China-U.S. trade deal is “fully intact,” it’s PMI day, and the virus latest.
Bump in the night
U.S. equity futures and Treasury yields briefly plunged after White House adviser Peter Navarro seemed to suggest in an interview on Fox News that the U.S.-China trade deal was over. Markets quickly recovered after President Donald Trump tweeted that the agreement was “fully intact” and Navarro said his comments were taken “ wildly out of context.” Michael Every, global strategist at Rabobank, wrote in a note that the whipsawed markets were a taste of things to come as he sees no way that China can stick to the terms of the agreement.
Purchasing Managers Indexes in Europe pointed to a long, slow recovery in economic activity in the wake of the pandemic shutdown. France produced a notable performance with composite PMI rising to 51.3, passing the 50 level than indicates an expansion from the previous month, well ahead of economist forecasts. A similar reading for Germany came in at 45.8 while in the U.K. it was at 47.6, led by a recovery in manufacturing. There was some hope in the latest World Trade Organization outlook which said that government responses mean their worst-case scenario will likely be avoided. PMIs for the U.S. economy are published at 9:45 a.m. Eastern Time.
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The Long Climb
While a near-term mechanical bounce in economic activity in response to the lifting or easing of lockdown measures looks likely, we expect the subsequent climb up to be long and arduous. Read more.
Pushing on a string
Speaking of government responses, companies in Europe have taken up less than 15% of the funds made available as loan guarantees by law makers, meaning more than 2 trillion euros ($2.3 trillion) remains untouched as economies continue to reopen. The U.K. government is due to further ease restrictions with Prime Minister Boris Johnson to make an announcement of whether to reduce to guidelines on social distancing. In the U.S. new infections in Florida rose to another high and Texas Governor Greg Abbott said contagion was accelerating at “an unacceptable rate.”
After the earlier Navarro kerfuffle, global equity investors quickly got back to the job of buying stocks. Overnight, the MSCI Asia Pacific Index added 0.7% while Japan’s Topix index closed 0.5% higher. In Europe better than forecast PMI data helped push the Stoxx 600 Index to a 1.3% gain by 5:50 a.m. It’s a similar story with S&P 500 futures which were firmly in the green, the 10-year Treasury yield was at 0.718% and oil was over $41 a barrel.
U.S. new home sales data for May and the June Richmond Fed Manufacturing Index are both at 10:00 a.m. The focus in Congress today is on coronavirus, with Anthony Fauci to testify in the House and the Senate to hold a hearing on China’s culpability for the pandemic. President Trump will be in Arizona, Joe Biden holds an event with former President Barack Obama, and John Bolton’s book is published. There are primaries in Kentucky, New York and North Carolina. The Bloomberg Invest Global summit continues with speakers including Treasury Secretary Steven Mnuchin. MSCI will announce the results of its 2020 Market Classification Review.
What we’ve been reading
This is what’s caught our eye over the last 24 hours.
- Global markets face reckoning with risks coming true all at once.
- “Everything is expensive.”
- Redefining normal in the age of covid.
- Wirecard’s former CEO arrested in Munich.
- Trump orders freeze on many work visas through end of the year.
- Europe targets U.S. coal, farms in election-year trade staredown.
- 100 degree heat in the Arctic Circle.
And finally, here’s what Joe’s interested in this morning
If you ever point out that inflation in the United States has been mild, someone is sure to respond with: “but have you been to the grocery store lately!?” I’ve been hearing people say this line for years in a variety of economic conditions, but lately it’s true that there was a rise in food prices. Since the start of the year, food prices are up about 5%.
Still, all you have to do is read this article, and you’ll understand that it’s got nothing to do with the Fed or any of the standard culprits, and everything to do with the fact that thanks to the virus, the food supply chain is messed up in numerous ways. For example, the shutting of ethanol plants led to a decline in carbon dioxide supplies, which hit food companies that depend on it for refrigeration, forcing them to source it from new suppliers, which raised their costs. Meanwhile, port disruptions in China forced companies like Kraft Heinz to source apple juice from Chile to make Capri Sun. The list of disruptions goes on and on and they all add up to higher prices. Another thing is that the surge in drinking at home (because bars are closed) led to demand strains for aluminum cans.
Anyway, with all that’s going on, it would be weird if prices didn’t go up, even in some fantasy hard-money scenario where we were paying in gold. Sourcing food got harder during the worst of the crisis. It’s the market at work.
Staring at its first recession in four decades, India faces a long hard slog to regain its former glory days of 8%-plus growth.
As it emerges from the world’s strictest stay-at-home rules, Asia’s third-largest economy finds local supply chains are broken, little demand for its goods in overseas markets and an escalation of a border dispute with its giant neighbor — China, which also happens to be the country’s second-largest trading partner.
All these bode ill for Prime Minister Narendra Modi’s vision to transform India into a $5 trillion economy over the next five years from $2.7 trillion currently and make it more attractive to foreign investors. Millions of Indians have lost their jobs since the lockdown was imposed in late March. Many migrants, who make up nearly a fifth of the workforce and are key to building its cities and running factories, fled to their villages.
They’re unlikely to return in a hurry, and that means output at India’s production lines won’t be restored before September. For a country whose financial year runs from April to March, that means half the year is written off. Bloomberg Economics sharply cut its growth forecasts recently and now expects gross domestic product to contract by 10.6% in the fiscal year, compared with a 4.5% drop forecast in April.
The slowdown will dim India’s allure at a time when its trying hard to win over U.S. businesses, including medical devices giant Abbott Laboratories, to relocate from China. Modi’s government has reached out more than 1,000 companies in the U.S. and through overseas missions with incentives for manufacturers, including medical equipment producers and food processors, along with apparel, leather and auto-part makers.
But the plans to brighten India’s investment allure have run into more headwinds, especially as a seven-week military standoff between the two nuclear-armed powers of China and India flared up and stoked geopolitical tensions.
While India said it remains committed to peace, an escalation risks even more bumps for firms from Alibaba and Xiaomi to Tata Motors and probably will spur companies to rewrite supply pacts. Swathes of Indian businesses also rely on raw materials from China and another bout of disruption can only prolong India’s recovery.
— Anirban Nag in Mumbai
Early South Korea export figures show shipment declines easing in June amid resilient semiconductor demand and more purchases from China that raise some hope the global trade slump may be bottoming. Average daily shipments fell 16% in the first 20 days of the month compared with the prior year, improving from a decline that exceeded 20% in May. Total semiconductor shipments, the country’s biggest source of trade income, rose 2.6%, while those of ships increased 36%.
Today’s Must Reads
- Clipped wings | China suspended poultry imports from a Tyson Foods plant where hundreds of employees caught Covid-19, stoking concerns over U.S. and global meat exports.
- Hop off the bus | Airbus plans to pursue voluntary job cuts before seeking forced reductions, as it aims to bring down costs without inciting a political uproar in France and Germany.
- American made | As the OPEC+ alliance sticks to its guns in trying to curb oil output to shore up prices, Asian buyers are increasingly looking to the U.S. for a cheaper source of supply.
- Super-charged | Singapore is positioning itself for a post-Covid world with massive investment in innovation, on top of the immediate support it’s giving to help the economy rebound from possibly its worst downturn on record.
- Still the king | The U.K. remains the most attractive place for foreign investment in financial services in Europe, despite the ongoing pressures of Brexit and the economic fallout from the coronavirus pandemic.
- Signs of the times | “Novel farming,” which turns out lucrative lettuces and herbs in indoor farms, is seeing a massive jump in demand. In these days of lockdowns and food insecurity, canned meat is also enjoying a moment.
On the Bloomberg Terminal
- Brexit effect | The U.K. construction sector’s supply patterns could be at least partially readjusted away from the EU in favor of China and other non-EU countries after Jan. 1, Bloomberg Intelligence says.
- Choppy waters | Bonds in Maersk, the No. 1 container-shipping player with a market share of about 17%, may not fully reflect the risks ahead, according to Bloomberg Intelligence.
- Use the AHOY function to track global commodities trade flows.
- Click HERE for automated stories about supply chains.
- See BNEF for BloombergNEF’s analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities.
- Click VRUS on the terminal for news and data on the coronavirus and here for maps and charts.
From an economic point of view, the fishery sector is an important sector in Nigeria. The sector provides millions of jobs; directly and indirectly. Small-scale farmers constitute 80% of the total market; supplying about 85% of the country’s domestic fish production. Notwithstanding, this large production, the demand for fish outweighs production. https://optionxpress.wordpress.com/2020/04/27/invest-in-fish-farmingby-idika-aja/
DEALS – FEB 19, 2020Telecom & IT
- Investment criteria:
- Revenue: US$ 5mn to 20mn
- EBITDA: US$ 1mn to 10mn
- Stake required: Less than 50%
- More about the client: Japanese investor looking for opportunities in the Telecommunication and IT sector across the globe. Click here to know more about this requirement
Submersible Motor Pumps
- Acquisition criteria:
- Revenue: US$ 5mn to 500mn
- EBITDA: US$ 2mn to 30mn
- More about the client: Global strategic acquirer is interested in the manufacturers for submersible motors pumps and components for Oil & Gas (Offshore & Onshore), Water pumps (Cooling & Hot Water). Click here to know more about this requirement
Ophthalmology surgical, Intraocular lens
- Acquisition criteria:
- Revenue: US$ 10mn to 250mn
- EBITDA: US$ 0mn to 30mn
- More about the client: Seeking companies manufacturing ophthalmological Surgical Devices & intraocular lenses, and other medical equipment across the globe.
Building Materials | Fasteners
- Acquisition criteria:
- Revenue: US$ 15mn to 200mn
- EBITDA: US$ 2mn to 30mn
- More about the client: Seeking companies specializing in wood construction connectors, cold-formed steel connectors, fasteners & fastening systems, Adhesive Anchors, etc
- Acquisition criteria:
- Revenue: US$ 5mn to 500mn
- EBITDA: US$ 0mn to 20mn
- More about the client: Seeking industry-specific software companies providing solutions to Legal, Accounting, Auditing, Tax, Compliance functions or any other industry.
You can connect with these investors and many more to share your deals by replying to this email or add it firstname.lastname@example.org That’s all!
We’re here as a resource to help you grow, so never hesitate to reach out.
- Dow jumps more than 800 points as Wall Street heads for fourth weekly gain in five weeks. – CNBC.
- Wirecard CEO Markus Braun resigns after the German payments company disclosed $2.1 Billion of missing Cash – Bloomberg
- Dow drops 200-points after jobless claims disappoint , reopening trades declines. – CNBC
- Dow recovers from 271-point loss, turns positive as reopening stocks rise. – CNBC
Hong Kong’s economy is in peril, but its financial system is not – The Economist
As they repay their debt to society, many Hong Kong prisoners are put to work making useful items like road signs, uniforms, furniture—and the surgical masks that now obscure the faces of almost everyone on the city’s subdued streets. To help stop the spread of the Wuhan coronavirus, which has infected over 28,000 people worldwide, prisoners will now be employed round the clock, boosting mask production by as much as 60%. https://www.economist.com/leaders/2020/02/06/hong-kongs-economy-is-in-peril-but-its-financial-system-is-not?utm_campaign=the-economist-today&utm_medium=newsletter&utm_source=salesforce-marketing-cloud&utm_term=2020-02-11&utm_content=article-link-6
Muller: Maybe we will give Robben a call and bring him back from retirement
Can Nigeria float the Naira now?
There is nothing wrong in borrowing within acceptable levels. But borrowing to fund non-self amortizing projects and/or funding unproductive and for consumption is the problem.
The presidency, CBN and productive economic reforms
For the total import of about 450,000 tons in 2017, it will take about 75 plants producing an average of 20 tpd in output to produce that quantity. The issue is will the South-East and South-South Governors key into the project, when everybody is running to Abuja to collection allocation. They have the comparative avenues to increase their IGR and employ their teaming unemployed youth. But No!, they will not do it! – CBN and the oil palm rescucitation