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China and Hong Kong Pressures are Having Limited Knock-on Effects

China and Hong Kong Pressures are Having Limited Knock-on Effects

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Overview: The S&P 500 gapped higher yesterday, above the recent ceiling and above the 200-day moving average for the first time since early March. The momentum faltered, and it finished below the opening level and near session lows. The spill-over into today's activity has been minor. The heightened tensions weighed on China and Hong Kong markets, but Japan, South Korea, Taiwan, and Indian equity markets rose. Europe's Dow Jones Stoxx 600 is higher for the third consecutive session, the longest streak this month. US shares are also trading higher, and the S&P 500 looks poised to rechallenge yesterday's high, leaving yesterday's opening gap unfilled. Benchmark bond yields are a little lower, and the US 10-year is hovering around 68 bp. The greenback is bid against most of the major and emerging market currencies. Among the majors, the yen, the Canadian dollar, and New Zealand dollar are steady to higher, while the European complex, led by the Swiss franc, is nursing small losses. Turkey, Hungary, and South Africa led the losers among emerging market currencies. The Chinese yuan (onshore and offshore) fell to its lowest level of the year. Gold drifted to two-week lows a little above $1700, while July WTI is consolidating in $33.50-$34.30 range as Russia seems to be balking at extending the maximum output cuts beyond next month.    

Asia Pacific

President Trump is threatening "very interesting" action against China by the end of the week. Apparently, under consideration are a new set of sanctions against officials, businesses, and financial firms over the effort to crack down on dissent in Hong Kong. There are actions the  US could take, including limiting transactions and freezing assets.  The US could suspend Hong Kong's special trade privileges, but this seems potentially too disruptive for US companies and would punish Hong Kong more than China.   Meanwhile, demonstrations and conflict with police have escalated in Hong Kong.  

Pressure on the Hong Kong dollar is evident in the forward market. The 12-month forward points increased by almost 60 to 670. A week ago, they stood at 256. The 3-month forward points increased by almost 20 today to about 167. A week ago, they stood at 75. Separately, the PBOC set the dollar's reference rate at CNY7.1092, while the bank models implied CNY7.1144. However, the dollar rose to almost CNY7.1630 to approach the CNY7.1850 peak last September. The dollar rose to almost CNH7.1770 against the offshore yuan. It peaked last September near CNH7.1965. Chinese officials do not appear to cause the yuan's weakness but are not resisting it forcefully.  

Separately, China reported a 4.3% decline in April industrial profits, almost a third of the decline that the median forecasts in the Bloomberg survey anticipated and what seems like an improvement after the nearly 35% decline in Q1. However, the performance of the state-owned enterprises suggests a more complicated picture. Profits in this sector fell 46% in the January to April period, a little worse than the 45.5% decline reported in Q1.  

Nevertheless, with the latest reserve requirement cuts for large banks, and additional efforts for small and medium businesses, and signs of more fiscal support coming from the National People's Congress, China is stepping up economic and financial efforts. At the same time, Japan's cabinet has approved a JPY117 trillion supplemental budget with JPY72.7 trillion of fiscal outlays. South Korea is expected to deliver another 25 bp rate cut tomorrow (bringing the seven-day repo rate to 50 bp).    

For the sixth consecutive session,  the dollar stuck on the JPY107-handle.  It has not traded below JPY107.30 since May 18. It neared JPY108 yesterday but backed off. Today there are $1.7 bln in options in the JPY107.80-JPY107.90 area that expire. If that is not a sufficient cap, there is another billion-dollar option at JPY108.15 that will also be cut. The Australian dollar is in a narrow range below yesterday's high near $0.6675. There is an option for nearly A$635 mln at $0.6650 that expires today.

Europe

The European Commission appears to be combining the German-French proposal with the other proposal by Austria, Sweden, Denmark, and the Netherlands to advance a 750 bln euro fiscal support effort. It would include 500 bln euro in grants and 250 bln euros in loans. It seems a popular meme to see an EU bond as a step toward the mutualization of debt and a fiscal union. This seems exaggerated. There are already common obligations, such as bonds issued by the European Stabilization Mechanism and the European Investment Bank. The EU itself has issued bonds in the past.  

ECB President Lagarde is laying the foundation for an increase in the central bank's Pandemic Emergency Purchase Program next week. She cautioned today that the more mild scenario that had been considered was out of date and that the more likely scenario is the one that anticipates an 8-12% contraction this year. The internal debate seems to be over relaxing more of the self-imposed limits. The capital key has already been diluted for PEPP, and the issue limit of 1/3 has also been waved. There does not seem to be much interest in taking rates deeper into negative territory.  

There has been much discussion of the Bank of England adopting negative rates. We have understood officials to be keeping that option on the table, which may help lower UK rates, such as last week's 3-year Gilt auction that resulted in a negative yield. However, it does not seem to be imminent. More likely, the Bank of England will increase its bond purchases when it meets on June 18. The BOE's chief economist, Haldane's comments, were consistent with the idea that other policy options will be explored before negative rates. 

The euro initially slipped to almost $1.0930 after stalling in front of $1.10 yesterday. However, with a running start in the European morning, the euro punched above $1.10 and above last week's high to poke above the 200-day moving average (~$1.1015) for the first time since the end of March. The $1.1050 area may hold some offers, but there is little chart-based resistance ahead of $1.1160-$1.1200. Sterling, on the other hand, is firm but through late in the London morning, has been unable to surpass yesterday's high near $1.2365. The next target above there is around $1.2425.  

America

The US reports the May Richmond Fed survey and the Fed's Beige Book for ahead of next month's FOMC meeting. Nearly every survey (diffusion indices and sentiment surveys) have shown some moderation in the weakness since in April. The improvement has also mostly been better than expected. And yesterday's it was reported that April new home sales, which were forecast to have imploded by nearly a quarter, eked out a small (0.6%) gain. Yes, there is little doubt that the world's biggest economy has suffered a large hit in this quarter, but the data suggests ideas of a Q3 recovered may not be misplaced. Other data, including traffic patterns, are also pointing to a slight pick up in activity as the lockdowns ease. Canada and Mexico's calendars are light today. Banxico issues its inflation report today, and coupled with the strength of the peso may spur speculation of another 50 bp rate cut at its next meeting.  

Although Fed officials have played down the likelihood of negative rate policy in the US and the fed funds futures curve is not implying negative rates, the central bank may not be done. There is more virtual ink being devoted to the possibility of yield curve control, where the Fed would not target a certain amount of Treasuries to be bought, as it is now ($5 bln a day down from $75 bln a day at the peak) but to target another rate. The Bank of Japan targets the 10-year yield, and the Reserve Bank of Australia targets the three-year yield. If the Fed adopts such a tool, it would more likely target a short or intermediate coupon such as something between a two- and five-year maturity. It would help steepen the curve and send a signal that rates will remain low for some time.   

The Canadian dollar joined the Australian dollar in breaking out of its recent range. The US dollar fell below the lower end of its two-month range against the Canadian dollar near CAD1.3850 yesterday. The losses are being extended today. The break of CAD1.38 is important from a technical perspective as it coincided with the halfway mark of this year's range. The next retracement objective is near CAD1.3600. More immediately, a bid in the European morning was found near CAD1.3730. The old support near CAD1.38 now offers resistance. The greenback is also pushing below the halfway mark of this year's range against the Mexican peso (~MXN22.15). A break of MXN22 would set the sights on the MXN21.00-MXN21.10 area. Mexico is reporting a record increase in virus cases and related fatalities. The peso's strength largely reflects the broader risk-on mood.  





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How ducks, geese and swans see the world – and why this puts them at risk in a changing environment

Our airspace has only started to become cluttered recently – many birds are struggling to navigate through it.

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The blue duck (Hymenolaimus malacorhynchos) is a species endemic to New Zealand. Graham Martin, CC BY-NC-SA

Each year, millions of birds fly into power lines, wind turbines and the other man-made structures that litter the open air space. These collisions frequently result in the death of birds and, if power systems go down, disrupt our lives and pose financial challenges for power companies.

Numerous bird species, including macaws in Brazil, geese and swans in the UK, and blue cranes in South Africa have been found to be susceptible to collisions with power lines. But any flying bird can fall victim to such a collision.

In some places, these collisions happen so often that they can jeopardise local populations of endangered species.

But birds are highly evolved flying machines. They can fly in tightly packed flocks that weave and turn to our delight and wonder. So why do they fly into things?

According to our latest research, the answer lies in how they see the world. We found that looking directly ahead is simply not that important to many species of duck, geese and swans.

A flock of swans flying past a power line.
Seeing what’s ahead is not that important to many species of duck, geese and swans. Marijs Jan/Shutterstock

How birds see the world

Exploring the reasons behind why birds are victims of collisions has led to new ideas that challenge our fundamental perception of what birds are. In the past, scientists have described birds as “a wing guided by an eye”. This implies that flight has been central to moulding bird vision throughout their evolution.

But now it is safe to conclude that a bird is instead best characterised as “a bill guided by an eye”. Rather than flight, the main driver of the evolution of bird vision has been the key tasks associated with foraging, in particular detecting food items and getting the bill to the right place at the right time in order to seize them. Alongside the detection of predators, this is the task that bird vision has to get right day in, day out.

Birds differ in how much the view from each eye overlaps (called the binocular field of view). The more the eyes look straight ahead, the more the view from each eye will overlap – much as human eyes do – thus broadening the binocular field. For a bird such as a duck, with its eyes positioned high up on either side of the head, the view from each eye will be very different (with smaller binocular field).

We measured binocular field size across a broad range of 39 species of duck, geese and swans. We found that the key driver of diversity in vision between species is their diet and how they forage for food.

Birds that primarily use their vision to locate foods such as seeds, or selectively graze on plants, tend to have broader binocular fields.

However, the binocular fields of species like mallards and pink-eared ducks are much narrower. These birds rely less on their eyes for foraging and more on touch cues from their bills. The vision of birds like these instead provides them with a comprehensive view of the region above and behind their heads.

Birds certainly need to have some visual coverage in front of them. But with eyes placed high on the side of the head, resulting in a very narrow binocular field, they are restricted to retrieving rather scant detail from the distant scene ahead. What matters to them more is placing their bill accurately at a close distance and seeing who is coming at them from the side or from behind.

Two pink-eared ducks in water.
Pink-eared ducks rely less on their eyes for foraging. Imogen Warren/Shutterstock

This finding is not confined to ducks, geese and swans. It probably generalises to all birds, except perhaps some owls (which have more front-facing eyes and rely upon sound to locate prey). The great majority of birds are therefore vulnerable to collisions.

However, it is larger birds like geese, swans and bustards that face real problems. Their restricted forward vision is compounded by flying fast and being unable to change direction quickly. These birds also often fly in flocks, and at dusk and dawn when the light level is lower.

Warning birds of hazards ahead

Understanding the vision of birds from the perspective of foraging and predator detection improves our understanding of what causes collisions. But, more importantly, it allows us to do something about it.

We must not assume that a bird’s view of the world is the same as ours. We are specialised primates with eyes on the front of our heads, and we see the world in a very different way to birds, not only with respect to visual fields but also acuity and colour vision. So, we must try to take a proper “birds’ eye view” of the problem.

Birds are also flying fast. But, as they do so, they are taking in only gross information of what lies ahead – much as we do when driving our cars. As with car hazard warnings, it is necessary to alert birds using markers that may seem excessive.

Birds that are vulnerable to collisions have evolved to fly in airspace that only recently has started to become cluttered. To be clearly visible to a bird, especially to species like ducks and geese, devices that warn birds about hazards ahead must be large, highly contrasting and produce flicker.

When marking hazards, there is no place for subtlety.

Jenny Cantlay received funding from NERC and the RSPB for her doctoral research on avian vision whilst at Royal Holloway University.

Graham Martin does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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What happens if a university goes bust?

Universities face growing costs but no prospect of increased funding.

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fongbeerredhot/Shutterstock

Governments face difficult choices when industries fail. They can stand by while private businesses collapse and see the resulting loss of jobs and revenue. Or they can step in and use public money to prop up these firms.

The Scottish government intervened in 2019 to rescue Ferguson Marine, the last shipbuilding firm on the river Clyde, but faces ongoing controversy on whether it broke state aid rules in doing so. And, of course, the global financial crisis of 2008 saw the UK government intervening to rescue banks such as RBS that were seen as “too big to fail”.

A similar financial crisis may be looming in higher education, a sector worth billions each year to the UK economy and a source of great national pride.

The UK boasts the second-largest collection of Nobel laureates and four of the world’s top-20 universities. But all is not well in higher education.

Financial woes

The most recent data from the Higher Education Statistics Agency for the financial year ending in 2022 shows that (excluding pension adjustments, which can skew accounts for particular years) 24% of UK universities reported a deficit.

The Russell Group, which represents an elite group of research-intensive universities, claims it faces an average shortfall of £2,500 on every home undergraduate taught, and that this could grow to £5,000 by 2029-2030.

The outgoing vice-chancellor of Sheffield Hallam University, Sir Chris Husbands, recently suggested that calls to increase fee levels could be perceived as being tone deaf. Faced with their core undergraduate activities being unprofitable, universities have diversified their income by recruiting more international students, despite UK immigration policy limiting their ability to do so.

With no immediate prospect of increased funding either from government or through increased fee levels for domestic students, such restrictions on international recruitment together with damaging rhetoric from the government about so-called “rip-off degrees” means it is no longer unthinkable that a UK university might fail.

To consider what might happen if a university went out of business, we can look at what transpires when other businesses – such as banks – go bust.

Students in coffee shop
Universities play a significant role in local economies. Rawpixel.com/Shutterstock

Of the brand names that collapsed during the 2008 global financial crisis, few will remember the Heritable Bank. It held 22,000 accounts, making it comparable to the number of students at a mid-size university.

The cost to UK taxpayers of rescuing the Heritable Bank was £500m. The government, via the Financial Services Compensation Scheme, paid compensation to Heritable’s customers and, while some of these monies were recouped, the upfront costs were significant and the endgame did not see all of the cost recovered.

Part of the solution when Heritable failed was that another provider, ING, took on its customers. Were a university to become insolvent, thousands of students would find themselves marooned part-way through a degree programme, with no obvious route to complete it. There is no guarantee that another university would want to absorb a collection of “new” students, especially at fee levels that are already acknowledged to be below the break-even point.

Consequences for students

Even if a neighbouring university was given incentives to step in by the government, there would be practical issues to consider. Despite a potential merger under consideration in Australia, there is little history of mergers between universities in the UK.

The government could step in to avert a crisis. However, compared with the crisis in financial services in 2008, there is no equivalent compensation scheme in place and the public finances are in poorer health. In combination, this means there is no certainty of a government rescue package – and there may be a real reluctance to interfere in the market.

Almost inevitably, a series of messy class action lawsuits would result, with students seeking recompense for fees paid, perhaps over multiple years, that did not result in the qualification advertised. Worse, the shockwaves felt in one university could easily rock confidence in others. Future students might become more interested in the annual financial reports of a prospective university than its traditional prospectus.

Pulling down communities

Beyond the students, there would be significant economic consequences for the region, town or city concerned. Universities are typically large employers, sometimes the biggest in the area, and often refer to themselves as “anchor institutions” – central to the local economic ecosystem in the same way that a household-name retailer might be key to the viability of a shopping mall.

Yet anchors can also drag. In the case of a university failure, the potential for large numbers of high-skilled roles to disappear would be matched by a set of economic ripples that would be felt more widely.

This could range from housing, hospitality and retail being starved of income, to these and many other sectors suffering a shortage of a part-time, flexible workers. There are 142 members of Universities UK, and the 130 universities operating in England are estimated to contribute £95bn to the economy each year. Somewhere between £0.5bn and £1bn is a reasonable estimate of the amount attributable to any one university.

Finally, there would be political consequences. Electorates, of course, comprise many current, past and future students. Accusations would follow that jobs, qualifications and potential futures had been squandered.

The university sector is not immune to the kind of industrial or technological revolutions that have swept through other industries. But neither is it a purely commercial sector. Some of our policymakers and regulators might regard a university failure as an indication that the market is working. If so, they should be careful what they wish for.

Robert MacIntosh does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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Nine women share what it’s like to have a miscarriage

Ten years of studying miscarriage has taught me that no two women will have the same experience.

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Most miscarriages happen in the first 12 weeks, known as early pregnancy. pexels/alex green

Miscarriage is a common woman’s health experience, but one that affects people differently. Ten years of studying miscarriage has taught me that no two women will have the same experience, and that the same woman is likely to experience separate miscarriages very differently.

There’s also a great deal of variation in types of miscarriage and a lack of understanding of this, which often leaves women adrift.

A miscarriage is the loss of a pregnancy during the first 23 weeks. It’s estimated that one in five pregnancies end in miscarriage, with most occurring in the first 12 weeks. My research focuses on these early miscarriages.

Approximately 1 in 100 women in the UK experience recurrent miscarriage, which is defined as having three or more miscarriages consecutively. And black women in the UK are 43% more likely than white women to experience a miscarriage.


This article is part of Women’s Health Matters, a series about the health and wellbeing of women and girls around the world. From menopause to miscarriage, pleasure to pain the articles in this series will delve into the full spectrum of women’s health issues to provide valuable information, insights and resources for women of all ages.

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Women’s pain is often not believed – here’s how to make your voice heard when seeking help

When IVF fails it can be devastating – so why do clinics offer so little in the way of support?

Science experiments traditionally only used male mice – here’s why that’s a problem for women’s health


Vaginal bleeding which may be followed by pain in the lower abdomen and cramping are the main signs of a miscarriage. However, 1-5% of pregnancies end in a missed miscarriage: when no pain or bleeding occurs despite the pregnancy not progressing.

This is typically diagnosed by an ultrasound. For a number of the women I interviewed, this happened at their routine 12-week scan. It can be a shocking, unexpected and distressing experience – as Shirley explained:

I went for my scan at the [hospital] and we saw a very small foetus. I was chatting away and then the sonographer said, “I have bad news” – and they told us the baby had passed away at ten and a half weeks.

Nicole described being “gobsmacked” when she was told at her 12-week scan that “there was a sac but nothing else”. She continued:

To me, a miscarriage is when you bleed and have cramps, but I had none of that. I had no idea what a missed miscarriage was … I had no idea the pregnancy had ended.

The 12-week rule

Many of the women I interviewed spoke about the unwritten “12-week rule” of not disclosing a pregnancy until after this point, in case of complications or loss. But following a miscarriage, many women described this wait as being an unhelpful tradition which left them feeling isolated, as family and friends didn’t know what they were going through.

For Nicole and Shirley, there was certainty about the pregnancy ending, but this isn’t always the case. For some women, a diagnosis of miscarriage may be more drawn out.

Grace went to an Early Pregnancy Assessment Unit when she experienced pain during early pregnancy. She had not experienced any bleeding, but had a feeling that things “weren’t quite right”. An ultrasound was unable to locate the pregnancy. She was told her dates might be out and it might be too early to identify the pregnancy, or that it might be a miscarriage. She explained what happened next:

I had a [hormone] test and the levels [indicated] that I was lower in weeks than my actual dates … I had to go back two days [later] and have another test done.

The second blood test revealed that her pregnancy was not continuing, and Grace later miscarried.

Physical impact

Miscarriages are often understood to involve cramping and bleeding followed by the spontaneous expulsion of the foetus or pregnancy tissue. But this scenario rarely, if ever, happened to the women I interviewed. Indeed, miscarriages are often drawn out over days, weeks or even months.

When Miranda first contacted me, she said:

My missed miscarriage was identified quite early, at approximately seven to eight weeks … [but] the process has taken nearly three months.

When I first interviewed Miranda, she was still undergoing her miscarriage and did so for six months in total. While her experience is unusual, it illustrates how varied miscarriages can be.

Women are often told a miscarriage “will be like a heavy period”, yet most of the women I interviewed said that this is woefully inaccurate. Grace said:

This whole idea of a heavy period was not my experience. I was having contractions [and] passing a lot of blood.

‘I blame myself’

Many of the women I spoke with felt responsible for their miscarriage, as Liv described:

I still blame myself … I’ve had doctors, nurses, family, friends and everyone tell me not to blame myself, but I think I [always] will.

Anxieties about fertility and future reproduction were common, as was apprehension during subsequent pregnancies. Marianne told me:

I felt really anxious, especially between finding out I was pregnant at ten weeks and feeling the baby kick for the first time.

Woman with ginger hair sitting by a window looking sad.
From 10-25% of all clinically recognised pregnancies ending in miscarriage. pexels/mart production

Many women also described feelings of failure, as Vicky and Emma did:

I had this real sense that there was something wrong with me.

I’m faulty and I can’t do what women are supposed to be able to do … You just feel fundamentally broken as a woman.

However, some women, such as Ruth, also expressed relief following a miscarriage:

I would have had a medical termination. I’m really glad I didn’t have to … I feel very relieved that it has happened this way.

Views of miscarriage

In the Early Pregnancy Assessment Unit where I was based, after a miscarriage women are offered access to specialist counsellors – a service many made use of and found helpful in navigating their feelings of loss and grief.

The recognition of the way miscarriage affects those who experience it is very welcome because in the past, miscarriage was seen as an unfortunate if routine event – but one that women would and should recover from quickly.

However, over the past 30 years, miscarriage has progressively been framed as the loss of a baby for which the appropriate response is one of bereavement. While many women I interviewed did, indeed, experience grief and distress in the face of their loss, not all did.

This is important because over the 10 years I’ve been researching miscarriage, I’ve become concerned that this latter group of women are not served by current clinical and public approaches to pregnancy loss. At times, this results in women feeling as though there is something wrong in the way they are experiencing their miscarriage.

This is why it’s important to recognise that, just as the physical experience of miscarriage varies, so too do the emotional and psychological experiences.

Susie Kilshaw receives funding from The Wellcome Trust. Wellcome Trust University Award in the Humanities and Social Science Grant number: 212731/Z/18/Z (2019-2025).

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