Written by Econintersect
Early Bird Headlines 10 July 2018
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, published Monday, Wednesday and Friday, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.
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​Global
- Asian shares close higher, tracking Wall Street’s rally as trade worries ease (CNBC) Markets in Asia closed higher on Tuesday, taking cues from the rally in U.S. stocks as investors temporarily set aside recent trade-related concerns. The dollar index firmed to trade at 94.203. Brent crude had added $0.25 cents (0.3%) to $78.32 per barrel by 0056 GMT, following a 1.2% climb on Monday. U.S. light crude futures were up by $0.17, or 0.2 percent, at $74.02. Spot gold was up 0.2% at $1,259.30 an ounce, as of 0357 GMT. In the previous session, the metal touched its highest since June 26 at $1,265.87.
- Tighter Financial Conditions Globally (The Daily Shot) Asia’s financial conditions have tightened substantially.
- Global Unemployment (The Daily Shot) The average unemployment rate in the OECD nations is at the lowest level in decades.
U.S.
- Trump taps Brett Kavanaugh to succeed Kennedy on Supreme Court (The Hill) President Trump on Monday selected Brett Kavanaugh as his nominee to replace Justice Anthony Kennedy on the Supreme Court, setting up a fierce confirmation battle as he seeks to cement conservative control of the nation’s highest court. Trump announced the selection of Kavanaugh, a politically connected judge on the influential U.S. Court of Appeals for the District of Columbia Circuit, after a suspenseful day that resembled the lead-up to his first Supreme Court pick, Justice Neil Gorsuch. See also What you need to know about Trump’s Supreme Court nominee Brett Kavanaugh (CNBC)
- Memos detail FBI’s ‘Hurry the F up pressure’ to probe Trump campaign (The Hill) An Op Ed:
Multiple reviews of whether FBI agents’ political bias affected the Russia-Trump collusion case remain in their infancy, but investigators already have unearthed troubling internal communications long withheld from public view.
- Leveraged-Loan Risks Are Piling Up (Wolf Street) US junk-bond issuance in June plunged 31% from a year ago to just $14.5 billion, the lowest of any June in five years, according to LCD of S&P Global Market Intelligence. During the first half of the year, junk bond issuance dropped 23% from a year ago to $110.6 billion. But high risk investment has only been transferred – leveraged loans are booming. Leveraged loans are arranged by banks and sold either as loans or as Collateralized Loan Obligation (CLOs) to other investors, such as pension funds or loan funds. They’re a $1 trillion market and trade like securities. But the SEC, which regulates securities, considers them loans and doesn’t regulate them. No one regulates them.
In the first half, companies issued $274 billion of non-amortizing leveraged loans, and $97 billion in revolving and amortizing leveraged loans, according to LCD, for a total of $371 billion, on par with the record set in the first half last year.
Leveraged loans come with covenants that are supposed to protect investors during the term of the loan and in case of default. With strong covenants and good collateral, leveraged loans tend to be less risky than junk bonds issued by the same company.
Alas, investors have the hots for this debt, and companies are taking advantage of it by weakening covenants, giving investors fewer protections and the company more leeway – such as paying interest with more debt rather than cash if it runs out of cash (payment-in-kind or PIK); normally, not being able to pay interest would constitute a default, but not with these “covenant lite” or “cov-lite” loans.
- Mueller team asks judge to stop Manafort from using ‘selective prosecution’ argument (The Hill) Special counsel Robert Mueller’s team on Monday reportedly requested a federal judge prevent former Trump campaign chairman Paul Manafort from arguing at his trial that he’s the subject of selective prosecution. Bloomberg reported that prosecutors for Mueller asked U.S. District Judge Amy Berman Jackson to stop Manafort from arguing that the special counsel targeted him for “vindictive reasons.” The news outlet reported that prosecutors also requested Berman block Manafort from providing evidence that shows he was investigated, but not charged, prior to Mueller’s appointment last summer.
Mueller’s team argued that any suggestion that the special counsel “resurrected” old charges would be misleading because it would indicate the Justice Department had concluded its original investigation.
- Where and why has agency rulemaking declined under Trump? (Brookings) This piece finds that agencies under Trump significantly reduced the total amount of rulemaking relative to prior administrations across the board. This drop held for both routine rules and important rules, and for both Cabinet agencies and independent agencies.
The research approach has four notable limitations. First, counts of rules issued do not shed light on whether the rules imposed additional regulation or were deregulatory. This problem is largely mitigated by the fact that the Trump administration did not have time in 2017 to draft, propose, and formulate deregulatory rules. Second, the classifications of “major” and “non-major” are relatively blunt proxies for the policy importance and scope of a rule. The data therefore do not capture if an agency changed its rulemaking practice and begun issuing larger rules instead of multiple smaller discrete rules. Third, the classification of “executive agency” or “independent” does not capture the nuance in the full continuum of agency independence. Fourth, the data do not capture whether the legal requirements for agencies to issue rules changed over time. Some of the Trump era decline in rulemaking could be the result of fewer new statutes requiring rulemaking. Confining the analysis to discretionary rules may therefore produce a more pronounced drop in rulemaking under Trump but the data are not divided in this way.
- We Have No Idea How Bad the Us Tick Problem Is (Wired) Around the world, diseases spread by ticks are on the rise. Reported cases of Lyme, the most common US tick-borne illness, have quadrupled since the 1990s. Other life-threatening infections like anaplasmosis, babesiosis, and Rocky Mountain spotted fever are increasing in incidence even more quickly than Lyme. Meat allergies caused by tick bites have skyrocketed from a few dozen a decade ago to more than 5,000 in the US alone, according to experts. And new tick-borne pathogens are emerging at a troubling clip; since 2004, seven new viruses and bugs transmitted through tick bite have shown up in humans in the US.
- Sonoco Hikes Some Prices By 4% In Response To Tariffs (TalkMarkets) Today US-based Sonoco (SON) announced that it will raise prices on all composite cans and metal ends in the U.S. and Canada by 4%, in response to recent tariff announcements, with the price increases effective Aug. 1.
- U.S. Automotive Imports (The Daily Shot) Changes in U.S. car imports over time have been fairly moderate, except for Mexico.
UK
- UK PM appoints Remainer as new foreign secretary after Boris Johnson quits (Euro News) Health Secretary and pro-Remain MP Jeremy Hunt has been appointed as the UK’s new foreign secretary after Boris Johnson resigned earlier on Monday. Explaining his exit, Johnson released a scathing letter attacking the PM’s approach to Brexit, saying “the dream is dying, suffocated by needless self-doubt“.
Russia
- In Helsinki, Putin can grant Trump great success, of sorts (Brookings) The July 16 face-to-face between President Trump and Russian President Vladimir Putin is both entirely natural and extremely unconventional, very encouraging and deeply disturbing. At the two previous meetings, in Hamburg and Danang, the two leaders had a lot to talk about – and they agreed on approximately nothing. There have been all sorts of variably informed speculations about the agenda, proceedings, and outcome of the upcoming rendezvous, but most appear to miss the point that Putin is interested in making it a success for his counterpart, and can do so at very little cost.
Whether the NATO summit in Brussels prior to the Helsinki meeting is as quarrelsome as the G-7 gathering in Quebec or as smooth as the previous summit of the Alliance, Putin can stick to his script of insincere bonhomie. He knows full well that Trump needs this long-anticipated tête-à-tête to be a personal triumph of his will over the warnings – sometimes written in capital letters – of his advisers, the so-called “adults.” For a skillful intriguer like Putin, it is not that difficult to turn this desire for success to his advantage.
- Former Putin adviser has secret investment in US energy firm praised by Trump (The Guardian) Vladimir Putin’s former chief of staff has a secret investment in an American energy company hailed by Donald Trump as creating jobs for American workers. Alexander Voloshin – who served as Boris Yeltsin’s chief of staff before working for Putin between 2000 and 2003 – has an undisclosed stake in American Ethane, a Houston-based firm that recently signed a multibillion dollar export deal with China.
In November 2017, Trump presided over a series of trade agreements with his Chinese counterpart, Xi Jinping. One of the biggest was a $26bn (£20bn) deal to supply liquid ethane to China, struck between privately owned American Ethane and a large Chinese conglomerate.
China
- The future of the U.S.-China trade war (Brookings) China has made a basic offer: It is willing to buy more agricultural products, energy and high-tech manufacturing if the U.S. is willing to sell. It is gradually opening up more sectors of its economy, such as automobiles and financial services. If the U.S. persists in the trade war, then American firms are likely to be shut out as China opens up. By 2019, the negative effects of the protection are likely to be stronger while the influence of the fiscal stimulus wanes. The article concludes:
Do not be surprised if in 2019 the U.S. takes the offer that has been on the table, dressing it up a bit in order to declare victory.
- China needs to do more reform-wise or risk an elevation in tensions in the global economic system, the European Union Chamber of Commerce in China said in a report.
- China has made progress on environmental policies, streamlining business procedures and encouraging R&D.
- But major shortcomings, including SOE dominance and technology transfers, have overshadowed that progress.
- China Inflation Rises (Twitter) Producer Price Inflation continues at a high level, now at the highest reading in six months..
Canada
- What happened to Tim Hortons? The downfall of Canada’s brand (The Guardian) Tim Hortons is a famously Canadian brand. It’s not just a corporation – it’s a cultural icon which elicits an extraordinary passion, entirely incommensurate with its unremarkable product.
But while the popular purveyor of caffeinated patriotism may have burrowed its way into the national psyche, there are signs that it is beginning to lose its hold on Canadian hearts; not a week seems to go by without a new negative headline about Tim Hortons. In May, for example, the company fell from 13th place to 67th place in a study tracking Canada’s most reputable companies. This was announced only a few weeks after Tim Hortons dropped from number four to 50 in an annual survey of corporate reputation by research firm Leger
