The Daily Update - Battery Tech, All About Speed

The Daily Update - Battery Tech, All About Speed

Away from the President Trump inspired trade and sanctions fury, it is very difficult to tell the difference between Tariff and Sanction, a great piece from the team at Bloomberg yesterday regarding ‘stranded assets’.

In the past the term was used to describe fossil-fuel projects which had turned unprofitable before even being deployed as pollution regulations tightened. Now the term is being used in conjunction with battery technologies as the pace of new development in the storage devices is so fast that yesterday’s technologies is outdated before production can start.

The Daily Update - Turkey's Woes Continue

The Daily Update - Turkey's Woes Continue

The Turkish lira continued to set record lows against major currencies overnight as the country wrestles with a crisis that is beginning to rattle other markets. The lira was down 11% at one point against the US dollar, trading at a low of 7.23, on top of the 20% the currency dropped last week. However, in spite of the nation’s predicament, the Turkish president is showing no signs of backing down.

The Daily Update - US LNG: China Turns up Nose to Trump’s Gas

The Daily Update - US LNG: China Turns up Nose to Trump’s Gas

China-US trade tensions have continued to escalate with Trump having stated that a further USD16bn of tariffs will be implemented over and above the USD34bn already implemented in July. The US has also threatened a further USD200bn in tariffs. China has responded with a further USD60bn in proposed tariffs.

China’s proposed tariffs include adding US LNG imports to a list of goods incurring a 25% tariff. As of 2017 China was the world’s second largest LNG importer at 39mt (GIIGNL data) behind Japan at 83.5mt, although the European region imported 45.9mt.

The Daily Update - Taking a Pounding

The Daily Update - Taking a Pounding

For the 4 months since its peak in April sterling has continued to tumble. After yesterday’s announcement – that Theresa May is planning a cabinet meeting on the prospect of a no-deal Brexit – sterling dropped below 1.29 against the dollar for the first time in over 11 months. Of course over the last 3-4 months the currency markets have faced broader dollar strength, with the DXY Index moving from below 90 to above 95.

The Daily Update - Mubadala Taking Over the World

The Daily Update - Mubadala Taking Over the World

Mubadala Investment Co, Abu Dhabi’s sovereign wealth fund and one of our core holdings has been extremely busy over the last eighteen months; according to records it has transacted 31 major deals since January 2017.

Mubadala was created back in 2002 but has sprung into life following its merger with Abu Dhabi’s Investment Council which doubled its balance sheet to around $250bln and has become the main focus of the government to diversify the country’s economy from oil production.

The Daily Update - USDTRY free fall

The Daily Update - USDTRY free fall

Yesterday the Turkish Lira fell to record level against the US dollar amid the ongoing diplomatic spat with the US over the American pastor Andrew Brunson resulting in the US government’s threat to review Turkey’s duty-free access to the US market. A move that could threaten nearly USD 1.7bn of Turkish exports. The lira fell 6% at one point touching 5.4222, before recovering slightly to 5.25 (at time of writing).

The Daily Update - More Brexit scaremongering ??

The Daily Update -  More Brexit scaremongering ??

The National Institute of Economic and Social Research (NIESR) issued a stark warning last week if the UK government was to continue to follow its official plan for the post-Brexit economy. In the NIESR’s first major assessment of the economic impact the government’s white paper would have on the economy, it calculates that UK GDP would be 2.5% smaller over the next 10 years if the UK’s preferred relationship with the EU is achieved. With the government prioritising trade and services, while bringing back control of budgetary contributions and immigration, the NIESR believes it will have to make ‘significant concessions’ to the EU.

The Daily Update - Turkey Turning up the Heat, NFP

The Daily Update - Turkey Turning up the Heat, NFP

While we wait for today’s U.S. payrolls release we thought we would have a look at Turkey. Unfortunately, or fortunately, depends on your point of view Turkey is not in our mandate as it is only a two star country and rated Ba2. But for those investors that like to experience ‘life on the wild side’ Turkey has moved to levels in both bonds and currency which justifies investigation.

The Daily Update - The Fed, as Expected

The Daily Update - The Fed, as Expected

As expected the Fed left the fed funds target range unchanged at 1.75-2%. The decision was unanimous with a few wording changes to the statement reinforcing an improved growth outlook. There was no press conference post this meeting and the minutes are likely to be of more interest. The market is looking for another 25 basis point increase at the 25-26 September meeting.

The Daily Update - US Tariffs and their inconsistencies - China and Vietnam

The Daily Update - US Tariffs and their inconsistencies - China and Vietnam

As the US warns of further ratcheting of tariffs up to 25% (from the originally threatened 10%) on $200bn of Chinese imports (beyond the $34bn already imposed and a further $16bn that may come into effect later today) it’s worth reviewing the US policy on FX manipulation, consider its impact on the global economy, and - as many will be worse-off in this brinkmanship - identify any that stand to gain from these escalating tariff threats.

The Daily Update - A Little Bit Chile...

The Daily Update - A Little Bit Chile...

Moody’s recently downgraded Chile’s long-term rating by one notch to A1 (stable), bringing it in line with S&P’s A+ rating, and one notch higher than Fitch’s. Moody’s stated: “The rating downgrade reflects the gradual but broad-based deterioration in Chile's credit profile. Despite clear indications of near-term improvements in economic and fiscal prospects, Moody's does not anticipate the sovereign will regain the credit strength it had in previous years.”

The Daily Update - Will Trump shut down the US government ??

The Daily Update - Will Trump shut down the US government ??

U.S. President Donald Trump yesterday threatened he would consider ‘shutting down’ the US government if he cannot get the Democrats to back his immigration proposals. In a tweet (naturally), he said ‘I would be willing to ‘shut down’ government if the Democrats do not give us the votes for Border Security, which includes the Wall!’ adding ‘Must get rid of Lottery, Catch & Release etc. and finally go to system of Immigration based on MERIT! ‘We need great people coming into our Country!’

The Daily Update - ECB, US GDP, I knew I was right.

The Daily Update - ECB, US GDP, I knew I was right.

The ECB left its policy rates, QE stance, and its forward guidance on rates unchanged at yesterday’s meeting in line with market observers’ expectations. President Draghi called the Trump-Juncker deal a “good sign” but still noted downside risks to the outlook from trade. He continued to call the outlook for growth as “broadly balanced” and noted some improvement in recent survey data.

The Daily Update - NAFTA and AMLO's letter

The Daily Update - NAFTA and AMLO's letter

Andrés Manuel López Obrador (AMLO), will not be officially inaugurated as Mexico’s next President until December but already looks to be taking a proactive role on issues such as NAFTA. Since his Presidential election victory on 1 July, he has written to Trump advocating that the US and Mexico work together on the key issues of ‘trade, migration, development, and security’.

The Daily Update - "Tariffs Are The Greatest!"

The Daily Update - "Tariffs Are The Greatest!"

Last week the EU signed the world’s largest bilateral trade pact with Japan – reducing friction in the eastward flow of wine and cheese and the westward shipment of vehicles and parts – five years in the making. However, this week is another story and the EU faces the further undoing of such Trans-Atlantic trade relations as its diplomats stand-up or stand-down to Trump’s escalating trade demands. According to Donald Trump yesterday, “Tariffs are the greatest!” – unless of course they are levied against the US like the EU’s £3bn retaliatory tariffs on bourbon and bikes.

The Daily Update - China's Firepower

The Daily Update - China's Firepower

This week we heard that China has unleashed a raft of measures to counter the potential ill effects of the Trump Trade Wars on its economy, and in particular the renminbi. We have often spoken of the nation’s plethora of firepower which it can deploy to maintain stability, and recent actions have displayed just how these can be utilised. ‘Proactive’ fiscal policy and ‘reasonably adequate’ liquidity conditions were stated as the main ingredients to support growth and structural reform.

The Daily Update - IMF Global Growth

The Daily Update - IMF Global Growth

Last week the International Monetary Fund (IMF) warned that the sustained and escalating global trade conflicts initiated by the Trump Administration threaten to derail the economic recovery and depress medium-term growth prospects. The IMF believes that the global economy as a whole could lose about 0.5% of growth or about USD 430bn in lost GDP by 2020, with the possibility of the US being hit especially hard.

The Daily Update - UAE-China: Closer Economic Ties

The Daily Update - UAE-China: Closer Economic Ties

Xi Jinping’s state visit to UAE has perhaps been overshadowed by media coverage of the Trump-Putin meetings in Helsinki earlier in the week: the visit is part of UAE-China week running from 17-24 July focusing on bilateral relations and enhancing the trading and cultural relationship between the countries. Importantly, we see the event as highlighting the importance of China’s Belt and Road Initiative (BRI) (also known as One Belt, One Road  or OBOR) which also fits with a plan by Sheikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, to ‘Restore the Silk Road’ trading route.

The Daily Update - When to Worry About an Inverted Curve

The Daily Update - When to Worry About an Inverted Curve

Over the past week the term spread between 2-year and 10-year US Treasuries has averaged 25bps – equivalent to just one more Fed rate hike. Also earlier this week the 3-month Treasury bill yield touched 2% for the first time since 2008; this means that even short-term bonds now yield more than US stocks for the first time in a decade – becoming a viable alternative for those apprehensive about both stocks and bonds.

The Daily Update - Turkey - Keeping it in the Family

The Daily Update - Turkey - Keeping it in the Family

On Friday Fitch downgraded Turkey’s long-term credit rating by one notch, to BB, negative outlook; in-line with Moody's, and one notch above S&P’s BB- rating. We highlighted our concerns last month, ahead of the elections, as the economic fundamentals looked increasingly shaky and the lira collapsed; currently down 20.5% ytd. Also, inflation hit a 15-year high of 15.39% yoy in June off the back of the tumbling lira.

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