Live Finance Blog - August 8th 2016
Good morning on this lovely Monday! Lots of things happening today.
First up is news from China's economy.
China July trade (USD)
Trade surplus $52.31b
Exports -4.4% (est -3.5% prev -4.8%)
Imports -12.5% (est 7% prev -8.4%)
China imports raw materials and then exports finished goods. What these figures are telling us is that orders for Chinese goods continue to fall, hence imports of raw materials are down too. Is this down to a weakness in the global economy? Or have China's trade partners simply stopped buying from her and are buying instead from Vietnam, Korea and other cheaper countries? And is there an impact from the on-shoring of manufacturing in the USA, as businesses decide that it's safer to use bots to make things at home and protect their intellectual property, rather than make stuff in China.
It turns out that China is importing less crude oil too. See the following article from Bloomberg:
The markets believe that China will try to weaken it's currency against the dollar, and re-double efforts to stop capital flight - which might be very good news for bitcoin.
- Compounding China's problems are the strong American jobs growth.
Last Thursday US non-farm payrolls exceeded expectations - but more importantly wages roses as well as jobs. Inflationary pressures are building, and the Federal Reserve is going to have to act with another interest rate rise.
When to raise is the question. They can't do it in November because that would interfere with the US Presidential Elections. So they either have to wait till December, or get it out of the way at their next meeting on September 20th - 21st.
A rising US interest rate strengthens the dollar.
UK's consumers are partying on despite (or because of) Brexit
VISA has issued data showing that UK consumer spending using VISA debit and credit cards (i.e. most of spending) rose an annual 1.6 percent in July, up from 0.9 percent in June. So people who had paused spending in the run up to the referendum are back at the shops again.
Does this mean the Bank of England were premature to cut interest rates last week? If this quarter proves to be business as usual, the BoE might have egg on it's face due to panicking and will have to put interest rates back up later this year.
The Misery Index is Out
Falling prices mean less misery (as anyone who has experienced inflation will tell you). As Bitcoin is a protection against inflation, it follows that it's adoption will gain traction in South America rather than in Asia where deflation is taking hold.
Italian Banking Rescue News
Italy has now created a bank rescue fund called Atlante, and it has raised 2.4bn euros according to the Financial Times:
https://www.ft.com/content/7c1d7c12-5b2b-11e6-9f70-badea1b336d4
This is well short of the target it needed to rescue Monte dei Paschi di Siena, but I guess it is better than nothing, and the Italian banking system stumbles on...
The British stuff looks interesting - it really would be funny if all the doom and gloom were misplaced. And of course if they get through without a recession, it might encourage other EU countries to break free as well.