South Korea sees fresh spike in coronavirus cases amid outbreak in e-commerce warehouse

South Korea reported 40 new cases in the past day, the highest total in 49 days


This comes after e-commerce firm, Coupang, reported an outbreak at its logistics center located in Buncheon with at least 36 cases linked to the fresh cluster at the moment.

The firm did already say that it has moved to test 3,600 people at its facility after the reported incident. Once again, tracking and tracing is going to be the utmost importance here.
The fear is that it could lead to a widespread community transmission that may result in secondary wave of infections in the country.
If you need reminding, South Korea also had an incident at the start of the month where one infected person who visited nightclubs led to a resurgence in the number of virus cases. As of yesterday, the nightclub-linked cases has increased to 257 persons.

Heads up for Tuesday in Germany – court decision could place limits on ECB action

Coming up today, 5 May 2020 ,Germany’s constitutional court (in Karlsruhe) will announce its decision on whether the ECB’s public sector purchase QE program is legal under German law.

It seems likely the decision will accept the program as legal but it could nevertheless impose restrictions on what the ECB does
  • ie. it may impose conditions for the ECB’s sovereign bond purchases that could impact the flexibly of policy.
Could be a EUR negative or at least prompt some volatility. A heads up.
Coming up today, 5 May 2020 ,Germany's constitutional court (in Karlsruhe) will announce its decision on whether the ECB's public sector purchase QE program is legal under German law.

Count now up to 64 US military personnel in Iraq suffered brain trauma in a Iranian missile attack

Originally it was no one was injured

  • Then it went to 11
  • Then 34
  • Then 50
  • And now its 64
64 service members — 14 more than previously reported — have been diagnosed with mild traumatic brain injuries, Lieutenant Colonel Thomas Campbell, a Defense Department spokesman, said in a statement on Thursday night. 
Of those, 39 have returned to duty; at least 21 have gone to Germany for “further evaluation and treatment.”
The steady drip feed of more and more brain injured personnel suggests even further bad news to come on this. Are those screeching about misinformation coming out of China doing the same on how the US is treating its people?
All is not well.
Originally it was no one was injured

FT reports that the EU may give the derivatives industry and extension on Brexit

Financial Times says the European Union is readying moves to offer an extra year to the financial derivates industry to prepare for Brexit

  • Valdis Dombrovskis, vice-president of the European Commission, said on Friday that contingency plans for accessing UK-based clearing houses would have to be extended beyond the current March 2020 end date because the EU financial services industry would not have alternatives in place in time.
That’s the in a nutshell version of the report – here is the link for more (FT may be gated)

Highlights from Pres. Trump at the Economic Club of New York

Speaking at the Economic Club of New York

  • Jobs were not plentiful when he took over as President
  • The experts said they had no choice but to accept stagnation
  • I knew working together we could make America even greater
  • Fed moved rates higher far too fast and lowered rates far too low
  • US is competing against other countries and the Federal Reserve does not let us compete
  • Fed puts us at a competitive disadvantage to other countries
  • If we had a Federal Reserve that work with us the US stock market would be up by another 25%
  • last year GDP growth match the highest growth rate in over a decade
  • we want companies to be in America
  • The US has tremendous economic potential
  • Says he thinks US can bring down tax rates further
  • Corporate tax rate could go lower
  • US is pursuing energy independence
  • China has taken advantage of the US because of its WTO designation as a developing nation
  • to be a strong nation the US has to be a manufacturing nation
  • US has added 10,000 brand-new factories
  • Europe is set up terrible barriers for US on trade in some ways more worse and then China
  • No country has cheated US more than China
  • China is devaluing its currency, is dying to make a trade deal
  • We are close to signing a phase 1 trade deal and it could happen soon
  • we will only accept a deal if it is good for United States and US workers
  • China is having the worst year in over 57 years
  • Having strong, substantial negotiations with Japan on trade
  • Calls for passage of USMCA.  If put toward a vote Democrats would vote for today

What happens now that Boris Johnson has managed to strike a Brexit deal?

We have been down this road before


A Brexit deal is only as good as its chances to pass a vote in parliament. Just ask Theresa May how that worked out for her.

For all the optimism we’re seeing in the pound over the past week, all of that now hinges on whether or not Boris Johnson can get this deal through a parliamentary vote.
So, what are the key signs to watch for that?
The most obvious telltale sign is to watch for the stance adopted by the DUP. Just be reminded that Johnson doesn’t have a working majority in parliament so he will need all the support he can get at this point in time.
As it stands, the DUP isn’t quite on board yet so that means there is still a high chance of the deal failing to get through a vote in parliament.
What would that mean if we see such a scenario? Again, it just puts us back to a similar position when Theresa May was trying to get her Brexit deal through a vote – where she failed three times by the way.
Another possibility is if Johnson decides to couple his deal with a referendum vote in order to sway Labour lawmakers to get on his side. But that is likely a long shot and one he is almost certainly not going to pursue.
Otherwise, I still reckon it is a tall order for this Brexit deal to pass a vote in parliament at this juncture. But if the DUP and ERG gets on board, I think the pound has the potential to first head towards 1.33 before looking towards 1.35 next.

Guggenheim’s Recession Probability Model shows US recession can not be avoided

Guggenheim recession forecast model showed a 58% chance of the economy being in a recession by mid-2020

  • 77% chance of one beginning in the next 24 months
  • “aggressive policy action can delay recession, but not avoid it.”
From a note written by Guggenheim Partners global chief investment officer Scott Minerd.
  • Minerd oversees more than $US240 billion in assets under management
via Reuters, more at the link
As an aside, when folks quote probabilities at something like 77% instead of rounded to 70, or 80, or 75 or some such they tend to gain more credibility.
I’m not dissing Guggenheim here, just making an observation. Which is accurate 76.38% of the time.
And another thing …. if the probability is 77% then it can be avoided, right? (at least in the time frame specified)

Highlights in the Week Ahead

Three events that will capture the market’s attention next week:  The consequences of the Japanese election, the first look at US Q1 GDP, and the ECB meeting.  The central banks of Turkey and Russia also meet. Both are expected to cut interest rates, following rate cuts in the middle of last week by South Korea, Indonesia, and South Africa.
Japan goes to the polls on July 21 to elect the upper chamber of the Diet.  There is little doubt that the LDP-Komeito coalition will retain its majority.  The real issue is whether it keeps its 2/3 super-majority, which allows it to pursue constitutional changes.  The economy itself is struggling, and the sales tax increase in October is unpopular.  In addition, news of a (~JPY20 mln or $185k) gap between pension payouts and the cost of a 30-year retirement is seen as due to longevity more than low returns savings but does not sit well in either case.  The opposition is weak and divided, and there is much pride attached to hosting the Rugby World Cup in September and the Olympics next year.
The recent Tankan Survey showed sentiment among large manufacturers stood at three-year lows at the end of June.  The government reported a larger than expected year-over-year decline in exports–for the seventh consecutive month. The Bank of Japan has reduced its bond purchases with little fanfare, while its equity purchases dominate the ETF space.  There is no exit strategy in sight.  Indeed, it seems more likely that it steps up its JGB purchases again if the government debt finances a supplemental budget to blunt the effect of the sales tax increase.  Before the weekend, Japan reported that its core measure of CPI, which excludes fresh food, fell to 0.5% in June, a two-year low.
Regardless of the results of the election, just getting it over will impact the agenda.  The US-Japanese trade talks will turn more serious.  At first, the US seemed to want a comprehensive agreement, but now it appears it wants to show positive results.   Due to Japanese trade agreements under the TPP and the EU, US farmers are at a commercial disadvantage.  It has not been clear what Japan wants in exchange, but some have suggested reduced tariffs on auto parts.  Abe interest is projecting Japan’s power dovetails with Trump’s push that greater burden-sharing, including protecting oil tankers in the Gulf.
Perhaps with the election behind him, Prime Minister Abe will be in a better position to have a rapprochement with South Korea.  The issue has been escalating since Moon Jae-in took office in 2017 and distanced his administration from the 2015 agreement about Japan’s apology and compensation.  At the start of this year, Korea’s high court allowed the seizure of the assets of a Japanese corporation for compensation for forced labor.
The shape of Abe’s response, a licensing process for South Korea companies who buy semiconductor and display materials from Japan on national security grounds, may have been influenced by the US precedent.  In fact, it was likely that the US was notified beforehand.  Although the US helped broker earlier agreements between its two allies, like one in 1965, the US has shown little interest in mediating.  Abe could still ratchet the pressure up a notch as early as next month by removing South Korea from its list of countries with privileged access to Japan’s exports.  This would broaden Japan’s impact and notably include auto parts.


Wisdom of Dickson Watts

Dickson Watts (PDF) has been dead for decades, but his wisdom never dies. Some fine lines:

“Many lean, few lift.”

“The man who conforms never transforms.”

“Rest with descending wave; mount with the ascending wave.”

“There is many a slip between the cup and the lip, but only one slip between the cup and the ground.”

“The unpardonable sin — not to make money.”

“Some men are alive after they are dead; others are dead while still alive.”

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