Originally published at: https://peakprosperity.com/daily-digest/stocks-plummet-and-layoffs-surge-chinese-shipbuilders-merge/
Economy
Global financial markets are showing signs of strain, with Japanese stocks experiencing a significant drop and the yen rising. This reflects broader economic concerns, particularly in the US, where tech stocks and the AI sector have also faced declines. Recent US labor data revealed a sharp drop in job openings, weak hiring, and the highest level of layoffs since last March, indicating a deteriorating labor market. The yen carry trade, which involves Japanese financial firms leveraging yen to invest in US dollar assets, has been unwinding since early August. This reversal is reportedly driven by a reassessment of global risk, particularly in the US economy, rather than central bank rate hikes. Commodities like oil and gasoline are also falling, signaling broader economic weakness.
Central banks, including the Bank of Canada, have been cutting rates in response to this weakening. Federal Reserve Chair Jerome Powell has acknowledged the rising unemployment rate and changing economic conditions. The Japanese stock market’s decline highlights the fragility of the global financial system when faced with systemic risk. The yen’s strengthening is a result of the carry trade reversing, not central bank actions. Japanese financial firms, heavily leveraged in US dollar assets, are now retreating due to increased perceived risks. This shift began in late July and early August as Japanese firms reassessed the stability of the US economy.
Interest rates and bond yields globally have been moving lower, reflecting synchronized economic weakness. The US labor market, as indicated by the latest JOLTS data, is showing signs of significant trouble, with falling job openings, weak hiring, and rising layoffs. The ISM Manufacturing Index also reported weak new orders and employment conditions. This situation is reportedly not about central bank policies but about the global economy confronting and repricing systemic risk. The yen carry trade’s unwinding is a symptom of this broader issue, revealing the financial system’s fragility and the deep, long-term consequences of the current economic downturn.
Health & Environment
In Europe, food and farming lobbies have reportedly acknowledged the need to reduce meat consumption in a shared vision report developed with green groups and other stakeholders. The report calls for urgent and feasible changes in farm and food systems, recognizing that Europeans consume more animal protein than recommended by scientists. It suggests measures such as better education, stricter marketing, and voluntary buyouts of farms in regions with intensive livestock rearing to shift diets toward plant-based proteins. The stakeholders also emphasize the need to rethink subsidies, proposing a “just transition fund” to help farmers adopt sustainable practices and targeted financial support for those in need.
European Commission President Ursula von der Leyen, who commissioned the report, stated that the findings would inform her planned vision for agriculture. She stressed the importance of enabling farmers to live off their land to invest in sustainable practices and achieve climate and environmental goals. While the report does not set specific targets for reducing meat production, it advocates for support to change dietary habits through initiatives like free school meals, detailed labeling, and tax reductions on healthy and sustainable food products. The report, resulting from seven months of negotiations, aims to harmonize farming and nature protection.
Geopolitics
In China, two major state-owned shipbuilders, China CSSC Holdings and China Shipbuilding Industry (CSICL), announced plans to merge. This move is seen as a strategy to better serve the military, with the merger involving CSSC Holdings absorbing CSICL through a stock swap. The companies aim to “further focus on major state strategy” and promote equipment for a strong military. The merger aligns with government policy goals to enhance market value by improving governance, raising disclosure standards, conducting share buybacks, and increasing dividends. The history of CSSC dates back to a 1950 government organization for shipbuilding, which was reorganized in the 1970s and later split into “North Ship” and “South Ship” entities in 1999. These merged in 2019 to form the current CSSC, but CSSC Holdings and CSICL remained separate listed companies with overlapping businesses until now.
Sources
Global Recession Fears Trigger Tokyo Stock Plunge and Yen Surge
“No, it didn’t spark recession fears; it further confirmed recession reality.”
Source | Submitted by rhollenb
Europe’s Farming Lobbies Embrace Plant-Based Future in Landmark Report
The wide-ranging report calls for “urgent, ambitious and feasible” change in farm and food systems and acknowledges that Europeans eat more animal protein than scientists recommend.
Source | Submitted by Shplad
Economist Predicts Hard Landing for U.S. Economy Amid Systemic Banking Risks
“That’s why my base case would be that we have a hard landing and we don’t have a soft landing.”
Source | Submitted by rhollenb
“Debt Overload: John Rubino Predicts Economic Turmoil and Potential Recession”
“Because we have so much debt now and so much of that debt is bad debt, it’s impossible to use history to make accurate predictions anymore. We’re dealing with a society that is so much more overleveraged than it used to be, and therefore so much more fragile.”
Source | Submitted by rhollenb
Chinese Shipbuilding Giants Merge: Strategic Move or War Prep?
“Promoting equipment for a strong military” was also mentioned as a priority in the filings, according to the report.
Source | Submitted by AaronMcKeon