, after the Grim Reaper’s original romp through the most vulnerable populations – especially the nursing homes and long-term care facilities in March/April – the preponderant share of the remaining populations being infected and testing positive appear to have stronger immune defenses, and are mainly either asymptomatic or treating and recovering at home in the normal flu-season manner.

So on the facts, the Hysteria should be dying out, but, alas, the facts are of small moment in the context of a runaway public hysteria that is being turbocharged by a severely aggravated anti-Trump partisanship that has no modern precedent, or any at all.

We are constantly reminded that there are less than 100 days until the election, but probably of even more salience is that the next flu season will be arriving even sooner in October. And it won’t matter whether the obvious herd immunities building up against the SARS-Cov-2 cause the next flu season to be unusually mild or not.

That’s because the Virus Patrol will be at shrill alert for the “second wave” in the run-up to October, keeping the suffocated economy evident in today’s GDP report on its back foot for the balance of the year, at least. That means the ballyhooed V is now surely dead-as-a-door nail.

In this context, it needs be recalled that the services sector of the US economy is bearing the brunt of the Lockdown orders, but that it now counts for fully $ 8.7 trillion or 45 percent of GDP. That compares to a mere 26 percent back in the days of America’s industrial might in the mid-1950s.

In the big picture context, therefore, national policy – especially at the Eccles Building – caused the off-shoring and hollowing-out of the US industrial economy over the last three decades. In turn, that has left main street especially vulnerable to a state-orchestrated attack on its new services sector center of gravity such as outpatient surgery clinics, Pilates studios and tapas bars.

Again, an economic martial law attack on the new epicenter of the US economy means that the issue is not traditional stimulus, but clearing the decks and clearing the air of the Virus Patrol orders and Covid-Hysteria, which was the real culprit behind the Q2 GDP disaster.

Nominal GDP (light brown) Versus Service Sector PCE (dark brown), 1955-2020

Perhaps nowhere is the impact of economic martial law more evident, ironically, than in the health care sub-sector of the services economy.

The former, of course, has been the workhorse of US GDP growth for decades. However, after peaking at $ 2.50 trillion in Q4 2019, it weighed in at just $ 1.89 trillion in Q2 2020. That’s a $ 608 billion decline, reflecting an astounding -24 percent contraction.

And this is supposed to be the worst medical crisis to hit America since the Spanish Flu of 1918!

But, actually, the government’s data mill is telling an absolutely opposite, nay crazy, story. Namely, that the single largest sector of the US economy plunged at a 61.6 percent annualized rate in Q2 – meaning that the figure gives the notion of being “off the charts” of history an altogether new definition.

Needless to say, health care spending is not now and never has been amenable to Washington’s vaunted stimulus machines. The overwhelming share of spending is government funded directly through Medicare/Medicaid et al or through the $ 300 billion per year tax shelter for employer health plans; and whether public or private, consumer health payments are overwhelming made by third-parties, thereby further limiting the efficacy of the cheap money from the Fed and free money from Uncle Sam.

The plunging red line below, therefore, is the doing of the Virus Patrol and its orders to shutdown most so-called discretionary healthy care services, such as cancer screenings. So until it is put out of business and the public Covid-Hysteria is substantially abated, the rebound of the health services sector is likely to the contained and protracted.

In short, what we have is a government-ordered depression, not a macroeconomic recession that is purportedly remediable by a huge dose of monetary and fiscal stimulus. So the truth is, the Virus Patrol, not the Fed and Washington’s everything bailout brigade, is in charge of the recovery from the Q2 disaster, and they are not much interested in letting it happen.

To take another salient example, the go-to strategy of the Virus Patrol has been to shutdown large scale public gatherings entirely, but that’s obviously the venue of the recreation sector.

So it is not surprising that the PCE spending rate for this sector has given “cliff-diving” a run for its money. Compared to the $ 590 billion annualized rate of spending in Q4 2019, the current quarter clocked in at just $ 272 trillion.

The amounted to a 53.4 percent decline from Q4 and an out-of-this-world contraction of 61 percent annualized in the current quarter. Or alternatively, recreation spending in Lockdown Nation during Q2 reverted to the level first crossed in Q2 2002.

That’s 18 year’s worth of growth gone in a virtual economic heartbeat.

Of course, there was one thing that was way up in Q2 – transfer payments and personal income. And every dime of the massive increase in transfer payments shown below was borrowed by Uncle Sam and monetized by the Fed.

Yet the only thing it accomplished was to further balloon the public debt because the current depression does not flow from the want of means or desire to spend: It’s the product of economic martial law ordered up by the Virus Patrol.

Still, it is worth noting that wage and salary income (brown line) was down by $ 680 billion at an annual rate in Q2, while the Washington spending machine boosted transfer payments at a $ 2.4 trillion annual rate, or by nearly four times more!

Once upon a time, that would have been considered insane overkill, and at least caused Republicans to screech at the top of their lungs about fiscal profligacy.

Alas, as they put up their $ 1.2 trillion Everything Bailout 5.0 against the House Dems’ $ 3.3 trillion alternative in the days just ahead, the chart below will be nowhere seen in the porkers’ lounges of Capitol Hill.

Change From Prior Quarter In Billions: Transfer Payments (purple line) Versus Wages and Salaries (brown line)

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Traders Will Soon Be Able To Buy CLOs & Other Risky Debt Products On Robinhood

Traders Will Soon Be Able To Buy CLOs & Other Risky Debt Products On Robinhood Tyler Durden Mon, 08/03/2020 – 05:30

Esoteric credit products like CDOs and CLOs gained mainstream notoriety ten years ago as politicians, pundits and a deeply humbled Wall Street accused them of helping to nearly destroy the global economy. But a few years ago, banks started looking for new ways to package and sell “safe” high-rated CLOs and other products based on the newly ascendant leveraged loans.

Now, it seems, lenders are facing a perfect storm: With the Fed making a foray into the corporate credit market, part of the central bank’s quest to make investing losses a thing of the past (at least for now – or for as long as it can) and Robinhood-enabled retail traders buy up tech stocks, bitcoin, gold (or at least the precious metals ETFs that offer ‘easy exposure’ to gold and silver), ETF sponsors are quickly dreaming up new products to hawk to this newly invigorated generation of retail bagholders traders who understand only one thing about market dynamics: Prices simply don’t go down.

And with brokerages now relying on bundling retail trades and selling ‘order flow’ to the big HFT firms – all of Robinhood’s established competitors have now adopted this business model as commissions have gone out of fashion – there’s a new perverse incentive to create products that will encourage mom-and-pop traders to play in markets previously reserved for institutional traders. And the latest example of this comes via Janus Henderson, the $ 337 billion asset manager that just filed to launch a new ETF that will allow Robinhood traders to buy into the highest-quality AAA-rated CLOs.

At this rate, retail traders will pile in to this new and exciting market just as the wheels are coming off.

At a time of mounting corporate defaults and deepening economic gloom, a new fund may be about to bring collateralized loan obligations to the masses.

Janus Henderson is planning a U.S. exchange-traded fund that will seek floating-rate exposure to the highest-quality CLOs, according to a filing with the Securities and Exchange Commission this week. While many loan ETFs exist, there are currently none dedicated to CLOs.

CLOs, which package and sell leveraged loans into chunks of varying risk and return, have drawn scrutiny in recent months as the coronavirus pandemic spurs a wave of corporate distress. They typically don’t attract retail investors, though an ETF would in theory make them far more accessible.

Wary day traders can rest assured: because the loans comprising these CLOs are among the safest and most highly rated on the market.

The riskiest corners of the $ 700 billion CLO market may be signaling trouble, but the highest-rated tier tends to be a safe space, he said.

“In the case of AAA CLOs, it’s a safe and low-risk asset class,” said the chief investment officer. “Yields are fairly low on AAA CLOs in the first place, but if investors can earn 150 to 175 basis points of spread on a short duration asset, it can be attractive.”

And with the Fed bent on keeping rates low until things get “back to normal”, this might be only the beginning.

The central bank’s intent to keep them low for the foreseeable future could mean the more-than $ 4 trillion U.S. ETF market sees a spate of launches like the fund planned by Janus Henderson, according to Ken Monahan at Greenwich Associates.

“Given that yield suppression is here to stay it would seem, you’ll probably see a lot more of this,” said the senior analyst covering market structure and technology. “RMBS and CMBS are probably not far off.”

CLOs are a cousin of collateralized debt obligations, which became notorious for their starring role in the 2008 financial crisis.

There are several major differences, however, not least that CDOs bundle loans to consumers rather than businesses.

But once the Fed backstop is removed – if that ever happens – the only real beneficiaries of this product will be the fund sponsors who collect the management fees, and the HFT firms who front-run the order flow in the underlying CLOs.

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Ship Orders Collapse; Will Rate Boom Follow?

Ship Orders Collapse; Will Rate Boom Follow? Tyler Durden Mon, 08/03/2020 – 05:00

By Greg Miller of FreightWaves,

Pre-COVID, the bull case for shipping rates was all about plunging newbuild orders. A drop in orders in 2019 pointed to rising freight rates in 2021, given the lag between contract signing and delivery. Mid-COVID, the bull case for rates is even more about plunging newbuild orders than before. There will be a lot fewer vessels on the water in 2021, 2022 and beyond than previously thought.

New data provided to FreightWaves by U.K.-based VesselsValue confirms that 2020 is shaping up to be an exceptionally weak year for tanker, bulker and container-ship orders.

New data from Alphaliner shows that container-ship newbuild capacity is down to just 9.4% of capacity on the water. “For the first time in more than 20 years, the global newbuilding pipeline fell below the 10% threshold,” reported Alphaliner on Wednesday, calling it a “historic low.”

Tanker and bulker orderbooks

According to VesselsValue, the tanker orderbook has fallen to 9% of the operating fleet in terms of capacity (measured in deadweight tons or DWT) as of July. This is down sharply from a high of 23% in January 2016.

The dry bulk orderbook is only 7% of the on-the-water fleet. This is down from 24% in January 2015 and an even higher peak — 27% — in January 2010.

The number of ship orders year-to-date is extremely low. VesselsValue data shows just 134 tanker orders through July, 28% below last year’s pace, despite historically high spot rates. Only 88 bulkers are on order, 31% below last year’s pace.

Clarksons Platou Securities has released data for specific tanker and bulker segments. For very large crude carriers (VLCCs, 200,000-plus DWT), the orderbook is only 7.4% of the on-the-water fleet. For Suezmaxes (120,000-199,999 DWT), it’s 11.3%.

In the products sector, the ratio is just 6.5% for medium-range (MR) tankers (30,000-59,999 DWT). It is 0.8% for long-range 1 (LR1) tankers (60,000-79,999 DWT) and 9.6% for LR2s (80,000-119,999 DWT).

In the dry bulk sector, Clarksons puts the orderbook-to-fleet ratio at 10% for Capesizes (120,000-plus DWT). It is 8% for Post-Panamaxes (85,000-119,999 DWT) and 6.8% for Panamaxes/Kamsarmaxes (65,000-84,999 DWT).

Container-ship orderbook

According to Alphaliner, the container-ship orderbook is down to just 2.21 million twenty-foot equivalent units (TEUs). This contrasts to a high of around 7 million TEUs in 2008. In that year, orderbook capacity was more than 60% of on-the-water capacity.

Of ships on order, virtually all are in the 10,000-plus TEU category or the 3,999-TEU-or-less category. There are effectively no orders in the midsized 4,000-9,999 TEU category.

Fear of premature obsolescence

Orderbooks are evaporating for two main reasons. The first is regulation. The International Maritime Organization (IMO) has vowed to create rules to compel shipping to cut greenhouse gas (GHG) emissions by 50% by 2050, a regulatory target known as IMO 2050. Owners don’t want to order until they know the rules, lest their assets suffer premature obsolescence.

As Star Bulk (NASDAQ: SBLK) President Hamish Norton explained during a Marine Money virtual forum in June, “What may be legal today may not be legal in five years. In the old days, ships were grandfathered in until the end of their useful life. Given the political situation, people are afraid — I think with good reason — that a ship they order today will not be grandfathered in, and will become obsolete.”

Coronavirus effects

The second reason for the orderbook shortfall is COVID-19. Travel restrictions in the first half of the year made newbuild contracting extremely impractical. Furthermore, current and future economic fallout make it much tougher to pull the trigger on orders and get financing. “If economic uncertainty can be measured by ship-ordering activity, then shipowners must be feeling completely lost at the moment,” wrote Stifel analyst Ben Nolan in a recent research note.

The pricing of secondhand ships is also undercutting the case for newbuilds. Newbuild prices are at too high a premium to secondhand prices for most orders to make sense.

Stamatis Tsantanis, CEO of Seanergy (NASDAQ: SHIP), explained during a Capital Link webinar last week that a secondhand 5-year-old Capesize costs around $ 30 million, whereas a newbuild costs $ 50 million. “The price differential is not justified by the incremental earnings [of the newbuild],” he pointed out.

Risks to rate upside

The IMO 2050-coronavirus one-two punch sounds like a guaranteed recipe for future freight-rate strength. But there are no guarantees in ocean shipping. Following is a devil’s advocate list of things that could go wrong:

Cargo demand could slumpA multiyear virus-induced recession or depression could cut cargo demand as much or more than vessel capacity. This would erase owners’ future rate-negotiation advantage.

Another demand risk relates to GHG emissions. If the world’s governments are serious about forcing GHG cuts by shipowners, wouldn’t they also force cuts of fossil-fuel consumption? And if so, wouldn’t this reduce future demand for tankers, bulkers and gas carriers?

Shipping regulations are not a sure thing — The IMO has no power to enforce regulations. Only IMO member nations do. GHG regulations for shipping can only move forward if they’re supported by countries with the most to gain from ocean trade, and by the world’s largest charterers.

The coronavirus changes the equation. One theory is that the cleaner post-lockdown skies and waters will drive momentum for environmentalism and GHG regulation. In this scenario, shipping decarbonization is more likely.

Another theory is that the outbreak will spur an extended period of economic pain and geopolitical unrest. In this scenario, countries would focus on rescuing economies and keeping transport costs cheap, making shipping decarbonization less likely.

If owners believe GHG regulations face significant delays, or may not happen at all, they could lose their fear of ordering.

Orders may go forward regardless of IMO 2050 and COVID headwinds If rates jump in 2021-22 due to lower vessel supply, owners could decide to order regardless of the premature-obsolescence risk, on the belief that they’ll earn sufficient returns before obsolescence strikes. This would limit the duration of the upcycle.

Alternatively, if there is a deep economic slump due to the coronavirus and owners do not order ships, there could still be newbuilds — a lot of newbuilds.

Commercial shipbuilding is almost entirely based in China, South Korea and Japan. Asian governments could fill yard slots with orders by state-controlled shipowners tapping state-backed financing.

This would not only preserve Asian shipbuilding jobs, it would also depress freight rates — a plus for economies that benefit from cheap transport of raw-material imports and finished-goods exports. Economies like China’s.

Talk to a shipping veteran who has been around since the 1980s and the conversation will often turn to the infamous Sanko orders. In 1983, Japan’s Sanko Steamship Co. placed a $ 1.25 billion order at Japanese yards for 103 dry bulk newbuilds totaling 4 million DWT. The order helped Japanese yards but crippled rates for years.

The fear, if orders don’t pick up, is that an Asian shipbuilding nation will “pull a Sanko.” Most likely, China.

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“Protecting NATO’s Eastern Flank”: Poland To Host 1,000 US Troops Leaving Germany

“Protecting NATO’s Eastern Flank”: Poland To Host 1,000 US Troops Leaving Germany Tyler Durden Mon, 08/03/2020 – 04:15

Judging by recent statements out of Russian media, the Kremlin has been closely monitoring just where the Pentagon intends to send the some 12,000 troops ordered to permanently depart Germany, after the Trump administration slammed Berlin for not shouldering its fair share of NATO defense spending.

While its believed the majority will be returning home, with a little less than half to return be redeployed around Europe, on Friday Poland indicated some will be deployed right near Russia’s doorstep. As the Defense Post reported:

Washington will deploy at least 1,000 soldiers in Poland and oversee forces on NATO’s eastern flank, Defense Minister Mariusz Blaszczak said Friday after the US announced a massive troop pullout from Germany.

US Air National Guard file image

Blaszczak told a Polish public radio broadcaster, “At least 1,000 new soldiers will be deployed in our country,”

“We will have an American command in Poland. This command will manage the troops deployed along NATO’s eastern flank,” he said.

“It will be the most important center for ground forces in our region,” he said. “We will soon sign the final pact with the Americans.” The Trump administration has long been in negotiations as part of an ongoing deal with Warsaw which cements closer defense ties, something which has riled Moscow.

Further angering the Kremlin is that Secretary of Defense Mark Esper last week said the Germany withdrawal will reinforce NATO’s south-eastern flank near the Black Sea, due to the redistribution of American forces. It’s expected that many could go to Baltic countries as well as Italy.

Meanwhile, last month it was reported that the Polish proposal to rename a base “Fort Trump” – which would host US troops in the East European country – has crumbled over disagreements over funding and precisely where the soldiers would be garrisoned.

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Microsoft Says Talks To Buy TikTok Are Back On As White House Ups Pressure

Microsoft Says Talks To Buy TikTok Are Back On As White House Ups Pressure Tyler Durden Sun, 08/02/2020 – 19:44

Word on the street – according to WSJ – is that Microsoft and TikTok-owner ByteDance were on the cusp of a deal for the software giant to buy TikTok’s business (which encompasses all global markets except China) when President Trump’s comment about barring the app from the US (which followed repeated hints that the administration was “looking into” some kind of action) prompted both sides to put things on hold, barring more concrete guidance from the administration.

It’s reasonable to suspect that any deal for Microsoft to buy TikTok would require dependable assurances from the administration that Microsoft would be protected should lawmakers try to turn around and target Microsoft alongside Amazon, Facebook and Alphabet, as anti-trust probes into the Silicon Valley titans ramp up.

And, apparently, the “OK” has been handed down, because Microsoft, which has, until now, refused to comment on the record about the purported deal, has reportedly just affirmed that it’s moving ahead with deal talks to potentially buy TikTok, which a private group of investors recently valued at $ 50 billion. The deal may involve outside investors from the US as well.

In sum: At a time when Congress is beating the tech antitrust drum louder than at any other time since the late 1990s during the landmark Microsoft antitrust case, the tech giant, which has a market cap of $ 1.6 trillion and already owns one social media platform with more than half a billion members (LinkedIn), is about to get even bigger.

To be sure, even with Trump’s blessing, a deal with TikTok would still be a risk for Microsoft, should Democrats take back control and redouble their anti-trust efforts. But right now, with the administration threatening to drop the hammer, the company might be able to get a reasonably good deal.

Microsoft is now planning to wrap up the deal talks by the middle of September:


Earlier today, Sec Pompeo dropped the latest threats about potential action against TikTok, WeChat and other Chinese apps.

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Baboons Prowl UK Safari Park “Carrying Knives & Chainsaws”, Sparking Chaos

Baboons Prowl UK Safari Park “Carrying Knives & Chainsaws”, Sparking Chaos Tyler Durden Mon, 08/03/2020 – 03:30

Authored by Elias Marat via TheMindUnleashed.com,

Workers at a popular safari park are on edge after baboons were spotted wielding tools like knives, screwdrivers, and even a chainsaw. And to make matters worse, the primates are having a blast using the tools to terrorize visitors’ cars.

The baboons at Knowsley Safari Park in Merseyside, England, have long enjoyed the ignominious reputation of being extremely destructive mischief-makers who were previously infamous for nabbing objects from the cars of visitors, including side-view mirrors and windshield wipers.

One mechanic in nearby Sale said that he’s had two customers this year alone who needed work done after the monkeys went to town on their cars.

“The kids start chirping up saying they want monkeys all over the car, and the next thing you know, you’re driving home with no registration plate,” the mechanic said.

However, some local workers worry that the creatures are possibly being given the weapons and power-tools “for a laugh” by equally mischievous park-goers, reports the Sunday Times.

“We’re not sure if they are being given weapons by some of the guests who want to see them attack cars, or if they’re fishing them out of pick-up trucks and vans,” one worker said.

Given the primates’ history of thievery, it would make sense that the baboons themselves are taing it upon themselves to find goods hidden in toolboxes scattered across the 550-acre safari park.

“One of the baboons was seen lugging around a chainsaw,” the worker added.

However, given the frequency with which the baboons have been sighted walking about with knives or screwdrivers in-hand, suspicion has been raised about how they are suddenly so well-supplied to wreak havoc.

“The baboons have been found with knives and screwdrivers. I do wonder if it’s some of the guests handing them out,” a source told Daily Record.

The safari park, which hosts a range of individual creatures including rhinos, lions and tigers, reopened last month after being closed due to the coronavirus pandemic. Aquariums and other zoos were also given the green light by the U.K. government to resume operations following the lockdown.

On the park’s website, potential visitors are assured that while proper public health measures are in place and people are restricted to their cars, a similar guarantee can’t be made about the problems caused by the baboobs.

“If you take a drive through our Baboon Jungle, we’re unable to return any car parts that our cheeky baboons may take,” the website noted, adding that a “car friendly route” is also an option.

Managers at the safari park are skeptical about whether the tales of knife-wielding baboons stalking park grounds is true, shrugging it off as an urban myth.

“We believe many of these stories have grown in exaggeration as they’ve been retold, with embellishment to make the objects that are sometimes found in the enclosure seem more exciting and unbelievable,” the park said.

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France Remains The World’s Most Nuclear-Dependent Nation

France Remains The World’s Most Nuclear-Dependent Nation Tyler Durden Mon, 08/03/2020 – 02:45

France is getting greener.

A series of measures have been announced aimed at making the economy more environmentally friendly such as a ban on outdoor heaters at bars and restaurants, more efficient domestic heating systems and two regional parks. Most importantly though, as Statista’s Niall McCarthy notes, the country has set a goal to reduce nuclear’s share of electricity generation from its current 70 percent to 50 percent by 2035.

The change in direction comes amid the controversial construction of the Flamanville EPR nuclear reactor by state-utility EDF which is more than a decade over schedule and is expected to cost €12.4 billion compared to an initial budget of €3.5 billion. It is finally expected to start operation in 2023. France also appointed former green politician and nuclear critic Barbara Pompili minister for the environment earlier this month.

As this infographic, based on the 2019 World Nuclear Industry Status Report, shows, no country is as reliant on nuclear energy as France.

Infographic: The Countries Reliant On Nuclear Power | Statista

You will find more infographics at Statista

It operated 58 reactors last year, second only to the United States’ 97, and they accounted for 71.7 percent of total electricity generation. The U.S. reactors had a 19.3 percent share of total electricity generation.

After France, the countries most reliant on nuclear power are all concentrated in Eastern Europe. Reactors generate between 50 and 55 percent of all electricity in Slovakia, Ukraine and Hungary. Sweden is also high up on the list with just over 40 percent, with Belgium (39 percent) and Switzerland (37.7 percent) close behind.

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