The global economic slowdown has begun. The facts are in the figures. Leading the downtrend is China, the world’s #2 economy, whose leaders caused the socioeconomic decay when they launched the COVID War during their Lunar New Year in January 2020, “The Year of the Rat.” After imposing draconian zero-COVID policies for some three years, they have destroyed the lives and livelihoods of hundreds of millions across the nation. 

As China’s National Bureau of Statistics reported yesterday, manufacturing and services activity continues to weaken as its manufacturing purchasing managers index was 49.3 in July. Anything below 50 registers a contraction. On a slight up-note, but still weak, the nation’s non-manufacturing PMI came in at 51.5… down from 53.2 in June.

With its Gross Domestic Product up just 0.8 percent in the second quarter, a slumping real estate market, weak construction, youth unemployment above 21 percent… the economic fallout is global, since it also damages foreign imports as Chinese businesses and consumers buy less. 

On the up-note, with the yuan down and China being hit with deflation, it’s cheaper for consumers from other nations with stronger currencies to buy Chinese products. But the weak yen and a weak economy put more downward pressure on Chinese consumers to buy products produced abroad… especially from Europe which is a big supplier.

On another down-note, as a result of Washington’s extensive import restrictions that deny China access to advanced semiconductor products and high-tech components, its once-booming tech sector is now struggling. So far this year, on the high-end chip front, chip-manufacturing equipment imports fell by 23 percent and semiconductor imports are down by 22 percent. 

TREND FORECAST: As history shows, China’s rapidly booming economy mirrors those of other nations—such as Japan which rapidly grew then collapsed in the 1990s. 

Minus a wild card, such as a U.S./NATO/Taiwan war against China or a nuclear war ramping up as a result of the Ukraine War, etc., we maintain our forecast that the Chinese economy will become the world’s largest in the coming decades… or sooner. 

And while China’s economy is expected to grow just 5 percent this year, it is a much stronger growth rate than the United States and Europe.

Also, while the U.S. hi-tech sanctions will hurt China in the short term, as we have forecast, the massive nation with the world’s largest population has the human and natural resources to rely on self-sustainability rather than depend on globalization:

• “CHINA 2021: THE CHINESE CENTURY” (9 Mar 2021)
• “CHINA MOCKS AMERICA: ELITES IN CHARGE, IT’S NOT A DEMOCRACY” (23 Nov 2021)
• “SPOTLIGHT: CHINA”  (1 Feb 2022)
• “U.S. FADING FAST: SOUTHEAST ASIANS SEE CHINA AS #1” (22 Feb 2022)
• “SELF-SUFFICIENCY TOP TREND: UKRAINE WAR PUSHES CHINA TO STRENGTHEN ALLIANCES” (5 Apr 2022)
• “SELF-SUFFICIENCY TOP TREND: CHINA CREATING A ‘UNIFIED DOMESTIC MARKET’” (12 Apr 2022)
• “GERMANY TAKES TOUGHER STANCE AGAINST CHINA: ‘SELF-SUFFICIENCY’ TOP TREND” (7 Jun 2022) 
• “CHINA’S DOMESTIC ECONOMY REBOUNDS, WE’RE #1?” (14 Feb 2023)
• “YELLEN: BIDEN WILLING TO DAMAGE U.S. ECONOMY TO CONTAIN CHINA” (25 Apr 2023)

Over There

Last week, following the U.S. path, the EU raised interest rates 25 basis points. And while Europe’s inflation has fallen to 5.3 percent, service inflation hit a new high at 5.6 percent and core inflation came in at 5.5 percent… way above the European Central Bank’s made-up 2 percent magic number.

Thus, while the EU registered an annualized growth rate of 1.1 percent in the second quarter, we forecast that if the ECB again raises interest rates… it will bring down the GDP into negative territory in the fourth quarter. The economic growth is minimal and as reported by the Financial Times, which quoted ING economist Bert Colign, “Excluding Ireland, Eurozone growth would have halved.”  Indeed, as a result of the big drug companies doing business out of Ireland—and with more of the world addicted/and or prescribed to swallow prescription drugs—its Gross Domestic Product spiked 13.7 percent. 

Also, Germany’s economy—Europe’s largest, and the fourth largest in the world—stagnated in the second quarter, while Italy, Austria, and Italy’s GDP shrunk.

As for where EU interest rates are going, it is a guess. Christine Lagarde, the ECB head, warned that “there could be a future hike of the policy rate or perhaps a pause. A pause, whenever it occurs, in September or later, would not necessarily be definitive,” she said in an interview with the newspaper, Le Figaro. 

From Bad to Better Bad

As we note above, Europe’s export slowdown with China plus higher interest rates which equal higher borrowing will push the EU back into recession by the fourth quarter. As we have said, it is summertime and the living is easy. The tourism boom will bring up third quarter GDP numbers, but the boost in the service sector is temporary while weak manufacturing continues its downward trend. 

TREND FORECAST: We maintain our forecast of worse economic times ahead for Europe… thanks to its involvement in the Ukraine War and the effects of the sanctions its politicians put on Moscow which spiked inflation… and greatly diminished EU’s business dealings with Russia. 

Indeed, even Lagarde said that “High inflation and tighter financing conditions are dampening spending.” 

And thanks to the higher interest rates, not only has economic growth basically stalled and manufacturing greatly weakened, an ECB survey of European banks shows loan demand in the last quarter hit a record low. 

Over Here

Again and again, as we keep forecasting, people are in a summer state of mind in the Northern Hemisphere and the living is easy. The masses are doing their best to spend what they can and vacation as much as they can… which is also driving up the GDP, especially in the service sector. 

However, the money making manufacturing sector, which indicates where the economy is heading, came in at just 46.4. Any number below 50 signals contraction.  

LAST WEEK: OPTIMISM REBOUNDS ON GOOD NEWS

The labor department’s report that inflation slowed to 3 percent in June, robust earnings reports, and strength in a key handful of major tech stocks lifted the three main U.S. stock indexes to a week of gains.

The Dow Jones Industrial Average rose 0.6 percent, the NASDAQ 1.6 percent, and the Standard & Poor’s 500 index 0.8 percent.

On 26 July, the Dow marked 13 consecutive “up” days, the longest such stretch since 1987, The Wall Street Journal said. The Dow and S&P booked a third consecutive positive week. The S&P is up 19 percent this year as of last week, erasing its 19-percent loss in 2022, the WSJ noted.

With inflation nearing the U.S. Federal Reserve’s 2-percent target and no overt signs of a recession under way, investors gained confidence that the economy will have the best outcome: inflation under control, a strong labor market putting money in consumers’ pockets, and no serious economic downturn.

Also, with about half of S&P companies having reported second-quarter earnings, 80 percent have beaten analysts’ estimates, data service FactSet reported. The historical average is 77 percent.

Alphabet and Meta’s share prices each gained by double digits last week after the companies reported accelerating sales.

Yields on the two-year treasury note edged down from 4.939 percent Thursday to 4.885 percent Friday. The return on the 10-year note also slid, falling to 3.957 percent Friday from 4.012 percent the day before. Yields fall as securities’ prices rise.

Gold’s continuous contract price was essentially flat for the week, dipping by $3 to trade at $1,958.30 at 5 p.m. U.S. EDT on 28 July.

Brent crude oil’s price shot up 4.9 percent on the week to $84.99. U.S. benchmark West Texas Intermediate gained 4.6 percent.

Bitcoin ticked up less than 0.01 percent to $29,353.90 at 5 p.m. U.S. EDT on 28 July.

Markets were quiet last week in much of the world but flared in China.

London’s FTSE ticked up 0.4 percent. The all-Europe Stoxx 600 shrank 1.2 percent.

The Japanese Nikkei 225 eked out a 0.3-percent gain while South Korea’s KOSPI was flat.

Chinese markets soared on renewed expectations that Beijing will finally unleash effective stimulus measures to revive the economy.

The Hang Seng in Hong Kong rocketed up 5.5 percent. The CSI Composite grew by 4.9 percent and the SSE Composite added 3.7 percent.

YESTERDAY: DOW SEES GAINS BEFORE SECOND-QUARTER EARNINGS SEASON 

The Dow Jones Industrial Average increased by 100.24 yesterday, or 0.28 percent, to 35,559.53, and the S&P 500 gained 6.73, or 0.15 percent, to 4,588.96. The Nasdaq Composite was up 29.37, or 0.21 percent, to 14,346.02. 

Traders have seen five straight months of gains and the S&P is at a 16-month high, according to the Associated Press. There is growing hope that the Fed may have orchestrated a soft landing, but others say the market is not out of the woodwork. 

The probability that the Fed will leave rates unchanged for the remainder of the year is at 60 percent, according to the CME’s FedWatch Tool.

Elsewhere, London’s FTSE was up 5.14, or 0.07 percent and the STOXX600 was up 0.57, or 0.12 percent, to 471.35. In Asia, Japan’s Nikkei was up 412.99, or 1.26 percent, to 33,172.22 and South Korea’s Kospi was up 24.26, or 0.93 percent, to 2,632.58. Hong Kong’s Hang Seng was up 162.38, or 0.82 percent, to 20,078.94. In China, the Shanghai Composite was up 15.11, or 0.46 percent, to 3,291.04 and the Shenzhen Component was up 0.75 percent to 11,183.91.

TREND FORECAST: Barron’s noted yesterday that U.S. stocks are on a roll and there seems to be no end in sight. The message to Joe Schmuck the investor out there is: “Come on in, the water’s fine!”

It’s summertime and the living is easy. The S&P 500 is up 20 percent on the year and the Nasdaq is up 37 percent, which is its best year since 1975. 

But storm clouds are on the horizon. 

“People are in a summer state of mind,” Gerald Celente said. “They don’t know what’s going on. The market is an artificial game. People are going to be spending more now, and then, we’re forecasting the end of September, October, you’re going to see the market start to go down.” 

OIL: Brent crude futures for October were trading down 13 cents to $85.30 a barrel and West Texas Intermediate was down 11 cents to $81.69. 

“Oil prices have rallied by 18 percent since mid-June on the return to deficits and on the oil market abandoning its negative growth views, which we saw as too pessimistic,” Daan Struyven, Goldman Sachs’s senior energy economist, wrote to clients, according to Yahoo! Finance. 

TRENDPOST: The banksters from Goldman Sachs want you to think that its economic optimism that is sending oil prices higher, which is a bunch of bullshit. Sure, stocks are artificially high, but OPEC+ has taken steps to limit the amount of crude on the market because of the weak economic conditions in Europe and China and the risk of a global slowdown..

Again, oil remains our wildcard and can surge if WWIII becomes official or war breaks out in the Middle East. 

GOLD: Spot gold gained 0.6 percent to $1,971.27 and is trading up 2.5 percent on the month

The precious metal benefited from a weakening dollar, which makes bullion more attractive to foreign investors. There is also a growing feeling on The Street that the Fed could be done raising rates for the year.

“I don’t think the Fed’s going to make a move in September, but later in the year, if we continue to get strong economic data, the Fed probably will make one more rate-hike,” Jim Wyckoff, senior market analyst at Kitco, told Reuters. “Right now, the gold and silver markets are waiting for the next catalyst… if demand from China starts to recover, we see more upside in gold and silver.”

TRENDPOST: Gerald Celente has long said recessions are not created overnight, and the high interest rates in the U.S. have yet to officially hit the economy. The Fed will eventually lower interest rates, and when it does, the U.S. dollar will weaken and when the dollar goes down, gold prices will skyrocket.

BITCOIN: The digital asset trended lower yesterday and was trading down to the $29,200 range.  

Kristin Smith, the CEO of Blockchain Association, praised the U.S. House Financial Services Committee for passing four bills to help regulate cryptos and assert its authority to “design a regulatory framework, rather than allowing overzealous federal agencies to fill the gap with enforcement actions.”

“It’s the first time crypto regulatory bills have been voted out of committee, on their way to a full House vote,” she said, according to Bitcoin.com.

TRENDPOST: The Trends Journal has identified federal oversight as one of the biggest risks for bitcoin.

TODAY: STOCKS OPEN MONTH MIXED AS INVESTORS WEIGH LATEST ECONOMIC DATA

The Dow Jones Industrial Average was up 71.15 points, or 0.20 percent, to 35,630.68 as the benchmark S&P 500 was down 12.23, or 0.27 percent, to 4,576.73. The tech-heavy Nasdaq was down 62.11, or 0.43 percent, to 14,283.91.

The feeling on The Street is that the slight pullback was the result of an overbought market.

The U.S. Labor Department posted its May Job Openings and Labor Turnover Survey that showed job vacancies and layoffs were lower in June compared to the previous month. 

There were 9.58 million job openings for the month, which was lower than the 9.62 million in May and layoffs were also down from 1.55 million in May to 1.53 million in June…but the reading is basically the same as the previous month. The feeling is that these numbers indicate that the Federal Reserve’s interest rate hikes could be taking hold while not crashing the economy.

Rachel Sederberg, a senior economist at Lightcast, told CNBC that the economy is “definitely heading in a Goldilocks direction.” 

“We still have a long way to go, and we still have a very high number of openings, especially as compared to where we were pre-pandemic. But we’re heading in the right direction and we’re doing so in a calm manner, which is what we want to see,” she said.

TRENDPOST: The Federal Reserve has used the data to determine if the labor market’s supply-demand is still out of balance and if the U.S.’s labor demand is slowing. 

Jay Powell, the Fed-Head, said in July that labor demand was still much higher than the supply. 

The focus now shifts to the key U.S. nonfarm payrolls report for July due on Friday. Overall payrolls are forecast to rise by 200,000 jobs in July after increasing by 209,000 in June.

Elsewhere, London’s FTSE was down 33.14, or 0.43 percent, to 7,666.27 and the STOXX600 was down 4.19, or 0.89 percent, to 467.16. In Asia, Japan’s Nikkei was up 304.36, or 0.92 percent, to 33,476.58 and Seoul’s Kospi was up 34.39, or 1.31 percent, to 2,667.07. Hong Kong’s Hang Seng was down 67.82, or 0.34 percent, to 20,011.12. Shanghai Composite was down slightly to 3,290.95 and the Shenzhen Component was down 40.68, or 0.36 percent, to 11,143.23.

OIL: London’s Brent crude was down 30 cents a barrel to $85.12 and West Texas Intermediate fell 23 cents to $81.57.

Last month, Saudi Arabia began cutting its oil supply along with Angola, Nigeria, and Libya. These production cuts amounted to a total of 840,000 fewer barrels in the market, OilPrice.com, citing a Reuters survey, reported.

James Davis, the director of short-term global oil services at FGE, told Bloomberg that Riyadh could begin to unwind these cuts by September to accommodate demand. Saudi Arabia could reduce these cuts by between 250,000 and 500,000 barrels a day.

Oil prices hit a three-month high on Monday, capping off a month that saw Brent crude see its most significant rise since January 2022—before the Ukraine War.

TRENDPOST: Demand for oil is up while production is tight, which is driving prices higher. As prices fell over the past several weeks to the $70 per-barrel range, Russia took a half-million barrels a day off the market and OPEC+ cut back supply. As the Ukraine War continues to heat up, as well as tensions in the Middle East, oil prices will remain in their current range.

GOLD: The U.S. dollar went up today and spot gold dropped some $22.00 an ounce to $1,949 per ounce

The 10-year Treasury also climbed above 4 percent.

TREND FORECAST: Should the Fed not raise rates in September, the dollar will weaken and gold prices will rise. Again, the lower interest rates fall, the lower the dollar will fall and the higher gold prices will rise. 

BITCOIN: The digital asset was trading up $4.70, or 0.02 percent, to $29,260.80 as the coin continues to struggle around the $29,000 mark.

James Straten, research and data analyst at crypto insights firm CryptoSlate, told the Coin Telegraph that he expects bitcoin to test the short-term holder cost basis, which is $28,300.

“This would be the third time testing this support level this year,” he said.

The report also said Titan of Crypto, a popular trader on Twitter, called the $28,300 level as the “level to watch.”

TREND FORECAST: We’ve seen bitcoin face pressure from the rising U.S. dollar and high interest rates. The coin is still trading in a strong range. Again, it is summer time and trading is much lighter and people are more in a vacation state-of-mind.