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Developed economies

Britain’s economic growth accelerated in the second quarter this year. Warm weather boosted consumer spending and the country posted a 0.6% QoQ growth rate vs. the 0.4% QoQ growth rate in the first quarter. There was also an uptick in construction activity, albeit after being depressed by extreme weather in the first quarter.

World equity markets are in their longest bear market since early 2016. European, Asian and American exchanges are down between 1% to 3% on aggregate since last week. Global stock markets, especially American ones, have been in a long-term bull market and recent moves lower may just be the market coming down to earth. But some commentators are saying that the Trump-era trade wars have been making the Chinese economy fragile and investors warier. Over the longer term the German stock exchange is down 4% YoY, the FTSE 100 is down 2% YoY, NASDAQ and the NYSE are up 26% and 9% respectively, whilst the Tokyo Exchange is up 4% YoY and the Shanghai Composite Index is down 21% YoY.

Sweden is facing political uncertainty as no clear winners emerged from the parliamentary election. The country’s slightly left of centre coalition and its slightly right of centre coalition received almost the same vote share (40.6% vs 40.3%). While the right-wing Sweden Democrats party received 17.6% of the vote. Which means that, unless the two main blocs can form a grand coalition government, the Sweden Democrats party (which neither bloc wants to enter a coalition with) will be the country’s political king maker until the next election. This rise of a right-wing anti-immigration party mirrors the rise of the AfD party in German politics.

Emerging markets

The Brazilian economy is stagnating as the country’s next general election approaches. Second quarter Brazilian GDP growth was 0.2% QoQ or an annualized rate of 1%. The Brazilian Real has been one of the weakest performers against the US dollar. The Real started the year at 3.30 BRL to USD and is currently trading around 4.05 BRL to USD cutting foreign earnings from raw commodity exports. While unemployment stands at 12%. The current front runner in upcoming elections is the right-wing Jair Bolsonaro, who was stabbed at an election rally last week. The current ruling party PT has no candidate yet as its chosen candidate, former president Luiz da Silva, was prevented by running due to previous corruption convictions.

China is participating in an Australian run maritime drill for the first time. Australia runs the drills every two years for Navies in the Indian and Pacific oceans to understand each other’s practices and procedures for future joint missions. Chinese naval involvement reflects an increasing desire by the country to become a more active naval power.

Indian economic growth was 8.2% in the second quarter this year, a jump from the 7.7% recorded in the first quarter.


Icy weather in China’s north east pushed Dalian soybean futures 5% higher at the start of this week. Soybean Meal and Soybean futures are trading at ¥3,325/tonne and ¥3,624/tonne respectively. The Trump-era USA-China trade war has interfered with the soybean trade between the two country’s and from that Dalian soybean meal futures are up 18% over the last 90 days and 22% higher over the last year. China is the world’s biggest consumer of   soybeans and has been increasing its imports of Brazilian soybeans recently.

US trade negotiators say that any new NAFTA deal must open Canada’s milk market and end milk protein production subsidies. Currently Canada encourages overproduction of milk proteins by its farmers who pump their excess production into export markets for yoghurt and cheeses. This is done under Canada’s so-called Class 7 pricing scheme. Ending the scheme would make US milk more competitive in the Canadian market and reduce the downward price pressures that excess Canadian milk protein puts on international dairy markets. US Class 3 Milk futures are trading around $16.27/cwt and have been climbing over the last few months.

Brazil’s sugar exports may drop by 28% tonnes according to a Brazilian agricultural body. This will come as the country funnels more sugar cane into ethanol production and away from raw sugar production. Raw sugar prices are trading around 11c/lb now and Chicago ethanol is trading at $1.288/gallon. Both futures markets are down on the year and quarter, with sugar down 22% YoY and ethanol down 18%. Sugar has, however, been ticking upwards in recent weeks and is 5% higher WoW. Ethanol is flat WoW and MoM as US driving season comes to an end and ethanol fuel additive demand tapers off.


Carbon credits swung wildly upwards over the last few days. Currently the market is trading at €25.4/tonne. This is 26% up WoW, 41% MoM, 70% QoQ and 264% YoY. This comes after a very strong German auction last week above the secondary market price reflecting strong demand for credits. Meanwhile some 33.4m December delivery futures contracts changed hands on ICE which was more than double the volume traded over the last 50 sessions. It is clear that industrial emitters are coming to the market to hedge out in a big way and speculators are following them in.

State-owned Qatargas has agreed to a 22-year LNG supply deal with China for some 3.4m tonnes of LNG per year. China is rich in coal but is looking to move to a cleaner source of fuel such as LNG to combat air pollution. From this commentators expect the country will import some 65m to 70m tonnes of LNG per year which will almost certainly put competitive pressure on cargoes from natural gas regions and elevate prices.

Norwegian oil market consultancy DNV GL proclaimed that global oil demand will peak in 2023 and after 2040 no new oil developments will likely be necessary. This is due to the rise of electric vehicles. The firm predicted that by 2045 half of all road transport will be via electric vehicles and by 2050 oil demand will be half of what it is today. Indeed, this summer the millionth electric vehicle entered service on European roads.


Chinese pollution curbs reduced Chinese iron ore imports in August slightly. MoM imports were 0.7% lower according to Reuters while year to date imports are 0.5% lower than 2017. At the same time steel rebar output in Tanghshan, China’s main steel production region, has been cut over recent weeks to reduce smog. This has elevated Shanghai Futures Exchange rebar prices to ¥3,652/tonne, a two-week high.

Despite the Trump-era trade war, the warnings of a Chinese debt bubble, emerging market currency routs and Brexit, investor money has not been flowing into precious metals as a traditional safe haven asset class. Over the last 3-months Gold is down 8%, Platinum is down 2%, and Silver is down 17%. There has been nothing safe about these assets. Bitcoin, which some are calling the ‘new’ safe haven asset has faired better falling only 1% QoQ, but it’s down 10% on the week and remains highly volatile while having lost 56% of its value YoY.

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