Recession: A Near Certainty By 2020 -- Morgan Stanley -- November 28, 2017 -- The Energy And Market Page, Part 2, T+311

From Reuters via Twitter: 

JUST IN: OPEC and non-OPEC committee back extension of crude oil supply cut until the end of 2018 with an option to renew in June

Interpretation: a six-month option since it will be reviewed in June. Previous extension went to March, 2018, so this is simply a three-month extension to June, with another review then.


Raining on Trump's parade: the short-term, long-term Treasury curves are flattening. This is what it means to some people:

A flattening yield curve spells trouble for banks, which generate money from the gap between long-term loans and short term deposits. So it’s no surprise that financial stocks have trailed the S&P 500 this year.

Finally, an inverted yield curve has predicted the past 7 recessions. Flattening isn’t the same thing as inverting, but it is one step closer. Morgan Stanley notes that “we are not on recession watch now, and peg the 12-month probability of recession at 25% … [but] by 2020, that probability grows to near certainty.”

Something for Jay Powell to manage.

Dollar become scarce overseas. If firms don't have access to the US dollar, their growth is challenged. From The Wall Street Journal.

It is one of the ironies of the global financial crisis: A decade later, a panic whose origins were in the U.S. has left the dollar more important to the rest of the world than ever before.

Putative contenders for its throne—the euro, the Chinese yuan—have failed to gain global acceptance. It remains the dominant force in world trade. A slow, yearslong decline in the proportion of dollars among the holdings of the world’s central banks, which were trying to diversify, has stopped. And the commercial banks of Japan, Germany, France and the U.K. now have more dollar-denominated liabilities than those in their own currencies.

The dollar dominance is testing the world again: Rules designed to make finance safer have already made dollars harder to come by. To add to the pain, the Federal Reserve is now sucking dollars out of the world’s financial system as it tries to tighten its monetary policy.

Those commenting suggest there is nothing to worry about.

GDP now: Latest forecast: 3.4 percent — November 22, 2017.

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2017 is 3.4 percent on November 22, unchanged from November 17.

After this morning's advance durable manufacturing report from the U.S. Census Bureau, the forecast of real nonresidential equipment investment growth inched up from 14.1 percent to 14.2 percent and the forecast of the contribution of inventory investment to fourth-quarter GDP growth inched down from 0.06 percentage points to 0.02 percentage points.