E Good Places

Welcome to Monday and the ides of March. Markets are in a good place – or good enough to rebound as the FOMC continues to push its wait-and-see policy. US/China talks are in a good place according to the rumor mills from Beijing/Washington even as the weekend showed less CNY loans and lower PPI/CPI. The UK appears to be in a less good place as the PM May has “run out of road,” and considers offering up her resignation in exchange for a Brexit deal with her Tory party. The tragedy of Ethiopia Air crash Sunday also leaves Boeing in a less good place with China and others grounding their 737 Max 8 plane. North Korea and the US are also in a less good place as satellite images suggest further missile test preparation and a UN security council report admits holes in the sanctions regime. The clearly not good place is Venezuela as it suffers the 4th day of blackouts with no cell phones, the government urging stay in place and food rotting in stores. Throw in the weakness in the economic data today from Japan machine tool orders – there is a growing debate about recession risks now there - and German industrial production weakness continuing and you get the picture of a world in a less good place than the US. Markets are struggling to be bearish, however, as risk aversion last week left many value opportunities and the passive money flows continue.   

  • FOMC Chair Powell: Outlook is good, economy doesn’t need higher or lower rates. The just right policy mix sent shares higher in Europe – even as he sees China and European slowdown risks. “Our interest-rate policy is in a very good place,” he said during a rare television interview broadcast on CBS 60 Minutes Sunday. “What’s happened in the last 90 or so days is that we’ve seen increasing evidence of the global economy slowing down. We’re going to wait and see how those conditions evolve before we make any changes to our interest-rate policy,” Powell noted. 
  • UK May might need to resign to get Brexit deal passed. Several cabinet members suggest she should offer this up ahead of the late Tuesday vote. “It is all quite tense. It looks like it will go right down to the wire,” said one aide to the prime minister. “It has been quite a tough week.” Another said that one “shouldn’t assume” that Mrs. May would travel to Brussels.“I don’t believe there is a single one of us who thinks it’s a good idea for her to stay beyond June,” one cabinet minister told the Sunday Times. Another said: “She’s run out of road.”
  • DJIA suffers with China/Boeing issue. China orders all its airlines to ground the Boeing 737 Max 8 aircraft after Sunday’s Ethiopia Air jet crashed killing all 157 on board. This is a similar enough crash to Indonesian Lion Air jet crash in October. It is highly unusual for regulators to take such a step before a similar move by regulators in the country that certified the aircraft type. However, the Chinese move is being followed by Indonesia, Ethiopia and Cayman Airways. 
  • North Korea eludes UN sanctions according to security council report. North Korea has accelerated its import of oil products through ship-to-ship transfers, increased its coal exports, and sold weapons to Iran-supported Houthi rebels in Yemen, Libya, and Sudan. “These violations render the latest United Nations sanctions ineffective,” notes the report,referring to the North’s success in importing petroleum products and selling coal “Global banks and insurance companies continue to unwittingly facilitate payments and provide coverage for vessels involved in ever-larger, multi-million-dollar, illegal ship-to-ship transfers of petroleum products, as well as an increasing number of ship-to-ship coal transfers and attempted transshipments,” it adds. As sanctions enforcement has lagged, the report notes, North Korea’s nuclear and ballistic missile programs “remain intact.”
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