Why China’s Economic Slowdown Could Trigger a Full-Blown Global Recession

By CCN.com: According to new figures from the International Monetary Fund (IMF), the European Central Bank (ECB), and the Chinese government, Europe and China are continuing to struggle following a poor year of growth in 2018.

ECB President Mario Draghi said on January 24 that downside economic risks could pose a threat on the economy of the euro-zone, citing geopolitical uncertainties, the U.S.-China trade war, and the volatility in the global financial market as major contributing factors.

China and Europe Slowdown May Lead to a Global Recession

Earlier this month, a market strategist Russel Napier wrote in a column that the demise of the euro could trigger the collapse of the global monetary system, resulting in a full-blown global recession.

Napier said:

“The key consequence of this collapse will be the destruction of the euro. The expected success of the far-right and far-left in the European parliamentary election in May this year augurs the beginning of the end for the currency union. Both extremes share a commitment to the return of sovereignty to their parliaments that is incompatible with a single currency.”

In an official speech, ECB President Mario Draghi acknowledged the decline in the momentum of the euro and the euro-zone economy on Thursday, stating that the central bank will have to establish new inflation and economic forecasts by the end of the first quarter of 2019.

Draghi emphasized that a wide range of instruments such as bonds, interest rates, and long-term loans could be utilized to stimulate the euro-zone economy. But, analysts remain unconvinced whether it would be sufficient to lead to the euro-zone to a full recovery by the year’s end.

An economics commentator Greg Ip noted that based on the numbers released by the IMF, which suggest that the global economy is set to expand by 3.5 percent in 2019, a global recession will not occur in the short-term.

However, Ip explained that the series of revisions made by the IMF in its forecasts and projections present an issue for central banks across the world and depending on the strategies employed by major regions like the euro-zone and China, the global economy may face long-lasting turbulence throughout the years to come.

“This latest disappointment isn’t the story; the real story is the serial disappointments that have dogged this expansion from the start. The IMF keeps projecting a return to the 4%-plus growth that prevailed in the 2000s, and keeps having to revise it down,” Ip wrote.

The slow down in the growth rate of the European economy coincides with the newly released report from the Chinese government that the economy of China grew by a mere 6.6 percent in 2018, recording the slowest pace in over two decades.

U.S. Economic Growth is on the Decline as Well

Several reports in the past week have claimed that the struggle of the euro-zone and China may affect the economy of the U.S. in the short-term.

Already, as disclosed by the Conference Board economic research director Ataman Ozyildirim, U.S. economic growth is projected to slow down by the end of the year, having recorded a slight drop in the last quarter of 2018.

Since late December, major stock market indexes including Dow Jones, S&P 500, SSE Composite, and Nikkei 225 have performed relatively well, but analysts believe that the global economy remains vulnerable to a potential downturn and trend reversal.


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Author: Joseph Young 
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Japan’s Next Economic Boom Will Be Bitcoin And Blockchain Fuelled

Japan’s economy — which for years has struggled to return to its 1980’s growth levels — could be about to boom once again, thanks to bitcoin, cryptocurrency and blockchain technology.



At the Japan Blockchain Conference this week in Tokyo (the first of what’s expected to become a yearly event) the chief executive of financial services giant SBI Holdings Yoshitaka Kitao said he is betting that blockchain related technologies will fuel the next boom for the Japanese economy after decades of economic malaise.

In the 1970s, Japan had the world’s second-largest GDP after the U.S. and this boom continued through to the 1980s. However, by the early 1990s Japan’s economy had stalled, plunging the country into what has been called the “lost decade” of growth.

It has previously been suggested Japan’s economy could be kick-started by a “technological boom.”

bitcoin blockchain japan economy

Improved mobile connectivity through the long-awaited 5G technology, along with the Internet of Things (IoT), rapid increases in computing power and artificial intelligence, could combine to trigger an economic boom, in which Japan is well placed to lead the way.

SBI is investing in companies in Japan and across east Asia through its $460 million so-called AI & Blockchain Fund, established earlier this year.

“We want to take blockchain beyond financial,” Yoshitaka Kitao said. “There’s a lot of speculative demand around cryptocurrencies, which is why the price is going up so quickly, but people need to think about how these technologies are being used in real life and how they can improve people’s businesses.”

Yoshitaka expects this boom to happen within the next few years and has been steering SBI towards blockchain and cryptocurrencies as a result.

Earlier this year it was revealed SBI is planning to launch a cryptocurrency exchange this summer and has also invested in a renewable energy wind farm to begin mining Bitcoin Cash — which Yoshitaka believes is more viable than the original bitcoin.

“Bitcoin is too expensive and people are just holding it and hoping it increase in value,” said Yoshitaka.



Aaron McDonald, the chief executive of decentralised app marketplace Centrality (which closed a $80 million initial coin offering (ICO) earlier this year), expects Japan and east Asia to be the core driver of global bitcoin, cryptocurrency, and blockchain adoption.

New Zealand-based Centrality’s ICO was predominantly bought by investors from Japan, where one third of adults have used a cryptocurrency wallet.

“We’re focused on the region because people in Japan are far further ahead than the rest of the world when it comes to blockchain and crytocurrencies,” said McDonald, who agrees the blockchain boom is just a few years away.

Tezuka Mitsuru, the chief executive of blockchain investment advisory company CTIA, one of Centrality’s major investors, said: “If blockchain is integrated into the Japanese market it will be a great tool and prevent the market from declining.”

 

 

This week it was announced Centrality has secured a partnership with China tech giant InfiniVision and Japan-based Jasmy — founded by the former president of the Sony Corporation.

However, there are fears heavy-handed regulation could suffocate the blockchain and cryptocurrency industry in Japan, with the government clamping down on crypto exchanges earlier this year in the wake of a number of high-profile thefts.

Fears of a global regulatory crackdown have contributed to a sharp fall in the bitcoin price in 2018, after a rapid rise last year.

The likes of illegal ICOs, money laundering, tax evasion, thefts, exchange outages, excessive speculation have all become a worry for regulators this year.

While Japan has broadly chosen a more accommodating approach to blockchain and cryptocurrencies, last year introducing a law that resulted in 16 licensed trading venues, in early March it also cracked down, penalizing six exchanges and telling another to revise its management structure among other changes.


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Author: Billy Bambrough
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Bank earnings: Expect a strong first quarter, but more questions lie ahead

What should investors expect from first-quarter bank earnings?

The answer, from multiple industry veterans, is a decided “it depends.” The macro business environment should be good for banks: the economy is strong, taxes have just been cut, and regulations are likely to be rolled back.

But a peek under the hood reveals that not only is the devil in the details, but that even the broad themes may not boost market views of bank stocks, especially if management only sees more of the same on the horizon.

As Karen Petrou, managing partner for Federal Financial Analytics, put it, “This is a period of enormous policy volatility. This is a government of, by, and for tweets. It’s extremely hard to discern the direction of policy and that makes stable markets and corporate forward-looking strategic judgements based on policy very difficult.”

Normal uncertainties about policy are amplified even more now, Petrou said. It’s possible for investors to spend time analyzing the winners and losers from a trade war, for example—but even that’s not a given right now.

One positive from the uncertainty, Petrou said, is that in coming months, market choppiness will be a boon for banks: “Volatility is their lifeblood. They can’t make money when nothing changes.”

Jason Goldberg, chief bank analyst for Barclays, broke down the quarter’s specifics in a recent research note. He expects slower-than-expected growth in commercial real estate and subdued overall loan growth “but more positive outlooks.” Net interest margins—the difference between what banks make on lending versus what they pay to depositors—will expand—but banks will put aside more to cover for expected losses from loans they make. Goldberg also expects “only modest growth” in revenues from trading, and lower investment banking fees, although there’s a possibility of stronger investment banking activity in the future.

But those business conditions say little about market reactions. Petrou thinks much of the tax cut, the promise of regulatory reforms, and the possibility of steadily rising interest rates, could already be priced in to stocks. “If it’s fully priced in, the question is, for further gains what else is needed?” she said.

According to Goldberg, “Bank stocks (and the market) have been more volatile of late. On some days the market seems to want to focus on the positive data points and on others it focuses exclusively on the negative ones.”

For Chris Whalen, a long-time bank analyst, there’s a clear short-term story and a less-clear long-term outlook. “Earnings are going to be great because of the tax bill, banks have one-third more income to distribute to shareholders and so clearly the numbers are going to be higher. They’re also going to be buying back stock pretty aggressively.”

Whalen has been gloomy about the banks’ ability to make profits in the “new normal” post-crisis landscape, even without Washington uncertainty.

“Banks don’t have as many ways to make money, costs are up and the spread environment has compressed loan spreads,” he said. “Their ability to generate raw revenue, pre-tax, has diminished a lot but they’ve gotten bigger and raised more capital. They’ve been delivering earnings but mostly from a cost-cutting perspective. They are constrained in terms of future earnings because the competition for loans and other assets is intense. A big bank that’s still 8-9% equity returns, I don’t care what the earnings are, it just tells me that business is just utility and there isn’t much alpha.”

JPMorgan Chase & Co, Citigroup Inc. and Wells Fargo kick off earnings season on Friday, April 13—not that there should be anything frightful about that auspicious date, Goldberg wrote. Here’s what analysts surveyed by Factset expect for the coming quarter.

Analysts expect JPMorgan to report EPS of $2.28 in the quarter, up from $1.65 a year ago, and revenue of $27.7 billion, compared to $25.6 billion last year. Their average stock price target is $122.64 and average rating is overweight. The stock is up 30% over the past 12 months.

The Factset analyst consensus for Wells Fargo & Co. calls for per-share earnings of $1.06, compared to $1.00 a year ago. The consensus for revenue is $21.7 billion, down from $22.0 billion a year ago. The analysts have an average stock price target of $63.64 and an average hold rating. Shares of Wells, dogged by scandals, have lost more than 3% over the past 12 months; it’s the only one of the big four not to have beaten the Dow Jones Industrial Average over that period.

Factset analysts forecast per-share earnings of $1.61 for Citigroup Inc. compared to $1.35 a year ago, and revenue of $18.9 billion, versus $18.1 billion a year ago. Their average stock price target is $84.19 and average rating is overweight. Shares have risen nearly 19% over the past year.

Finally, when Bank of America Corp. reports on April 16, analysts expect earnings of 59 cents per share, up from 41 cents last year, and revenue of $23 billion, up from $22.2 billion. FactSet analysts have an average stock price target on BofA stock of $34.52 with an average overweight rating. The stock is up 31% over the past 12 months.

 


Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

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Author: Andrea Riquier 
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What Happened to the Oil Glut?

Stored oil is at its lowest level in more than three years, partly due to OPEC and Russia’s output cuts

A glut of stored oil that helped keep prices low for years is almost gone, thanks to production cuts by OPEC and Russia, a humming global economy and a series of small but meaningful supply disruptions.

Excess inventories of stored oil by the world’s industrialized economies are now at their lowest level in more than three years, based on a five-year running average, according to data released Thursday by the Organization of the Petroleum Exporting Countries. After months of steepening declines, the cartel said commercial inventory levels shrunk a further 17.4 million barrels in February, to about 2.85 billion barrels.

That represents a surplus of just 43 million barrels, based on the five-year average. Two years ago, the storage surplus hit 400 million barrels.

The drain on storage is partly a consequence of a concerted effort by Saudi Arabia, its OPEC colleagues, and Russia, to throttle back output to bolster prices.

“The rebalancing process is well under way,” OPEC Secretary General Mohammed Barkindo told an energy summit in New Delhi on Wednesday.

The quickening depletion of excess stored oil has analysts throwing around a word they haven’t had to use that often in the past few years: shortages. Without much cushion in storage, the threat of supply outages can more quickly drain inventories—and boost prices.

Venezuelan crude output has been hobbled by political and economic instability there, and rising tensions between the U.S. and Russia over Syria have also contributed to worry over supply. President Donald Trump has threatened a missile attack against Syria, in retaliation for an alleged chemical attack by Syria’s government, which Moscow has backed during the country’s long civil war.

Syria doesn’t pump much oil itself, but the new tensions have raised the specter of bigger production outages across the oil-rich Middle East, should military action escalate. Many similar supply-shock worries have had only muted impact on oil prices in the recent past, thanks to the glut of oil in storage. With that cushion gone, analysts say geopolitics may again start playing an outsize role in oil markets.

“Global oil supply and demand are quickly approaching a balanced position after spending several years in an excessively high inventory mode,” said Dominick Chirichella, co-president of New York-based Energy Management Institute, in a report Wednesday. “Geopolitical risk is bubbling up in the oil pits.”

Saudi Arabia has indicated little appetite for opening up the spigots. In its report Thursday, OPEC said its collective production fell by an average 201,000 barrels a day. Part of the decline came from fresh, voluntary cuts by Saudi Arabia. Earlier this week, the kingdom said it would keep its overall crude-oil exports below 7 million barrels a day next month.

Saudi Oil Minister Khalid al-Falih told the New Delhi conference this week that “we will not sit by and let another glut resurface in the coming years and bring the market through the roller coaster that we have seen.”

Thinning inventories isn’t just down to OPEC-led cuts. Oil demand has been growing amid a rare, synchronized economic expansion by the world’s biggest economies. OPEC said it now sees demand for this year growing by about 30,000 barrels a day more than it had previously forecast. That growth is now expected to come to an average 1.63 million barrels a day for the year.

Amid that new appetite, a series of production outages are already sapping supply. Last month, OPEC says it lost about 100,000 barrels a day because of the crisis in Venezuela and disputes by rival political groups in Libya and Iraq.

All that has translated into higher oil prices. Brent, the international oil benchmark, has been hovering above $70 a barrel—levels not seen in three years.

The big question for markets now is whether, amid the tightening market, North American shale producers swing back into action. These smaller, nimbler producers have in previous periods of oil-price strength, ramped up output to take advantage of the higher prices.

That new production typically boosts supply, and eases prices back down again. In its report, OPEC upgraded its non-OPEC oil supply forecast for the year, saying Canada and the U.S. will pump about 90,000 barrels a day more than expected.

 


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Author: Benoit Faucon
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