Market Morning: Tariff Deadline Lifeline, Brexit Vote Postponed, Fannie & Freddie, JPMorgan Likes Gold

Market Morning

Tariff Deadline No Longer 

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As expected, President Donald Trump has indefinitely postponed the March 1st deadline for a trade deal with China when tariffs were scheduled to rise to 25% for all imported Chinese goods. Trump tweeted as much yesterday, saying that he is scheduling a summit with Chinese President Xi Jinping later next month to finalize the greatest deal in the history of deals ever made and that ever will be made by two human beings. Asian stocks are happy about this, with China’s Shanghai Composite exploding higher more than 5% today. US futures are up tepidly.

Five Weeks to Brexit and May Buckles Down, Postpones Vote to March 12

British Prime Minister Theresa May insists that Britain us leaving the European Union in five weeks, a date that “must not, will not” be delayed. But that didn’t stop her from delaying yet another parliament “meaningful vote” on the final Brexit Deal, as she’s hanging out with a bunch of bureaucrats on the Sinai Peninsula and Sharm-el-Sheik in Egypt in the meantime. She used that trip as an excuse to postpone the vote, which was supposed to take place this week, in what looks increasingly like an attempt to fork MPs into either supporting her deal or de facto advocating for a hard, No Deal Brexit by voting it down, which news media are touting as the End of the World, or at least the End of Great Britain, as trade between Europe and the UK would have to revert overnight to pre-EU regulations and would have businesses scrambling to figure out just what in the world they are supposed to do in that case. If the deal is once again voted down, then MPs will have 17 days to figure out how to postpone Brexit past March 29th, of just let it happen and see if they world actually blows up.

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Fannie, Freddie Privatization Could Take A While

Fannie Mae (OTCMKTS:FNMA) and Freddie Mac (OTCMKTS:FMCC) have been speculative favorites following rumors that the Trump Administration would seek to let them keep their profits and take them out of government conservatorship, but word has it now that that there is infighting among administration officials regarding exactly how to do this. Conclusion being, it will take a long time and may not even get done before yet another election season gets into full swing. Earlier reports suggested that the reform plans were nearing completion, which saw shares jump earlier this year but now things are getting more confusing. The two government sponsored enterprises needed a combined bailout of $200 billion in 2008 to keep the housing market afloat, after banks just handed off their mortgages to the two giants, putting all the risk on them, in a business model fraught with oodles of moral hazard.

JPMorgan Says Fed Wants Inflation Running Hot

JPMorgan (NYSE:JPM) believes that the Federal Reserve will tolerate inflation running higher than 2% for an extended period of time in order to “make up” for supposedly terrible outcome of prices just being too stable for too long, those rascally prices. Former Fed Chair Ben Bernanke, who presided over the financial crisis that he didn’t even see coming, is actually out with a paper defending the theory and urging even more inflation, even though he admitted that inflation is a tax in question and answer sessions with congress during his tenure. In any case, JPMorgan is advising clients to buy gold (NYSEARCA:GLD) in preparation for inflation running hot. And Treasury Inflation-Protected Securities (TIPS).

Chinese Debt Gone Wild

China is levering up again, with $34 trillion in debt and counting piling up faster from every corner of the economy, says Bloomberg. New yuan loans jumped by a record 3.23 trillion, close to half a trillion dollars, in January, and margin trading accounts are increasing their limits. A news release from the country’s central bank, the People’s Bank of China, deemphasized its efforts on deleveraging, showing that the monetary authorities in the People’s Republic are on the same inflationary page as the Federal Reserve. Some analysts believe that China has shelved deleveraging efforts entirely in order to goose the economy further. The end result of all this will be higher debt, higher inflation, and the danger of a crack-up boom in both the US and China, perhaps as a domino effect, simultaneously.

Exxon Teams Up With Microsoft on Oil Production

The ever-productive Permian Basin is going to triple its productivity in terms of shale oil production in the next decade, that is if Exxon Mobil (NYSE:XOM) has anything to say about it. The oil giant has teamed up with Microsoft (NASDAQ:MSFT) in order to make it happen, using Microsoft’s data-crunching software to optimize production by up to 50,000 barrels a day. Exxon usually develops its own technology so this step is out of character for it, but it realized it needed tech expertise that it didn’t have on its own in order to meet new production targets. The increased production out of the US may be necessary to keep oil prices stable as Iran and Venezuela are being increasingly cut off from international markets as the sanctions vice tightens.

Economic Calendar This week:

Tuesday: Case Shiller 20

Wednesday: Durable Goods and 30Y mortgage rates

Thursday: Jobless Claims

Friday: PCE December and January

 

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