Global Financial Crisis 2.0 - 2023 Edition

[inlinesix]

1 hour ago, Wt_know said:

now we understand why amdk "never" trust PRC on Covid outbreak

suka suka i tell you

suka suka i no tell you

i can tell you what i want to tell you

even without telling ... it's already obvious the economic data must be damn fk up liao

now the scholar scrambling stories how to massage the data ie: chasing economic growth is no good ... must take care of people  

jit dong jeng!

 

[noobcarbuyer]

https://www.nytimes.com/2022/10/18/business/economy/china-economy-gdp.html

China’s Economic Picture Grows Murkier in Xi’s ‘New Era’

The delay in announcing routine growth data this week was only the latest example of how hard it has become to peer into China’s economy, the world’s second largest.

For the past quarter-century, China was run by a well-oiled government bureaucracy that predictably focused on the economy as its top priority.

That may no longer be the case.

Xi Jinping, China’s top leader, made clear on Sunday at the opening of the Communist Party’s national congress, a twice-a-decade gathering of the country’s ruling elite, that politics and national security were paramount. That point was reinforced the next day when Beijing made the unusual move of delaying what should have been a routine, closely stage-managed release of data on how the economy fared in the past three months.

“It does show the primacy of politics in influencing the very competent, institutional technocracy that China has,” said Victor Shih, a specialist in Chinese elite politics and finance at the University of California, San Diego.

“The very likely reason the numbers were delayed was the State Council leaders were afraid the numbers would detract from the triumphant tone of the party congress,” he added. The State Council is China’s cabinet.

It is extremely rare for any large economy to delay the release of such an important economic report. The data included not just China’s economic growth from July through September but also the country’s factory production, retail sales, fixed-asset investment and property prices for September.

Mr. Xi, who is expected to claim a third term in power, has sought to project confidence in China’s outlook. On Monday, a Chinese economic planning official reiterated the Communist Party’s talking points about how well China’s economy was faring, saying it improved in the last quarter.

But that optimistic message was quickly undercut by news of the delayed release of gross domestic product data, and how the delay was handled. Reporters who called government employees on Friday and Monday about the release were told they had no information.

Contacted again late Monday afternoon, the workers said only that the release had been postponed indefinitely. The National Bureau of Statistics still has not explained the delay or announced a rescheduled date. On Friday, the government also failed to release data on exports and imports for September, and has not said when it would do so.

China’s refusal to provide statistics, combined with the haphazard way the postponements were communicated, suggested either that part of the bureaucracy was in disarray or that China’s economy was in worse shape than most people had realized. It also raised questions about the reliability of the data.

“It’s a horrible blunder,” said Taisu Zhang, a Yale University law professor who specializes in comparative legal and economic history. “I don’t know if they are massaging the numbers — even if they need to massage the figures, the better thing to do would be to massage them within the usual time frame.”

Beijing set a target in March that growth would be “about 5.5 percent” this year. Yet Western economists have estimated that China’s economy grew only a little more than 3 percent in the third quarter.

That still would have been better than growth of 0.4 percent logged in the second quarter, when Shanghai was locked down for two months to stamp out a Covid-19 outbreak.

Mr. Xi has put a premium on social stability and national security, often with actions that have had a side effect of slowing economic growth and employment. Regulators have clamped down on the tech sector, contributing to widespread layoffs among young employees. Dozens of the country’s private property developers have defaulted on debts this year after Beijing discouraged real estate speculation. Tycoons have been fleeing the country. Municipal lockdowns to stop outbreaks of Covid-19 have taken a heavy toll.

Questions have long been raised about whether China’s economic growth statistics may be inflated somewhat or smoothed from one year to the next. But until recently China had also released more granular data that made it possible to draw conclusions about the economy’s overall health.

One such measure is the rising value of new office complexes, rail lines and other investment projects. But last year, China stopped releasing data on inflation in construction costs.

That has made it hard to calculate the true value of the new investments, said Diana Choyleva, chief economist at Enodo Economics, a London consulting firm. So while the total money invested is still available, it is no longer clear what that money is buying.

Underlying data had been available for China’s international trade, its main engine of growth. But growing inconsistencies started to become apparent over the summer.

China’s General Administration of Customs reported sharp increases through August in exports to the United States and Europe. But the number of containers leaving Chinese ports for these destinations was flat.

Average prices charged by factories in China to wholesalers have been little changed. Few economists think that China is earning more money from exports through inflation. The plateau in containers even as export statistics are rising is consistent with previous periods of economic weakness in China, as exporters exaggerate the value of their shipments to customs officials as part of complex strategies to move money out of China.

There are other signs that actual exports of goods are now in trouble. Taiwan has very similar trade patterns to mainland China, and on Oct. 7, Taiwan reported a sharp, unexpected drop in its imports and exports during September.

The cost of shipping each container from China to the United States or Europe has also fallen steeply over the past year. It dropped much further in September. The cost of loading a container onto a ship in eastern China for delivery to Los Angeles has plunged by more than half this year, according to Container xChange, an online container logistics platform. This suggests few factories are bidding for space aboard ships.

“The retailers and the bigger buyers or shippers are more cautious about the outlook on demand and are ordering less,” said Christian Roeloffs, the chief executive and co-founder of Container xChange.

Another problem is that even when China releases data, it sometimes provides less explanation now of how the data is calculated. Derek Scissors, a senior fellow specializing in China and India at the American Enterprise Institute in Washington, said he used to be able to get answers from Chinese officials on how certain investment statistics were calculated. But in the past couple of years, they are no longer willing to discuss their data.

Monday’s postponement of the release of economic data had little discernible effect on Chinese financial markets on Tuesday. Share prices rose sharply in Hong Kong as a change in British tax policy preceded a global rally in stock markets. The Shanghai and Shenzhen stock markets, more insulated from international events and also heavily managed by the Chinese authorities, were little changed.

But delays can have a corrosive effect on China’s image in financial markets.

“If delays start to become a regular occurrence,” said Julian Evans-Pritchard, the senior China economist at Capital Economics, “then that could reduce confidence in the official economic data and the professionalism of China’s bureaucracy.”

[noobcarbuyer]

https://www.reuters.com/business/autos-transportation/tesla-falls-after-delivery-warning-sparks-doubts-over-growth-momentum-2022-10-20/

Tesla shares skid after Musk flags recession in China, Europe

Oct 20 (Reuters) - Shares of Tesla Inc (TSLA.O) slid on Thursday, a day after Chief Executive Elon Musk said it was a "little harder" for the electric-vehicle maker to garner demand in the face of a weakening global economy.

At least six brokerages lowered their price targets on the stock, with Tesla bull Wedbush Securities making the biggest cut of $60 to bring its target to $300. Tesla's third-quarter revenue on Wednesday missed analysts' estimates.

Musk told analysts on a conference call on Wednesday that China and Europe are experiencing “a recession of sorts” that are causing demand to be "a little harder than it otherwise would be." But he also said the EV maker has "excellent demand" for the current quarter, although Tesla said it would miss its annual delivery target due to limited transportation capacity.

He flip-flopped on demand during a July conference call, saying at first that macroeconomic uncertainty might have some impact on demand for its electric vehicles, but when pressed for details by an analyst, he said the company did not have a demand problem but a production problem.

Musk said he had a "super bad feeling" about the economy and that Tesla needed to cut about 10% of staff at the electric carmaker, according to a June email seen by Reuters. Later, he said the reduction would apply only to salaried workers.

Tesla shares have lost more than a third of their value so far this year. The shares were down 6.5% at $207.56 on Thursday afternoon after falling as much as 9% to hit a 16-month low earlier in the session.

"The results will likely add to debates about demand destruction that ensued after 3Q deliveries tracked -5% below company-compiled consensus," JP Morgan said in a report.

Tesla missed automotive gross margin expectations on Wednesday, as costs to ramp up production at its new factories in Berlin and Austin weighed.

"The bullish narrative is clearly hitting a rough patch as Tesla must now prove again to the Street that the robust growth story is running into a myriad of logistics issues as opposed to demand softening," Wedbush analyst Daniel Ives said.

[noobcarbuyer]

https://www.washingtonpost.com/us-policy/2022/10/20/recession-inflation-white-house-fed/

As recession fears rise, Washington begins to weigh how to respond

White House and Federal Reserve officials remain focused on inflation and confident in the economy’s trajectory

Amid intensifying forecasts of a U.S. recession, Washington policymakers are beginning to confront their limited options for easing the effects of a slowdown accompanied by high inflation – a confounding set of economic conditions that would present starkly different challenges from recent downturns.

Officials at the White House and the Federal Reserve say that they continue to believe a recession can be avoided and that they remain focused on fighting inflation, which is rising at rates not seen in four decades. But with Wall Street trembling, and many private forecasters warning that recession is likely, preliminary talks about policy options are underway around town.

On Capitol Hill, congressional officials have begun discussing the challenge of intervening to alleviate the pain of a recession in ways that do not exacerbate inflation. At the White House, aides have informally begun weighing hypothetical options, such as unemployment benefits and food stamp assistance. And at the Federal Reserve, staffers have discussed with outside analysts how monetary policy could simultaneously respond to an economic contraction and high prices — a dual challenge it has not faced in decades.

“I’m asked a lot by policymakers what we should do during the next recession if inflation is still high — this is very much on their minds right now, including inside the Biden administration,” said Wendy Edelberg, director of the Hamilton Project and a senior fellow in economic studies at the Brookings Institution, a center-left D.C.-based think tank. “I have talked to them about it.”

Experts generally agree that a downturn now is unlikely to cause the kind of deep rupture in the labor market seen during the Great Recession of 2008-2009 or the 2020 collapse in the face of the pandemic. Many analysts predict that any downturn is likely to be “mild,” with unemployment staying below 5 or 6 percent. The current unemployment rate is 3.5 percent.

But Washington’s options for providing relief could be constrained by the effort to fight inflation. During the pandemic and the Great Recession, Washington flooded the economy with aid to the unemployed and other cash supports. If enacted now, such policies would risk pushing inflation higher. Meanwhile, with the Fed hiking interest rates faster than it has in decades as part of its battle against inflation, the new federal spending would require additional borrowing at a time when debt is becoming increasingly expensive.

“Typically in a recession, where inflation is not too high, monetary and fiscal policy try to stimulate demand to stimulate our way out of a recession — which has the effect of bringing up inflation from too low a level,” Edelberg added. “But in this case, stimulating our way out of a recession would be counterproductive to the efforts to also fight inflation.”

Joe Brusuelas, chief economist at RSM, said Fed staffers had reached out to him to discuss how economic turmoil abroad could weigh on the U.S. economy and how financial markets would respond if a recession happened while inflation was still high, or if there was a more conventional recession that happened in tandem with global economic upheaval. “It was within the context of the current environment, which is more external than U.S.,” Brusuelas said.

In a statement, a senior White House official disputed the idea that the administration was preparing for a recession and emphasized aides’ focus on inflation. The job market has proven very resilient despite the central bank’s rate hikes — unemployment claims fell to a three-week low in mid-October, a report out Thursday showed. Another report next week is expected to show economic growth in the third quarter of this year.

“The White House is not planning for a recession — the economy is showing growth, and the unemployment rate is 3.5 percent, the lowest in 50 years,” said Heather Boushey, a member of the White House Council of Economic Advisers. “We are working on bringing down inflation, and focused on lowering the cost of living.”

Policymakers around Washington are adamant that they are concentrating on lowering prices in the face of the highest inflation in 40 years. The latest inflation report showed prices continuing to rise again in September, with “core inflation” climbing a worrying 0.6 percent over the month. The labor market has maintained its rapid growth, as well: The United States added 263,000 jobs in September, and the unemployment rate fell to 3.5 percent. In that context, some government officials dismissed the idea of planning for a recession now as premature.

But cracks have emerged that have many policymakers worried. The Federal Reserve’s campaign to cool inflation has led to a series of large interest rate hikes aimed at slowing consumer demand and spending. Despite the persistence of inflation and the strength in the job market, there are indications that the Fed’s efforts are working: Housing demand is plummeting, and the stock market has fallen precipitously. The average rate for a 30-year fixed mortgage, the most popular U.S. home loan, rose to 6.94 percent in this week’s Freddie Mac survey, a huge increase from 3.22 percent in January.

At the White House, some officials recently had informal discussions about potential policy responses to the next recession and the lack of obvious available tools, according to two people familiar with the matter, who spoke on the condition of anonymity to reflect private talks. Those talks touched on improvements to the unemployment system and increased food stamp benefits as potential measures that could buffer vulnerable Americans from a recession without boosting broad-based inflation. White House aides emphasized that such conversation was hypothetical and not a reflection of serious administration policy considerations.

The president has also summoned aides to brief him on the potential for a similar panic in financial markets to the one in the United Kingdom, one person familiar with the matter said. The aides found that such an outcome was highly unlikely. This briefing was first reported by the New York Times.

“We may have to think about this recession in terms of very targeted relief; it’s a much more subtle strategy,” said one person aware of the administration’s “highly preliminary” talks, speaking on the condition of anonymity because they were not authorized to speak to the media. “We are trying to prepare for a recession where there is also inflation, and so the sweeping recovery bills in the style of the American Rescue Plan or the Cares Act or the Recovery Act are off the table — economically and politically.”

Congress is starting to wrestle with similar questions. At a bipartisan briefing for staffers earlier this week, three policy analysts — Edelberg; Michael Strain, director of economic policy studies at the conservative-leaning American Enterprise Institute; and Marc Goldwein, senior vice president of policy for the Committee for a Responsible Federal Budget — fielded questions about how lawmakers should weigh options for responding to a recession. Several Democratic members of Congress have also separately asked about potential policy responses to a recession in the next year, according to Strain.

“They’re asking for the policy options available if we have a recession,” Strain said. “I suspect the administration is concerned about the possibility of a recession in 2023.”

The most difficult challenge in an inflationary recession may be that faced by the Federal Reserve. Typically, when downturns emerge, the central bank lowers interest rates to stimulate demand. But a recession that starts while inflation is still high would complicate that response. Federal Reserve officials at an annual conference in Jackson Hole, Wyo., in August held both formal and informal discussions about the difficulty the central bank would have fighting inflation and a recession at the same time, according to Eswar Prasad, an economist at Cornell University who worked as a lead economist at the International Monetary Fund.

Among the challenges facing the bank is that its balance sheet remains large from its response to covid, limiting the extent to which it can buy assets to prop up spending. Its other major tool — interest rates — would face similar constraints, because any cut to rates to juice economic demand would work against this year’s attempts to contain inflation.

A spokeswoman for the central bank declined to comment.

“This is a real conundrum for both monetary and fiscal policy right now. How can policymakers avoid stoking inflation while still supporting a weakening economy that is heading toward a recession?” Prasad said. “The tools involved are very different.”

[noobcarbuyer]

https://www.ft.com/content/48d674a8-ae51-4f75-909c-0e5b6e38475c

Global economic warning lights are flashing red

Policymakers need to be level-headed and focus on building resilience

“Polycrisis”: this was the description Jean-Claude Juncker gave the nexus of challenges facing the EU in 2016, when he was European Commission president. Last week the International Monetary Fund underscored how multiple clouds — including the European energy crisis, rapid interest rate rises and China’s slowdown — have been gathering over the global economy. What has seemed like separate crises emerging from many different regions and markets are now coalescing: we may be facing a polycrisis on a global scale.

It is rare for so many engines of the global economy to be stalling all at once: countries accounting for one-third of it are poised to contract this year or next, according to the IMF. Indeed, its outlook for the largest economies — the US, the eurozone and China — is bleak. As global inflation rates have touched their highest in 40 years, central banks have been raising interest rates this year with a synchronicity not seen in the past five decades, and the US dollar has hit its strongest level since the early 2000s. These forces are driving the gloomy forecasts and creating new strains.

Emerging economies have been saddled with higher dollar-denominated debt burdens and disruptive capital outflows. Meanwhile, mortgage rates and corporate borrowing costs have surged across the world. Many gauges of financial market stress are also flashing red, as the rapid snapback in rates from lows during the pandemic has exposed vulnerabilities. Fire-sale dynamics are an ongoing risk, as UK pension funds recently demonstrated.

The proximate causes of the global maelstrom are two historic shocks in quick succession: Covid-19 and Russia’s invasion of Ukraine. The Federal Reserve has raised interest rates at its sharpest pace since the early 1980s, when Paul Volcker was its chair, to quash inflation spurred in part by pandemic support and supply bottlenecks. Meanwhile, Putin’s weaponisation of natural gas flows means Europe is undergoing a huge terms-of-trade shock, and China’s economy is suffering under its zero-Covid policy, alongside a property market crash. Indeed, new ailments have emerged before the scars of the pandemic have even healed.

The multiple and mutually reinforcing shocks have left policymakers with a difficult balancing act. For governments, efforts to boost growth and support households and businesses need to avoid pouring further fuel on the inflationary fire and raising debt burdens — which have already been pushed up by the pandemic — particularly as borrowing costs are now rising. The more interest rates rise, the greater the risks of a housing market crash and further financial market strains. Yet for central bankers, not tightening monetary policy enough may embed high inflation.

While there are no simple solutions, there are some lessons. Today’s fragile economy needs policy to be well calibrated and attuned to risks. The UK is an example of how not to do it. Its bull-in-a-china-shop approach of recent weeks shows what happens when realities are ignored. Policy errors are partly why the IMF sees a one-in-four chance of global growth next year falling below the historically low level of 2 per cent.

The contagious effect of global crises intensifies the need to build resilience. While the banking system was strengthened after the financial crisis, policymakers did too little to bolster the non-bank financial system. Many will also lament the lack of productivity-enhancing and inflation-busting investments in skills, technology and fossil fuel alternatives over the past decade, when interest rates were low. Without level-headedness and long-term thinking the global economy will only continue to lurch from one crisis to the next.
 

 

Letter in response to this editorial:

https://www.ft.com/content/74d374aa-9dd5-41a7-ad90-438c04c9da34

Letter: Fed tightening risks a global financial crisis

From Desmond Lachman, Senior Fellow, American Enterprise Institute, Washington, DC, US

Your fine editorial (“Global economic warning lights are flashing red”, October 17) should have gone further in questioning the appropriateness of the Federal Reserve’s newfound monetary policy religion.

At a time when the US economy is already showing signs of weakness and when the dollar keeps soaring to new heights, the Fed keeps tightening monetary policy at a very rapid pace, not seen since the 1980s when the Fed was led by Paul Volcker. When US and global financial and credit markets are already showing signs of considerable fragility, America’s central bank is engaged in quantitative tightening at the unprecedented rate of $95bn a month by not pumping the proceeds of maturing Treasuries back into the bond market.

Knowing that monetary policy operates with long and variable lags, might the Fed now be engaged in monetary policy overkill to regain control of inflation? We’re already seeing cracks in the global credit markets. But might the Fed be inviting a global financial market crisis by continuing to raise interest rates and withdraw very large amounts of market liquidity at a time when world financial markets are on the back foot?

Desmond Lachman

Senior Fellow, American Enterprise Institute, Washington, DC, US

[noobcarbuyer]

https://finance.yahoo.com/news/elon-musk-says-already-recession-115826344.html

Elon Musk says we’re already in a recession that could last until spring 2024, and only the strong will survive

The world could be facing the longest recession it has seen since the global financial crisis over a decade ago, according to Tesla and SpaceX CEO Elon Musk.

Asked to predict the length of a contraction in economic activity, the world’s richest and most successful entrepreneur responded on Thursday: “probably until spring of ’24.”

This would set the U.S. gross domestic product on course to shrink for a period longer than the 18-month recession of the global financial crisis, which lasted from December 2007 to June 2009.

Painful but necessary

While these bouts are painful, Musk indicated they do serve the valuable purpose of shaking out bad business ideas by cleansing the market of so-called malinvestments.

Such poor investments gradually build in the system during boom times, as capital chases increasingly marginal profits until the incremental returns no longer justify the risk.

A key element factoring into investor calculations is the cost of money, which is set by policymakers at the world’s central banks. Until its recent shift to rate rises, the largest central bank—the U.S. Federal Reserve—had its foot on the accelerator pedal in an effort to suspend the normal dips of the economic cycle.

It is no accident then that ever since June 2009 the U.S. economy has contracted only once, for two short months, according to the National Bureau of Economic Research (NBER), the government agency that declares the official start and end dates of a recession.

Ever since the global financial crisis, policymakers have pumped unprecedented stimulus into the system to prevent a recession, mainly in form of trillions of dollars of freshly created money but also through fiscal measures such as corporate tax cuts and pandemic checks.

In such a cheap money environment, investors have been rewarded for withdrawing their savings and putting the money to work by backing new startups that promise to solve major social problems such as Theranos and Nikola Corp., or have innovative ideas like Juicero and Celsius.

It’s these same kinds of companies that invariably suffer when cheap money dries up.

Bill comes due

Noninflationary economic growth is largely a function of productivity, and cannot be achieved through sustained money printing (although “modern monetary theory”—until recently fashionable in some circles—did attempt to argue there was such a thing as a free lunch).

Eventually the bill comes due, triggering a wave of insolvencies as weak managers run out of investors willing to finance their business plans.

“Recessions do have a silver lining in that companies that shouldn’t exist stop existing,” wrote Musk.

Experts believe that point is upon us. After offering markets a buffet of nonstop cheap money, the Federal Reserve has now been forced into an abrupt reversal to cool off an overheating economy.

Less than a week ago, the newest winner of the Nobel Prize in economics, Douglas Diamond, told Fortune that the U.S. central bank held rates “too low for too long” and now risked a crash.

This year alone, the central bank hiked rates by three full percentage points, dramatically affecting asset prices for everything from stocks and housing to cryptocurrencies. As recently as the start of March, when policymakers knew inflation was running at 8%, the Fed was still expanding its balance sheet and with it the money supply.

Elon Musk himself recently expressed his disdain for the Fed, agreeing with Wharton finance professor Jeremy Siegel, who blasted Fed policymakers for making the biggest mistake in the institution’s 110-year history.

“Siegel is obviously correct,” said Musk.

Ironically one of those companies that might not have survived is Musk’s own. The CEO admitted back at the height of the stock market bubble that Tesla was “about a month” away from bankruptcy. The prime beneficiary of the 2020 pandemic rally might not have survived had it not been for the Fed’s decade-long period of ultralow interest rates and monetary stimulus.

[Mkl22]

On 10/21/2022 at 7:59 AM, Wt_know said:

now we understand why amdk "never" trust PRC on Covid outbreak

suka suka i tell you

suka suka i no tell you

i can tell you what i want to tell you

even without telling ... it's already obvious the economic data must be damn fk up liao

now the scholar scrambling stories how to massage the data ie: chasing economic growth is no good ... must take care of people  

jit dong jeng!

Chinese value their face. If there are things that can haolian, for sure will blow it up till the moon. Conversely when the shit hits the fan, still want to act cool and convince confuse. 🤣

[noobcarbuyer]

https://finance.yahoo.com/news/jeremy-siegel-warns-home-prices-160715104.html?

Jeremy Siegel warns home prices are about to suffer their 2nd-worst crash since World War II amid Fed rate hikes

• Jeremy Siegel warned home prices will post the second-worst crash since World War II in the next 12 months.
• He told CNBC that the Federal Reserve's aggressive tightening is hitting rate-sensitive sectors of the economy.
• Siegel said fears that the central bank will keep rates "higher for longer" are spooking markets.

Wharton professor Jeremy Seigel warned that home prices are about to experience their second-worst drop since World War II as the Federal Reserve continues to raise rates.

He told CNBC on Monday that the Fed's aggressive tightening campaign is already hitting rate-sensitive sectors of the economy, adding that fears that the central bank will keep rates "higher for longer" are spooking markets.

"I think we're gonna have the second-biggest housing price decline since post WWII period over the next 12 months," Siegel said. "That's a very, very significant factor for wealth [and] for equity in the housing market."

He said last week that home prices will decline by as much as 15% as Fed rate hikes send mortgage rates higher. The 30-year fixed rate is now back above 7% by some measures, hitting the highest levels since 2007.

On Tuesday, the National Association of Home Builders said its market index fell 8 points to 38 in October, just half of what it was six months ago.

Markets widely expect the Fed to increase rates by 75 basis points at its November and December meetings, following three consecutive hikes of that size already.

On Monday, Siegel said the Fed has to "slow down and wait and see what the tightening has already wrought on the economy."

He also said he would support an additional 50-basis-point hike from the Fed if it were then followed by a pause in tightening.

"I wouldn't even mind a stop because I think if they wait, they will see how inflation has come down," he said.

[noobcarbuyer]

https://www.theguardian.com/politics/2022/oct/23/whitehall-fears-hunts-spending-cuts-could-tip-uk-into-deep-recession

Whitehall fears Hunt’s spending cuts could tip UK into deep recession

Senior Whitehall officials are concerned that Jeremy Hunt now risks going too far in cutting public spending and should delay the Halloween statement outlining his austerity plans, the Observer has been told.

Simon Case, the cabinet secretary, is understood to have been made aware of concerns that the chancellor risks going too far in cutting back spending if he decides to go ahead with a sweeping programme of reductions.

Some in the Treasury are understood to be among those to believe that it would be “irresponsible” to present the promised medium-term fiscal plan at the end of the month. It would come just days after the appointment of the new prime minister, risking further uncertainty over the stability of the proposals.

In particular, Whitehall concerns have emerged over any move to delay infrastructure investment seen as crucial to Britain’s ability to secure economic growth in the years ahead. In the short term, there is nervousness that slashing increases to welfare payments would risk tipping the UK into recession.

However, some of those with concerns believe Hunt has deliberately come out hard in favour of swingeing cuts in order to reassure the markets and lower Britain’s borrowing costs. Lower borrowing costs will actually help shrink the size of the fiscal hole that Hunt is required to fund.

“Some are worried that Hunt is going beyond where the Treasury is suggesting in terms of cuts,” said a source. “There’s a danger that this pushes the economy into either a deeper recession or stops the chances of building long-term growth through capital investment in projects and infrastructure. The view of many is that we don’t need to do the statement on 31 October and that Jeremy is basically going a little bit far.”

[Scion]

meanwhile Hang Seng crashing... a vote of no confidence to Xi's new term 

[noobcarbuyer]

https://www.bloomberg.com/news/articles/2022-10-24/china-markets-set-for-cautious-start-after-leadership-overhaul#xj4y7vzkg

Xi’s Power Grab Spurs Historic Market Rout as Foreigners Flee

• Stocks, yuan extend losses on Monday as Party congress ends
• Traders worry leadership filled with Xi allies may disappoint

A sense of exasperation swept across Chinese markets as President Xi Jinping moved to stack his leadership ranks with loyalists, with stocks capping their worst day in Hong Kong since the 2008 global financial crisis and the yuan weakening to a 14-year low.  

The Hang Seng China Enterprises Index, a gauge of Chinese stocks listed in Hong Kong, plunged 7.3% in its worst showing after any Communist Party congress since the inception of the index in 1994. Foreign investors fled mainland markets, selling a record amount of equities via trading links in Hong Kong and fueling a nearly 3% loss in the CSI 300 Index. The onshore yuan fell as much as 0.6% to the weakest since January 2008.  

The market meltdown following the reshuffle, which highlighted Xi’s unquestioned grip over the ruling party, shows deep disappointment over a likely continuation of policies staked on Covid Zero and state-driven companies. Tech giants Alibaba Group Holding Ltd., Tencent Holdings Ltd. and Meituan all tumbled more than 11% as investors remained skeptical that Xi and his allies will seek a rejuvenation of private enterprise. 

“The market is concerned that with so many Xi supporters elected, Xi’s unfettered ability to enact policies that are not market friendly is now cemented,” said Justin Tang, head of Asian research at United First Partners. 

While the appointment of Xi’s allies to key posts may help accelerate major agendas, the addition of Covid Zero advocates to the Politburo Standing Committee diminishes the chance of any early loosening of Covid restrictions. 

Foreigners sold a net 17.9 billion yuan ($2.5 billion) of mainland shares via trading links with Hong Kong on Monday, a record since data going back to 2016.  

The swoon in Chinese stocks stands in contrast to global shares, which had their best weekly performance since July last week. The Hang Seng China index is trading at the lowest relative to the S&P 500 since 2001, according to data compiled by Bloomberg.  

A slew of China’s key economic data -- released Monday after abrupt delays last week --- showed a mixed recovery. The economy grew faster than expected in the third quarter with industrial activity improving despite Covid restrictions and a property slump, but retail sales weakened.  

Economists remain wary about future growth given the rolling Covid lockdowns. Authorities suspended in-person schooling and dining-in at restaurants in a district at the center of Guangzhou, stoking concerns about potential disruption in the southern manufacturing hub. 

“Panic Selling” 

“The Hong Kong market is seeing a panic selling moment,” said Dickie Wong, executive director of research at Kingston Securities Ltd. “While China reported macro data that beat expectation, the market is on a way down, as the leadership reshuffle and tensions between China and US continue to drag down sentiment and adds uncertainty.” 

In the currency market, the onshore yuan is nearing its weak end of the 2% trading limit around the fixing again, signaling a rise in bearish sentiment toward the currency. The People’s Bank of China set the fixing at 7.1230 per dollar on Monday, weaker than the recent pattern of near 7.11 per dollar.  

China’s high-yield dollar bonds, dominated by notes sold by real estate firms, dropped about 1-3 cents on the dollar on Monday, according to credit traders.

The onshore credit market, however, is a rare bright spot. Some key onshore corporate-bond yields have been at their closest levels to comparable Chinese government debt in about 15 years, boosted by a slew of easing measures to support a slowing economy.

“The market situation currently might be the worst I’ve even seen in my career. Sentiment is even worse than the 2008 global financial crisis,” said Harris Wan, vice president at iFAST Global Markets.  

[noobcarbuyer]

Hang Seng Index dropped to levels not seen since the 2008 great crash. 

[Throttle2]

I must say that i was wrong about Xi.  
I expected him to understand Deng Xiao Ping’s world views on the economic importance of an open China.

Despite buying China after a 40% dip, it has dipped a further 30% which is truly ridiculous. 
The recent CCP congress yield no positive impact and in fact shrouded the market with a cloud of uncertainty.

 

[Wt_know]

29 minutes ago, Throttle2 said:

I must say that i was wrong about Xi.  
I expected him to understand Deng Xiao Ping’s world views on the economic importance of an open China.

Despite buying China after a 40% dip, it has dipped a further 30% which is truly ridiculous. 
The recent CCP congress yield no positive impact and in fact shrouded the market with a cloud of uncertainty.

 

Hang Seng Index lagi jialat ... 2022 return to 2008/2009 .... 14 years of value wiped out ... jit dong jeng!

[inlinesix]

4 minutes ago, Wt_know said:

Hang Seng Index lagi jialat ... 2022 return to 2008/2009 .... 14 years of value wiped out ... jit dong jeng!

Sounds like Shanghai index 2 or 3 years ago.

 

[Jamesc]

If there is a financial crisis the last people to know will be the IMF.

[Jamesc]

Don't worry about HK Ah Seng collapsing.

Xi and his new team of yes men I mean experts will handle it.

Buy the dips

Edited October 25, 2022 by Jamesc

[Jamesc]

Of all the presidents of China I think Xi is the worse.

30 years of nation building will be destroyed in months.