Posted by & filed under Daily Intelligence Briefing.

We bring you our Daily Intelligence Briefing courtesy of McAlinden Research Partners. The report is provided to Hedge Connection members for free. Below is snapshot, login to view the full report. Not a member? Join today.

McAlinden Research Partners is currently offering a complimentary full month subscription of the DIB. Activate yours today –


Daily Intelligence Briefing – March 6, 2017

Featured Topic: Global Central Banks:

  • Fed – Fed Officials Indicate Rate Increase Is Likely in March
  • Fed – How the Rest of the World Paved the Way for a March Fed Hike 
  • ECB – Fed and ECB go their separate ways 
  • BoJ – BOJ Faces Call to Release Handbrake, Let Longer Yields Rise 
  • PBOC – China signals change of course on long-standing yuan policy 
  • BoT – Thailand’s Rallying Currency Proves a Headache for Its Central Bank 
  • BCV – Venezuela Only Has $10 Billion Left In Its Foreign Reserve 


According to the CME Group FedWatch tool, which shows the probability of FOMC rate moves for upcoming meetings, the probability of a March interest rate hike, as of today, is 86.4%.

Meanwhile, investors are already looking ahead towards the next FOMC Dot Plot which will be released following this month’s meeting. What they want to know is whether the upcoming Dot Plot will show a more aggressive posture from the Fed. Here’s where the Dot Plot stood following the FOMC’s December 2016 meeting.

Other Highlights:

  • Markets: 
    • Commodities – Bullish Commodity Bets Hit Record Highs, as Investors Seize on Signs of Growth
  • Economics and Trade: 
    • China – China targets economic growth of around 6.5 per cent
    • China – China to simplify tax rules to shore up the economy
    • India – India’s twin balance-sheet problem
  • Politics and Policy: 
    • Defense – Japan Moves to Highest Alert Level After North Korea Fires Missile
    • Defense – China defence budget tops Rmb1tn for first time 
    • Defense – Trump administration to propose ‘dramatic reductions’ in foreign aid 
    • Immigration – President Trump Signs Revised Executive Order Restricting Travel to the U.S.
  • Finance: 
    • Banking – China overtakes eurozone as world’s biggest bank system 
  • Real Estate & Infrastructure:
    • U.S. Real Estate – As consumer confidence hits cycle high, builders gear up for demand 
    • U.S. Real Estate – Redfin: Housing demand persists as inventory remains tight 
    • Infrastructure – Iraq to get 10 billion pound loan for British contracts
  • Manufacturing and Logistics: 
    • Industrial IoT – GE, Siemens Vie to Reinvent Manufacturing by Harnessing the Cloud
  • Technology: 
    • Surveillance & Intelligence – Palantir Provides the Engine for Donald Trump’s Deportation Machine
    • Blockchain – A Better Way to Track Pork Chops, Bonds, Bad Peanut Butter?
  • Transportation:  
    • Airlines – Big Airlines Cheer as Trump Administration Suspends Obama-Era Consumer Protection 
    • AVs – Self-Driving-Truck Startups Race to Take On Uber
  • Commodities: 
    • Oil – Venezuelan oil production may tumble 20% by the end of 2017 
    • Steel – China vows new steel, coal capacity cuts to make sky blue 
    • Poultry – Bird flu found in Tennessee chicken flock on Tyson-contracted farm
  • Endnote: 
    • The World Map According To Population Size

MRP Reports:

Current Themes: 

  • Long Aerospace and Defense
  • Long Homebuilders
  • Long Gold
  • Long Value over Growth
  • Long U.S. Energy
  • Long Oil Services and Equipment
  • Long CAPEX
  • Long Steel
  • Long Emerging Markets 
  • Long Treasury Inflation Protected Securities (TIPS) & Short Long-Dates Treasuries
  • Long Coffee
  • Long Financials
  • Long Regional Banks
  • Long Cybersecurity

About the DIBs: MRP focuses on identifying transformational change in the global economy and offering an investment thesis whenever an opportunity arises that has not yet been recognized by the market. The DIBs are MRP’s compilation of articles and data from multiple sources on subjects reflecting disruptive change that have potential investment implications for an industry or group of securities. We share these with our clients who may already have or may be considering exposure in the industries affected. The subjects change daily and constitute an excellent update on featured topics. Every day, the DIBs also include links to MRP’s MARKET VIEWPOINT, THEME TRACKER and MACRO MONITOR. On many days, the DIBS will also include NEW DATA & THEME DEVELOPMENTS for active themes.

  • United States, Factory Orders, MoM: 1.2% from prior 1.3%
  • United States, Factory Orders ex Transportation, MoM: 0.3% from prior 2.4%
  • United States, Gallup US Consumer Spending Measure, MoM: $101 from prior $88
  • China, Foreign Exchange Reserves, MoM:  $2998B from prior $2969B
  • Mexico, Auto Production, YoY: 11.1% from prior 4.1%
  • Mexico, Consumer Confidence, 75.7 from prior 68.5
  • Euro Zone, Retail PMI, MoM: 49.9 from prior 50.1
  • France, 3-Month BTF Auction, -0.733% from prior -0.667%
   MARKETS Top   

Commodities – Bullish Commodity Bets Hit Record Highs, as Investors Seize on Signs of Growth

Commodity prices are enjoying their best run in years, fresh evidence that investors are betting on a pickup in the global economy after years of sluggish growth and scant inflation. The S&P GSCI Index, which tracks commodity futures, rose 28% last year in its biggest gain since 2009. Oil and natural-gas prices have soared more than 50% over the past 12 months. Precious metals like silver and materials like lumber have scored big gains in recent weeks.

A sustained rally in commodities would likely signal healthy consumer and business demand. It could also be a boon to the many emerging-market countries that rely on commodity exports, such as Russia, South Africa and Malaysia.

Bullish bets on oil, copper and cotton futures all hit record levels in January, according to data from the CFTC that goes back to 2006. That was the first time in nearly a decade that this cross section of materials and resources established new highs simultaneously. WSJ


China – China targets economic growth of around 6.5 per cent

China has lowered its annual economic growth target to “around” 6.5 per cent, as Beijing plans to focus on risk control in the final year of President Xi Jinping’s first term.  The figure is down from the government’s target growth range of 6.5 to 7 per cent for 2016. Actual growth came in at 6.7 per cent last year.

Over the past year, the government has appointed new heads of the securities and banking regulators as well as the National Development and Reform Commission, an economic planning agency. Most are reform-minded technocrats who have sounded the alarm about the risks stemming from speculative bubbles in China’s property, equity and insurance sectors. 

This contrasts with a policy debate that broke out in wake of last year’s NPC session about China’s growing debt levels, which some officials felt were necessary to support economic growth. That debate has since been settled in favour of officials who feel the government should pay more attention to financial and economic risks even if it results in slower economic growth. 

Eswar Prasad, a China finance expert at Cornell University, said the premier’s lower growth target was “symbolically important”. “[It signals] the government’s concerns about rising financial risks and environmental degradation wrought by the earlier emphasis on high growth at all costs and the unbalanced growth model that sustained it,” he added. Zhou Hao, Commerzbank economist, said that “China’s policy stance has turned to risk control”. “Monetary policy will gradually tighten,” he added. FT



China – China to simplify tax rules to shore up the economy

China has pledged to simplify the value-added tax (VAT) regime this year to level the playing field and shore up the real economy amid complaints about the chokingly high tax burden in a slowing economy. Premier Li Keqiang said on Sunday the government will trim the four-tier VAT regime to three levels.

Under the current tax regime, businesses face four rates based on industry classification: 17 per cent or 13 per cent for the sales or import of products, 11 per cent for transport and property lease or sale, and 6 per cent for finance, modern services and consumer services.

The 13 per cent rate for the sales or import of products including agricultural products, publications, and utilities could be cut to 11 per cent amid the simplification, market watchers said. “The 13 per cent rate is likely to be dropped with the least disturbance on business and tax revenue,” said Robert Li, a PricewaterhouseCoopers tax partner in Shanghai.

The simplification of VAT rates reflects Beijing’s drive to trim tax and support a stabilising economy against slower economic growth, Li said. SCMP

India – India’s twin balance-sheet problem

In a nation of 1.3bn steadily growing at around 7% a year, firms are busy cutting back investment as if mired in recession. Bank lending to industry, growth in which once reached 30% a year, is shrinking for the first time in over two decades. After India dodged the worst of the financial crisis a decade ago, a flurry of investment was made on over-optimistic assumptions. Banks have been in denial about the ability of some of their near-bankrupt borrowers to repay them. The result is that the balance-sheets of both banks and much of the corporate sector are in parlous states.

After years of burying their heads in the sand, India’s authorities now worry that its “twin balance-sheet” problem will soon imperil the wider economy. Both the Reserve Bank of India (RBI) and the government have nagged banks to deal with their festering bad loans. Around $191bn-worth, or 16.6% of the entire banking system, is now “non-performing”, according to economists at Yes Bank. That number is still swelling.

Investment is a key component of GDP, and it is now shrinking, thanks to parsimonious firms. India runs a trade deficit and the government is seeking to cut its budget shortfall, which leaves consumption as the sole engine of economic growth. Indeed, until demonetisation, consumer credit was booming, up by about 20% year on year. Some may wonder whether those are tomorrow’s bad loans…

Bankers, companies and policymakers once hoped the twin balance-sheet problem would eventually solve itself. It has not: profits are in fact shrinking at the large borrowers, many of them in the infrastructure, mining, power and telecoms sectors. But banks have cut credit across the board, including to small businesses. E *


Defense – Japan Moves to Highest Alert Level After North Korea Fires Missile

Japan moved to the highest possible alert level after North Korea fired four ballistic missiles simultaneously into nearby waters, the latest provocation from Kim Jong Un’s regime. Three of the missiles fell into Japan’s exclusive economic zone, with one dropping about 350 kilometers west of the nation’s northern Akita prefecture. The launches “clearly show that this is a new level of threat” from North Korea, Japanese Prime Minister Shinzo Abe told lawmakers in Tokyo. “North Korea’s nuclear and missile capabilities have really improved, and they are becoming more difficult to predict,” Abe said.

While North Korea routinely test-fires missiles, the timing of these launches is particularly sensitive… as South Korea and the U.S. undertake annual military drills that Pyongyang has called a prelude to an invasion, and right after the start of the National People’s Congress in Beijing — a gathering aimed at showcasing President Xi Jinping’s command over foreign and domestic affairs.

Tensions have escalated in recent weeks between China and South Korea over American plans to deploy a missile-defense system known as Thaad on the peninsula, part of measures to thwart Kim from gaining the ability to strike the continental U.S. with a nuclear warhead. Long-time allies China and North Korea had a rare public spat last month after Beijing banned coal imports. Beijing accounts for more than 70 percent of its neighbor’s trade and provides food and energy aid.  B

Defense – China defence budget tops Rmb1tn for first time 

China’s defence spending will exceed Rmb1tn ($145bn) for the first time this year, the Ministry of Finance on Monday announced, reflecting a 7 per cent rise from the previous year…  China’s defence budget has grown at a double-digit rate for the last 25 years, and the country now ranks s econd only to the US in terms of global military spending. 

That remains a distant second, however, US President Donald Trump has asked for a 10 per cent increase in US defence spending this year, potentially adding another $54bn to a military spending budget that exceeded $600bn in 2016. FT


Defense – Trump administration to propose ‘dramatic reductions’ in foreign aid 

The White House budget director confirmed Saturday that the Trump administration will propose “fairly dramatic reductions” in the U.S. foreign aid budget later this month. The administration plans to propose to Congress cuts in the budgets for the U.S. State Department and Agency for International Development by about one third.  White House Office of Management Budget director Mick Mulvaney said the cuts in foreign aid would help the administration fund a proposed $54 billion expansion of the U.S. military budget. The United States spends just over $50 billion annually on the State Department and USAID, compared with $600 billion or more each year on the Pentagon.

A U.S. government website said 20 government agencies plan to award $36.5 billion in foreign assistance programs in more than 100 countries around the world during the current budget year. Senator Marco Rubio, a Florida Republican, tweeted earlier this week: “Foreign Aid is not charity. We must make sure it is well spent, but it is less than 1% of budget & critical to our national security.” Mulvaney said the Trump administration will release its budget proposal on March 16. R

Immigration – President Trump Signs Revised Executive Order Restricting Travel to the U.S.

President Donald Trump signed a scaled-back travel ban on Monday that bars people from six Muslim-majority nations from entering the U.S. for 90 days but exempts travelers holding valid visas. The revised ban applies to the nations of Iran, Libya, Somalia, Sudan, Syria and Yemen. The order is effective on March 16, a delay that could address some of the judicial concerns about due process. The new order still suspends the admission of refugees to the U.S. for 120 days and caps the annual total admission of refugees at 50,000.

Administration officials said they would use the delay to review vetting procedures and implement tougher rules. In making their case that there is a safety risk, the Justice Department said about 300 people admitted to the U.S. as refugees are currently under investigation by the Federal Bureau of Investigation for potential terrorism-related activities.

The decision to remove Iraq from the ban came after lobbying by senior administration officials, diplomats and Iraqis, who warned that including Iraq risked doing lasting harm to bilateral relations at a critical moment in the war with Islamic State. WSJ *


There is much more to this report! McAlinden Research Partners offers Hedge Connection members weekly access to the Daily Intelligence Briefing research for free – click here to view. (You must be logged in first). Not a member? Join today.

McAlinden Research Partners is currently offering a complimentary full month subscription of the DIB. Activate yours today –

Leave a Reply

Your email address will not be published. Required fields are marked *

This blog is kept spam free by WP-SpamFree.