China deliveries in its fiscal year: -34%. And not getting better: in April, -45%.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Britain’s largest automaker, Jaguar Land Rover (JLR), owned by  India’s Tata Motors, plunged £3.6 billion into the red in its fiscal year 2018, ended March 31, as the financial fallout from slumping Chinese demand and sinking diesel sales in the UK and Europe took its toll. It was the company’s biggest ever annual loss. Global retail deliveries fell 5.8% to 578,900 vehicles, and global revenues fell 6.1% to £24.2 billion.
Investors in Tata Motors had already been expecting the worst, because the worst of the news had already been telegraphed in February, when JLR posted a gargantuan £3.4 billion loss for the third quarter of its fiscal year

Citi Group analysts slashed their price target to zero.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
The shares of 178-year-old British global travel company Thomas Cook are in free fall, tumbling 10% on Thursday and another 40% today, after it issued a zinger of a profit warning for the second half of its fiscal year — the third profit warning in less than a year — and announced a £1.46 billion loss before taxes for its fiscal first half, ended March 31. It also unveiled a 12% slump in tour operator bookings, and a 37% rise in net debt.
The company’s shares are now worth just 11 pence a piece, down 92% from 130 pence a year ago. At that time, Thomas Cook Group was worth £2.5 billion. Today, its worth a couple of hundred million.
Citi Group analysts said first thing

Like the mortgage crisis never happened.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
As the UK housing market is facing serious challenges, a high-risk relic of the last housing bubble is staging a big comeback: the interest-only mortgage. This financial product, often held up as the epitome of irresponsible lending, is hitting the market at a faster rate than at any time since the 2008 financial crisis.There are now 193 of these mortgage products available — almost double the 102 that existed six years ago.
With these mortgages, the borrower pays only the interest on the loan but makes no principal payments, and therefore doesn’t built up equity in the property. At the end of the loan’s term, the full balance becomes due all at once. Borrowers are supposed to have

This time it’s about the safe deposit boxes at Metro Bank.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Shares in Metro Bank, until recently the UK’s fastest growing high street lender, slumped 11% on Monday to £4.75, the lowest level since the bank went public back in 2016. Metro’s shares have lost almost three-quarters of their value since January, when the lender first revealed it was seeking to raise fresh capital following a very costly accounting blunder. They have now collapsed by 84% from March last year.
The latest rout comes on the heels of news over the weekend that hundreds of customers asked to withdraw money and items from safe deposit boxes after a series of warnings on Whatsapp. On Saturday, queues formed at a number of Metro Bank branches in London,

Chinese corporate defaults this year through April are 3.4 times the amount last year.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Since the global financial crisis, the total value of outstanding corporate bonds has doubled, from around $37 trillion in 2008 to over $75 trillion today. But the growth has been far from even, with non-financial debt growing much more rapidly in certain jurisdictions. As the volume and price of this debt has grown, so too has its riskiness. And that could be a recipe for disaster, warns Sir John Cunliffe, deputy governor for financial stability at the Bank of England.
In the US, non-financial debt is up 40% on the last peak in 2008. Cunliffe expressed even greater caution concerning emerging markets, where corporate debt as a

“Zombie firms,” kept alive by low interest rates, account for up to 14% of UK companies.  
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
The number of companies in the UK going into administration — which is when a licensed insolvency “administrator” is appointed to manage a company’s affairs, business, and property for the benefit of the creditors — jumped by 21.8% in Q1 2019 to 451, the highest quarterly level in five years (although the number of administrations is still much lower than during and after the Financial Crisis).
In Q1, the number of small businesses going into liquidation rose 5.1% compared to the same period a year ago, to 4,187. Liquidations also rose  6.3% from the fourth quarter of 2018, according to The UK Insolvency Service.
“Both the total

More and more companies either choose not to invest in other countries or are prevented from doing so.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Global foreign direct investment flows plunged by another 27% in 2018 — after having already plunged 16% in 2017 — to just $1.1 trillion, the equivalent of 1.3% of global GDP, the lowest ratio since 1999, according to new data released by the OECD. It was the third consecutive annual plunge in global FDI flows, as more and more companies either choose not to invest in businesses or assets in other countries or are prevented from doing so.
At the peak in 2015, before the trade wars began, before the Brexit vote happened, and before China began cracking down on the capital outflows that had fueled big-ticket purchases of

“The worst labor market” on the planet: unemployment exceeded 20% in three downturns over the past 35 years.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Spain’s unemployment rate ticked up by a quarter percentage point to 14.7% in the first quarter of 2019, when economists had expected a down tick, as the number of people claiming unemployment benefits increased by 50,000 to 3.35 million, according to data released by the National Statistics Institute (INE). Although it’s not unusual for unemployment in Spain to tick up during the first quarter, this is the biggest quarter-on-quarter increase in six years and it highlights a persistent weak link in an economy that has done nothing but grow since late 2013.
The biggest job losses were registered in the services

16% of the 4 million new vehicles sold in the US in Q1 were assembled in Mexico.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
The total number of new vehicles exported from Mexico to the US in the first quarter of 2019 surged 10.1% to 658,243 vehicles, according to figures compiled by the vehicle manufacturers association AIMA and released by Mexico’s National Institute of Statistics and Geography (INEGI). It’s all about “trucks”: 63% of these vehicles were “trucks” — pickups, SUVs, crossovers, and minivans. This Q1 surge in exports to the US comes despite the 3.2% decline in auto sales in the US.
In the last eight years, Mexico’s auto exports to the US have doubled, from 1.3 million in 2011 to 2.6 million in 2018, at annual growth rates between 6.3% and 13.9%. If Q1

February was bad. Housing market weakness is now spreading out from London.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
London home prices in February took their biggest one-off hit since the dark days of the last crisis, according to data published Thursday by the UK’s Office of National Statistics. The average price of a residential property in London tumbled 2% in February from January, the sharpest monthly drop since November 2008, when the City was grappling with the fallout from the Lehman Brothers bankruptcy. For the 12-month period, the average price dropped 3.8%, the sharpest year-over-year fall since August 2009, during the Global Financial Crisis. The average home in London is now worth £459,800 ($600,000), down 5.9% from the peak in July 2017:

But it’s

Spanish banks expanded aggressively into Emerging Markets to flee the consequences of the euro debt crisis.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
UBS has alerted that Spanish banks’ outsized exposure to Latin American markets could serve as a source of contagion for future crises: 80% of the Eurozone’s total banking exposure to the region is channeled through Spain whose banks have around €384 billion of counterparty claims in the region.
A ‘shock’ in emerging and developing markets could also drag down the Eurozone economy, UBS said. Spanish banks’ exposure to Latin America is equivalent to around 30% of Spain’s GDP and leaves both the country and the Eurozone susceptible to contagion effects from a crisis emerging in any of the major contingent economies,

“Once. Only this year. Later on, that’s their problem”: Finance Minister. $3.4 billion in fuel was stolen in 2018, including by insiders. Crackdown now underway.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
After years of falling production, compounding losses, and plunging credit ratings, Pemex, the world’s most indebted oil company, is not in a fit enough shape to issue new debt. That’s the dire assessment of the Mexican government, which on Friday announced that it was extending its embattled state oil company yet another financial lifeline, this time worth 107 billion pesos ($5.7 billion).
It’s a drop in the ocean compared to the $106 billion of total debt Pemex owes its creditors. But it should be enough to tide the company over at least for the rest of this

Italy’s fiscal health is once again in serious decline.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
On Wednesday, Italy’s coalition government slashed its growth forecast for the Italian economy in 2019 to 0.2% – the weakest forecast in the Eurozone – from a previous forecast of 1%. Italy is already in a technical recession after chalking up two straight quarters of negative GDP growth in the second half of 2018.
The government’s budget for this year was based on the assumption that the economy would expand by 1% this year. Now, it seems the economy may not grow at all; it could even shrink.
One direct result of this is that Italy’s current account deficit for 2019 will be substantially higher than the 2.04% of GDP Italy’s government pledged to stick to late last

“The traditional private equity model should have no place in retail.”
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Shares of UK-based multinational department store Debenhams — with 165 stores in the UK and Ireland and with 58 franchise stores in 19 other countries — were suspended today after the company and its creditors turned down two last ditch rescue offers from discount retail group Sports Direct, which owns close to 30% of Debenhams’ stock. Debenham’s shares have collapsed spectacularly since they were floated on the stock market in 2006 by its then-private equity owners, Texas Pacific Group, CVC, and Merrill Lynch Private Equity:

The latest rejection means that Debenhams, after gracing British high streets for over 200 years, now faces a “pre-pack”

But “superminis” are hot.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Sales of new passenger vehicles, as measured by registrations, fell 3.4% in March from a year earlier in the UK, the second largest auto market in Europe, as consumers shunned showrooms during what’s usually a bumper month for sales due to a number plate changeover, according to the the Society of Motor Manufacturers and Traders (SMMT). Total sales in March of 458,054 vehicles was the worst performance in March since 2013.
Sales in the first quarter of 2019 dropped 2.4% from Q1 2018. But Q1 2018 had been a terrible quarter, when sales had plunged 12.4% from Q1 2017. So in Q1 this year, sales were down 14.5% from Q1 2017 and were close to where they had last been in Q1 2014:

“March is a key

Opposition Is Growing to Merger Between Deutsche Bank and Commerzbank.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
The chief executive of eternally troubled Too-Big-To-Fail Deutsche Bank, Christian Sewing, believes the time is ripe for a merger with its national rival, Commerzbank, Germany’s two biggest, most dangerous lenders. So, too does his counterpart at Commerzbank, as does US private equity firm Cerberus, which owns 3% of Deutsche Bank and 5% of Commerzbank.
Germany’s Finance Minister and card-carrying social democrat Olaf Scholz is also firmly on board. Indeed, many say that he’s the one leading the charge despite the tens of thousands of job losses a merger between the two banks is guaranteed to produce. Scholz’s deputy, Joerg Kukies, has courted

“In addition to uncertainty about what’s going to happen, now there’s uncertainty about when it will happen.”
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
With each passing day, the fog of uncertainty surrounding Brexit thickens, with myriad knock-on effects for businesses on both sides of the English Channel. “Companies no longer have any idea what they should be preparing for,” Martin Wansleben, executive director of the German Chambers of Industry and Commerce (DIHK), told the Funke Mediengruppe newspaper chain. “In addition to uncertainty about what is going to happen, now there’s uncertainty about when it will happen.”
The UK parliament’s advisory non-binding votes of the past week to seek to delay the country’s departure from the European Union and reject any

Shareholders wiped out, 14 Months after competitor Carillion Collapsed.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Shares in UK outsourcing giant Interserve, which employs over 65,000 people worldwide including 45,000 in the UK, were suspended today after almost 60% of the firm’s shareholders, led by the US hedge fund Coltrane Asset Management, rejected a last-ditch debt-for-equity swap with Interserve’s creditors that would have diluted the shares of current stockholders to nearly nothing, leaving them just 5%. The company has thousands of government contracts, including for hospital cleaning, probation services, school meals and the maintenance of military bases.
Interserve now faces a “pre-pack” administration that — it is hoped — will see its various divisions

“Serious risks of sleepwalking into a cashless society before we’re ready – not just to individuals, but to society.”
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Ten years ago, six out of every ten transactions in the UK were done in cash. Now it’s just three in ten. And in fifteen years’ time, it could be as low as one in ten, reports the final edition of the Access to Cash Review. Commissioned as a response to the rapid decline in cash use in the UK and funded by LINK, the UK’s largest cash network, the review concludes that the UK is not nearly ready to go fully cashless, with an estimated 17% of the population – over 8 million adults – projected to struggle to cope if it did.
Although the amount of cash in circulation in the UK has surged in the last 10 years

The banks claim they’re complying with anti-money laundering regulations. 
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Spain’s Association of Financial Users (ASUFIN) has announced it will be representing Chinese residents in Spain in their legal struggle against three of the country’s biggest lenders, BBVA, Caixabank and Bankia, which it accuses of contravening Spain’s data protection and consumer protection laws and even the Spanish constitution.
The three banks in question recently froze the accounts of thousands of Chinese residents in Spain for almost two weeks, in accordance — or so the banks claim — with Spain’s money laundering regulations. On Feb 15, after weeks of being locked out of their accounts, feelings finally boiled over and hundreds of Chinese

While contagion is definitely contained, the Eurozone “is not sufficiently armed to face a new economic or financial crisis.” French banks are heavily exposed to Italy.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
“Don’t underestimate the impact of the Italian recession.” This was the stark warning from French Economy Minister Bruno Le Marie in an interview with Bloomberg News. “We talk a lot about Brexit, but we don’t talk much about an Italian recession that will have a significant impact on growth in Europe and can impact France because it’s one of our most important trading partners.”
Italy’s economy as measured in real GDP shrank for two quarters in a row, which puts it into a “technical recession”:

It’s the second time in four months that France’s Economy

No one can afford even the smallest hiccup in derivatives.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
After months of furious lobbying, the City of London Corporation has finally got what it wanted: recognition by the European Securities and Markets Authority (ESMA) of the three biggest clearing houses it hosts, LCH, ICE Clear Europe and LME Clear. This will allow the three to continue providing services throughout the EU even in the event of a no-deal Brexit, which is looking increasingly likely. It will also limit the potential for disruption in central clearing and prevent any negative impact on the financial stability of the EU, says ESMA.
Clearing is where a company acts as a middleman between financial trades, collecting collateral and standing between

“If you are looking to buy a house in Q1 you will have the market to yourself.”
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
In some places, in particular prime markets in London and the south-east, house prices have been tumbling. According to London-based estate agency LonRes, average “achieved” prices:
In Prime Central London: -6% in Q4 2018; and -14% from their 2014 peak.
In slightly cheaper Prime London districts: -5% in 2018.
In Prime Fringe districts, i.e. prime sectors further removed from the city center: -7% in 2018.
In a survey by LonRes, 63% of the agents said they had seen prices in their market plummet by 10% or more from peak levels as sales ground to a standstill. In London transactions slumped by 9% between 2017-2018 for properties under 1 million,

GM’s Mexico vehicles now are 23% of its US sales. And the Japanese have massively discovered Mexico’s cheap labor.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
The total number of new vehicles exported from Mexico to the US in January rose 9.1% from a year ago to 191,072 vehicles, according to figures compiled by the vehicle manufacturers association AIMA and released by Mexico’s National Institute of Statistics and Geography (INEGI). In the year 2018, total new vehicle exports from Mexico to the US leaped by 9.9% to 2.57 million vehicles, after having already jumped by 9.4% in 2017.

Since 2011, vehicle exports to the US have surged by 93%. During that period the number of vehicles exported to the U.S. from Mexico has gone up every single year, sometimes by

What could this mean for one of its big creditors, the ECB?
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Spanish supermarket chain Dia, once one of Europe’s largest grocery chains, has just unveiled its results for 2018 and they do not make for pretty reading. In what it describes as “probably its hardest year ever,” the company racked up €352 million in net losses. EBITDA (earnings before interest, tax, depreciation and amortization) of €246 million plunged by 47% from a year ago. Net sales dropped 11% from a year ago to $7.2 billion. And its total debt soared by 50% from the end of 2017 to €1.45 billion.
The firm’s shares, reduced to a penny stock, have slumped almost 90% since Jan 1, 2018. Its credit rating — investment grade until October 2018 — was cut serially

These workers are a lifeline for Mexico’s economy.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
The total amount Mexico received in “remittances” — transfers of money by workers of Mexican descent mostly in the US but also other countries to individuals in Mexico — surged by 10.5% in 2018 to $33.4 billion, the highest figure registered since records began, back in 1995, and beating the prior records set in 2016 and 2017, according to the Bank of Mexico.
Note the six-year downtrend that kicked off in 2007 with the Financial Crisis, the US housing bust, and the US housing construction downturn:

The cash remittances are a lifeline for Mexico’s economy, accounting for 2.7% of Mexico’s GDP, up from 1.9% in 2009. Most of them get spent very quickly in the Mexican economy.

The banking lobby and the ECB will have a cow.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
On Friday, Italy’s coalition government unveiled new banking regulations that it hopes to pass in the coming months, including a rule that would separate banks’ commercial and investment arms. It would be the Italian equivalent of the Glass-Steagall Act, the 1933 U.S. law that separated commercial banks that took deposits, made loans, and processed transaction, from riskier investment banking activities. The law was designed to protect deposits. Its repeal in 1999 led to the consolidation of the U.S. banking sector, unfettered risk-taking by deposit-taking banks, and arguably the Financial Crisis just eight years later.
In Italy investment and commercial banks have been able

Desperate measures for desperate times?
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
As house prices in the UK continue to slip-slide downwards, compounding fears that the multi-year housing boom has run out of gas, the country’s largest mortgage lender, Lloyds Bank, has unveiled a new mortgage scheme called “Lend a Hand” to help first-time buyers with little or no personal savings inject fresh blood into the souring market. It is an adjustable-rate mortgage with no down-payment and with a teaser-interest rate for the first three years of just 2.99%. It allows buyers in England and Wales to borrow the entire amount of the purchase price of up to £500,000 ($653,000).
These types of mortgages are high-risk instruments that helped fuel madcap property booms and busts,

But online sales are hot, now at 20% of total retail. 
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
It’s a confusing picture. A monthly survey of retailers published by the Confederation of British Industry (CBI) indicated that just 4% of retailers reported good sales volumes for January, whereas 41% said they were poor, giving a balance of -37%, the lowest since November 2011 (-39%). Sales volumes fell in the majority of retail sub-sectors with clothing (-43%), footwear & leather (-53%) and hardware & DIY (-40%) posting the largest declines.
“Pressures on the retail sector remain high, with consumer spending expected to remain fairly subdued and competition fierce,” said CBI Chief Economist Rain Newton-Smith. This competition is mostly online retailers.
This comes

Will Madrid be next?
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Less than a year has passed since Uber returned to Barcelona, after a three-year leave of absence. But it’s already planning to leave the city again in the wake of renewed conflict with the city’s highly mobilized taxi drivers as well as the passage of unfriendly regulation.
Late last week the Catalan regional government unveiled legislation that would force customers to request the services of ride-sharing firms 15 minutes before travelling. It wasn’t enough to placate the taxi representatives, who wanted the period to be extended to between 12 and 24 hours. Donned in yellow vests reminiscent of recent anti-government protests in Paris, they called a strike on Friday and hundreds of taxis occupied