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SNBDL Daily Briefing
Report prepared using big data solution Quid
Our take away from the last 24 hours news
Central banks news: Jean Tirole won 2014 Economy Nobel Prize for his work on regulation. This comes to us as a signal that we have entered 3rd stage of central banks’ actions (CBs). During the first stage, CBs have focused on saving the financial markets through liquidity injection. During the second stage, they have been pushing for fiscal consolidation in order to avoid jeopardising currencies solvency and hyperinflation – as studied by Stanley Fischer & Michael Bruno here -. The third stage is in line with G-20 agenda and OECD initiative to reduce tax “optimisation” and evolves around better and more efficient regulation.
Nobel committee has chosen Jean Tirole of Toulouse Economic School while the recent “hype” has been taken by Thomas Piketty from Paris Economic School. Thomas Piketty’s book was received worldwide and many could have understood that he would have won the Nobel Prize. But instead of giving the spot light to “wealth taxation” as a solution to nowadays problems (a solution Piketty is supporting), they have preferred to honour regulation which enables – when well conducted, and J. Tirole work is very insightful on this – to cut “indirect taxes” (inefficiency, bad governance, red tapes etc.).
To sum up on the Nobel Prize, we congratulate Jean Tirole for his win, and we increase our confidence that the next stage of CB actions would focus on regulation / macro prudential. This scenario is supportive to rates (receive rates), supportive to equities, but differentiates EM between vulnerable countries, which will suffer from carry trade reduction – such as Brazil – and countries which are undertaking (or have undertaken) reforms.
US: Stanley Fischer tampered growth prospect excitement which drove down 30Y treasuries to below 3%. We have been stressing that short fixed income positioning has been excessive recently and market is set for disappointment and short squeeze. He have been indicating that this short squeeze is likely to happen between mid-October and beginning November. The timing and the event seems in line with our expectations.
Pimco came out with 38 triggers which could derail markets, drive rates higher and send stock prices to the abyss. While these triggers are genuine we are frustrated that Pimco did not present the overall pictures and the mitigation factors. For example, the triggers include an upward inflation surprise. This comes at odd with Saudi indication that markets should get used to LOW energy prices. How inflation can restart with LOW energy prices? Obviously, the triggers include geopolitical risks but did not take into consideration “upside risks” such as a conclusive negotiation with Iran. We are frustrated by how some asset managers have skewed the information they use to analyse market in order to justify wrong decisions and bad performances.
China: As we were indicating a couple of weeks ago, iPhone 6 represented a good “stimuli” to Chinese exports. Export increased 15.3% from a year earlier (please see more below). Thus, PBoC does not see any need for a “big stimuli”. Ma Jun (Chief Eco. of research bureau at PBoC) said, at a panel discussion on the sidelines of IMF annual meetings, that “[he] do[es]n’t see the reason for big stimulus in the foreseeable future”. This is in line with our expectations that although China is soft landing (please see Premier Li comments on growth), PBoC will contribute with dedicated and targeted stimuli and refrain from any “big bang” which could derail the current reform agenda (rebalancing process).
Eurozone: The two narratives have became even clearer during the recent period: 1) Weidmann pushes back Draghi on any additional QE – outright sovereign purchase -, 2) Eurogroup is moving ahead with “growth pact » while pressing countries (with a clear hint toward France and Italy) to not unravel their structural reforms agenda. On the latter, the talk about reforming unemployment allowances in France is a big thing should Francois Hollande and Manuel Valls stick to the reform agenda (which could be summarised in Jacques Attali’s commission conclusions here).
Emerging markets: Brazil development constitutes our main worry in the short term. While Fed is likely to play down tightening expectations, we see the pressure on BCB and Brazil government to continue. Yesterday, President Dilma Rousseff has used Fmr. Pres. Calderon to point to the risk of crony capitalism should Brazilians vote for her opponent. We consider this strategy to be very dangerous because President Rousseff is using what Brazilians critics of the current ruling party (bottleneck, corruptions, bad governance…) to weaken her opponent. It like telling people whether they would prefer crony capitalism or left wing corruption. Frankly, at SNBDL we don’t see the difference. We continue to see a financial crisis likelihood in Brazil increasing in order to push the rulers to undertake reforms. India seems to have got the message and is doing whatever it takes to avoid this pressure.
Oil Prices: Reuters reports Saudi officials have been privately admitting to oil market participants that they are comfortable with lower oil prices. According to the news service, the Organization of the Petroleum Exporting Countries (OPEC) is willing to accept prices as low as $80 a barrel for as much as the next two years. This again confirmed our view and target price for oil prices (please see our Energy Update).
Greece is considering bailout exit plan, while France is attacked over budget. We have been in the view that Greece is likely to exit the bailout plan because many institutions need to change the narrative of the second stage CB actions in order to indicate that austerity has succeeded to improve growth. We continue to be constructive on France because the government and EcoMin Macron are clearly supporting reforming. In October 13th Daily Briefing, we stressed that talks around unemployment allowances reform could be a game changer as it would help improve the current 2015 budget proposal while reforming a system which has became self-defeating. We don’t rule out the political pushback but the Parti Socialist is in the cross roads between New Labor or Left conservatism. The former group is clearly winning the ideological battle, though French and international media continue to see the PS through the lengths of 1980s.
In our Russia update, we said President Putin is winning communication battles but he is doomed to loose the economic war. Though China is providing a back channel (a role Russia played with Iran when Iran was suffering from Western sanctions), Russia central bank is recognising that its loosing the war to stabilise the RUB, due to Saudi decision to accept lower energy prices. Our first reaction to Saudi “get used to lower energy prices” was that Saudi is hinting that 1) it agrees that Iran sanctions to be lifted (which we expect to take place after the on-going nuclear energy negotiation) and 2) it wants to use oil prices to defeat ISIL (Oil smuggling is the only economic resource ISIL can finance its terrorism with – assuming that there are no other channels -). Furthermore, Saudi – OPEC decision to drive oil prices toward our $80 target would have positive consequences for India and energy vulnerable countries (incl. Eurozone countries) while would require a speed up in reforms in Mexico and Brazil.
Obviously a $80 a barrel is too close to President Putin’s administration existential threat (which we assume to be $75 in line with other experts) to revise our view of Ukraine – Russia tension sequence. PM Abbott is said to push President Putin over MH-17 (calling it a murder due to Russia arms in the hands of Pro-Russian). PM Abbott declarations did not come at a surprise. We were expecting it as soon as MH-17 has been shut down and Australia took the lead of Western fight against Putin because the Australia could not be blackmailed (a totally different situation when compared to Germany, France, Italy or Eastern Europe)
Ebola: “There’s nothing to fear but the fear itself”, President Roosevelt
Our competitors have started to compare Ebola to the 1918 Spanish Flu (more here) which has been responsible for 50 to 100 millions casualties and a genuine driver of WW-II. Why are we relaxed that this scenario will NOT take place? Two reasons explain our different view: 1) many of our economist colleagues have not spotted Ebola when it started as a driver to markets and economy, they have not had time to study three components (institution reaction, global coordination, and the 1st reason of spread of the disease : mistrust and disinformation), 2) many have not spotted the narrative around the vaccine and how the experimental vaccines have been effective (on primate as well as on humans). There is a third factor why media and some “newly declared experts” are getting morbid excitement. These are not getting all the story. Let’s face it, you can sell more volatility and news paper when people fear something. At SNBDL, we consider that good research finds its clients without any need of stress.
Our main fear is that Ebola could be used as a dirty weapon, and many intelligence experts are fearing the same. But US military are taking the risk seriously and the newly installed military hospital in Africa is indicating that the US with France are leading the fight to this disease.
Unlike in the beginning of XX century, many corporations have contingency plans in place in the case the situation intensifies (and we are not ruling out that the number of cases will increase). In the XXI century, workers can continue to generate value from their homes. Furthermore, Japan Fukushima brought one of the most interesting innovation: the “now-ers”. These are people which use devices (in the case of Fukushima these devices provided the level of nuclear emissions) to map real time a situation in a country (nuclear emission in the case of Japan). Should the outbreak increase, everyone can use symptom reporting mobile Apps in order to avoid collusion between “non-lethal flu” symptoms reporting with Ebola cases. This collusion is likely to be the main driver of any excessive fear. Dr. Ezekiel Emanuel, a former White House health adviser, said ‘Panic is something we can’t afford’ when discussing Ebola.
Gaza: During the last 20years, we have not been as optimistic that Palestine – Israel peace process to move forward as today. Why? Because this time, the global community has to get rid of ISIL – which uses Palestine’s and Assad’s victims as a justification for their hiring of new Jihadists *usually the use the definition of “humanitarian work” to get in contact with their victims*-. British parliament voted on Monday to recognize Palestine as a state, a move that will not alter government policy, but carries symbolic value as Palestinians pursue international recognition. Britain does not classify Palestine as a state, but says it could do so at any time if it believed it would help promote peace between the Palestinians and Israel. These development in addition to the aid decided by donors during the weekend (please see yesterday daily briefing) and UN Chief Ban Ki-moon call for peace process to be discussed are bringing all the conditions to move forward. Behind the scenes, Muslim brotherhoods are loosing the ideological fight, Hamas is splitting between moderate (which decided to participate to a coalition government) and extremists (which are struggling to look even more barbaric than ISIL to attract “talents”). Iran and Saudi are heading toward a peaceful Sunni-Shia schism etc.
What are the consequences for global markets? Less geopolitical risk premium and lower energy prices (low inflation, and higher profit margins for corporations).
Iraq & Syria: Information war is intensifying. ISIL claims winning battle even before fighting them (e.g. Baghdad). We have been indicating that Kobani battle is very important for ISIL to strengthen its narrative. Our analysis of ISIL communication tool have shown that the terrorist organisation is using Spartacus narrative in conjunction with the biblical reference of David & Goliath. Though we refuse to spread ISIL propaganda material, and I hope that our readers will understand our position, we can send to client our references upon-request. To sum up our finding, 1) ISIL needs to win Kobani or shift the focus to other places (Baghdad), 2) any news which could push oil prices higher is welcome (because ISIL Oil Co “refinery margins” are shrinking every day), 3) the investment portfolio of ISIL reserves (those stolen from Iraqi Central Banks) are invested – according to our sources – to benefit from any information win, 4) by spreading chaos, ISIL jihadists hiring initiative got more traction because their view of the “end of the world” (or the Apocalypse) get traction.
Turkey decision to let US military to use its bases in the country to fight ISIL is a game changer. This is a first step before Turkey found a narrative where it helps Kurds without giving credit to independent kurdistan. President Erdogan can play a very important political (and economical) card should he decided to lead the fight on the ground. The shift in Muslim Brotherhood position vis-a-vis of ISIL (please see our yesterday report on Tariq Ramadan) is likely to help President Erdogan to more ahead with the ground operations.
We continue to be negative on Oil prices and on volatility because both include a risk premium related to ISIL battles. ISIL is winning some communication battle but is doomed to fail, because the international community is taking over the narrative and genuinely showing that the institutions are not rotten to the core. Gaza development is very positive element in our scenario.
Russia: President Putin ordered troops withdraw from the Ukrainian border ahead of Ukraine-Russia head of states meeting in Italy this week. While this action could be positively perceived, we advise cautious because the same action has been taken after Crimea annexation. Meanwhile, Ukraine is considering a peace process with Donbass region self-proclaimed republics. However, as we were indicating for some time (please see our Friday take below), a quick resolution seems un-compatible with Ukraine aim to ultimately join EU and NATO. President Putin actions could be explained by 1) Premier Li visit to Russia, which seeks economic collaboration, and 2) the acceleration in RUB depreciation which cost ~$1.5bn currency intervention daily. Putin is reducing the pressure on Eastern Ukraine because he stuck a domestic political win during last week Formula 1 in Sochi and wants to reduce the pressure ahead of the G-20 (please see PM Abbott declaration on MH-17)
From our Oct. 10th daily briefing
European Union’s incoming foreign affairs head Federica Mogherini hinted her strategy with the “bear” Russia: firmness and tact. Actually, we believe that firmness is coming from EU Council President Donald Tusk, while tact needs to come from the EC. EU’s Mogherini hinted that others in Brussels know better to deal with bears (in politics that mean “I know that you have vested interests with Russia”). Many political parties have to drop their support to Russia and start think about EU public interests. Otherwise, many will start questioning whether these are not conducting treason (betraying those who have voted for them). The list is long and no one have interest to name names. In an environment where Iran wants to secure the negotiation without upsetting Russia (a long term ally which have helped provide a back-door to Iran oil), Rouhani said that Iran negotiation should not derailed any political solution with Russia. Unfortunately for Russia this will not help lift sanctions. Because, many commentators are watching: EU should make no mistake, vested interest will not go away with the crimes Russia is responsible for (and that goes beyond annexing Crimea).
Oil prices plummeting continue to constitute an existential threat to President Putin administration. A policy document of the Islamic State discovered at one of the raids brings forth some alarmingly ambitious plots of the jihadist outfit. The plan includes bribing Russia with access to oilfields in exchange for Iran’s nuclear technology. This document confirmed that ISIL is looking to Russia to increase it force. We have been worry that vested interests would align their force with those of the barbaric. Should they do so, they would be no place to hide. Make no mistake, if ISIL got the technology Putin and Russia (with interest groups which have been supporting them) will be held accountable.
While Russia continue to prepare its isolation (VTB’s says consider that capital control is not the end of the world), Putin stays put and keep his narrative: the cost will be more harsher for EU than for Russia. Unfortunately, for President Putin, facts have no political bias or religion. Russia economy is collapsing and the Saudi oil prices cut, Iran negotiation amongst other thing are pushing oil prices to a free fall spiral and threatening the stability of the government (an Oil price at $75 will push Putin out). In our Energy Update (our call that oil might go as low as $80 for WTI) we’ve highlighted the trends we observe now. These are not only providing a boost to EU (currently mistakenly analysed by many XX Century economists as a deflationary risk) but also increasing the current Russian administration existential threat. We forecasted last February that Russia will have to go through a period of isolation, will create Eurasia by annexing Eastern Europe (we still unsure where the division will take place). We stick to this scenario. However, we are working on an alternative scenario, where the speed of oil prices collapse may over through Putin administration and oligarchs before President Putin reached his messianic goal (many economists agree with the view that some of Russian President speeches are messianic – 2007 Munich is a very telling speech-).
Ukraine President is taking the “good governance bill” to the floor. This on one hand increase the likelihood of our scenario that Ukraine – West will become a new Poland but it increases short term the risk of more actions of “bad governance agents: the self designated Eastern Republics”). I wonder what kind of economic prospect will have these Russian federation satellite. Old USSR satellite (Latvia and Bulgaria) are fighting political crisis spur by the widely spread mistrust in their government. Like during the Cold War, Russia continue to use the spread of disinformation (in the internet). But we see these posturing likely to fail, should EU Commission President pursue his genuine plan to change EU narrative (more jobs, more investment – specially in digital -). The emergence of new media companies helped by big data is likely to be another leap in defeating the disinformation and mistrust spread.
Hong Kong protests are calming down, as we were expecting. But Mainland sticks to its view that any political reform should bind by the “basic law”. We do not see HK and Mainland China governments to accept any substantial change in the short term. China wary of HK protests ease pain of Macau Casinos (a pain organised by China to reduce corruption). This is 100% in line with our first comment on HK protests please find below some of what we were saying yesterday.
However, unlike with Tian’anmen square protest, we see Chinese leadership being less “harsh” fighting the protests, as we acknowledge Chinese leader fear vis-a-vis social media power. In the medium term, we see China devoting more democratic say in HK. Our forecast is built on the view that the Chinese government is fearing a HK political change to threat its reform agenda. President Xi wants to be seen as the strong man to fight conservatism push back to the reform, specifically ahead of the IV-th Plenum, which will focus on improving governance (which creates an important shift of power from “princelings” to the reformists). After the IV-th Plenum we see President Xi and HK government coming with a middle ground solution, which could take the form of a split designation of leaders. Democracy comes with cost and responsibility. We consider that President Xi long-term objective of political reform to be intact, but he fears that “House of Cards” like politics could jeopardise his aim to avoid the middle-income trap risk should interest groups (Raymond Tusk character in the TV-show) to derail his genuine fight against conservatism and vested interests.
Catalonia: referendum called off. We were expecting it and we add Catalonia to the numerous subjects were big data has proven its accuracy.
We were saying “calls for independence referendum is increasing pressure on both Madrid and EU to move forward to offer better conditions and better narrative to the public. We see PM Rajoy taking constitutional actions to deter Catalonia from conducting the referendum, at a moment where more the referendum is gaining support from the independence forces all over the world. Madrid may accept to open discussion to devote additional autonomy to Catalonia in order to reduce the pressure. This story is likely to push EUR existential threat higher short term, but we consider that EUR is likely to rebound by the end of this year, when these threats will be repriced as less likely.” (daily briefing Sept. 30 2014). Catalonia decision to suspend formal campaign is the first step in our constructive scenario. However, Artur Mas uses the threat of going ahead with the referendum, though the constitutional court has specified that’s un-constitutional. This threat is urging PM Rajoy to act which he did in Saturday by opening discussion of some kind of PM Cameron solution to Scotland independence call (i.e. more fiscal autonomy). Catalonia government will decide by October 15 on whether to hold referendum. We see the most likely scenario to be some deal with Madrid which would : 1) help Artur Mas to claim victory – he would have secured more autonomy – and 2) help PM Rajoy to de-escalade the tension over Catalonia. We see the next region to start a fight for more autonomy to be Bavaria (Germany’s most wealthy region which is pushing Alternative fur Deutschland – AfD – anti-EZ party wants to reduce its contribution to other regions – “lazy” EZ members states, in their parlance -. Business interest (Football Clubs) are starting to indicate the cost of a secession. Novo-Russia continue to support Catalonia, as a secession could help justify Crimea. Many have been talking about war in the East, the War against Russia is also taking place in Catalonia. The relations between populists parties in EU and Russia speaks volume. Czar Putin should make no mistake EU is one and indivisible. Populism is a cancer, EU is recovering from it.
Ferguson – Missouri: replace Catalonia, HK Occupy with Ferguson, keep calm and carry on.
Ferguson-Missouri tension resumed during the weekend after a new fatal shooting. The Tea Party caucus is using these events as a way to increase the racial tension, while Sen. Rand Paul wants to use the spread of African-American anger vis-a-vis President Obama administration as a way to bring these voters to the GOP. Sen. Rand Paul has used exactly the same strategy with the youth, which suffers the most from the global financial crisis consequences. The administration needs to increase it rhetoric against disinformation, mistrust and pessimism should it want to avoid that the voters turn to those who are placing the most emphasis on pessimism with the help of donors which interest is to keep status quo (at a moment when the US need urgently to undertake structural reforms – immigration, taxes etc. -).
Ferguson, HK Occupy, Scotland Independence, Catalonia share the same problem: inequality. Many are considering that Inequality will bring a class struggle and some kind of XIX century like revolution. Notwithstanding that depending on where someone seats, we might think that these mass protests (1000 for Ferguson, much more in Catalonia) are sufficient to start the revolution. But like we were saying in our earlier notes, we genuinely believe that Occupy and Anonymous groups have been hijacked by “commodity interest groups” (it suffice to look at the links between investment portfolio’s advise of those groups – Gold and Commodities – and the consequence of a derailed soft power to move toward better governance).
However, unlike in the old “organised revolutions” in LatAM, this time around the social media is in charge and the overwhelming majority wants to see soft power – and Ferguson is part of that – but the chaos and Apocalypses imagined by the 3G group (the most radical group within libertarians and their name stands for Gold, Guns and God) are unlikely to take place. Of course Ebola, and ISIL are genuine threats but 1) the on-going improvement in governance (cf. Australia G-20), 2) the work to reduce disinformation and skepticism (EU, Gaza), 3) military and medical action against the two deadly diseases ISIL and Ebola, are supportive to the positive scenario. Furthermore, there is a win-win scenario which is taking place and which could help: workers, shareholders and consumer to benefit from.
Happy Columbus Day!
Columbus Day: Some social media activists have “trolled” Columbus Day to change it into Indigenous Day in order to focus the narrative on the human causalities consequence of the exploration of the Americas. These activists tried to increase the tension in Ferguson (what’s best to make the tension increase then talking about slavery…).
These activists are using the very high inequalities and the forthcoming robotics area to spot that the “wealthy” will make it all and we will be leaving into some kind of “Elysium” 2-sided “countries”. These are complete non-sense for many reasons: 1) the overwhelming majority are willing to have robot colleagues or bosses (personally I have robot colleagues and there as very helpful), 2) knowledge is about to become as easy as playing games on one’s smartphone, 3) governance is improving and this is likely to open many markets hijacked by crony capitalism, 4) commodity prices are plummeting (should one take Saudi’s “get use to it” with the same credibility as markets have taken Draghi’s or Kuroda’s “whatever it takes”).
We are at the edge of starting discovering two “new” continents: Africa and the Oceans. Anonymous hackivists, Boko Haram, ISIL and many others are spreading the pessimism that China will be Columbus of Africa. This is totally UNFAIR and FALSE. We have been in contact with Chinese thinkers for years, and China has shown – though some mistakes have been made – that it aims achieving a win-win scenario: education, health and prosperity for Africa in exchange for labor. Furthermore, Robot has made jobs much less “slaving” than when Columbus arrived to the Americas. Finally, Africa is much more than just commodities or cheap labor. Each time I visited Africa I’ve been overwhelmed by the ingenuity of the public and its ability to adapt. As soon as we get rid of Ebola and some other diseases (such as Malaria) Africa would become the next 20% asset allocation in every pension fund portfolio, because pension funds are struggling to find high returns to compensate from life expectancy improvement (thanks to technology and wearable devices) with higher returns.
The second “continent” which we have not discovered yet is Oceans. This is mainly due to the lack of technology so far. However, the introduction of energy efficient submarine drones (which uses waves to generate autonomously energy) is likely to put NOAA forthcoming years budgets at odd with those of NASA. Again the same “pessimists” are saying that this will destroy our planet (as if anyone could trust Koch Industries to be the champion of the environment) but our technologies are likely to be much more energy efficient and environment friendly (2014 Physics Nobel Prize is one good example of where we are heading).
Finally, the next decade Columbus is likely to be Elon Musk with Space X. We have the ability to upload of conscience on robots / computers. XXI Century Santa Maria is likely to be piloted by robots which are run by the brightest minds conscience uploading. These robot life expectancy is theoretically infinite. Should Santa Maria take with it some of our human DNA, we can populate other planets * which probabilistically have been proven they exist*.
I hope that we will not loose too much time fighting XIV Century devils (ISIL etc.) and will move forward to upload of the maximum of consciences because this can help us move from a Type I species to Type II or even III. Type I: are planet inhabitants which use all energy of their planet. Type II use their solar system energy. Type III uses the Galaxy resources.
Let’s accept our history mistakes and move on, because we have achieved so many things in 13.8billions years, let take the next leap and move into the new Goldilock conditions. Happy Columbus Day !
US Midterms elections: November 4th midterm elections is coming with many uncertainties. Should GOP win the Senate, the US administration is likely to find itself stuck with a divided government which could make : debt ceiling, budget negotiation, Fed Transparency Bill negotiation, very hard. Some humorists have called the Tea Party caucus to be the “no-negotiators”. Without leaning toward a liberal Tea Party bashing, we would like to remind our readers of October 2013 debt ceiling talk. These period have created too much fear that the US might default that some Sovereign Wealth Funds (SWF) have been considering challenging the USD reserve currency privilege status. The average polls are giving 55% chance to the GOP to secure a win in the Senate. However, these polls do not track the weak signals narrative (a model we’ve built for Scotland Independence and which has proven a very good results).
We continue to side with the consensus. But we consider that as soon as investors will start looking at the consequence of a GOP Senate majority win we might see some change in the dynamics. We have the opportunity to use a new source of big data information. We will be using it to bring the change in the narrative in the coming 3 weeks. Stay tuned and thanks for your support.
US markets continue to behave between repricing downward growth prospect (as we were expecting) and reassign Fed policy going forward. Although VIX has moved up it still below the high stresses period we have experienced during the recent period. The Mid-Term elections prospect is not discussed as one reason which could create more crisis: GOP are likely to tight Fed hands, should they secure the Senate majority, while the recovery is still underway. We see the next two weeks to focus on the narrative on the negative consequences of a GOP Senate win. A strategy the UK has followed to secure the Scotland independence vote. Meanwhile, recent Clinton Presidency document release shows the stress around the impeachment risk (a gesture GOP has been considering until recently and which may resume after mid-term elections). Furthermore, the political mistrust continues to be on focus in DC while policymakers discussing inappropriate conduct during the 2012 prostitution scandal in Colombia
Br-exit: Knowing that EU is changing its narrative, UKIP call for an early Br-exit vote doesn’t come as a surprise. Actually, we were expecting it to come earlier because the populist are likely to loose the supports they are having now. Populists parties are using investment advisory businesses to spread their mistrust. A recent study conducted by the AMF (France SEC), showed that 9 web-traders over 10 are loosing money when investing in FX. This is mainly due to the fact that 9 over 10 are investing like they vote: buy Gold, USD and sell EUR because it’s doomed (this is their beliefs not ours). By better regulating the internet retail investment sector, we are likely to see less spread of mistrust. These internet retail websites are widely spreading mistrust and advising ‘moms and pops’ to make easy money when the doom scenario will come. Again our legal have forbidden us from spreading some website adds (because they consider these are non respecting SEC and other regulations). These attract their “victims” by claiming making $8,000 a month by becoming a trader. The 9 over 10 are usually exposed to the next big splash in the markets. This is exactly how our research have found ISIL portfolio to be invested. While the first is betting that our institutions are rotten to the core and are listing to the doom and gloom widely spread, the former is speaking its own books. No one can be held accountable for making wrong investment decisions. However, by stressing the losses many individual investors are likely to change their strategy and diversify their views. This financial market war is likely to leave only those which bet on ISIL success largely exposed to the doom and gloom scenario.
While EU-skeptics groups continue to do well in the polls, EU is heading to a grand bargain which would clear the way to regain public support for the EU project. Germany’s FinMin Schauble indicated that Germany’s response to a “clear weakening” of the economy will be a shift in public spending toward investments and away from government consumption. He said that Germany could be willing to increase EIB capital (a strategy designated Commissioner Moscovici seems to be open to during his weekend interview). Eurogroup has cleared the way to a shift toward growth agenda / pact. Furthermore, China Premier Li visit to Germany has conducted to the release of a guideline for bilateral corporation. Furthermore, EcoMin Macron hinted that France may be considering a change in U/E allowances (a reform we understood to be very high on Chancellor Merkel ask list to move for more EU integration). Furthermore, US and UK are considering joint model to deal with too big to fail (after ISDA agreed on a “big bang” deal to reduce systemic risk arising from derivatives). Finally, according to Reuters, Germany is trying to convince Turkey and Iran to join the fight against Islamic State (IS) militants, Foreign Minister Frank-Walter Steinmeier told a German newspaper. EU developments are in line with our constructive scenario for the region (a view which is not priced yet by markets).
China: Continuing data out of China confirm that the country is soft landing while rebalancing. Labor statistics have been showing that the manufacturers have started to rebalance their activities away from labor intensive (an objective already stressed by the Chinese leadership). These are in line with the objective to rebalance the economy away from credit driven investment. “BHP Billiton has raised the stakes in the ongoing war of attrition in global iron ore with a plan to slash costs and lift production” confirms our view that commodity companies are starting to adapt to the new normal, while China is cutting the road to nowhere and excessive bureaucracy (China removes 160,000 phantom staff on payroll, China Today). Acknowledging that there is “phantom staff” out loud is an event for those who have been following China for years (this could have cost some China Today’s managers their jobs a couple of years ago).
Furthermore, the west is helping China to change it’s “narrative” from being anti-democracy (China has not gone back on its agreements with Britain over the future of Hong Kong, whose autonomy is far greater than what Britain expected three decades ago, a former aide to late British Prime Minister Margaret Thatcher has said.).
Furthermore, Premier Li is undertaking a state visit to EU. This is likely to bring more collaboration with the West, while China will be offering a back-door to Russia energy at a moment when : President Putin is challenged by plummeting oil prices and sanctions are making harder for the energy sector (finance projects and investments).
The government continues to fear that the economic rebalancing has not taken momentum yet although 1) labor intensive manufacturers are relocating in cheaper labor countries, 2) businesses are upgrading their business models [while becoming environmental friendly], 3) President Xi has conducted many trade – investment agreement with Neighbours (after Premier Li did the same in Africa) to secure investment projects which use Chinese manpower – engineers know-how in this domaine, 4) China is gaining more military presence and has fluxed it mussels – e.g. China “Top Gun” intercept by a US fighter jet -, 5) China has signed many RMB agreement which reinforce the currency usage and prepare its full liberalisation – after Free Trade Zones (FTZ) have proven to be a success -, 6) China has undertaken a genuine fight against bad governance and better regulation – many examples in our recent daily briefings of fight against corruption and bad governance-. We see in FinMin Lou Jiwei recent comment an indication that not only China wants to create a reserve currency it does want it to be strong when Chinese leaders perceive the heavy pressure place on USD by a category of investors to avoid debasing the currency through deficit financing – although we consider that this worry is misplaced -.
Australia: Australia struggles with the labor statistics glitches. Treasurer Hockey offered the private sector to check the information and help to correct that data. While this information does not change drastically our view that the RBA will stay put (due to the fear of a housing bubble, which the central bank is dealing with through macro prudential tools). However, the glitches reduces the “view” in the market that countries such as China are manipulating their figures. While our work on macro eco data has pushed us to take the economic figures with a pinch of salt (due to the methodology which could create some issues), we do not side with camp mistrusting everything. However, we believe that the big data analytics is likely to help improve the accuracy and the frequency of the high frequency data. However, the statistic office may take time before undertaking the experiment.
Australia continues to be seen, by markets, as a derivative to the old Chinese model (i.e. commodity provider). This view explains the high beta between Australian assets and commodity prices (or China demand for commodities). Banks shares are suffering from the combination of the increase perception of increase in risks and additional macro prudential constants to curb housing prices frothiness. Small business defined the “goldilock range” for AUDUSD to be [.90-.94]. This level is much higher than RBA own assessment (based on PPP models). We have been criticising PPP models because they do not factor any structural changes.
These assume that neither China nor Australia are conducting their rebalancing agenda. We do believe that the current weaknesses offers genuine opportunity to benefit from the other drivers to the Australian economy which are not related to commodities. We see the current Australian Dollar weakness to continue at least until the USD start to weaken again when markets will realise that it has beaten too much on a quick rate normalisation. Meanwhile, from our previous daily briefing, we have gathered sufficient support to the view that the drivers of the Australian GDP are moving toward: 1) education, health and finance services provider to Asian neighbours, 2) innovation and digital sector, 3) energy resources export to Japan (the later contributes to our constructive view that the current negative Japan Energy Trade deficit will rebalance in the medium term – reducing Japanese Government bonds solvency risk – ).
Japan: inflation softening along with economic downgrade was widely expected as a result of the 1st VAT hike (cf our strategic note Dec 26th 2013). We see BoJ to keep the bazooka of QQE-2 un-tested until the JPY excessive depreciation and JGB solvency risk came down * investors are still short JGB expecting a Japan crisis *. The 2nd VAT hike will require some stabilisation at the current levels, though we expect that PM Abe will undertake the 2nd hike in steps, because BoJ is unlikely to be sufficiently confident to move ahead with more QQE while JPY is accelerating its depreciation. PM Abe voiced concerned over the JPY rapid depreciation, as he pointed (rightly in our opinion) to the increase in energy cost, which deteriorate further the energy trade deficit – and increase the risk of JGB solvency -. The Prime Minister confirmed in his Diet address to pursue Abenomics 3rd arrow. Japan is said to resume discussion with US on TPP, while energy sector is heading toward energy transition away from Nuxe. Physics Nobel price attribution to energy efficient and environmental friendly technology is a game changer because it does support the view that the Win-Win scenario is feasible, if only the consensus stop being pessimistic for no reason.
Furthermore, GPIF delayed its asset allocation review. This is positive because it will calm down markets nervousness that GPIF will shift over-night its JGB holding and would create a market fixed income crash. We see the current development in line with our constructive scenario.
However, BoJ might do some adjustment to its monetary program but nothing excessive. The news flow out of this weekend G20 meeting shows that the global community is gently pressing the government and the BoJ to pursue structural reforms, economic rebalancing, solvency improvement (through VAT 2nd hike commitment) and adequate monetary policy (not too hot – to avoid a crisis – not too cool – to avoid derailing the on-going portfolio rebalancing approach -). Japan continues to face heavy public pressure to rebalance its energy reliance to nuclear. While we believe that Japan will continue to press for reopening nuclear plants (when Nuclear Watchdog gives his green light), the medium to long term trend is that Japan will use Trade negotiation with neighbours to secure new energy sources while using this pressure to deregulate and move forward with Abenomics 3rd arrow (please see our Japan update for more on our views). We are not surprise by the fact that Russian news media are reporting the pushback to reopening nuclear plans, ahead of Japan-Russian talks (about sanctions, energy agreement, and disputed territories).
As China, Japan, and South Korea heads toward a constructive talks (as we were reporting in our previous daily briefings) and Japan and North Korea are heading toward a solution on Japanese civilians abduction, North Korea leaders close to Kim Jong Un held last weekend high level talks with South Korea minister of reunification. This indicates that the scenario of an unified Korea is advancing. We have been considering that the reunification will ultimately take place but it requires normalised relation amongst the 3 important players: China, Japan, South Korea.
Central banks News
Central banks news: Jean Tirole won 2014 Economy Nobel Prize for his work on regulation. This comes to us as a signal that we have entered 3rd stage of central banks’ actions (CBs). During the first stage, CBs have focused on saving the financial markets through liquidity injection. During the second stage, they have been pushing for fiscal consolidation in order to avoid jeopardising currencies solvency and hyperinflation – as studied by Stanley Fischer & Michael Bruno here -. The third stage is in line with G-20 agenda and OECD initiative to reduce tax “optimisation” and evolves around better and more efficient regulation.
Nobel committee has chosen Jean Tirole of Toulouse Economic School while the recent “hype” has been taken by Thomas Piketty from Paris Economic School. Thomas Piketty’s book was received worldwide and many could have understood that he would have won the Nobel Prize. But instead of giving the spot light to “wealth taxation” as a solution to nowadays problems (a solution Piketty is supporting), they have preferred to honour regulation which enables – when well conducted, and J. Tirole work is very insightful on this – to cut “indirect taxes” (inefficiency, bad governance, red tapes etc.).
To sum up on the Nobel Prize, we congratulate Jean Tirole for his win, and we increase our confidence that the next stage of CB actions would focus on regulation / macro prudential. This scenario is supportive to rates (receive rates), supportive to equities, but differentiates EM between vulnerable countries, which will suffer from carry trade reduction – such as Brazil – and countries which are undertaking (or have undertaken) reforms.
US: Stanley Fischer tampered growth prospect excitement which drove down 30Y treasuries to below 3%. We have been stressing that short fixed income positioning has been excessive recently and market is set for disappointment and short squeeze. He have been indicating that this short squeeze is likely to happen between mid-October and beginning November. The timing and the event seems in line with our expectations.
Pimco came out with 38 triggers which could derail markets, drive rates higher and send stock prices to the abyss. While these triggers are genuine we are frustrated that Pimco did not present the overall pictures and the mitigation factors. For example, the triggers include an upward inflation surprise. This comes at odd with Saudi indication that markets should get used to LOW energy prices. How inflation can restart with LOW energy prices? Obviously, the triggers include geopolitical risks but did not take into consideration “upside risks” such as a conclusive negotiation with Iran. We are frustrated by how some asset managers have skewed the information they use to analyse market in order to justify wrong decisions and bad performances.
China: As we were indicating a couple of weeks ago, iPhone 6 represented a good “stimuli” to Chinese exports. Export increased 15.3% from a year earlier (please see more below). Thus, PBoC does not see any need for a “big stimuli”. Ma Jun (Chief Eco. of research bureau at PBoC) said, at a panel discussion on the sidelines of IMF annual meetings, that “[he] do[es]n’t see the reason for big stimulus in the foreseeable future”. This is in line with our expectations that although China is soft landing (please see Premier Li comments on growth), PBoC will contribute with dedicated and targeted stimuli and refrain from any “big bang” which could derail the current reform agenda (rebalancing process).
Eurozone: The two narratives have became even clearer during the recent period: 1) Weidmann pushes back Draghi on any additional QE – outright sovereign purchase -, 2) Eurogroup is moving ahead with “growth pact » while pressing countries (with a clear hint toward France and Italy) to not unravel their structural reforms agenda. On the latter, the talk about reforming unemployment allowances in France is a big thing should Francois Hollande and Manuel Valls stick to the reform agenda (which could be summarised in Jacques Attali’s commission conclusions here).
Emerging markets: Brazil development constitutes our main worry in the short term. While Fed is likely to play down tightening expectations, we see the pressure on BCB and Brazil government to continue. Yesterday, President Dilma Rousseff has used Fmr. Pres. Calderon to point to the risk of crony capitalism should Brazilians vote for her opponent. We consider this strategy to be very dangerous because President Rousseff is using what Brazilians critics of the current ruling party (bottleneck, corruptions, bad governance…) to weaken her opponent. It like telling people whether they would prefer crony capitalism or left wing corruption. Frankly, at SNBDL we don’t see the difference. We continue to see a financial crisis likelihood in Brazil increasing in order to push the rulers to undertake reforms. India seems to have got the message and is doing whatever it takes to avoid this pressure.
Oil Prices: Reuters reports Saudi officials have been privately admitting to oil market participants that they are comfortable with lower oil prices. According to the news service, the Organization of the Petroleum Exporting Countries (OPEC) is willing to accept prices as low as $80 a barrel for as much as the next two years. This again confirmed our view and target price for oil prices (please see our Energy Update).
How Frenchman’s Nobel research could aid consumers
U.S. consumers might be paying less than they are for cable and Internet access if regulators had followed the guidance of Jean Tirole in promoting industry competition.
So say experts in assessing the work of Tirole, a 61-year-old Frenchmen who won the Nobel prize in economics Monday for showing how to encourage better products and competitive prices in industries dominated by a few companies.
“He has given us an instruction manual for what tool to use in what market,” said Torsten Persson of the prize committee. “Politicians would be stupid not to take his policy advice.”
They haven’t always listened.
Joshua Gans, management professor at the University of Toronto, says U.S. regulators didn’t follow Tirole’s advice to require cable and phone companies to sell competitors access to “the last mile” of cable connecting homes to telecommunications networks. Instead, giants such as Comcast and Time Warner now control the last mile.
China needs no « big stimulus » despite slowdown
WASHINGTON — China does not need large-scale monetary stimulus in the near future despite a slowdown in the world’s second-largest economy, a senior economist with the Chinese central bank said Saturday.
« I don’t see the reason for big stimulus in the foreseeable future, » Ma Jun, chief economist of the Research Bureau of the People’s Bank of China (PBOC), said at a panel discussion on the sidelines of the Annual Meetings of the International Monetary Fund (IMF) and the World Bank.
Although the economic growth has « slowed a bit, » China’s job market « looks pretty stable, » because China’s economy is transforming from a manufacturing-dominated structure to a « more services-based » one, Ma told the session, hosted by the Institute of International Finance (IIF) and focused on China’s economic outlook.
Services, which are generally labor-intensive than manufacturing, became bigger than the industrial sector last year. According to Ma’s recent research, the creation of urban jobs by an increase of one percentage point in the share of the services sector as of China’s gross domestic product (GDP) can offset the job losses caused by a decline of 0.4 percentage point in the GDP growth.
China’s Exports Buoy Outlook as IPhone Effect Kicks in: Economy
Oct. 13 (Bloomberg) — China’s slowing economy received a shot in the arm from faster export growth in September, with external demand spilling over to boost imports for processing and re-shipment of goods such as the iPhone 6.
Exports increased 15.3 percent from a year earlier, the biggest increase since February 2013 and beating the 12 percent median estimate in a Bloomberg survey of analysts. Imports rose 7 percent, against projections for a 2 percent decline, leaving a trade surplus of about $31 billion, data from the Beijing- based customs administration today showed.
Stronger exports will help China weather a property slump even as the global outlook becomes more clouded, with Federal Reserve officials highlighting concern about the improving U.S. economy’s ability to withstand foreign weakness. A surge in imports for processing and re-export suggested domestic demand remains subdued, while a 34 percent increase in shipments to Hong Kong reignited speculation that figures are inflated.
“Import growth in September is heavily driven by external demand and the processing trade industry, instead of domestic demand,” said Le Xia, Chief Asia Economist at Banco Bilbao Vizcaya Argentaria SA in Hong Kong, with iPhone production one component of that. “China’s economy at the current stage is still kind of externally demand-driven.”
Chinese stocks maintained declines after the data. The Shanghai Composite Index fell 0.4 percent at the close while the Hang Seng China Enterprises Index was down 0.2 percent.
The iPhone 6 has “positive impacts on processing trade,” Zheng Yuesheng, a spokesman for the customs agency, said after a press briefing in Beijing today. The customs department of Zhengzhou, where the iPhone factory is located, reported 6.22 million exports of new iPhone models by Sept. 21, according to a report by China News Service, a state news agency.
ECB Clash Resumes as Draghi Spars With Weidmann on Stimulus
Oct. 13 (Bloomberg) — Mario Draghi and Jens Weidmann are clashing anew over how much more stimulus the ailing euro-area economy needs from the European Central Bank.
As Europe’s woes again proved the chief concern at weekend meetings of the International Monetary Fund in Washington, President Draghi repeated he’s ready to expand the ECB’s balance sheet by as much as 1 trillion euros ($1.3 trillion) to beat back the threat of deflation. Bundesbank head Weidmann responded by saying that a target value isn’t set in stone.
The differences at the heart of policy making risk leaving the ECB hamstrung as the region’s economy stalls and inflation fades further from the central bank’s target of just below 2 percent. History suggests Draghi will ultimately prevail over his German colleague.
“There’s an enormous conflict within the Governing Council on what the ECB should do,” said Joerg Kraemer, chief economist at Commerzbank AG in Frankfurt. “Clearly, it’s Draghi against Weidmann once again. In the end, Draghi will get his way and we will see quantitative easing next year.”
The ECB is swelling its balance sheet as it seeks to revive inflation of 0.3 percent, the lowest in almost five years. By buying private-sector assets, as it plans to do from this month, or continuing to accept collateral from banks in return for cheap loans, it is pushing liquidity into the economy. Still unresolved is if it will ultimately buy sovereign debt, a taboo subject in Germany where politicians worry it amounts to financing governments and removing pressure on them to act.
ECB Dark Room Crunches Bank-Test Data Amid D-Day Nerves
Deep in the European Central Bank’s Frankfurt headquarters, there’s a room sealed off from the world.
In the Dark Room, as it’s referred to internally, staffers are combing through almost 39,000 points of data on the euro area’s 130 biggest banks before the results of the ECB’s Comprehensive Assessment are released on Oct. 26. The security precautions — no Internet connection or external phone lines — being taken are part of a plan to ensure that “Disclosure Day” arrives without leaks, lawsuits or glitches.
When it starts to supervise euro-zone banks on Nov. 4, the ECB will embark on its biggest new mission since the introduction of the single currency, one that also poses the biggest threat to its reputation. The challenge between now and then is to publish the results of its year-long bank audit and convince the world that it’s tougher, fairer and more credible than any test that came before.
“The ECB understands that they’ve only got one chance at getting this right, and if they don’t their reputation will be severely damaged,” said Christian Thun, a senior director at Moody’s Analytics in Frankfurt. “It has been a massive undertaking, but I think they will achieve their aim of restoring confidence in the banking system.”
The Comprehensive Assessment started in October 2013 as a way to ensure that when the ECB became the euro zone’s single supervisor it would know exactly what it was dealing with. Since then, at least 25 million data points have been collected on credit files, collateral and provisioning. This knowledge of asset quality has been fed into a stress test, an innovation the ECB says makes this better than previous tests run by the European Banking Authority.
Pimco flags long list of triggers for new waves of market turmoil
One of the world’s largest bond fund managers has drawn up a list of 38 events that could trigger a fresh wave of volatility in financial markets.
An inflation surprise, US interest rate speculation and a rerating of equity market valuations top the list drawn up by Pimco.
Devised over the past few months, the list includes Federal Reserve tapering talk as a precursor to global volatility, an event that has indeed just set off a new wave of currency and stock market realignment.
Markets around the world were on Monday facing further equity and currency selling as global growth fears – particularly about the chance of a third recession in six years for Europe – weigh on most asset classes.
Bratkowski Seeks More Rate Cuts as Polish Economy Sputters
Poland’s central bank may need to cut its benchmark interest rate as much as 75 basis points as economic growth will probably slow to less than 3 percent next year, monetary policy maker Andrzej Bratkowski said.
A quarter-point reduction to 1.75 percent next month is “obviously possible, but not a foregone conclusion and will depend on the incoming data,” Bratkowski said in an Oct. 11 interview in Warsaw. A repetition of last week’s larger-than-expected half-point cut is unlikely, he said.
Policy makers last week reduced the main interest rate for the first time since July 2013, cutting by double the amount forecast in a Bloomberg survey of economists. With the German economy slowing and Russia under sanctions because of the crisis in Ukraine, Polish growth is under pressure as export markets suffer, manufacturing shrinks and consumer prices fall.
Treasury 30-Year Yield Falls Below 3% as Fischer Warns on Growth
Treasuries climbed, sending 30-year (USGG30YR) bond yields below 3 percent for the first time since May 2013, after comments from Federal Reserve Vice Chairman Stanley Fischer underscored concern the global economy is slowing.
Treasury futures advanced, while equities and the dollar dropped yesterday as Fischer’s speech fueled speculation the central bank may push back the timing for raising interest rates and airline shares sank on concern Ebola may spread in the U.S. While the Fed is set to end its bond-buying this month, the prospect of monetary tightening has been tempered by concern output is sagging from Europe to China. Debt investors’ inflation expectations fell last week to a 15-month low.
“There’s been a flight to quality that has pushed Treasury yields lower,” said Kazuaki Oh’e, a debt salesman at CIBC World Markets Japan Inc. in Tokyo. “Inflation is not a problem so it’s easy for investors to buy longer-end Treasuries.”
Brazil Analysts Raise Estimates for Inflation, Growth This Year
Brazil economists raised their forecasts for growth and inflation this year, as the central bank maintains its key interest rate at the highest level in more than two years.
Analysts boosted their 2014 gross domestic product forecast for the first time in 20 weeks to 0.28 percent, according to the Oct. 10 central bank survey of about 100 analysts published today. That compares to the previous week’s forecast of 0.24 percent growth. They also increased their estimate for inflation this year to 6.45 percent from 6.32 percent.
President Dilma Rousseff is battling above-target prices and slowing growth as she prepares for the second round of elections in two weeks. The economy entered recession in the first half of the year as investments contracted. At the same time, annual inflation has reached the highest level since October 2011.
Brazil’s economy contracted 0.6 percent in the second quarter after falling a revised 0.2 percent in the first three months of the year, the national statistics agency said on Aug. 29. The central bank on Sept. 29 cut its 2014 GDP growth estimate to 0.7 percent from its June forecast of 1.6 percent.
The International Monetary Fund said on Oct. 7 that Latin America’s biggest economy is expected to expand 0.3 percent this year, down from July’s estimate of 1.3 percent. The IMF sees Brazil growing 1.4 percent next year, compared with July’s estimate of 2 percent. The economists in the central bank survey see Brazil’s economy expanding 1 percent in 2015.
India’s CPI Slows More Than Estimated in Boost for Rajan
India’s retail inflation slowed more than economists had estimated after central bank Governor Raghuram Rajan held one of Asia’s highest interest rates for a fourth straight meeting.
Consumer prices rose 6.46 percent in September from a year earlier, the slowest pace since the index was created in January 2012 and compared with 7.73 percent in August, the Statistics Ministry said in New Delhi yesterday. The median of 42 estimates in a Bloomberg survey had been for a 7.11 percent gain.
While the Reserve Bank of India seems set to achieve its 8 percent CPI target for January, its goal of 6 percent a year later is in doubt, Rajan said Sept. 30. Lower inflation or a narrower budget deficit may lead to sustainable growth and boost India’s credit rating after Standard & Poor’s last month raised its outlook to stable from negative.
The Russian Central Bank Admits Defeat
Russian Central Bank head Elvira Nabiullina has admitted that if currency markets continue to turn against the ruble the bank « won’t be able to restrain them. »
Despite the central bank spending $6 billion of Russia’s foreign exchange reserves in only 10 days to prop up the value of the ruble, it continued its slide against the dollar on Monday.
Saudi Arabia’s Oil Price ‘Manipulation’ Could Sink The Russian Economy
The vice-president of Russia’s state-owned oil behemoth Rosneft has accused Saudi Arabia of manipulating the oil price for political reasons. Mikhail Leontyev was quoted in Russian media as saying:
Prices can be manipulative. First of all, Saudi Arabia has begun making big discounts on oil. This is political manipulation, and Saudi Arabia is being manipulated, which could end badly.
The news comes as Reuters reports Saudi officials have been privately admitting to oil market participants that they are comfortable with lower oil prices. According to the news service, the Organization of the Petroleum Exporting Countries (OPEC) is willing to accept prices as low as $80 a barrel for as much as the next two years.
Economic News
Greece is considering bailout exit plan, while France is attacked over budget. We have been in the view that Greece is likely to exit the bailout plan because many institutions need to change the narrative of the second stage CB actions in order to indicate that austerity has succeeded to improve growth. We continue to be constructive on France because the government and EcoMin Macron are clearly supporting reforming. In October 13th Daily Briefing, we stressed that talks around unemployment allowances reform could be a game changer as it would help improve the current 2015 budget proposal while reforming a system which has became self-defeating. We don’t rule out the political pushback but the Parti Socialist is in the cross roads between New Labor or Left conservatism. The former group is clearly winning the ideological battle, though French and international media continue to see the PS through the lengths of 1980s.
In our Russia update, we said President Putin is winning communication battles but he is doomed to loose the economic war. Though China is providing a back channel (a role Russia played with Iran when Iran was suffering from Western sanctions), Russia central bank is recognising that its loosing the war to stabilise the RUB, due to Saudi decision to accept lower energy prices. Our first reaction to Saudi “get used to lower energy prices” was that Saudi is hinting that 1) it agrees that Iran sanctions to be lifted (which we expect to take place after the on-going nuclear energy negotiation) and 2) it wants to use oil prices to defeat ISIL (Oil smuggling is the only economic resource ISIL can finance its terrorism with – assuming that there are no other channels -). Furthermore, Saudi – OPEC decision to drive oil prices toward our $80 target would have positive consequences for India and energy vulnerable countries (incl. Eurozone countries) while would require a speed up in reforms in Mexico and Brazil.
Obviously a $80 a barrel is too close to President Putin’s administration existential threat (which we assume to be $75 in line with other experts) to revise our view of Ukraine – Russia tension sequence. PM Abbott is said to push President Putin over MH-17 (calling it a murder due to Russia arms in the hands of Pro-Russian). PM Abbott declarations did not come at a surprise. We were expecting it as soon as MH-17 has been shut down and Australia took the lead of Western fight against Putin because the Australia could not be blackmailed (a totally different situation when compared to Germany, France, Italy or Eastern Europe)
Greece’s Early Bailout Exit Plan Sparks Euro-Area Doubts
Euro-area finance ministers expressed doubts about Greece’s plan to exit its rescue program early, highlighting a clash between Greek political priorities and European economic preferences.
“We are skeptical about this,” Austrian Finance Minister Hans Joerg Schelling told reporters today in Luxembourg, where he and his euro-area counterparts held a monthly meeting. “We are watching this with a certain skepticism and concern.”
Greek Prime Minister Antonis Samaras wants to sever the 240 billion-euro ($304 billion) lifeline that has kept the country afloat since 2010 by forgoing emergency international loans next year and in 2016.
Doing so would ease fiscal oversight of Greece by the euro area and International Monetary Fund, which finance the country’s rescue in exchange for unpopular budget cuts that have deepened a six-year Greek recession. The step could also bolster Samaras’s goal of avoiding early elections that polls indicate would be won by the main opposition party, which has lashed out at the belt-tightening conditions of the bailout.
More than four years after triggering the European debt crisis, Greece aims to join Ireland, Spain and Portugal in emerging from aid programs and to leave Cyprus as the last bailout victim. The size of the Greek rescue — around half of all the bailout funds committed for the five countries — and persistent difficulties in getting authorities in Athens to comply with the terms have made the euro area and IMF wary of cutting Greece loose.
France’s Budget Attacked as Finance Ministers Round on Plan
Oct. 13 (Bloomberg) — Euro-area governments warned France that it cannot expect special treatment if its budget for next year falls outside of European Union spending rules.
The euro zone’s finance ministers are meeting in Luxembourg today with a discussion of countries’ 2015 budgets on the agenda. With France’s economy recording scant growth and its government acknowledging that it will miss EU deficit targets, it’s call for greater leeway from its EU partners is receiving a frosty welcome.
“Based on the numbers we’ve heard up to now, the gap between what should be achieved based on the rules and the budget that’s expected is very big,” Dutch Finance Minister Jeroen Dijsselbloem told reporters before the meeting. “With all respect for France, this gap must be reduced.”
France is under pressure as it predicts its budget deficit to widen this year for the first time in half a decade and doesn’t see the shortfall shrinking to the EU limit of 3 percent of gross domestic product before 2017. That’s two years later than the extended deadline set down by the European Commission.
“The rules of the game should be the same for everyone — France has a very special responsibility here,” Austria’s Finance Minister Hans Joerg Schelling said. “Just like Austria, all the other countries have to do their homework.”
Euro-area countries including France must submit their budget to the EU this week. Using powers bolstered at the height of the debt crisis, the commission, the EU’s executive wing, can force France to revise the plan if it deems it to show insufficient progress in shrinking its deficit.
Court to rule on ECB bond bailout
German challenge to bond-buying to get hearing
German opposition to the European Central Bank’s bond-buying programme known as the outright monetary transaction (OMT) will be thrashed out today during a hearing at the European Court of Justice, though a final judgment is at least a year away.
The Luxembourg court will hear testimony related to the case, which was originally brought by a German conservative politician, questioning the legal basis of the bank’s OMT programme.
Earlier this year, the German constitutional court ruled the OMT should be considered illegal under European law, unless restrictions were imposed, though it referred the case to the European Court of Justice.
Buba’s Dombret Says ECB Bank Health Checks ‘already A Success’
FRANKFURT (Reuters) – A review of banks’ financial health led by the European Central Bank can be considered a success before it is completed as banks have raised around 200 billion euros ($254 billion) in preparation, a top Bundesbank official said on Monday.
The results of Europe’s most comprehensive banking review will be released on Oct. 26, giving the clearest picture yet of the state of a sector that was pummeled during the financial crisis.
In anticipation of the results and without knowing how they will do in the tests, European banks have taken steps to strengthen their balance sheets, including raising equity, retaining profit, reducing risk and selling investments.
« It’s already clear now that the exercise is a success because European banks have strengthened their balance sheets by around 200 billion euros, » Andreas Dombret, in charge of banking supervision on the Bundesbank board, was quoted as saying by German financial daily Handelsblatt on Monday.
Australia PM says will confront Putin at G20 over downed flight MH17 ‘murders’
(Reuters) – Australian Prime Minister Tony Abbott said on Monday that he would use an upcoming G20 leaders summit to confront Russian President Vladimir Putin over the downing of Malaysia Airlines Flight MH17 and the « murder » of Australian citizens.
Allegations that the jetliner was downed by pro-Russian separatists armed with surface-to-air missiles provided by the Kremlin sparked calls in Australia to bar Putin from the meeting of world leaders in Brisbane next month.
Abbott, who has been amongst the most strident critics of Russia’s handling of the affair, said on Sunday that it was not within Australia’s power to ban a G20 member from attending, but promised to give Putin a stern talking to.
« Look, I’m going to shirtfront Mr Putin – you bet I am, » Abbott told reporters, using an Australian Rules Football term meaning to hit someone front on and knock them to the ground.
« I’m going to be saying to Mr Putin, Australians were murdered and they were murdered by Russian-backed rebels using Russian supplied equipment, » he said.
UPDATE 2-Cheaper food pushes Indian retail inflation to record low in Sept
* CPI inflation slows to 6.46 pct, lowest level on record
* Retail food prices up 7.67 pct y/y vs 9.35 pct in August
* Sept core inflation 5.9 pct vs 6.9 pct in August
* Interest rates seen on hold until April-June 2015 (Adds more details, quotes)
NEW DELHI, Oct 13 (Reuters) – India’s retail inflation eased for a second consecutive month in September, but the risks of price shocks from poor monsoon rains and oil are expected to prevent the central bank from cutting interest rates soon.
Consumer prices rose a slower-than-expected 6.46 percent from a year earlier, the lowest since figures were first published in January 2012. Slowing food inflation and a favourable statistical base drove the decline, government data showed on Monday.
In August, retail prices rose 7.73 percent year on year.
Lower prices should cheer Prime Minister Narendra Modi, who won the strongest electoral mandate in 30 years in May on promises to control inflation and pull India’s economy out of its most protracted slowdown since the 1980s.
India has long struggled with soaring prices, particularly those for food. Food inflation dropped last month to 7.67 percent from 9.35 percent in August.
Singapore Expands More Than Estimated on Global Demand: Economy
Singapore’s economy expanded more than analysts estimated in the third quarter, adding to evidence that increasing global demand is fueling the island’s manufacturing pickup.
Gross domestic product rose an annualized 1.2 percent in the three months through September from the previous quarter, when it contracted a revised 0.1 percent, the trade ministry said in a statement today. The median estimate in a Bloomberg News survey of 12 economists was 0.8 percent. The central bank, which uses the island’s dollar to manage price pressures, said it will maintain a modest and gradual appreciation of the currency.
Singapore’s manufacturing output has benefited from a recovery in overseas demand, even as the government implements a 10-year plan to reduce reliance on cheap foreign workers and boost productivity which has caused a labor shortage and pushed up wage costs. Data released yesterday showed China’s exports to the U.S., Europe and Southeast Asia increased from a year earlier in September.
“The big sequential turnaround was led by manufacturing and squares with an improvement in global demand,” said Vishnu Varathan, a Singapore-based economist at Mizuho Bank Ltd. “The policy hold has become a more balanced kind of proposition, as inflation risks are not as elevated.”
The city’s consumer prices rose 0.9 percent in August from a year earlier, slowing from a rate of 1.2 percent in July. The central bank today cut its forecast for inflation this year to 1 percent to 1.5 percent from an earlier estimate of 1.5 percent to 2 percent. Prices will probably increase 0.5 percent to 1.5 percent in 2015, it said in a statement.
Ebola
Ebola: “There’s nothing to fear but the fear itself”, President Roosevelt
Our competitors have started to compare Ebola to the 1918 Spanish Flu (more here) which has been responsible for 50 to 100 millions casualties and a genuine driver of WW-II. Why are we relaxed that this scenario will NOT take place? Two reasons explain our different view: 1) many of our economist colleagues have not spotted Ebola when it started as a driver to markets and economy, they have not had time to study three components (institution reaction, global coordination, and the 1st reason of spread of the disease : mistrust and disinformation), 2) many have not spotted the narrative around the vaccine and how the experimental vaccines have been effective (on primate as well as on humans). There is a third factor why media and some “newly declared experts” are getting morbid excitement. These are not getting all the story. Let’s face it, you can sell more volatility and news paper when people fear something. At SNBDL, we consider that good research finds its clients without any need of stress.
Our main fear is that Ebola could be used as a dirty weapon, and many intelligence experts are fearing the same. But US military are taking the risk seriously and the newly installed military hospital in Africa is indicating that the US with France are leading the fight to this disease.
Unlike in the beginning of XX century, many corporations have contingency plans in place in the case the situation intensifies (and we are not ruling out that the number of cases will increase). In the XXI century, workers can continue to generate value from their homes. Furthermore, Japan Fukushima brought one of the most interesting innovation: the “now-ers”. These are people which use devices (in the case of Fukushima these devices provided the level of nuclear emissions) to map real time a situation in a country (nuclear emission in the case of Japan). Should the outbreak increase, everyone can use symptom reporting mobile Apps in order to avoid collusion between “non-lethal flu” symptoms reporting with Ebola cases. This collusion is likely to be the main driver of any excessive fear. Dr. Ezekiel Emanuel, a former White House health adviser, said ‘Panic is something we can’t afford’ when discussing Ebola.
UPDATE 3-U.S. needs to rethink Ebola infection controls, says CDC chief
Oct 13 (Reuters) – Medical experts need to rethink how highly infectious diseases are handled in the United States, a U.S. health official said on Monday, after a Dallas nurse contracted Ebola despite wearing protective gear while caring for a dying Liberian patient.
As an outbreak of the deadly virus spread beyond West Africa, hospitals and nursing associations across the United States were taking a closer look at how prepared they were to handle such infections.
« We have to rethink the way we address Ebola infection control. Even a single infection is unacceptable, » Dr. Thomas Frieden, director of the U.S. Centers for Disease Control and Prevention, told reporters. « The care of Ebola is hard. We’re working to make it safer and easier. »
Frieden said health authorities are still investigating how the nurse became infected while caring for Thomas Eric Duncan in an isolation ward at Texas Health Presbyterian Hospital.
Duncan died last week and the nurse is the first person to contract the virus on U.S. soil, taking concerns about containing its spread to new heights.
The infected nurse is Nina Pham, 26, according to a Sunday school teacher at the church where her family worships and through a public records check of her address. Attempts to reach her family were not immediately successful.
The family was in shock when it learned the young woman had contracted Ebola, said Tom Ha, a close friend of the Pham family who is also a Bible studies teacher at the Our Lady of Fatima Catholic Church in Fort Worth.
« The mother was crying, very upset, » he told Reuters.
Ebola Virus May Reach Russia But Outbreak Impossible: Minister of Health
MOSCOW, October 13 (RIA Novosti) – The import of the Ebola virus into Russia is possible but there are no conditions for the spread of the disease in the country, Russian Minister of Health Veronika Skvortsova said Monday.
“There are no self-sufficient conditions for the Ebola outbreak…, but as for imported cases, they are possible just like in any other country,” the minister said.
“Very serious measures have been taken to minimize the risk of an [Ebola cases] import,” the health official added.
Ebola Is Coming. A Travel Ban Won’t Stop Outbreaks
Ebola has officially gone global.
The World Health Organization recently confirmed that a Spanish nurse was the first case of transmission outside Africa. Now it seems the first patient diagnosed in the United States transmitted the disease before he died.
More outbreaks are on their way.
While nations struggle to contain the epidemic in West Africa, other countries are discussing how to protect their own citizens, with governments and health authorities repeatedly asked the same question:
Why don’t we just ban flights from Africa?
The idea seems logical. Prevent sick people entering the country, keep your loved ones safe. It’s selfish, but understandable. A survey of over 1000 people by NBC News found that the majority of Americans (58%) support a ban on flights from countries where the Ebola virus has broken out.
Dr Tom Frieden, director of the US Centers for Disease Control and Prevention, has tried to explain why he doesn’t support a travel ban:
Importantly, isolating countries won’t keep Ebola contained and away from American shores. Paradoxically, it will increase the risk that Ebola will spread in those countries and to other countries, and that we will have more patients who develop Ebola in the US. People will move between countries, even when governments restrict travel and trade. And that kind of travel becomes almost impossible to track.
Strike over Ebola pay hits Liberia hospitals
Several health care facilities « abandoned » as nurses strike over higher pay and protective equipment.
Hospitals and health care facilities have been affected in Liberia as some nurses and medical professionals staged a walkout demanding better pay and safer working conditions in the fight against the deadly Ebola virus.
Sources told Al Jazeera that several hospitals and clinics were hit by the strike on Monday as health workers abandonded hundreds of patients, demanding higher hazard pay and protective equipment.
Health Minister, Walter Gwenigale, confirmed that staff had gone on strike in some parts of the country, but tried to reassure workers that hazard allowances would be paid in full.
« That money is available and is being paid. So please, please stay with your patients, » he said.
A local journalist told Al Jazeera, that many facilities were « virtually abandoned », with « nurses afraid of touching patients ».
« They refuse to take blood samples from patients or even take their temperature because these require them to touch patients, » Terence Sesay said.
Staff at Monrovia’s Island Clinic, the largest government-run Ebola clinic in the capital, had already been on a « go slow » in recent days in their battle for extra pay.
Ill passengers on jet are deemed Ebola-free
Five passengers experiencing flu-like symptoms aboard an Emirates flight originating in Dubai were escorted off the plane Monday afternoon by a team in full hazmat suits at Logan International Airport — prompting the second Ebola scare in Massachusetts within two days.
Hazmat teams responded to Flight 237 at about 2:45 p.m., and escorted the five ailing passengers off the plane to evaluate their condition, according to Matthew Brelis, spokesman for Massport, which operates the airport.
Brelis said it does not appear that any of the sick passengers had been traveling in West Africa, where an outbreak of the deadly Ebola virus has already killed more than 4,000 people. Regardless, out of an abundance of caution, officials transported all five of them to area hospitals for a medical evaluation.
Ebola Outbreak in Spain ‘Under Control’ says Government
The spread of the Ebola virus in Spain « is under control », a government spokesperson has said.
Fernando Rodríguez Artalejo, a member of the scientific committee put in place by the Spanish government following an instance of Ebola in the country, stressed that no other case has been reported.
Teresa Romero Ramos, the nurse assistant who tested positive for the virus in Madrid and who is now in quarantine, is still in a serious condition. But Rodríguez confirmed that none of the people she had come into contact have shown symptoms of the disease.
« Right now there is no other person in Spain who is capable of transmitting the virus other than the patient, » he said. « We are in a situation of total calm. »
He also said Romero Ramos would be « definitively cured » of Ebola, that the virus was « no longer detected in her body », and that she was « clinically stable. »
Rodríguez explained that health officials will be monitoring the staff attending Romero Ramos until 27 October, when the 21-day virus incubation period will end.
« We will be certain that the outbreak has concluded when none of the staff attending to Teresa show symptoms past that point, » he said.
Romero Ramos, who is in quarantine with her husband Javier Limon Romero, assisted two missionaries who died from Ebola after returning to Spain from Sierra Leone in West Africa.
It is believed that she contracted the virus when she touched her face with the gloves she used to attend one of the two missionaries.
She was the first person believed to have contracted the virus outside west Africa, where the disease has killed more than 4,000 people since January 2014.
Medical, biotech stocks jump after U.S. nurse contracts Ebola
(Reuters) – Shares of little-known medical equipment and biotech companies jumped on Wall Street on Monday, after news that a nurse had become the first person to contract the deadly Ebola virus in the United States.
Airline stocks, meanwhile, were hit hard in a broad-market selloff on growing fears of the outbreak that has taken more than 4,000 lives, mostly in West Africa’s Liberia, Sierra Leone and Guinea. The S&P 500 lost 1.7 percent on Monday.
Shares of biotechnology company Ibio Inc (IBIO.A), hazmat suits maker Lakeland Industries Inc (LAKE.O), and face mask maker Alpha Pro Tech Ltd (APT.A) all ended the day with big gains.
Investors have piled into various companies that are either developing treatments for the disease or provide protective gear. Trading volumes have been on the rise, and the market values of some once-obscure names have soared in the span of a few days.
Ebola outbreak: 1st human trials of Canadian vaccine start in U.S.
The first human clinical trials of a Canadian-developed Ebola vaccine, VSV-EBOV, begin in Maryland today to assess the vaccine’s safety and determine the appropriate dosage to fight the virus that has killed more than 4,000 people, largely in West Africa, Health Minister Rona Ambrose has announced.
« We are able to share some very promising and hopeful news in the fight against Ebola, » Ambrose said from Calgary.
She made the announcement at a joint news conference with chief public health officer Dr. Gregory Taylor, who spoke from Toronto.
Both stressed no individuals in Canada have ever been diagnosed with Ebola, and the risk of contracting the disease remains low in this country. One person in Belleville, Ont., is in isolation with Ebola-like symptoms, though the hospital described the case as « extremely low risk. » Another person who had been in isolation in Ottawa since Sunday tested negative for the virus on Monday, health officials said.
Gaza
Gaza: During the last 20years, we have not been as optimistic that Palestine – Israel peace process to move forward as today. Why? Because this time, the global community has to get rid of ISIL – which uses Palestine’s and Assad’s victims as a justification for their hiring of new Jihadists *usually the use the definition of “humanitarian work” to get in contact with their victims*-. British parliament voted on Monday to recognize Palestine as a state, a move that will not alter government policy, but carries symbolic value as Palestinians pursue international recognition. Britain does not classify Palestine as a state, but says it could do so at any time if it believed it would help promote peace between the Palestinians and Israel. These development in addition to the aid decided by donors during the weekend (please see yesterday daily briefing) and UN Chief Ban Ki-moon call for peace process to be discussed are bringing all the conditions to move forward. Behind the scenes, Muslim brotherhoods are loosing the ideological fight, Hamas is splitting between moderate (which decided to participate to a coalition government) and extremists (which are struggling to look even more barbaric than ISIL to attract “talents”). Iran and Saudi are heading toward a peaceful Sunni-Shia schism etc.
What are the consequences for global markets? Less geopolitical risk premium and lower energy prices (low inflation, and higher profit margins for corporations).
UN’s Ban Ki-moon warns of ‘provocations’, calls for Israel-Palestinian talks
JERUSALEM: UN chief Ban Ki-moon warned on Monday against « provocations » as clashes erupted at Jerusalem’s holy sites, condemning Israeli settlement activity and calling for peace talks with the Palestinians.
Ban was speaking in Ramallah and Jerusalem where he met with Palestinian and Israeli leaders, a day after a donor conference for Gaza and hours after clashes at the Al-Aqsa mosque compound between Israeli police and Palestinians.
« I am also deeply concerned by repeated provocations at the holy sites in Jerusalem. These only inflame tensions and must stop, » Ban said at a joint news conference with Palestinian prime minister Rami Hamdallah in Ramallah on the West Bank.
‘Palestinians skeptical about promised financial aid’
Many Palestinians are skeptical about the $5.4 billion aid pledged for the rebuilding of the Gaza Strip, as they understand that conditions might be set for them to get the money, Hani al-Bassous from the Islamic University of Gaza told RT.
The donor conference in Cairo that took place last weekend garnered about $5.4 billion of assistance for Gaza, while the Palestinian Authority was asking for $4 billion dollars. The main contributors for the relief efforts turned out to be the US, the EU, and Germany, along with Turkey, Qatar and Kuwait.
International human rights lawyer Dr. Curtis Doebbler on pledged assistance to Gaza: “Qatar has always been supporting the people of Gaza and Palestinian people generally.”
Qatar became the biggest donor, pledging a billion dollars. « The state of Qatar announces its participation with an amount of $1 billion for the reconstruction of Gaza, » Qatari Foreign Minister Khaled-al-Attiya said at the conference.
The US promised to give Palestine $212 million; the EU pledged $568 million, with a separate $64 million donation from Germany, whereas Turkey, Kuwait and UAE together donated $200 million.
UK lawmakers pass symbolic motion on Palestinian state
(Reuters) – British lawmakers voted on Monday to recognize Palestine as a state, a move that will not alter government policy, but carries symbolic value as Palestinians pursue international recognition.
Britain does not classify Palestine as a state, but says it could do so at any time if it believed it would help promote peace between the Palestinians and Israel.
Prime Minister David Cameron abstained from the vote, which was called by an opposition lawmaker, and Cameron’s spokesman earlier said foreign policy would not be affected whatever the outcome.
The vote was closely watched by Palestinians and Israelis seeking to gauge the readiness of European countries to act on Palestinian hopes for unilateral recognition by U.N. member states.
Iraq & Syria
Iraq & Syria: Information war is intensifying. ISIL claims winning battle even before fighting them (e.g. Baghdad). We have been indicating that Kobani battle is very important for ISIL to strengthen its narrative. Our analysis of ISIL communication tool have shown that the terrorist organisation is using Spartacus narrative in conjunction with the biblical reference of David & Goliath. Though we refuse to spread ISIL propaganda material, and I hope that our readers will understand our position, we can send to client our references upon-request. To sum up our finding, 1) ISIL needs to win Kobani or shift the focus to other places (Baghdad), 2) any news which could push oil prices higher is welcome (because ISIL Oil Co “refinery margins” are shrinking every day), 3) the investment portfolio of ISIL reserves (those stolen from Iraqi Central Banks) are invested – according to our sources – to benefit from any information win, 4) by spreading chaos, ISIL jihadists hiring initiative got more traction because their view of the “end of the world” (or the Apocalypse) get traction.
Turkey decision to let US military to use its bases in the country to fight ISIL is a game changer. This is a first step before Turkey found a narrative where it helps Kurds without giving credit to independent kurdistan. President Erdogan can play a very important political (and economical) card should he decided to lead the fight on the ground. The shift in Muslim Brotherhood position vis-a-vis of ISIL (please see our yesterday report on Tariq Ramadan) is likely to help President Erdogan to more ahead with the ground operations.
We continue to be negative on Oil prices and on volatility because both include a risk premium related to ISIL battles. ISIL is winning some communication battle but is doomed to fail, because the international community is taking over the narrative and genuinely showing that the institutions are not rotten to the core. Gaza development is very positive element in our scenario.
Islamic State: Fighting in Iraq forces 180,000 from homes as suicide attacks hit Kobane and Baghdad
Fighting in Iraq’s western Anbar province has forced up to 180,000 people to flee since Islamic State (IS) fighters took over the city of Hit earlier this month, the United Nations said.
The IS militants extended their advance to an abandoned Iraqi army base eight kilometres west of Hit on Monday, members of a government-backed Sunni militia said.
In recent weeks, IS fighters have been on the offensive in the desert province of Anbar which borders Syria.
They took the town of Hit on October 2 and nearby Kubaisa two days later.
The advance in Anbar has raised concerns in the West because the area is close to the Iraqi capital Baghdad and it demonstrates the group’s reach.
IS fighters are also on the verge of taking the strategic town of Kobane, hundreds of kilometres away in northern Syria, on the border with Turkey.
UK Foreign Secretary Visits Iraq to Meet With Prime Minister Abadi
LONDON, October 13 (RIA Novosti) – British Foreign Secretary Philip Hammond is in Baghdad to meet with Iraqi Prime Minister Haider Abadi, amid a continuing struggle to defeat Islamic State (IS) militants in Iraq and Syria.
« In Iraq today meeting Prime Minister Haider Al Abadi to discuss support to GoI in fight against terrorism + need for national reconciliation, » Hammond wrote on Twitter Monday.
« I welcomed Iraq PM Haider Al Abadi’s commitment to inclusive gov’t: vital that all communities unite to fight ISIL, » Hammond wrote in another tweet.
Turkey agrees to US base use for anti-Islamic State fight
Jihadists fought their way into central Kobane in heavy clashes with the Syrian border town’s Kurdish defenders Monday, ahead of a Washington meeting of the US-led coalition against the Islamic State group.
The breakthrough saw IS claim half of Kobane, nearly a month after the Sunni extremists began their assault on the town on the Turkish frontier, despite more than three weeks of US-led air strikes in Syria aimed at stopping them.
That failure will be among the main points up for discussion at Tuesday’s meeting in Washington of military chiefs from the 21 countries in the US-led coalition, as will Turkey’s call for the establishment of a protective buffer zone.
In their latest air strikes, American and Saudi warplanes targeted seven sites around Kobane, the US military said, including IS staging posts used to try to cut the town off from the outside world.
A Kobane politician who is now a refugee said IS fighters had surrounded Kobane to the south, east and west, and warned of a « massacre » if they take the northern front bordering Turkey.
Iraq denies presence of IS militants near Baghdad airport
BAGHDAD, Oct. 13 (Xinhua) — The Iraqi Defense Ministry on Monday denied the reported presence of Islamic State (IS) militants in Abu Ghraib area near Baghdad international airport, stressing that security is under control.
« The reports about (IS militants) seizing Abu Ghraib area are not true, » Lt. Gen. Qasim Atta said. « Life is normal in the town of Abu Ghraib. »
Abu Ghraib, some 25 km west of the Iraqi capital of Baghdad, is just northwest of Baghdad international airport. The area is part of a volatile Sunni Arab area west of Baghdad that stretches through Anbar province to Iraq’s western borders with Syria, Jordan and Saudi Arabia.
Atta was responding to recent foreign media reports that clashes have been underway for more than a week between Iraqi security forces and IS militants, who are advancing toward the Iraqi capital.
ISIS Seizes Anbar Base After Iraqi Army’s ‘Tactical’ Retreat
ISIS militants seized a military base 85 miles from Baghdad early Monday after the Iraqi Army made what they described as a tactical withdrawal, local media and Reuters reported. The Iraqi soldiers took their weapons and equipment before leaving the base, close to the city of Hit, in Anbar province, some reports said. Iraq’s Ministry of Defense did not immediately respond to requests for comment from NBC News but Lt. Gen. Rashid Flaih, commander of operations in Anbar, told regional news outlet Al Arabiya that the retreat had been “tactical.” No other information was immediately available.
ISIS seized the city of Hit itself earlier this month, along with nearby Kubaisa. The fall of the military base came as the United Nations said up to 30,000 families – or 180,000 individuals – had fled the area because of the fighting and because of air strikes carried out by the Iraqi government and U.S.-led coalition forces. The fall of Hit is seen as a key step by ISIS in isolating government forces defending the Haditha dam, which controls the flow of the Euphrates to southern Iraq.
Russia
Russia: President Putin ordered troops withdraw from the Ukrainian border ahead of Ukraine-Russia head of states meeting in Italy this week. While this action could be positively perceived, we advise cautious because the same action has been taken after Crimea annexation. Meanwhile, Ukraine is considering a peace process with Donbass region self-proclaimed republics. However, as we were indicating for some time (please see our Friday take below), a quick resolution seems un-compatible with Ukraine aim to ultimately join EU and NATO. President Putin actions could be explained by 1) Premier Li visit to Russia, which seeks economic collaboration, and 2) the acceleration in RUB depreciation which cost ~$1.5bn currency intervention daily. Putin is reducing the pressure on Eastern Ukraine because he stuck a domestic political win during last week Formula 1 in Sochi and wants to reduce the pressure ahead of the G-20 (please see PM Abbott declaration on MH-17)
From our Oct. 10th daily briefing
European Union’s incoming foreign affairs head Federica Mogherini hinted her strategy with the “bear” Russia: firmness and tact. Actually, we believe that firmness is coming from EU Council President Donald Tusk, while tact needs to come from the EC. EU’s Mogherini hinted that others in Brussels know better to deal with bears (in politics that mean “I know that you have vested interests with Russia”). Many political parties have to drop their support to Russia and start think about EU public interests. Otherwise, many will start questioning whether these are not conducting treason (betraying those who have voted for them). The list is long and no one have interest to name names. In an environment where Iran wants to secure the negotiation without upsetting Russia (a long term ally which have helped provide a back-door to Iran oil), Rouhani said that Iran negotiation should not derailed any political solution with Russia. Unfortunately for Russia this will not help lift sanctions. Because, many commentators are watching: EU should make no mistake, vested interest will not go away with the crimes Russia is responsible for (and that goes beyond annexing Crimea).
Oil prices plummeting continue to constitute an existential threat to President Putin administration. A policy document of the Islamic State discovered at one of the raids brings forth some alarmingly ambitious plots of the jihadist outfit. The plan includes bribing Russia with access to oilfields in exchange for Iran’s nuclear technology. This document confirmed that ISIL is looking to Russia to increase it force. We have been worry that vested interests would align their force with those of the barbaric. Should they do so, they would be no place to hide. Make no mistake, if ISIL got the technology Putin and Russia (with interest groups which have been supporting them) will be held accountable.
While Russia continue to prepare its isolation (VTB’s says consider that capital control is not the end of the world), Putin stays put and keep his narrative: the cost will be more harsher for EU than for Russia. Unfortunately, for President Putin, facts have no political bias or religion. Russia economy is collapsing and the Saudi oil prices cut, Iran negotiation amongst other thing are pushing oil prices to a free fall spiral and threatening the stability of the government (an Oil price at $75 will push Putin out). In our Energy Update (our call that oil might go as low as $80 for WTI) we’ve highlighted the trends we observe now. These are not only providing a boost to EU (currently mistakenly analysed by many XX Century economists as a deflationary risk) but also increasing the current Russian administration existential threat. We forecasted last February that Russia will have to go through a period of isolation, will create Eurasia by annexing Eastern Europe (we still unsure where the division will take place). We stick to this scenario. However, we are working on an alternative scenario, where the speed of oil prices collapse may over through Putin administration and oligarchs before President Putin reached his messianic goal (many economists agree with the view that some of Russian President speeches are messianic – 2007 Munich is a very telling speech-).
Ukraine President is taking the “good governance bill” to the floor. This on one hand increase the likelihood of our scenario that Ukraine – West will become a new Poland but it increases short term the risk of more actions of “bad governance agents: the self designated Eastern Republics”). I wonder what kind of economic prospect will have these Russian federation satellite. Old USSR satellite (Latvia and Bulgaria) are fighting political crisis spur by the widely spread mistrust in their government. Like during the Cold War, Russia continue to use the spread of disinformation (in the internet). But we see these posturing likely to fail, should EU Commission President pursue his genuine plan to change EU narrative (more jobs, more investment – specially in digital -). The emergence of new media companies helped by big data is likely to be another leap in defeating the disinformation and mistrust spread.
China willing to promote all-round cooperation with Russia: premier
MOSCOW – China is willing to further materialize all-round and in-depth exchange and cooperation with Russia, visiting Chinese Premier Li Keqiang said here Monday.
China and Russia are each other’s biggest neighbors, with profound traditional friendship, Li said at a meeting with Sergei Naryshkin, speaker of the Russian State Duma, or the lower house of parliament.
Noting that Chinese President Xi Jinping and his Russian counterpart, Vladimir Putin, have held several successful meetings since last year, Li said the China-Russia comprehensive strategic partnership of coordination manifests itself not only in the high-level mutual political trust, but in the increasingly broad and deep economic and trade cooperation as well as cultural and people-to-people exchanges.
China, Li said, supports the two countries’ legislatures expanding exchanges and cooperation, promoting China-Russia friendship, and actively boosting bilateral practical cooperation, so as to lay a solid foundation of public opinion for the long-term development of both nations.
For his part, Naryshkin noted that Russia and China firmly support each other on issues concerning national independence, sovereignty and territorial integrity.
Grand Prix Formula 1 in Sochi marks another victory for Putin
Russia’s first modern-day Grand Prix Formula 1 in Sochi marked a « personal and political victory » for Vladimir Putin, the French Le Monde wrote.
The publication traced the history of relations between Formula 1 and Russia. One hundred years ago, such competitions were held in Russia, but they were stopped because of WWI. The head of Formula 1, Bernie Ecclestone, wanted to hold the tournament in the USSR, but could only achieve the goal in modern Russia, despite Western sanctions.
Prior to the competition, many European and American media outlets tried to propagate the topic of canceling Formula 1 in Sochi. Yet, Bernie Ecclestone said that no one had asked him of anything. Holding the Grand Prix in Russia was absolutely legal, Le Monde wrote. In turn, German publication Tagesspiegel drew attention to the quality of the sports infrastructure in Sochi.
Muscling up for a shirt-front: G20 becomes the Brisbane Biffo
Who might have imagined that the G20 – a conclave normally so lacking in animation that the biggest stoush is an endlessly polite exchange in back rooms over where to scribble « goodwill » and where to insert « concern regarding long-term economic recovery » in the official communique – is about to take on the intoxication of world championship wrestling?
Or, even more deliciously, a collision of muscled-up testosterone that on the footy field regularly leaves one of the contestants in dreamland before he hits the ground.
« I’m gonna shirt-front Mr Putin, » declared Prime Minister Tony Abbott, he of the boxing blue from Oxford, the budgie smugglers from Freshwater and the thunder thighs from the treadly.
Russian President Vladimir Putin, who is in the regular habit of dispensing with his shirt altogether, the better to wrestle Siberian bears, hunt with bow and arrow and demonstrate the occasional eruption of fire from an AK47 before a bout of judo, hasn’t yet formally responded to the offer of a shirt-front.
UPDATE 3-Oil falls on Kuwait, Saudi signals, but Chinese data lends support
* Chinese Sept crude oil imports up 9.5 pct vs Aug
* OPEC unlikely to cut output to support prices – Kuwait
* Saudi Arabia tells markets it is ready to accept lower prices
SINGAPORE/SEOUL, Oct 13 (Reuters) – Global oil futures lost more than a dollar on Monday after Saudi Arabia and Kuwait signalled a willingness to bear with lower prices to defend market share, although better-than-expected trade data from China pared the losses.
Contrary to market expectations, Kuwait said OPEC was unlikely to cut production to support prices, while Saudi Arabia has privately told oil market participants it could be comfortable with $80 for oil.
« Judging by the latest comments from Kuwait and Saudi Arabia, we expect more near-term downside ahead for oil prices amidst the ongoing global growth scare, » said Gordon Kwan, head of oil and gas research at Nomura.
« Without a firm commitment to cut OPEC exports, China’s increased demand alone is not enough to sustain a potential oil price rebound. »
Brent crude oil briefly touched its lowest since December 2010 at $87.74 in early trade, but pared losses after the Chinese data to trade at $88.98 a barrel by 0455 GMT, down $1.23.
Hong Kong
Hong Kong protests are calming down, as we were expecting. But Mainland sticks to its view that any political reform should bind by the “basic law”. We do not see HK and Mainland China governments to accept any substantial change in the short term. China wary of HK protests ease pain of Macau Casinos (a pain organised by China to reduce corruption). This is 100% in line with our first comment on HK protests please find below some of what we were saying yesterday.
However, unlike with Tian’anmen square protest, we see Chinese leadership being less “harsh” fighting the protests, as we acknowledge Chinese leader fear vis-a-vis social media power. In the medium term, we see China devoting more democratic say in HK. Our forecast is built on the view that the Chinese government is fearing a HK political change to threat its reform agenda. President Xi wants to be seen as the strong man to fight conservatism push back to the reform, specifically ahead of the IV-th Plenum, which will focus on improving governance (which creates an important shift of power from “princelings” to the reformists). After the IV-th Plenum we see President Xi and HK government coming with a middle ground solution, which could take the form of a split designation of leaders. Democracy comes with cost and responsibility. We consider that President Xi long-term objective of political reform to be intact, but he fears that “House of Cards” like politics could jeopardise his aim to avoid the middle-income trap risk should interest groups (Raymond Tusk character in the TV-show) to derail his genuine fight against conservatism and vested interests.
Hundreds of people, many wearing masks, have tried to remove protesters from the heart of Hong Kong’s business district, scuffling with the mainly student protesters who have occupied the streets for the past two weeks.
Barricades were ripped down by anti-protester groups of men calling for the students to leave.
« The group of people who look like gangsters, they start running toward them [protesters], and then one of them hit an old man with something hard, hit his head, so he’s injured over there right now, » said 20-year-old student protester and witness Winnie Locke.
Taxi and truck drivers, opposed to the protests which have seriously affected their business, surrounded some barricades as police stood between the opposing sides.
Watching Hong Kong: Taiwan on guard against China
Hong Kong’s Occupy Central demonstrations may be losing steam, but Taiwan’s movement to resist China is only intensifying.
While improved ties with China in recent years have been welcomed by many here, others worry about Beijing’s growing influence.
Its recent refusal to let Hong Kong decide who can run for chief executive confirms Taiwanese suspicions that China would never allow Taiwan to govern itself if the two sides reunified.
« Relations are now at a low point. It’s not just because of Occupy Central. After [Taiwan’s] own 18 March movement, people who are suspicious of Beijing have become more of the mainstream, » said Kou Chien-wen, a political science professor at National Chengchi University.
« It’s an accumulation of the past few years. So many agreements have been signed with China, but the ordinary person’s income hasn’t increased – of course that has to do with the poor distribution of wealth. »
Protests Seen as a Passing Economic Storm for Hong Kong
Hong Kong’s economy weathers three major typhoon warnings each year. So far, the Occupy Central protests have proved to be just another passing storm.
Like they do when a tropical cyclone closes schools and floods roads, Hong Kong’s 220,000 financial services workers have logged on from home and met with clients over Skype to avoid the rallies blocking streets in key business districts. Twelve of 15 economists surveyed by Bloomberg reaffirmed their 2014 gross domestic product forecasts since protests began Sept. 26, and only one has lowered 2015 estimates.
“While there are issues, we’ve found them fairly easy to cope with,” said Jessica Cutrera, a managing director and head of operations and compliance for investment firm EXS Capital Group, which has more than 20 employees in its Central office near one of the protest sites. “The protests are not nearly the scale of risk that a serious typhoon or terrorist incident would be.”
Catalonia
Catalonia: referendum called off. We were expecting it and we add Catalonia to the numerous subjects were big data has proven its accuracy.
We were saying “calls for independence referendum is increasing pressure on both Madrid and EU to move forward to offer better conditions and better narrative to the public. We see PM Rajoy taking constitutional actions to deter Catalonia from conducting the referendum, at a moment where more the referendum is gaining support from the independence forces all over the world. Madrid may accept to open discussion to devote additional autonomy to Catalonia in order to reduce the pressure. This story is likely to push EUR existential threat higher short term, but we consider that EUR is likely to rebound by the end of this year, when these threats will be repriced as less likely.” (daily briefing Sept. 30 2014). Catalonia decision to suspend formal campaign is the first step in our constructive scenario. However, Artur Mas uses the threat of going ahead with the referendum, though the constitutional court has specified that’s un-constitutional. This threat is urging PM Rajoy to act which he did in Saturday by opening discussion of some kind of PM Cameron solution to Scotland independence call (i.e. more fiscal autonomy). Catalonia government will decide by October 15 on whether to hold referendum. We see the most likely scenario to be some deal with Madrid which would : 1) help Artur Mas to claim victory – he would have secured more autonomy – and 2) help PM Rajoy to de-escalade the tension over Catalonia. We see the next region to start a fight for more autonomy to be Bavaria (Germany’s most wealthy region which is pushing Alternative fur Deutschland – AfD – anti-EZ party wants to reduce its contribution to other regions – “lazy” EZ members states, in their parlance -. Business interest (Football Clubs) are starting to indicate the cost of a secession. Novo-Russia continue to support Catalonia, as a secession could help justify Crimea. Many have been talking about war in the East, the War against Russia is also taking place in Catalonia. The relations between populists parties in EU and Russia speaks volume. Czar Putin should make no mistake EU is one and indivisible. Populism is a cancer, EU is recovering from it.
Catalan independence: November referendum ‘called off’
The Catalan regional government has called off plans to push ahead with a contested independence referendum, Spanish media says.
A spokesman for Catalan President Artur Mas said he would be holding a news conference at 08:00 GMT on Tuesday.
Spain’s government said the 9 November vote was unconstitutional but Catalan’s leaders had vowed to hold it.
Support for independence has increased among the 7.5 million Catalans following Spain’s economic crisis.
On 19 September, the regional parliament voted by 106 to 28 in favour of granting Catalan’s president the power to hold a referendum.
Spain’s central government protested against the move and the Constitutional Court agreed to hear their case against the referendum – a process that could take years.
UPDATE 1-Spain’s Catalonia to seek alternatives to independence referendum
Oct 13 (Reuters) – The leader of Spain’s Catalonia region will call off a referendum on independence from Spain planned for Nov. 9 and look for alternative ways to consult Catalans, a key regional political party said on Monday.
Esquerra Republicana de Catalunya, a pro-independence party that backs the regional government of Artur Mas said the Catalan leader had told it and other political forces during talks on Monday that he would not organise the referendum as planned.
Mas will instead offer to hold a « consultation of citizens, » an ERC spokesman told Reuters.
The referendum was suspended last month by Spain’s constitutional court, but the regional government of Catalonia had not announced a decision to abandon the planned vote.
Ferguson
Ferguson – Missouri: replace Catalonia, HK Occupy with Ferguson, keep calm and carry on.
Ferguson-Missouri tension resumed during the weekend after a new fatal shooting. The Tea Party caucus is using these events as a way to increase the racial tension, while Sen. Rand Paul wants to use the spread of African-American anger vis-a-vis President Obama administration as a way to bring these voters to the GOP. Sen. Rand Paul has used exactly the same strategy with the youth, which suffers the most from the global financial crisis consequences. The administration needs to increase it rhetoric against disinformation, mistrust and pessimism should it want to avoid that the voters turn to those who are placing the most emphasis on pessimism with the help of donors which interest is to keep status quo (at a moment when the US need urgently to undertake structural reforms – immigration, taxes etc. -).
Ferguson, HK Occupy, Scotland Independence, Catalonia share the same problem: inequality. Many are considering that Inequality will bring a class struggle and some kind of XIX century like revolution. Notwithstanding that depending on where someone seats, we might think that these mass protests (1000 for Ferguson, much more in Catalonia) are sufficient to start the revolution. But like we were saying in our earlier notes, we genuinely believe that Occupy and Anonymous groups have been hijacked by “commodity interest groups” (it suffice to look at the links between investment portfolio’s advise of those groups – Gold and Commodities – and the consequence of a derailed soft power to move toward better governance).
However, unlike in the old “organised revolutions” in LatAM, this time around the social media is in charge and the overwhelming majority wants to see soft power – and Ferguson is part of that – but the chaos and Apocalypses imagined by the 3G group (the most radical group within libertarians and their name stands for Gold, Guns and God) are unlikely to take place. Of course Ebola, and ISIL are genuine threats but 1) the on-going improvement in governance (cf. Australia G-20), 2) the work to reduce disinformation and skepticism (EU, Gaza), 3) military and medical action against the two deadly diseases ISIL and Ebola, are supportive to the positive scenario. Furthermore, there is a win-win scenario which is taking place and which could help: workers, shareholders and consumer to benefit from.
Police: More Than 50 Arrested in Ferguson Protests
Pounding rain and tornado watches didn’t deter hundreds of protesters Monday outside Ferguson police headquarters, where they stayed for almost four hours to mark how long 18-year-old Michael Brown’s body was left in a street after he was fatally shot by police.
Organizers of the four-day Ferguson October protests dubbed the day « Moral Monday » and committed acts of civil disobedience across the St. Louis region. In addition to the initial march on Ferguson police headquarters, protesters blocked the entrance to a major employer, held a loud rally inside St. Louis City Hall, disrupted business at a Ferguson shopping center and three Wal-Mart stores and tried to crash a private fundraiser for a St. Louis County executive candidate where U.S. Sen. Claire McCaskill was scheduled to appear.
At the Edward Jones Dome Monday night, protesters briefly draped a banner over a Jumbotron video board that read « Rams fans know on and off the field black lives matter. »
In Ferguson, coordinated acts of disobedience as protests evolve
FERGUSON, Mo. — Arms raised high in a chilly rain, waves of clergy, some standing, some on bended knee, pressed their bodies into a line of police officers Monday in the parking lot of the Ferguson Police Department.
Hours earlier, shortly before midnight, young protesters shut down a St. Louis intersection, playing hopscotch and jumping rope before joining others in a silent march to Saint Louis University, where, ultimately numbering nearly a 1,000, they staged a sit-in at the heart of campus.
And in the late afternoon, dozens of protesters stormed St. Louis City Hall, where they chanted, blew whistles, hung banners and ascended the marble steps demanding to see Mayor Francis Slay (D).
Happy Columbus Day!
Columbus Day: Some social media activists have “trolled” Columbus Day to change it into Indigenous Day in order to focus the narrative on the human causalities consequence of the exploration of the Americas. These activists tried to increase the tension in Ferguson (what’s best to make the tension increase then talking about slavery…).
These activists are using the very high inequalities and the forthcoming robotics area to spot that the “wealthy” will make it all and we will be leaving into some kind of “Elysium” 2-sided “countries”. These are complete non-sense for many reasons: 1) the overwhelming majority are willing to have robot colleagues or bosses (personally I have robot colleagues and there as very helpful), 2) knowledge is about to become as easy as playing games on one’s smartphone, 3) governance is improving and this is likely to open many markets hijacked by crony capitalism, 4) commodity prices are plummeting (should one take Saudi’s “get use to it” with the same credibility as markets have taken Draghi’s or Kuroda’s “whatever it takes”).
We are at the edge of starting discovering two “new” continents: Africa and the Oceans. Anonymous hackivists, Boko Haram, ISIL and many others are spreading the pessimism that China will be Columbus of Africa. This is totally UNFAIR and FALSE. We have been in contact with Chinese thinkers for years, and China has shown – though some mistakes have been made – that it aims achieving a win-win scenario: education, health and prosperity for Africa in exchange for labor. Furthermore, Robot has made jobs much less “slaving” than when Columbus arrived to the Americas. Finally, Africa is much more than just commodities or cheap labor. Each time I visited Africa I’ve been overwhelmed by the ingenuity of the public and its ability to adapt. As soon as we get rid of Ebola and some other diseases (such as Malaria) Africa would become the next 20% asset allocation in every pension fund portfolio, because pension funds are struggling to find high returns to compensate from life expectancy improvement (thanks to technology and wearable devices) with higher returns.
The second “continent” which we have not discovered yet is Oceans. This is mainly due to the lack of technology so far. However, the introduction of energy efficient submarine drones (which uses waves to generate autonomously energy) is likely to put NOAA forthcoming years budgets at odd with those of NASA. Again the same “pessimists” are saying that this will destroy our planet (as if anyone could trust Koch Industries to be the champion of the environment) but our technologies are likely to be much more energy efficient and environment friendly (2014 Physics Nobel Prize is one good example of where we are heading).
Finally, the next decade Columbus is likely to be Elon Musk with Space X. We have the ability to upload of conscience on robots / computers. XXI Century Santa Maria is likely to be piloted by robots which are run by the brightest minds conscience uploading. These robot life expectancy is theoretically infinite. Should Santa Maria take with it some of our human DNA, we can populate other planets * which probabilistically have been proven they exist*.
I hope that we will not loose too much time fighting XIV Century devils (ISIL etc.) and will move forward to upload of the maximum of consciences because this can help us move from a Type I species to Type II or even III. Type I: are planet inhabitants which use all energy of their planet. Type II use their solar system energy. Type III uses the Galaxy resources.
Let’s accept our history mistakes and move on, because we have achieved so many things in 13.8billions years, let take the next leap and move into the new Goldilock conditions. Happy Columbus Day !
Instead of Columbus Day, some U.S. cities celebrate Indigenous People’s Day
(CNN) — Columbus Day often brings to mind the Nina, the Pinta and the Santa Maria. This Monday, some cities and states would rather you think of the Sioux, the Suquamish and the Chippewa.
For the first time this year, Seattle and Minneapolis will recognize the second Monday in October as « Indigenous People’s Day. » The cities join a growing list of jurisdictions choosing to shift the holiday’s focus from Christopher Columbus to the people he encountered in the New World and their modern-day descendants.
The Seattle City Council voted last week to reinvent the holiday to celebrate « the thriving cultures and values of Indigenous Peoples in our region. » The Minneapolis City Council approved a similar measure in April « to reflect upon the ongoing struggles of Indigenous people on this land, and to celebrate the thriving culture and value that Dakota, Ojibwa and other indigenous nations add to our city. »
The Seattle School Board followed suit along with Portland Public Schools, where officials say Indigenous People’s Day will not replace Columbus Day but supplement it. Schools across the country have been working for years to clarify Columbus’ role in history.
« It’s not about one or the other, it’s about how do we get a complete picture to understand where we’re at in history, and how we got there? » said Portland School Board member Greg Belisle, according to the Oregonian.
It’s Columbus Day. Let’s talk about geography (and Ebola).
Today we commemorate Columbus Day, an American holiday observed in some states, perhaps for Christopher Columbus’s perseverance and bravery rather than his geographical knowledge. In light of recent scares involving “potential Ebola cases” and air travel involving individuals who had been nowhere near the Ebola outbreak zone, it seems we all could use a little geography lesson.
As college instructors of African politics, we both work to increase knowledge of African geography. Students usually come to college knowing American geography well, but few have ever been required to memorize a map of Africa. We require that students memorize the map because, when studying African politics, it essential that our students know where events happened and how they relate to one another. It’s impossible to understand the politics of the liberation movements in Southern Africa from the 1960s to 1980s without understanding where Angola and Mozambique lie in relation to South Africa and Zimbabwe. Students must know that the Democratic Republic of Congo shares a border with Rwanda in order to understand how the 1994 Rwandan genocide could have such a profound impact on the Congolese. Like most other African politics professors, we give map quizzes early in the semester of our introductory courses, requiring students to fill in a blank map of the African continent. One of us (Laura) also requires her students to memorize each African capital city. We find that students benefit greatly from this intensive exercise in memorizing the map early on; they don’t have to pause when reading to figure out where Ouagadougou is or how trade routes between Mali and Algeria worked in the pre-colonial era. (For those of you who can’t take our classes, The Washington Post has a neat interactive map quiz that will do just fine.)
US Midterms elections
US Midterms elections: November 4th midterm elections is coming with many uncertainties. Should GOP win the Senate, the US administration is likely to find itself stuck with a divided government which could make : debt ceiling, budget negotiation, Fed Transparency Bill negotiation, very hard. Some humorists have called the Tea Party caucus to be the “no-negotiators”. Without leaning toward a liberal Tea Party bashing, we would like to remind our readers of October 2013 debt ceiling talk. These period have created too much fear that the US might default that some Sovereign Wealth Funds (SWF) have been considering challenging the USD reserve currency privilege status. The average polls are giving 55% chance to the GOP to secure a win in the Senate. However, these polls do not track the weak signals narrative nor participation variable (a model we’ve built for Scotland Independence and which has proven a very good results).
We continue to side with the consensus. But we consider that as soon as investors will start looking at the consequence of a GOP Senate majority win we might see some change in the dynamics. We have the opportunity to use a new source of big data information. We will be using it to bring the change in the narrative in the coming 3 weeks. Stay tuned and thanks for your support.
Liberal Group Blames Republicans for Ebola in New ad
A liberal political group just played the Ebola card in the midterm elections.
A new ad by the Agenda Project Action Fund, a liberal outside group, opens with a line uttered by Senate Majority Leader Mitch McConnell—”Washington, actually, can cut spending”—and ends with the statement, “Republican cuts kill.”
The rest of the one-minute ad is peppered with clips of Republicans asking for cuts, interspersed with top officials from the Centers for Disease Control and Prevention and the National Institutes of Health saying the Ebola outbreak in West Africa could have been better handled if their agencies had more funding. NIH head Francis Collins said in an interview published Sunday that an Ebola vaccine might have been developed by now if it were not for a “10-year slide in research support.”
Election 2014: Why voters don’t care
Editor’s note: Julian Zelizer is a professor of history and public affairs at Princeton University and a New America fellow. He is the author of « Jimmy Carter » and the forthcoming book, « The Fierce Urgency of Now: Lyndon Johnson, Congress and the Battle for the Great Society. » The opinions expressed in this commentary are solely those of the author.
(CNN) — While America faces many big issues — unrest in the Middle East, the effects of climate change, uneven economic growth, growing income inequality, a costly and less than optimal health care system and more — the contest to control the House and Senate does not really seem to be turning into a defining struggle over the national agenda.
Clearly the 2014 midterm elections aren’t generating much excitement on the hustings. According to Gallup, voter enthusiasm is down significantly since 2010.
Republicans are more enthused than Democrats, according to Gallup, but neither party is doing very well. Given that many of the key races in competitive states might come down to a small percentage of voters, as is usually the case in midterms, enthusiasm and its impact on turnout can be decisive on Election Day.
The GOP is winning on the issues
President Obama’s foolish declaration that all his policies would effectively be on the ballot warmed the hearts of Republicans. At a time when Democratic policies are in low regard, nothing would please them more than a referendum on the Obama agenda. Former Republican Arkansas Gov. Mike Huckabee, left, listens as U.S. Rep. Tom Cotton, R-Ark., speaks in Little Rock, Ark., Monday, Aug. 25, 2014. Huckabee endorse Cotton in the race for U.S. Senate against U.S.
The Republicans in Congress hold significant leads over the Democrats on four of the six issues that U.S. registered voters say are most important in determining how they will vote in November: the economy, the way the federal government is working, the situation with Islamic militants in Iraq and Syria, and the federal budget deficit. Democrats, by contrast, top their Republican rivals on just one of the six: “equal pay for women.”
What is more, on the issues voters care most about, the GOP has been extending its lead over the Dems. (“On the No. 1 issue, the economy, Republicans have more than doubled their April lead over Democrats, to 11 percentage points. Notably, as the GOP tries to gain control of the Senate, the current GOP advantage on the economy nearly matches the 12-point advantage the party held in August 2010, shortly before the midterm elections that gave the Republicans control of the House of Representatives.”) And in a turnaround from the early Obama year,s the GOP now holds a double-digit lead on foreign policy and the Islamic State specifically. Likewise, Republicans lead on immigration, which Democrats had thought was a good issue for them.
Obama and the Midterms: What’s at stake?
WASHINGTON (AP) — For President Barack Obama, the stark reality of the looming midterm elections is that the best outcome for his party gets him nothing but two more years of the status quo.
Two more years of a divided Congress. Two more years battling a Republican-led House that sees little overlap with the president’s priorities. And two more years that are likely to pass without the kind of legacy-building legislation that has eluded the president throughout his second term.
And yet to White House aides, it sure beats the alternative — a Republican takeover of the Senate.
« Who sets the agenda in the Senate matters in a big way, » said Dan Pfeiffer, Obama’s senior adviser. If Republicans take the Senate, Pfeiffer predicted a « doubling down on the (Texas Republican Sen.) Ted Cruz, shutdown, hostage-taking » approach to government. »
US News
US markets continue to behave between repricing downward growth prospect (as we were expecting) and reassign Fed policy going forward. Although VIX has moved up it still below the high stresses period we have experienced during the recent period. The Mid-Term elections prospect is not discussed as one reason which could create more crisis: GOP are likely to tight Fed hands, should they secure the Senate majority, while the recovery is still underway. We see the next two weeks to focus on the narrative on the negative consequences of a GOP Senate win. A strategy the UK has followed to secure the Scotland independence vote. Meanwhile, recent Clinton Presidency document release shows the stress around the impeachment risk (a gesture GOP has been considering until recently and which may resume after mid-term elections). Furthermore, the political mistrust continues to be on focus in DC while policymakers discussing inappropriate conduct during the 2012 prostitution scandal in Colombia
Federal judge strikes down Alaska’s marriage ban
ANCHORAGE, Alaska (AP) — A federal judge on Sunday struck down Alaska’s first-in-the-nation ban on gay marriages, the latest court decision in a busy week for the issue.
It wasn’t immediately clear when marriage licenses would be issued to same-sex couples in Alaska, however the state does have a three-day waiting period between applications and marriage ceremonies.
The state intends to appeal the ruling, Sharon Leighow, a spokeswoman for Gov. Sean Parnell, said in an email to The Associated Press.
The late Sunday afternoon announcement caught many people off guard. No rallies were immediately planned.
« This is just an amazing day for Alaska. We’re just so fortunate that so many have fought for equality for so long — I mean, decades, » said Susan Tow, who along with her wife, Chris Laborde, were among couples who sought to overturn Alaska’s ban.
Vatican document challenges Church to change attitude to gays
(Reuters) – In a dramatic shift in tone, a Vatican document said on Monday that homosexuals had « gifts and qualities to offer » and asked if Catholicism could accept gays and recognize positive aspects of same-sex couples.
Roman Catholic gay rights groups around the world hailed the paper as a breakthrough, but Church conservatives called it a betrayal of traditional family values.
The document, prepared after a week of discussions at an assembly of 200 bishops on the family, said the Church should challenge itself to find « a fraternal space » for homosexuals without compromising Catholic doctrine on family and matrimony.
While the text did not signal any change in the Church’s condemnation of homosexual acts or gay marriage, it used less judgmental and more compassionate language than that seen in Vatican statements prior to the 2013 election of Pope Francis.
« Homosexuals have gifts and qualities to offer the Christian community: are we capable of welcoming these people, guaranteeing to them a further space in our communities? Often they wish to encounter a Church that offers them a welcoming home, » said the document, known by its Latin name « relatio ».
« Are our communities capable of proving that, accepting and valuing their sexual orientation, without compromising Catholic doctrine on the family and matrimony? » it asked.
Mitt Romney Is Using This Joke To Make Fun Of President Obama
Mitt Romney has a reputation for being somewhat robotic, but in his recent appearances on the campaign trail he seems to have added humor to his arsenal.
According to a National Journal report, Romney launched a zinger at President Barack Obama while campaigning for GOP Iowa Senate candidate Joni Ernst on Sunday.
Here is Romney’s joke in full:
President Obama went to the bank to cash a check and he didn’t have his ID. And the teller said you’ve got to prove who you are.
He said, « How should I do that? » She said the other day Phil Mickelson came in, he didn’t have his ID but he set up a little cup on the ground, took a golf ball, putted it right into that cup so they knew it was Phil Mickelson. They cashed his check.
And then Andre Agassi came in. And Andre Agassi didn’t have his ID either. He put a little target on the wall, took a tennis ball and racquet– hit it onto that target time. We knew that was Andre Agassi so we cashed his check.
And she said to him, « Is there anything you can do to prove who you are? » And [Obama] said, « I don’t have a clue. »
And she said, « Well, Mr. President, do you want your money in small bills or large bills. »
Europe News
Br-exit: Knowing that EU is changing its narrative, UKIP call for an early Br-exit vote doesn’t come as a surprise. Actually, we were expecting it to come earlier because the populist are likely to loose the supports they are having now. Populists parties are using investment advisory businesses to spread their mistrust. A recent study conducted by the AMF (France SEC), showed that 9 web-traders over 10 are loosing money when investing in FX. This is mainly due to the fact that 9 over 10 are investing like they vote: buy Gold, USD and sell EUR because it’s doomed (this is their beliefs not ours). By better regulating the internet retail investment sector, we are likely to see less spread of mistrust. These internet retail websites are widely spreading mistrust and advising ‘moms and pops’ to make easy money when the doom scenario will come. Again our legal have forbidden us from spreading some website adds (because they consider these are non respecting SEC and other regulations). These attract their “victims” by claiming making $8,000 a month by becoming a trader. The 9 over 10 are usually exposed to the next big splash in the markets. This is exactly how our research have found ISIL portfolio to be invested. While the first is betting that our institutions are rotten to the core and are listing to the doom and gloom widely spread, the former is speaking its own books. No one can be held accountable for making wrong investment decisions. However, by stressing the losses many individual investors are likely to change their strategy and diversify their views. This financial market war is likely to leave only those which bet on ISIL success largely exposed to the doom and gloom scenario.
While EU-skeptics groups continue to do well in the polls, EU is heading to a grand bargain which would clear the way to regain public support for the EU project. Germany’s FinMin Schauble indicated that Germany’s response to a “clear weakening” of the economy will be a shift in public spending toward investments and away from government consumption. He said that Germany could be willing to increase EIB capital (a strategy designated Commissioner Moscovici seems to be open to during his weekend interview). Eurogroup has cleared the way to a shift toward growth agenda / pact. Furthermore, China Premier Li visit to Germany has conducted to the release of a guideline for bilateral corporation. Furthermore, EcoMin Macron hinted that France may be considering a change in U/E allowances (a reform we understood to be very high on Chancellor Merkel ask list to move for more EU integration). Furthermore, US and UK are considering joint model to deal with too big to fail (after ISDA agreed on a “big bang” deal to reduce systemic risk arising from derivatives). Finally, according to Reuters, Germany is trying to convince Turkey and Iran to join the fight against Islamic State (IS) militants, Foreign Minister Frank-Walter Steinmeier told a German newspaper. EU developments are in line with our constructive scenario for the region (a view which is not priced yet by markets).
Spain to increase Ebola training as nurse remains seriously ill
NHS staff strike in dispute over pay
Thousands of health workers, including nurses, midwives and ambulance staff, have taken part in the first strike over pay for more than 30 years.
But disruption was minimised after unions agreed staff would make sure emergency care was covered.
Workers from seven trade unions took part from 07:00 to 11:00 BST in England, while two unions were involved in Northern Ireland.
The strike is being followed by four-days of work-to-rule from Tuesday.
This is expected to involve staff refusing to do overtime without extra pay and insisting on taking their breaks.
The full picture has yet to emerge about how much disruption was caused by Monday’s walkout – although no major incidents have been reported.
In advance, unions and managers had met to ensure essential services were maintained.
Irish pension savers take on more risk than UK peers
Almost one in five Irish pension savers wouldn’t alter their investment portfolio until its value dropped by 20 per cent, a survey of Irish defined contribution (DC) members has found. This compares with a 10 per cent level at which UK savers would take action, indicating that Irish pension savers are more reluctant to engage with their pension than their UK peers.
The survey, from State Street Global Advisors, also shows that Irish pension savers are the least confident that they’ll meet their retirement goals, with just 15 per cent expecting to do so. By comparison, almost one in three UK participants were confident about their retirement goals.
Anti-EU UKIP demands early ‘Brexit’ vote as poll shows support surging
(Reuters) – Britain’s anti-EU UK Independence Party said on Sunday it would use its growing success to try to secure an early referendum on leaving the European Union, after its support hit a record high of 25 percent in an opinion poll.
The poll, published days after UKIP won its first elected seat in Britain’s parliament at the expense of Prime Minister David Cameron’s Conservative Party, suggested it could pick up more seats than previously thought in a national election in May.
UKIP favours a British exit from the European Union, known as a ‘Brexit’, and tighter immigration controls. It has shaken up the British political landscape, challenging its traditional two-party system and piling pressure on Cameron to tack further to the right.
UKIP leader Nigel Farage said he would demand that Cameron bring forward a planned referendum on EU membership from 2017 to next year if UKIP polled strongly and the prime minister needed its support to stay in office.
« I’m not prepared to wait for three years. I want us to have a referendum on this great question next year and if UKIP can maintain its momentum and get enough seats in Westminster we might just be able to achieve that, » Farage told the BBC.
UKIP’s rise threatens Cameron’s re-election drive by splitting the right-wing vote, increases the likelihood of another coalition government, and poses a challenge to the left-leaning opposition Labour party in northern England too.
China News
China: Continuing data out of China confirm that the country is soft landing while rebalancing. Labor statistics have been showing that the manufacturers have started to rebalance their activities away from labor intensive (an objective already stressed by the Chinese leadership). These are in line with the objective to rebalance the economy away from credit driven investment. “BHP Billiton has raised the stakes in the ongoing war of attrition in global iron ore with a plan to slash costs and lift production” confirms our view that commodity companies are starting to adapt to the new normal, while China is cutting the road to nowhere and excessive bureaucracy (China removes 160,000 phantom staff on payroll, China Today). Acknowledging that there is “phantom staff” out loud is an event for those who have been following China for years (this could have cost some China Today’s managers their jobs a couple of years ago).
Furthermore, the west is helping China to change it’s “narrative” from being anti-democracy (China has not gone back on its agreements with Britain over the future of Hong Kong, whose autonomy is far greater than what Britain expected three decades ago, a former aide to late British Prime Minister Margaret Thatcher has said.).
Furthermore, Premier Li is undertaking a state visit to EU. This is likely to bring more collaboration with the West, while China will be offering a back-door to Russia energy at a moment when : President Putin is challenged by plummeting oil prices and sanctions are making harder for the energy sector (finance projects and investments).
The government continues to fear that the economic rebalancing has not taken momentum yet although 1) labor intensive manufacturers are relocating in cheaper labor countries, 2) businesses are upgrading their business models [while becoming environmental friendly], 3) President Xi has conducted many trade – investment agreement with Neighbours (after Premier Li did the same in Africa) to secure investment projects which use Chinese manpower – engineers know-how in this domaine, 4) China is gaining more military presence and has fluxed it mussels – e.g. China “Top Gun” intercept by a US fighter jet -, 5) China has signed many RMB agreement which reinforce the currency usage and prepare its full liberalisation – after Free Trade Zones (FTZ) have proven to be a success -, 6) China has undertaken a genuine fight against bad governance and better regulation – many examples in our recent daily briefings of fight against corruption and bad governance-. We see in FinMin Lou Jiwei recent comment an indication that not only China wants to create a reserve currency it does want it to be strong when Chinese leaders perceive the heavy pressure place on USD by a category of investors to avoid debasing the currency through deficit financing – although we consider that this worry is misplaced -.
Can China become a leading global innovator?
Few if any of China’s companies are considered innovative by global standards – and Nobel prizes for science remain frustratingly elusive.
But China wants to be more than the factory of the world and its government knows it has to move on from a « beg, borrow or steal » strategy on innovation if it is to keep growing its economy. Will it be able to do this?
The Innovators
Husband and wife entrepreneurs Yang Yang and Winnie are working on a prototype for a pen that writes in plastic. Unfortunately, the pen is smoking more than it’s writing and the room fills with a foul smell of burning plastic.
Silk company debuts French acquisition
Silk company Wensli Group marked a milestone of its internationalization on Friday in Hangzhou when it debuted its Marc Rozier brand.
The group purchased Marc Rozier, a 120-year-old silk scarf factory in France, in 2013 as part of its plan to extend into the international market.
Tu Hongyan, chairman of the group, said the debut of Marc Rozier in China is a turning point for the Chinese silk industry.
« Marc Rozier has been manufacturing for top brands including Hermes for decades and now it is manufacturing for us and our Chinese customers. It is time for Chinese customers to enjoy ‘made in France’ products, » she said.
Tu said that since the purchase of the French brand, the company has been speeding up to catch up with top international brands in all aspects including raw materials, design, equipment and manufacturing techniques.
Australia News
Australia: Australia struggles with the labor statistics glitches. Treasurer Hockey offered the private sector to check the information and help to correct that data. While this information does not change drastically our view that the RBA will stay put (due to the fear of a housing bubble, which the central bank is dealing with through macro prudential tools). However, the glitches reduces the “view” in the market that countries such as China are manipulating their figures. While our work on macro eco data has pushed us to take the economic figures with a pinch of salt (due to the methodology which could create some issues), we do not side with camp mistrusting everything. However, we believe that the big data analytics is likely to help improve the accuracy and the frequency of the high frequency data. However, the statistic office may take time before undertaking the experiment.
Australia continues to be seen, by markets, as a derivative to the old Chinese model (i.e. commodity provider). This view explains the high beta between Australian assets and commodity prices (or China demand for commodities). Banks shares are suffering from the combination of the increase perception of increase in risks and additional macro prudential constants to curb housing prices frothiness. Small business defined the “goldilock range” for AUDUSD to be [.90-.94]. This level is much higher than RBA own assessment (based on PPP models). We have been criticising PPP models because they do not factor any structural changes.
These assume that neither China nor Australia are conducting their rebalancing agenda. We do believe that the current weaknesses offers genuine opportunity to benefit from the other drivers to the Australian economy which are not related to commodities. We see the current Australian Dollar weakness to continue at least until the USD start to weaken again when markets will realise that it has beaten too much on a quick rate normalisation. Meanwhile, from our previous daily briefing, we have gathered sufficient support to the view that the drivers of the Australian GDP are moving toward: 1) education, health and finance services provider to Asian neighbours, 2) innovation and digital sector, 3) energy resources export to Japan (the later contributes to our constructive view that the current negative Japan Energy Trade deficit will rebalance in the medium term – reducing Japanese Government bonds solvency risk – ).
Melbourne tram stops removed in bid to speed up network
Coal ‘good for humanity’, Prime Minister Tony Abbott says at $3.9b Queensland mine opening
Prime Minister Tony Abbott says coal is « good for humanity » and will be the « world’s main energy source for decades to come » as he opened a new $3.9 billion coal mine in central Queensland.
The BHP Billiton Mitsubishi Alliance (BMA) Caval Ridge coal mine, south of Moranbah in central Queensland, will employ 500 fly-in, fly-out (FIFO) workers.
BMA said the new mine, the company’s eighth in the region, would produce about 5.5 million tonnes of coal each year.
Speaking at the mine’s opening, Mr Abbott said coal should not be demonised.
« Coal is good for humanity, coal is good for prosperity, coal is an essential part of our economic future, here in Australia, and right around the world, » he said.
« This is a sign of hope and confidence in the future of the coal industry – it’s a great industry, we’ve had a great partnership with Japan in the coal industry.
« Coal is essential for the prosperity of the world.
Japan News
Japan: inflation softening along with economic downgrade was widely expected as a result of the 1st VAT hike (cf our strategic note Dec 26th 2013). We see BoJ to keep the bazooka of QQE-2 un-tested until the JPY excessive depreciation and JGB solvency risk came down * investors are still short JGB expecting a Japan crisis *. The 2nd VAT hike will require some stabilisation at the current levels, though we expect that PM Abe will undertake the 2nd hike in steps, because BoJ is unlikely to be sufficiently confident to move ahead with more QQE while JPY is accelerating its depreciation. PM Abe voiced concerned over the JPY rapid depreciation, as he pointed (rightly in our opinion) to the increase in energy cost, which deteriorate further the energy trade deficit – and increase the risk of JGB solvency -. The Prime Minister confirmed in his Diet address to pursue Abenomics 3rd arrow. Japan is said to resume discussion with US on TPP, while energy sector is heading toward energy transition away from Nuxe. Physics Nobel price attribution to energy efficient and environmental friendly technology is a game changer because it does support the view that the Win-Win scenario is feasible, if only the consensus stop being pessimistic for no reason.
Furthermore, GPIF delayed its asset allocation review. This is positive because it will calm down markets nervousness that GPIF will shift over-night its JGB holding and would create a market fixed income crash. We see the current development in line with our constructive scenario.
However, BoJ might do some adjustment to its monetary program but nothing excessive. The news flow out of this weekend G20 meeting shows that the global community is gently pressing the government and the BoJ to pursue structural reforms, economic rebalancing, solvency improvement (through VAT 2nd hike commitment) and adequate monetary policy (not too hot – to avoid a crisis – not too cool – to avoid derailing the on-going portfolio rebalancing approach -). Japan continues to face heavy public pressure to rebalance its energy reliance to nuclear. While we believe that Japan will continue to press for reopening nuclear plants (when Nuclear Watchdog gives his green light), the medium to long term trend is that Japan will use Trade negotiation with neighbours to secure new energy sources while using this pressure to deregulate and move forward with Abenomics 3rd arrow (please see our Japan update for more on our views). We are not surprise by the fact that Russian news media are reporting the pushback to reopening nuclear plans, ahead of Japan-Russian talks (about sanctions, energy agreement, and disputed territories).
As China, Japan, and South Korea heads toward a constructive talks (as we were reporting in our previous daily briefings) and Japan and North Korea are heading toward a solution on Japanese civilians abduction, North Korea leaders close to Kim Jong Un held last weekend high level talks with South Korea minister of reunification. This indicates that the scenario of an unified Korea is advancing. We have been considering that the reunification will ultimately take place but it requires normalised relation amongst the 3 important players: China, Japan, South Korea.
FOREX-Yen rises as global growth woes hit risk sentiment
* Yen hits 1-month high vs dollar, 11-month peak vs euro
* Global growth concerns, retreat in risk appetite buoy yen
SINGAPORE, Oct 13 (Reuters) – The yen scaled a one-month high against the dollar on Monday, as heightened worries about the health of the global economy continued to shore up the safe-haven Japanese currency.
The yen has pulled away from a six-year low versus the dollar set in early October, after dovish-leaning minutes of the U.S. Federal Reserve’s September meeting released last Wednesday prompted the market to push back the expected timing of a Fed rate hike.
The low-yielding yen has gained further momentum in recent sessions as worries about the outlook for global growth hurt appetite for risk and triggered a selloff in global equities.
A drop in U.S. equities futures on Monday provided broad support for the yen, said Jeffrey Halley, FX trader for Saxo Capital Markets in Singapore.
« It’s definitely a risk-off move and we will have reduced liquidity with the U.S. and Japan on holiday today, » Halley said.
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