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Funds Flock to Dollar on Bets Markets Underpricing Trade Divide

This article by Ruth Carson for Bloomberg may be of interest to subscribers. Here is a section:

Uncertainty over how the dispute would be resolved in the one-month deadline set by Washington will reinvigorate a hunt for haven assets in a world already hampered by slowing growth.

An easy bet will be to short the expected losers: risk-sensitive currencies from Asia to South America, they say. “To be honest, I thought the dollar would be rising at a much faster pace than this -- markets were pricing in a Goldilocks environment and they were clearly wrong,” said Stephen Miller, an adviser at asset manager GSFM and a former head of fixed income at BlackRock Inc.’s Australian business.

“Right now I’d be long U.S. dollar versus EM currencies, the likes of Argentina and Turkey.” There’s a 60% chance that China and U.S. won’t reach a deal in the coming weeks, according to analysts at Australia and New Zealand Banking Group Ltd., after last week’s talks laid bare divisions including the removal of existing tariffs and a breakdown in trust. While both nations plan to continue negotiations, traders are waiting for Beijing’s retaliation measures after Washington slapped more duties.



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Trump, China Signal Harder Stands Ahead of High-Stakes Talks

This article by Shawn Donnan, Jenny Leonard and Miao Han for Bloomberg may be of interest to subscribers. Here is a section:

But the mood on both sides going into the talks appears to be hardening with Lighthizer calling members of Congress ahead of the discussions to warn that a deal this week is unlikely, according to people familiar with the conversations. While Trump on Wednesday insisted that Liu was coming to make a deal and dubbed him a "good man," he later told a rally of supporters that China "broke the deal" by backsliding on prior commitments, leading him to order higher tariffs.

China has disputed Trump’s characterization that the country reneged. But it has also sent its own signals that a deal could take time.

Unlike in some of his previous visits to Washington, Liu is not traveling with the designation "special envoy" of Xi Jinping, according to people briefed on his trip. Chinese officials’ public statements have also hardened in recent days with Beijing vowing to retaliate against Trump’s tariff increase and rejecting the idea that it has reneged on any commitments made during the months of tough negotiations that have led to this week’s showdown.

“China is credible and honors its word and that has never changed,” Commerce Ministry Spokesman Gao Feng told reporters on Thursday.

The Ministry of Commerce also announced it would soon publish details of new retaliatory tariffs.



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Trump Trade Tweets Send Grain Markets Diving to 42-Year Low

This article by Michael Hirtzer and Shruti Date Singh for Bloomberg may be of interest to subscribers. Here is a section:

“The U.S.-China deal sentiment is being unwound,” Joe Davis, director of commodities at Futures International LLC, said in a message. “There’s a zero percent chance of a deal by tomorrow -- it was almost a 100 percent chance last week.”

Soybeans have become something of a poster child of the trade dispute. China, the world’s biggest consumer, has mostly shunned imports from farms in rural American communities that voted for Donald Trump in 2016. Meanwhile, supplies from the 2018 harvest piled up in silos, bins and bags across the U.S. Midwest.

On Thursday, July soy futures in Chicago fell as much as 2.5 percent to $8.065 a bushel, the lowest since the contract debuted in late 2015.



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Why cheap coffee means more migrants at the border

This article by Paul Hicks and Dan McQuillan for the Houston Chronicle may be of interest to subscribers. Here is a section:

In recent years, their challenges have increased. Climate change stretches the dry season, or makes rainfall erratic. Last year some farms went up to 45 days without rain. The farmers watched their maize and bean plants wilt and die. Then they reaped only more debt from their meager coffee harvest.



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Can the gold industry return to the golden age?

Thanks to a subscriber for this report from McKinsey which may be of interest. Here is a section:



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Gold Futures Rise as Traders Focus on Stalled U.S. Wage Growth

This article by Marvin G. Perez for Bloomberg may be of interest.

Gold, coming off three straight monthly losses, got a lift as the wage data reassured investors that signs of moderate inflation will continue to stay the Fed’s hand on rates. Low rates are a boon to gold, which doesn’t pay interest. Fed policy makers reiterated their patient stance this week as Chairman Jerome Powell noted “very strong job creation’’ and said low inflation may be transitory.

“There was disappointing data on the wage-inflation side, and just puts a hint of doubt into the idea that low inflation is transitory,” Ryan McKay, a strategist at TD Securities in Toronto, said by phone. “Gold has been under a lot of pressure since the Fed comments this week, and this helps ease some of that.”



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Perspectives for the Clean Energy Transition

This report from the International Energy Agency may be of interest to subscribers. Here is a section:

In contrast to current trends, the Faster Transition Scenario sets out a vision for an extremely ambitious transformation of the energy sector. Energy-related emissions peak around 2020 and drop 75% to around 10 gigatonnes of CO2 (GtCO2) per year by 2050. The carbon intensity of the power sector falls by more than 90% and the end-use sectors see a 65% drop, thanks to energy efficiency, uptake of renewable energy technologies and shifts to low-carbon electricity.

Electrification plays a major role in the transition, combined with clean power generation. Electricity’s share in final energy reaches about 35% by 2050, compared to less than 20% today. That growth is mainly due to adoption of heat pumps in buildings and industry, as well as a swift evolution in transport. Efficiency improvements keep electricity demand for other end uses, such as lighting and cooling, relatively stable, while access to electricity improves worldwide.



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Under-Reporting inflation



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On Target

Thanks to Martin Spring for this edition of his ever-interesting letter. Here is a section on the coal market which I found particularly illuminating: 

While climate-change activists make a lot of fuss about the US, where emission of greenhouse gases has been in decline, they aren’t demonstrating loudly about China -- which attacks developed countries for not doing enough, while itself doing most to worsen it,

The New York Times reports that China, the world’s leading emitter of greenhouse gases from coal, now admits it’s burning up to 17 per cent more coal than its government previously claimed when it signed up for the Paris accord.

And it’s making things worse. Across China the government is building a fleet of new coal-fired stations with 259 gigawatts of capacity, while outside the country it’s financing even more new coal plants, providing $36 billion for 399 gigawatts.

“Chinese bankers and project planners like coal-backed projects because they are cheap,” says the energy consultancy IEEFA. “While they are restricted by Chinese pollution and emissions targets at home, they are free to fund coal-backed projects abroad.”



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Glencore's Congo Unit to Start Shipping Some Cobalt Again

This article by Thomas Biesheuvel for Bloomberg may be of interest to subscribers. Here it is in full:

Glencore Plc’s Democratic Republic of Congo unit will restart some cobalt exports after it halted sales last year due to low levels of radioactivity.

About 23 percent -- or 930 tons -- of the cobalt produced at Katanga Mining Ltd.’s Kamoto mine since January complies with regulations on uranium content, the company said in a statement. Katanga is controlled by Glencore and owns 75 percent of Kamoto.

The unit halted sales of cobalt in November after detecting radiation and said that a plant to remove the contamination would be ready this year. The suspension of sales came after prices for the metal used in rechargeable batteries collapsed on growing concerns about oversupply.

Glencore said at the time that it planned to stockpile cobalt supplies until the middle of this year. Kamoto is Glencore’s second-biggest source of the metal in Africa, producing about 11,100 tons last year.

Glencore has a long history of trimming mine supply to match demand, and has criticized rivals for producing too much and depressing prices. The Swiss commodity giant curtailed zinc output at mines in Australia, Peru and Kazakhstan in 2015 when prices languished at six-year lows.



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