Written by Econintersect
Early Bird Headlines 22 February 2017
Econintersect: Here are some of the headlines we found to help you start your day. For more headlines see our afternoon feature for GEI members, What We Read Today, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.
Global
Asia markets end higher; Toshiba shares jump 22% after report it asked bidders to value its memory business at more than $17bn (CNBC) Markets in Asia traded mostly higher on Wednesday, tracking U.S. gains, as investors await policy details from the Trump administration on tax reforms and deregulation. In the currency market, the dollar index traded at 101.50 AT 3:06 p.m. HK/SIN, rising from levels below 101.2 from earlier in the week. Oil and Gold were flat.
U.S.
Natural gas plunges as meteorologists declare winter is over, El Nino may be coming (CNBC) Natural gas futures plunged 9.5% Tuesday as the prospects for a last winter freeze faded, and traders were looking forward to the possibility of El Nino this summer. For developing weather and climate reports, read Sig Silber every week. His latest: February 20, 2017 Weather and Climate Report – Transition to Spring can be Cruel.
Trump, new security adviser differ on key issues (Reuters) President Donald Trump has shown little patience for dissent, a trait that is likely to be tested by his new national security adviser, Army Lieutenant General H.R. McMaster.
Fed’s Williams Says Historically Low Interest Rates Will Persist (Bloomberg) Historically low interest rates are here to stay, making it much harder for central banks in wealthy countries to prevent and limit recessions in the future, according San Francisco Federal Reserve Bank President John Williams. Writing in the bank’s latest economic letter, Williams argued that a decline in the long-run economic growth rate of the U.S. and other rich nations has depressed business investment, and with it, interest rates.
EU
Exclusive: White House delivered EU-skeptic message before Pence visit – sources (Reuters) In the week before U.S. Vice President Mike Pence visited Brussels and pledged America’s “steadfast and enduring” commitment to the European Union, White House chief strategist Steve Bannon met with a German diplomat and delivered a different message, according to people familiar with the talks. Bannon, these people said, signalled to Germany’s ambassador to Washington that he viewed the EU as a flawed construct and favoured conducting relations with Europe on a bilateral basis.
UK
U.K.’s Brexit Bill Will Be ‘Hefty,’ EU Commission President Says (Bloomberg) The U.K. will have to foot a “hefty bill” when it leaves the European Union, European Commission President Jean-Claude Juncker warned in words that up the ante on one of most contentious issues around Brexit. Running to an estimated 60 billion euros ($64 billion), U.K. Trade Secretary Liam Fox a month ago called the idea of a bill “absurd” and the government in London is adamant it won’t pay for any EU projects signed after last November. Neither side has officially put a figure on what the final sum will be.
France
France exiting the euro would be the largest sovereign default in history with serious contagion effects (CNBC) A few days ago, David Rachline of the far-right National Front party in France said that “the debt of France is about 2 trillion euros ($2.1 trillion), about 1.7 (trillion euros) are issued under French law, which means that it can be re-denominated.” The economic program of the National Front specifically calls for the exit of the euro and the creation of a new currency, the French franc, which would be “closely” linked to the euro while allowing the government to undertake “competitive devaluations” making the transition in an “orderly way“.
There is only one problem. It does not work. There is no “orderly exit” from the euro. It is an oxymoron.
This would be the largest credit event in history and would create a massive contagion effect throughout the euro zone. The euro, obviously, would suffer from the break-up risk, so the fallacy of the “closely linked” second currency is simply a joke. Both would collapse in tandem.
Germany
Greece
Greeks slide deeper into poverty (Reuters) Greece is in a severe depression and millions of Greek citizens have fallen into abject poverty. Pictured below is a one-month food pantry handout.
Iran
The rising risk of showdown between Trump and Iran (BBC News) Are the US and Iran heading for a new confrontation? After a turbulent first three weeks in which President Donald Trump described Iran as “the world’s number one terrorist state” and put it “on notice“, it is a question many are asking. For Iranians with connections in the United States, these are worrying times. Of the seven majority Muslim countries named in President Trump’s January travel ban (frozen pending a legal review), Iran is the one with the largest US-based diaspora, the most overseas students and the highest number of people travelling on visitor visas.
North Korea
Kim Jong-nam killing: Malaysia seeks North Korea embassy official (BBC News) Malaysia has asked for North Korea’s help in searching for a senior embassy official wanted in connection with the killing of Kim Jong-nam. Mr Kim, the half-brother of North Korean leader Kim Jong-un, died last week at Kuala Lumpur airport. Police also confirmed details of the killing, saying two women approached him and wiped a toxin on his face. There is widespread suspicion North Korea was behind the attack, which its envoy in Malaysia has angrily denied.
China
China’s surging steel, iron ore inventories at odds with price gains: Russell (Reuters) Something is not quite adding up in China’s iron and steel markets, with the reasons for the current rally in prices for both commodities jarring uncomfortably with actual data. Iron ore futures on the Dalian Commodity Exchange on Tuesday hit the highest since the contract was launched in 2013, reaching an intraday peak of 741.5 yuan ($108) a ton, ending 3.2% up on the day, taking the gain since the beginning of 2016 to 258%. But inventories of steel in Chinese warehouses has moved to near record high levels. The question is how long can the current situation be sustained? It certainly doesn’t seem logical that prices can continue to rally when inventories are reaching uncomfortably high levels.
It’s a ‘Wonderful, Wonderful’ World in China Stocks, $6.7B Hedge Fund Says (Bloomberg) Algebris Investments (UK) Ltd. is a $6.7 billion global hedge fund whose macro credit fund outperformed peers in January. And it’s why China is looking interesting to Ivan Vatchkov, the chief investment officer for Asia in Singapore at Algebris. For Vatchkov, 38, China has a buffer against global market turmoil thanks to its political cohesion and its tight controls on capital flows. The macro credit fund returned 2.6% in January, according to the firm. That compares with a 0.04% decline in a Eurekahedge index that tracks hedge funds employing a similar strategy. Emerging markets risk premium is at a three-year low, and China is the least risky EM.
Canada
Kevin O’Leary: Canada’s Donald Trump? (BBC News) An outspoken businessman who found fame on American reality TV is betting the wave of populist sentiment will help him upend Canada’s political establishment. Kevin O’Leary is one of 14 candidates vying for the leadership of Canada’s Conservative Party on 27 May and to challenge Prime Minister Justin Trudeau in the general election two years later.
