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SNBDL Daily Briefing
Report prepared using big data solution Quid
Table of contents:
Our take away from the last 24 hours news
ECB: ECB-day. Draghi will reveal some details on ABS QE program. The overwhelming majority in the market have decided that T-LTRO, QE ABS will not work and we need carry-trade. This is unlikely to happen. We strongly disagree with this view because we believe (though we are in the minority camp) that EU, EZ are executing a new grand bargain which will enable the EUR to become a reserve currency (please see our Europe update).
Fed: Yesterday, we have indicated that the market will start to realise : 1) the US economy is recovering, but the speed, at which this recovery is taking place, is far from reaching the escape velocity, which could have justified the excitement around the Transparency Bill, the inflation risk (through wages or deficit financing central bank), 2) central banks actions is data dependent (the most important in this affirmation is the word “data”) – Miles defence of BoE’s forward guidance communication is all about data dependency -, 3) robots, IT, mobile devices, IoT is not only about new “exciting” gadgets, it has also a disturbing effects on our lives, working practices, business execution and future – please don’t hesitate to ask for our special report: “robotonomics delivering Pizza in XXI Century” -. While we have not been (since beginning of 2014) in the camp of those who consider that escape velocity – or monetary policy exit – will be dealt with using interest rates, we have always considered (since 2009) that macro prudential will be the genuine tool to guarantee reaching the goldilock conditions (not too hot, not too cold, just the sufficient monetary stimuli to adapt our economies to the XXI century). [Goldilock conditions is a concept used in Astro physics to define the conditions which make live possible on Earth – just the right distance from the Sun to be alive -].
Big History Project : I like saying that our Mankind age is 2 years. If we consider that he have created 90% of the data, which explain our 13.8bn years common history (since the big bang), during the last 2years, it means that our most accurate knowledge of ourselves is limited to 2years only. Cats video in the internet is a reflect to our “young” age. The common intelligence of internet is still used for fun, it’s used for evil destine (ISIL) but these are natural development when we are heading to a disturbing technologies much more empowering to people than have been the printing press, fossil energy utilisation, or transportation all together. These very well know technologies have in common that they’ve helped connecting people. I am just astonished by how easy you can communicate with more than 100K people nowadays. I tried to estimate how many people our ancestors 200, 300, 1000 years ago were able to communicate with. It has been a fraction of what anyone of us could make by sharing a funny Cat video.
ISIL development is a natural process as well. Throughout our big history in common (please check our Big History Project and help this wonderful project), we have gone through periods which are similar to the one we are in now. Due to the reduction in the Universe Entropy (the physical measure of Chaos), inequalities nowadays are just a fraction of what Jews have had to support in Egypt under Pharaoh. But the empowering effect of technology makes any inequality, racism, gender-inequality etc. an unacceptable behaviour even if a couple of 100years ago Democracy means voting rights for White Male only (women and slave were considered second-citizens class). These moments in our history give the bird of new ideologies, political systems and religions. ISIL has created a new religion with values are similar to Satanism: the world has become too complex for these people so let’s take the same decision God made in Noah biblical story. Let’s put a side our beliefs for a second, from a pure economic and scientific rational, ISIL values are similar to Dinosaurs. If you had the opportunity to check out big history project, you’ll find that the best chance Mankind had to flourish was Dinosaurs disappearance (apparently we constitute a very good food for them). What ISIL is about? Destroying ISIL is likely to make us go through a new leap in our history with a great future. “Am I a Dreamer? But I am not the only one.” But this time, Dreamers are not only Nice, they bring growth, jobs, profits, shareholders value, … just check out Zalando. While the overwhelming quantity of data we can make any link to ISIL (though finance, ideological support etc.) look as obvious the fact that the Eiffel Tour is in Paris. The speed at which western countries are tracking finance links is a clear indication of the power of the data.
Economic News: “moderate to weak” is our one-word sum-up to the recent global high-frequency data. Brazil is battling with its fiscal situation, Italy postpones budget target to 2017 due to weak economic environment, US high frequency data – e.g. consumer confidence – are turning red, Japan’s factory output, household spending and job market are far from the excesses which would justify the JGB doom scenario. Echoing our “Central Banks News” take away, we see central banks remaining on hold. We don’t see central banks changing their monetary strategy in the short term. The stress built during the last 9 months on the basis of the mistrust in their ability to manage correctly exit the “monetary experiment” (though debt vigilantes continue to push hard) is a sufficient threat to wait, until the storm passes. The global growth stimuli is likely to come from other factors which will contribute to improve the Total Factor Productivity (automation, big data, governance improvement) along with some fiscal stimuli which will support digital infrastructure investments (a needed investments to prepare our global economies to the XXI century challenges).
Ebola: Days after the WHO and the CDC revised upward their estimates for the development of the outbreak to as high as 1.4 millions by beginning 2015, the First Ebola case has been diagnosed in Texas. The 1st patient (i.e. 1st person known affected in a region – not brought affected from other places -) arrived to the US in September 20th from Liberia. The CDC has started an intensive search for anyone who might have come in contact with the patient while the person was infectious. While the spread of Ebola is less viral than Cat pictures on the internet, the fear is likely to edge up before CDC and WHO will show how capable and efficient are these two institutions. We have been discussing Apps and big data which would help report any symptoms to the public. Japan nationals and internet have been very effective mapping real-time the consequence of March 2011 Fukushima nuclear catastrophe. The same tools can be used today, although a very wide understanding of the symptoms is genuinely and urgently needed to make it succeed. We have been saying that even a non-lethal epidemic can spur fear, confidence collapse and economic headwinds. Unlike in the very good film “Contagion”, the tech tools and social media help can be very effective in reducing the spread of the disease and reporting the infectious agents. Doctors, which have been affected in Africa and brought to the US, have been saved. The experimental vaccine, which has a 100% hit ratio for primates, is likely to limit the casualties. Our only genuine fear, is that one of the affected has a political or ideological agenda and tries to spread the disease more widely. To our readers, there is no need to be stressed but please stay safe.
But more importantly, the first US case is likely to intensify, the global coordinated response which have started during the recent weeks. We have highlighted that the global coordination has been intensifying to: 1) fight disinformation (we were talking about it in our recent daily briefings), 2) provide short term medical assistance (France, US, Israel, etc.) with the help of military expertise – when numerous Western African countries are indicating the lack of medical personnel – , 3) provide financial support (wealthy donors, government funding, NGO help etc.), and 4) fast track the Ebola drug trial (the drug has had a very good result in the experimental tests).
Notwithstanding the on-going difficulties, and the short term negative economic effect, we continue to believe that the fight against Ebola will succeed and will clear the way to the increase in Africa investment and economic support (cf. our note “This time for Africa” which stressed that Africa is heading to experience the same development China had experienced when it joined the WTO in 2001 with positive consequences for both Africa and the world economy). The global coordination triggered by the response to the terrorist risk might help responding to the Ebola risk as well (due to the threat a dirty weapon using Ebola virus constitute). We disagree with the bet of Cocoa upward spiral because many analysis assumes the doom-and-gloom scenario which is unlikely to happen. We see the intensification of the worrying rhetoric as a part of the genuine action to keep the subject high in the leaders to do list.
Gaza: As Hamas and Fatah head toward a national coalition, Hamas leadership are distancing themselves away from radical groups, in order to clear the path toward Gaza reconstruction, while President Abbas intensifies his rhetoric against Israel to move ahead with a durable peace solutions. Although President Abbas speech was very hawkish, Opposition Chairman Isaac Herzog told Ynet on Sunday ”you can criticize Abbas, but at the end of the day, we prefer and the Palestinian Authority taking responsibility of Gaza, and we prefer Abbas and the PA’s full security cooperation in the West Bank,”. Many commentators have mis-understood the change in President Abbas rhetoric. He has no choice but being though in order not to provide the ground to the new terrorist – militant organisations that Fatah-Hamas coalition under his leadership will sell Palestine cheap. It’s in Israel and the global community interest that President Abbas becoming the Boss to deal with Palestine-Israel conflict. During my 25 years of covering the conflict, I have not been as optimistic as nowadays that a peace between Palestine and Israel could be achieved within the next 5 years: because it’s not just Nice it’s profitable for both sides.
Egypt President el-Sisi intensifies the fight against the Muslim Brotherhoods, the political arm of the radical islam fighters (whose fighters include the hard-core liners ISIL and Al Qaeda), Egypt is re-gaining its leading role in the Palestinian – Israeli peace process. The pressure to reduce Israel’s defence budget aims bringing the hawks to consider peace solutions. Furthermore, at last, the terror financiers are brought to justice increase the likelihood to make the current fight against terror much more effective than it has been so far. The social media focus against ISIL is likely to require a total rethinking of communication out the Muslim Brotherhood, as we were forecasting a couple of weeks ago. Indeed, the muslim community push back against “barbaric groups naming their fight in the name of Islam” may back-fire on Muslim Brotherhood political arm. As soon as Muslim Brotherhood will move to condemn ISIL, the end of terror will be close. But Kremlin and Commodity bugs interests groups are likely to postpone such a shift in the strategy.
We are very optimistic (as we have been since the beginning of the Gaza crisis) that : 1) Hamas leadership will break from extremists and will recognise Israel – as Fatah did years ago – (though some radical fractions are already burgeoning with much less financial and arm support), 2) Iran will be instrumental in settling a long-term peace process (as the nuclear negotiation heads toward a civil nuclear Iran), 3) a LT peace process will help the development of Mediterranean sea gas exploitation (as it enables to return to the Israeli – Turkish normalisation, a process which was very close in April but has been postponed by the Gaza crisis).
Fight against ISIL success likelihood increases:
Secretary Theresa May outspoke our main fear: dirty weapons acquisition by ISIL. But the Secretary came short explaining what could be the consequences of a dirty weapon acquisition or use: 1) between 40K to 200K casualties – depending on the spread, response etc. -, 2) the D+1 (the equivalent to Sept. 12 2001) would be the day will start Nuremberg II (a trial which will use all the data we have in our disposal from DNA, social media, etc.) to track anyone who have facilitated what would become the most abject human crime (after Shoah). Personally, I find that, should ISIL uses a dirty weapon, it would justify launching a Nuxe strike on ISIL territories (civilian casualties would be no different from Hiroshima and Nakasaki’s civilian casualties who suffered the consequence of their rulers). This is because I am convinced that ISIL, self proclaimed Calif Abu Bakr are not Humans. They are member of a group which is equivalent to Dinosaurs or Chikungunya. Using Nuxe to destroy them would be a natural response.
Turkey is about to vote for joining the global community fight against ISIL. Turkish military forces are getting ready ahead of parliamentary go-ahead.
The global community military action continue to enjoy a wide support (i.e. UK voted for air strikes, though both SNP and UKIP criticised the move). The support is likely to intensify after the militants beheaded Herve Gourdel (a French citizen abducted in Algeria) and Philippines Militants threatened to harm a German. Threats against US and EU interests have been intensifying on the internet, but the risk is likely to focus on Cyber-Attacks, a domaine where the Western intelligence is less well prepared than for attacks such as 9/11. Turkey and Iran participation to the coalition will be instrumental to secure an important degradation of ISIL. We were saying “Turkey decision to provide asylum to Muslim Brotherhoods is making it difficult to see Turkey joining the coalition is the short term (though President Ergodan is arguing the opposite)” but yesterday news are coming as a positive surprise it increases our probability to degrade ISIL quickly. At the other hand, Iran wants to secure some concession on the Nuclear discussion in exchange of its help (though Iran Quds brigades have already been instrumental in supporting Iraq militaries against ISIL).
The Social media is also joining the fight against the terrorist organisation, Muslims are making #NotInMyName viral to push the view that ISIL is NOT a State NOR represent Islam.
The terrorists organisations are currently in an escalation of violence due to its leadership a fight for Abou Moussab Al Zarkawi legacy. The threats spread on the internet are likely to be a part of ISIL marketing campaign for terror to hire new young westerners. Fortunately for the global coalition fight, the “Murders in Iraq and Syria” known as ISIL, have no ideological leadership and will struggle to hire new fighter should the global community take the fight to the Social Media in genuine coordinated actions to : 1) fight bad governance, to justify 2) reducing mistrust. Unfortunately, mistrust and the “institutions are rotten to their core” mantra is helped by groups as wide as: Extreme right, gold bugs, 2nd amendment supporters and Bitcoin marketers… We are surprised how some “mainstream media” have joined spreading the same “mistrust” message for a clear agenda to avoid improving governance. This pressure is accelerating G-20 actions to push for tax evasion fight (OECD initiative) and improve governance.
The US call to put “boots on the ground” to defeat ISIL might be achieve through the use of regional arm forces (Turkey, Arab countries). This will have the same consequence for the US defence sector (positive for the sector stocks) because weapons and knowledge will be provided by the Western countries (specifically the US).
Oil prices continue to come under pressure (in line with our recent energy update note). However, the situation on the ground continue to be fragile, with a new threats to the security of many countries from Egypt to US. The quickest the West recognises that the fight against ISIL and terrorists necessitate a fight against mistrust which spread not only in the jihadist internet web but also in the extreme right and gold bugs forums, the more the risk of isolated radicalised youth actions will decrease.
The fight against mistrust is likely to accelerate with the global governance improvement. Furthermore, any advance in Iran nuclear talks will help Iran joining the fight against ISIL. The recent news flow out of ISIL indicates that the terrorist organisation is getting isolated and its power is weakening. Furthermore, the recent strikes have reduced Al-Qaeda operatives which were preparing attacks against the West (according to informations out of the intelligence community).
Last but not least, UAE fighter pilot Mariam al-Mansouri shot to fame last week for her role in a US-led bombing campaign in Syria might be a game changer for the Muslim world. It’s becoming a communication war between ISIL (a XVI century like barbaric group for which women are to be rapped, and lands are to be destroyed) and the idea that Muslim Women can be empowered and help defeat the terror. The self-proclaimed Califat calls him name from Abu Bakr (first Califat of Saidouna Prophet Muhamed). It’s a shame to link Abu Bakr, one of the first followers of the Prophet, to Califat Ibrahim who is a muppet in the hand of the interests groups. But Mariam al-Mansouri is remanding Muslims that the first teacher of Coran was a Woman, Prophet’s Saidouna Muhamed daughter.
Russia: Ukrainian situation continues to calm down (BUT NOT deescalate – Merkel recognised that Cold War II has started – a view we expressed in our Feb 27th note -). Ukraine continues to increase its ties with EU and NATO, despite Putin threat last week. The Cease fire in Eastern Ukraine is coming under pressure. Our contacts on the ground are indicating that the situation is very fragile and self-proclaimed Eastern Republics are willing to pursue the pressure.
Lavrov pressed during the weekend the global coalition against ISIL to seek authorisation at the UN security council. Under such a scenario , Russia could use its veto to buy some time to ISIL to strengthen its power, or to provide Assad legitimacy through having him participating to the coalition (which would crack the coalition which “implied” objective is to change the Syrian regime).
The Eastern Ukraine region self proclaimed republics autonomy perimeter continue to be the name of the game. Too much autonomy (the current self proclaimed government are calling for a full fledge independence – which could give legitimacy to Crimea annexation-) would make Ukraine IMF program dead born (as Kiev government would be in the incapacity to deliver on governance improvement and structural reforms). At the other end, an autonomous regions which would bind by the IMF program reform will increase the ability of Kiev government to strengthen the Ukrainian economy along with the governance improvement. Thus, it would increase the likelihood of joining NATO. Russia is unlikely to let this scenario take place without a fight. We continue to see some Ukraine debt restructuring very likely though the timing will depend on the autonomous republics aggression.
Therefore, the Kremlin is putting a lot of emphasis on how badly an isolated Russia would impact the global economy (and specifically would constitute a Eurozone existential threat), while the Russian economy is preparing for this outcome (e.g. Russian corporations are considering spinning of their US subsidiaries, Wealth Fund is considered to be used to self-finance needed infrastructure investment, international experts are rushing to find financial solutions for the New Russia political strategy, outside the West energy deals – e.g. with Turkey – ). From the political spectrum, the opposition is organising itself should oil prices drop sustainably below $75bbl – this scenario is possible should the geopolitical blue sky scenario take place -. But the Kremlin is “threatening” oligarchs to keep them away from joining the opposition. For more analysis on this matter, please see our recent “Russia update note”. Meanwhile, Russia accelerates the construction of Eurasia, which is seen by many analysts (incl. “gold bugs”) as a better replacement of the EU Union (because it enables to avoid improving governance and fight against corruption).
Hong-Kong political reforms protest
Pro-democracy protests gained more traction this weekend. 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.
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: 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.
Piers Morgan hire by Daily Mail may indicate the start of a new era in journalism. While robot are replacing the day-to-day reporting, analysis, global picture (10,000 feet view) are likely to be on the demand. « As editor-at-large (U.S.) [Piers Morgan] plan on breaking down the biggest stories that matter to Americans and analysing them in a way that will generate discussion and create debate, » he said in a MailOnline story on Tuesday. Why it will work? Because it aims simplifying things and help make a sense of the inflating data / stories. What’s the key of success? “trust-wordiness”. Many news media websites are coming under intense existential threat because of their biases. Using big data to link ideologies and believes with how media report stories show that as soon as a news media become biased, it’s stagnate. This is the single reason why in SNBDL we have only one bias – hate terror and extremism – except that we think that both moderate right and left parties have many things to say. When Internet started to reach our day-to-day lives, many though that we were heading to George Oswell 1984 society. While this film, explains what ISIL-like organisations could lead us to, should they succeed, it’s far from being possible in a connected world. No conspiracy can pass the data test. This is why any media which chooses to be trust-wordy will make a killing (in investor parlance) because it answers the question Why before focusing on the other things.
PM Modi visit to US: Positive for India economically, Positive for the US in its fight against terror
Emails from the Fed (which constitute an important historical source on how Fed and US government dealt with the Great Financial Crisis), have shown that they have not been elite collusion (very positive to defeat the on-going mistrust). However, after analysing pros-cons, it became evident that refraining from bailing out AIG would have cost much more to our global economy and financial system (which although I believe that it should be reformed is a wonderful social development if one look at it from the Big History prospect – i.e. how Mankind has adapted its organisation to prosper -).
Afghanistan political solutions (at last) cleared the way to a comprehensive agreement. This is very positive for securing peace in the region and defeating the global terrorism (though the global terrorism terminology is a weak definition because its the combination of different groups which have different agenda and ideologies).
Zalando’s IPO is proving that a corporation could combine: 1) profits, 2) return to shareholders, 3) empowering its workers, 4) behaving nicely with consumers. Food for thoughts.
From Sept 30th Daily Briefing:
US Tax inversion: As we were expecting since the announcement of Burger King deal (which has been widely reported as being solely pursuing tax inversion objective) we’ve indicated that this would sign the end of the system. US Treasury took actions to make it harder to execute such deals, while the tax reform seems in limbo due to DC gridlock. Administrative actions taken by Treasury Secretary Lew makes it harder to execute tax inversion but does not derail it entirely. We consider that G-20 initiative to undertake OECD proposal to reform the rule of “double non-taxation” (see our previous daily briefing) will help improve the tax governance (and incidentally the rise in the mistrust in the public institutions – which are seen to be colluding with businesses -). Markets have reacted negatively to the actions taken against tax loopholes, because these are seen to be the only remaining way for Corporations to improve their EPS (while demand continue to be subdued). We disagree with this view because G-20 initiatives to tackle “tax optimisation” will come along with more investments and fiscal stimuli which would help spur more economic demand.
US Economy: high frequency economic data continue to show a mixed message. The widely common economic forecast models have been weak understanding the current economic evolution. We have indicated in our article “Perceptions & realities : closing the gap between the two” that while the growth and inflation continue to be subdued to justify any urgent action from the Fed, there are genuine signs which indicates that growth potential will improve. In a nutshell, big data, technology, energy transition, lower commodity prices and better governance are the driver we see for the creation of goldilock conditions – not too hot, not too cold – which would enable spur sustainable growth and create the conditions for central banks to normalise (in a couple of years) the monetary policy without triggering a new financial crisis or excessive financial bubbles. Gas prices decrease, a reflect of the on-going oil prices decrease, is likely to provide the Fed with some support to postpone acting too quickly normalising monetary policy.
Bill Gross – PIMCO: On Friday, Bill Gross announced that he will leave PIMCO to join Janus. Markets have reacted to the short term fixed income force selling, which may take place, as investors may reconsider their mandate (as a result of the change in management of the funds “U.S. Stocks Rebound on GDP as Bonds Fall on Pimco Concern”). While this pressure is likely to be short lived, it may bring opportunity to go long rates when the market is realising that inflation is subdued and help the Fed to delay normalising rates. There have been many speculations regarding the reason of Mr. Gross departure from PIMCO. We see the shift in Bill Gross rhetoric to defy the Fed, by criticising the Fed attitude – using arguments going from asset frothiness to central bank deficit financing -, as being the most likely good reason of this departure. By being short fixed income since mid last year, PIMCO has reported weak returns spurring an increase in redemptions (which cost PIMCO profits and Bill Gross his job).
EU: the glass half empty view is that unemployment rate is still very elevated (23.3% in August) but it’s coming down, even before EU Commission President elected Juncker’s infrastructure plan, digital initiative, EU Council President elected Tusk’s energy union, are not in place. Though this story combined with Catalonia independence can lead, mistakenly, people to believe that “la Bastille” will be taken in days, we disagree with this view, as those who see a bloody revolution are being hired by ISIL and alike, while the overwhelming youth are working genuinely to improve their lives (alike their ancestors, Youth are adapting to the XXI Century to survive).
From another subject, Russia continue to dream that it’s communication, it’s EU-skeptics allies in the parliament and its fake-cease-fire in Ukraine will help lift sanctions. But the Chancellor Merkel said it all “Merkel Evokes Cold War in Warning of Long Ukraine Crisis”. Chancellor Merkel description is very important because she is amongst the few EU leaders which have experienced the cold war from inside the other camp, she speaks Russian and has a deep understanding of KGB methods.
France starts to reveal 2015 budget measures. Local municipalities spending to be reduce by 3.7bn. More news are due in the coming days, we will keep you posted as the information is announced. Designated Economy Commissioner Moscovici Vows to Objectively Examine France’s Budget Deficit. Although the French Assemblee Nationale vote will be close, MPs will do the necessary to avoid the nuclear threat of a “dissolution” (even Fmr. Pres. Sarkozy does not want it because it could trigger a political crisis). The threat is genuinely coming from FN Marine Le Pen which could provide a considerable help to Russia in its struggle to lift sanctions.
China:Manufacturing data support our view that China is soft landing while rebalancing. Labor statistics showed 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. The government seems fearing 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, 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 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 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 – ).
New Zealand: Fontera payout cuts fuel concerns over NZ economic prospects. This increases the pressure on new PM Key Cabinet to accelerate rebalancing the economy and reforms. We have been indicating that NZ has already started a genuine shift toward new Tech agriculture, health and education services directed to Asian neighbours. The fact that PM Key secured another term supports our constructive scenario on NZ.. This constructive scenario narrative is currently overshadowed by the “search for yield” (or interest rates differential) and RBNZ fight against excessive carry trade effects.
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.
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 push back to reopening nuclear plans, ahead of Japan-Russian talks (about sanctions, energy agreement, and disputed territories).
Central banks News
ECB: ECB-day. Draghi will reveal some details on ABS QE program. The overwhelming majority in the market have decided that T-LTRO, QE ABS will not work and we need carry-trade. This is unlikely to happen. We strongly disagree with this view because we believe (though we are in the minority camp) that EU, EZ are executing a new grand bargain which will enable the EUR to become a reserve currency (please see our Europe update).
Fed: Yesterday, we have indicated that the market will start to realise : 1) the US economy is recovering, but the speed, at which this recovery is taking place, is far from reaching the escape velocity, which could have justified the excitement around the Transparency Bill, the inflation risk (through wages or deficit financing central bank), 2) central banks actions is data dependent (the most important in this affirmation is the word “data”) – Miles defence of BoE’s forward guidance communication is all about data dependency -, 3) robots, IT, mobile devices, IoT is not only about new “exciting” gadgets, it has also a disturbing effects on our lives, working practices, business execution and future – please don’t hesitate to ask for our special report: “robotonomics delivering Pizza in XXI Century” -. While we have not been (since beginning of 2014) in the camp of those who consider that escape velocity – or monetary policy exit – will be dealt with using interest rates, we have always considered (since 2009) that macro prudential will be the genuine tool to guarantee reaching the goldilock conditions (not too hot, not too cold, just the sufficient monetary stimuli to adapt our economies to the XXI century). [Goldilock conditions is a concept used in Astro physics to define the conditions which make live possible on Earth – just the right distance from the Sun to be alive -].
Big History Project : I like saying that our Mankind age is 2 years. If we consider that he have created 90% of the data, which explain our 13.8bn years common history (since the big bang), during the last 2years, it means that our most accurate knowledge of ourselves is limited to 2years only. Cats video in the internet is a reflect to our “young” age. The common intelligence of internet is still used for fun, it’s used for evil destine (ISIL) but these are natural development when we are heading to a disturbing technologies much more empowering to people than have been the printing press, fossil energy utilisation, or transportation all together. These very well know technologies have in common that they’ve helped connecting people. I am just astonished by how easy you can communicate with more than 100K people nowadays. I tried to estimate how many people our ancestors 200, 300, 1000 years ago were able to communicate with. It has been a fraction of what anyone of us could make by sharing a funny Cat video.
ISIL development is a natural process as well. Throughout our big history in common (please check our Big History Project and help this wonderful project), we have gone through periods which are similar to the one we are in now. Due to the reduction in the Universe Entropy (the physical measure of Chaos), inequalities nowadays are just a fraction of what Jews have had to support in Egypt under Pharaoh. But the empowering effect of technology makes any inequality, racism, gender-inequality etc. an unacceptable behaviour even if a couple of 100years ago Democracy means voting rights for White Male only (women and slave were considered second-citizens class). These moments in our history give the bird of new ideologies, political systems and religions. ISIL has created a new religion with values are similar to Satanism: the world has become too complex for these people so let’s take the same decision God made in Noah biblical story. Let’s put a side our beliefs for a second, from a pure economic and scientific rational, ISIL values are similar to Dinosaurs. If you had the opportunity to check out big history project, you’ll find that the best chance Mankind had to flourish was Dinosaurs disappearance (apparently we constitute a very good food for them). What ISIL is about? Destroying ISIL is likely to make us go through a new leap in our history with a great future. “Am I a Dreamer? But I am not the only one.” But this time, Dreamers are not only Nice, they bring growth, jobs, profits, shareholders value, … just check out Zalando. While the overwhelming quantity of data we can make any link to ISIL (though finance, ideological support etc.) look as obvious the fact that the Eiffel Tour is in Paris. The speed at which western countries are tracking finance links is a clear indication of the power of the data.
UPDATE 1-U.S. Fed to study impact of capital rules on big insurers
WASHINGTON, Sept 30 (Reuters) – The U.S. Federal Reserve on Tuesday announced plans to study the potential effects of forcing big insurance companies to meet tough funding restrictions required by the 2010 Dodd-Frank law.
The Wall Street oversight law directed regulators to identify big non-bank financial firms that could pose risks to the U.S. financial system.
Those companies are regulated by the Fed, and must meet capital requirements comparable to those for big U.S. banks.
Insurers American International Group and Prudential Financial have already received this designation, and regulators are considering applying it to MetLife too.
Treasury yields trade at almost 3-week low on weak data, Russia
NEW YORK — Treasury 10-year note yields traded at almost a three-week low amid declines in manufacturing and consumer confidence and as Russia was said to weigh capital controls to halt the flow of money out of the country.
U.S. government debt fell earlier amid speculation the nonfarm payrolls report Oct. 3 will keep the Federal Reserve on track to raise interest rates next year. Withdrawals from a Pacific Investment Management Co. exchange-traded fund that was run by Bill Gross slowed Monday after record redemptions the day the star trader left. The European Central Bank may announce further stimulus measures Oct. 2.
« The data today was pretty weak, the talk from Russia spooked the market a bit, » said Jason Rogan, managing director of U.S. government trading at Guggenheim Securities, a New York- based brokerage for institutional investors. « It’s going to be tough to move one way or the other until we get Friday’s news about the employment and wage picture. »
BOE’s Miles Defends Guidance From ‘Flip-Flopping’ Criticism
Bank of England official David Miles defended the central bank’s forward-guidance policy amid criticism that it is “flip flopping” and confusing investors and households about future borrowing costs.
While giving messages that can be widely understood is “a major challenge,” issuing some assessment of the different paths that interest rates may follow is probably helpful, Miles said. Statements like the BOE’s current one that rate increases will be “gradual” are the most useful, he said.
After Governor Mark Carney introduced forward guidance last year, policy makers were forced to adapt it as the unemployment rate fell faster than they anticipated, prompting questions about the clarity of their communication. Officials also considered and rejected the idea of publishing a specific projected path for interest rates.
Euro zone inflation slows in September, weakens euro versus dollar
(Reuters) – Euro zone inflation slowed again in September as some food and energy prices fell, a first estimate showed, reinforcing expectations the ECB will ease policy further and sending the euro to a two-year low.
Eurostat said on Tuesday that consumer prices in the 18 countries sharing the euro rose 0.3 percent year-on-year, less than the 0.4 percent increases seen in August and July. The September reading was in line with market forecasts.
The European Central Bank wants to keep headline inflation at just under 2 percent over the medium term. Persistently low price growth underscores the difficulty of hitting that target while the euro zone economy continues to stagnate.
ECB under pressure as inflation falls again
LONDON (AP) — Inflation across the 18 euro countries dipped further toward zero in September, piling pressure on the European Central Bank to pull the trigger on its biggest stimulus weapon — a large-scale program to create new money.
Expectations that the bank will back such a program— similar to the one pursued by the U.S. Federal Reserve — mounted Tuesday after official figures showed consumer prices in the eurozone rose only 0.3 percent in the 12 months to September.
Economic News
Economic News: “moderate to weak” is our one-word sum-up to the recent global high-frequency data. Brazil is battling with its fiscal situation, Italy postpones budget target to 2017 due to weak economic environment, US high frequency data – e.g. consumer confidence – are turning red, Japan’s factory output, household spending and job market are far from the excesses which would justify the JGB doom scenario. Echoing our “Central Banks News” take away, we see central banks remaining on hold. We don’t see central banks changing their monetary strategy in the short term. The stress built during the last 9 months on the basis of the mistrust in their ability to manage correctly exit the “monetary experiment” (though debt vigilantes continue to push hard) is a sufficient threat to wait, until the storm passes. The global growth stimuli is likely to come from other factors which will contribute to improve the Total Factor Productivity (automation, big data, governance improvement) along with some fiscal stimuli which will support digital infrastructure investments (a needed investments to prepare our global economies to the XXI century challenges).
Canadian GDP unchanged in July
Canada’s economy was essentially unchanged in July, Statistics Canada says, as a slowdown in the mining, and oil and gas industries was offset by an uptick in manufacturing and the public sector.
The flat showing was the first month without growth since December when the Canadian economy shrank by 0.4 per cent, the data agency said.
Consumer spending, incomes see a pick up
Consumers spent more as they made more money in August. Meanwhile pending home sales took a surprise dive. Amid uneven data like this, economists are trimming GDP forecasts. Jeanne Yurman reports.
Hong Kong unrest may shake world economy
The protests in Hong Kong are not yet sparking fears that the region will become the next trouble spot for the global economy, but such concerns will grow if the conflict intensifies and ensnares China, economists say.
Hong Kong is small, producing 0.4% of the world’s gross domestic product. IHS Global Insight estimates its economy will grow 2.5% this year and 3.2% in 2015.
The region is a small U.S. trading partner, accounting for 0.3% of U.S. imports and 2.7% of exports, according to the Office of the U.S. Trade representative and PNC Financial Group. Pro-democracy protests that don’t turn more violent likely would have minimal effects on the global and U.S. economy, says Bill Adams, PNC’s senior international economist.
Revisiting the Lehman Brothers Bailout That Never Was
Inside the Federal Reserve Bank of New York, time was running out to answer a question that would change Wall Street forever.
At issue that September, six years ago, was whether the Fed could save a major investment bank whose failure might threaten the entire economy.
The firm was Lehman Brothers. And the answer for some inside the Fed was yes, the government could bail out Lehman, according to new accounts by Fed officials who were there at the time.
Ebola
Ebola: Days after the WHO and the CDC revised upward their estimates for the development of the outbreak to as high as 1.4 millions by beginning 2015, the First Ebola case has been diagnosed in Texas. The 1st patient (i.e. 1st person known affected in a region – not brought affected from other places -) arrived to the US in September 20th from Liberia. The CDC has started an intensive search for anyone who might have come in contact with the patient while the person was infectious. While the spread of Ebola is less viral than Cat pictures on the internet, the fear is likely to edge up before CDC and WHO will show how capable and efficient are these two institutions. We have been discussing Apps and big data which would help report any symptoms to the public. Japan nationals and internet have been very effective mapping real-time the consequence of March 2011 Fukushima nuclear catastrophe. The same tools can be used today, although a very wide understanding of the symptoms is genuinely and urgently needed to make it succeed. We have been saying that even a non-lethal epidemic can spur fear, confidence collapse and economic headwinds. Unlike in the very good film “Contagion”, the tech tools and social media help can be very effective in reducing the spread of the disease and reporting the infectious agents. Doctors, which have been affected in Africa and brought to the US, have been saved. The experimental vaccine, which has a 100% hit ratio for primates, is likely to limit the casualties. Our only genuine fear, is that one of the affected has a political or ideological agenda and tries to spread the disease more widely. To our readers, there is no need to be stressed but please stay safe.
But more importantly, the first US case is likely to intensify, the global coordinated response which have started during the recent weeks. We have highlighted that the global coordination has been intensifying to: 1) fight disinformation (we were talking about it in our recent daily briefings), 2) provide short term medical assistance (France, US, Israel, etc.) with the help of military expertise – when numerous Western African countries are indicating the lack of medical personnel – , 3) provide financial support (wealthy donors, government funding, NGO help etc.), and 4) fast track the Ebola drug trial (the drug has had a very good result in the experimental tests).
Notwithstanding the on-going difficulties, and the short term negative economic effect, we continue to believe that the fight against Ebola will succeed and will clear the way to the increase in Africa investment and economic support (cf. our note “This time for Africa” which stressed that Africa is heading to experience the same development China had experienced when it joined the WTO in 2001 with positive consequences for both Africa and the world economy). The global coordination triggered by the response to the terrorist risk might help responding to the Ebola risk as well (due to the threat a dirty weapon using Ebola virus constitute). We disagree with the bet of Cocoa upward spiral because many analysis assumes the doom-and-gloom scenario which is unlikely to happen. We see the intensification of the worrying rhetoric as a part of the genuine action to keep the subject high in the leaders to do list.
‘A Disease That Comes to Kill’: Fear Hinders Ebola Efforts in Africa
The girl was loaded into a wheelbarrow to be admitted to the Ebola holding unit. Just 17, she was with her mother and appeared to be on the brink of death.
But in a blink, her eyes opened. She jumped up and started to run away.
In a scene that is becoming sadly familiar in Liberia, the suspected Ebola patient was chased down by people nearby who held her until an ambulance could arrive. The girl, named Jane Doe, had feet bloodied from running away — too afraid of the stigma, the isolation, the death that come with the rapidly spreading diagnosis to seek treatment.
“Those patients come with frightful eyes,” Dr. John Sankoh, medical director at Redemption Hospital, told NBC News. “It is a disease that is beyond boundaries. It is a disease that is irrespective of who you are. It is a disease that comes to kill.”
Resistance to treatment and quarantine is one of the problems that plagues doctors trying to contain the outbreak here. Earlier this month, a man who escaped a quarantine center fended off vigilantes with rocks and a stick before a medical team caught up with him.
UNMEER won’t provide direct medical care — UN official
ACCRA, Sept. 30 (Xinhua) — The United Nations Mission for Ebola Emergency Response (UNMEER) will not provide direct medical care to patients in affected countries, Special Representative of the UN Secretary General and Head of the mission, Anthony Banbury said Tuesday.
He said the team was here to create the enabling capacity in the affected countries that would enable organizations with the capacity to offer medical care to the victims of the disease to do their work.
The mission will establish treatment centers and equip them, provide logistics such as vehicles, and other equipment needed by the medical teams to do their work and achieve results, according to Banbury.
As Ebola confirmed in U.S., CDC vows: ‘We’re stopping it in its tracks’
Months after the deadliest Ebola outbreak in history began ravaging West African countries, a man who flew from Liberia to Dallas became the first case of Ebola to be diagnosed in the United States.
Health officials stressed that they are confident they can control this situation and keep the virus from spreading in the U.S.
« We’re stopping it in its tracks in this country, » Thomas Frieden, director of the Centers for Disease Control and Prevention, declared during a news conference Tuesday afternoon.
Gaza
Gaza: As Hamas and Fatah head toward a national coalition, Hamas leadership are distancing themselves away from radical groups, in order to clear the path toward Gaza reconstruction, while President Abbas intensifies his rhetoric against Israel to move ahead with a durable peace solutions. Although President Abbas speech was very hawkish, Opposition Chairman Isaac Herzog told Ynet on Sunday ”you can criticize Abbas, but at the end of the day, we prefer and the Palestinian Authority taking responsibility of Gaza, and we prefer Abbas and the PA’s full security cooperation in the West Bank,”. Many commentators have mis-understood the change in President Abbas rhetoric. He has no choice but being though in order not to provide the ground to the new terrorist – militant organisations that Fatah-Hamas coalition under his leadership will sell Palestine cheap. It’s in Israel and the global community interest that President Abbas becoming the Boss to deal with Palestine-Israel conflict. During my 25 years of covering the conflict, I have not been as optimistic as nowadays that a peace between Palestine and Israel could be achieved within the next 5 years: because it’s not just Nice it’s profitable for both sides.
Egypt President el-Sisi intensifies the fight against the Muslim Brotherhoods, the political arm of the radical islam fighters (whose fighters include the hard-core liners ISIL and Al Qaeda), Egypt is re-gaining its leading role in the Palestinian – Israeli peace process. The pressure to reduce Israel’s defence budget aims bringing the hawks to consider peace solutions. Furthermore, at last, the terror financiers are brought to justice increase the likelihood to make the current fight against terror much more effective than it has been so far. The social media focus against ISIL is likely to require a total rethinking of communication out the Muslim Brotherhood, as we were forecasting a couple of weeks ago. Indeed, the muslim community push back against “barbaric groups naming their fight in the name of Islam” may back-fire on Muslim Brotherhood political arm. As soon as Muslim Brotherhood will move to condemn ISIL, the end of terror will be close. But Kremlin and Commodity bugs interests groups are likely to postpone such a shift in the strategy.
We are very optimistic (as we have been since the beginning of the Gaza crisis) that : 1) Hamas leadership will break from extremists and will recognise Israel – as Fatah did years ago – (though some radical fractions are already burgeoning with much less financial and arm support), 2) Iran will be instrumental in settling a long-term peace process (as the nuclear negotiation heads toward a civil nuclear Iran), 3) a LT peace process will help the development of Mediterranean sea gas exploitation (as it enables to return to the Israeli – Turkish normalisation, a process which was very close in April but has been postponed by the Gaza crisis).
Oman calls on Syrian gov’t, rebels to resume talks
UNITED NATIONS, Sept. 30 (Xinhua) — The continuation of violence in Syria and its implications on peace and security underscored the need for Damascus and rebel groups to return to negotiations, Oman’s foreign minister told United Nations on Tuesday.
« The two parties should approach these negotiations in a positive manner by focusing on areas of consensus and avoiding negative aspects and positions, with the aim being to save the Syrian people from further suffering and tragedies, » Yusuf bin Alawi bin Abdullah said in his address at the general debate of UN General Assembly.
Oman looks forward to UN’s efforts to encourage the Syrian and international stakeholders to reconvene the Geneva conference, said Alawi, adding that « we believe that the current situation is conducive for this effort. »
Mahmoud Abbas’s dangerous grandstanding
THE GOOD news from the Middle East is that the truce between Israel and Hamas in the Gaza Strip has held for a month, and Hamas appears ready to make concessions to avoid a resumption of fighting. Last week the Islamist movement renewed its agreement with the secular Fatah party to turn over Gaza’s government and security control of its borders to the West Bank-based Palestinian Authority. Though it’s not clear that the accord will last, Hamas is emerging as the loser of the summer war. According to Israel, as much as 80 percent of Hamas’s military arsenal has been destroyed, and its poll ratings among Palestinians are sinking as it fails to deliver the gains it promised from the conflict.
Hamas’s diminution might seem to create new possibilities for agreement between Palestinian Authority President Mahmoud Abbas and Israeli Prime Minister Benjamin Netanyahu. Mr. Abbas, after all, denounced Hamas’s embrace of carnage and refused to support a simultaneous uprising in the West Bank. Yet Mr. Abbas delivered a bridge-burning speech to the U.N. General Assembly last week, mendaciously accusing Israel of “a new war of genocide” and declaring that a return to negotiations was “impossible.”
Abbas, Netanyahu trade accusations at the UN
UNITED NATIONS (AP) — Palestinian President Mahmoud Abbas and Israeli Prime Minister Benjamin Netanyahu attacked each other in speeches before world leaders at the U.N. General Assembly. Here is look at some of their remarks:
Iraq & Syria
Fight against ISIL success likelihood increases:
Secretary Theresa May outspoke our main fear: dirty weapons acquisition by ISIL. But the Secretary came short explaining what could be the consequences of a dirty weapon acquisition or use: 1) between 40K to 200K casualties – depending on the spread, response etc. -, 2) the D+1 (the equivalent to Sept. 12 2001) would be the day will start Nuremberg II (a trial which will use all the data we have in our disposal from DNA, social media, etc.) to track anyone who have facilitated what would become the most abject human crime (after Shoah). Personally, I find that, should ISIL uses a dirty weapon, it would justify launching a Nuxe strike on ISIL territories (civilian casualties would be no different from Hiroshima and Nakasaki’s civilian casualties who suffered the consequence of their rulers). This is because I am convinced that ISIL, self proclaimed Calif Abu Bakr are not Humans. They are member of a group which is equivalent to Dinosaurs or Chikungunya. Using Nuxe to destroy them would be a natural response.
Turkey is about to vote for joining the global community fight against ISIL. Turkish military forces are getting ready ahead of parliamentary go-ahead.
The global community military action continue to enjoy a wide support (i.e. UK voted for air strikes, though both SNP and UKIP criticised the move). The support is likely to intensify after the militants beheaded Herve Gourdel (a French citizen abducted in Algeria) and Philippines Militants threatened to harm a German. Threats against US and EU interests have been intensifying on the internet, but the risk is likely to focus on Cyber-Attacks, a domaine where the Western intelligence is less well prepared than for attacks such as 9/11. Turkey and Iran participation to the coalition will be instrumental to secure an important degradation of ISIL. We were saying “Turkey decision to provide asylum to Muslim Brotherhoods is making it difficult to see Turkey joining the coalition is the short term (though President Ergodan is arguing the opposite)” but yesterday news are coming as a positive surprise it increases our probability to degrade ISIL quickly. At the other hand, Iran wants to secure some concession on the Nuclear discussion in exchange of its help (though Iran Quds brigades have already been instrumental in supporting Iraq militaries against ISIL).
The Social media is also joining the fight against the terrorist organisation, Muslims are making #NotInMyName viral to push the view that ISIL is NOT a State NOR represent Islam.
The terrorists organisations are currently in an escalation of violence due to its leadership a fight for Abou Moussab Al Zarkawi legacy. The threats spread on the internet are likely to be a part of ISIL marketing campaign for terror to hire new young westerners. Fortunately for the global coalition fight, the “Murders in Iraq and Syria” known as ISIL, have no ideological leadership and will struggle to hire new fighter should the global community take the fight to the Social Media in genuine coordinated actions to : 1) fight bad governance, to justify 2) reducing mistrust. Unfortunately, mistrust and the “institutions are rotten to their core” mantra is helped by groups as wide as: Extreme right, gold bugs, 2nd amendment supporters and Bitcoin marketers… We are surprised how some “mainstream media” have joined spreading the same “mistrust” message for a clear agenda to avoid improving governance. This pressure is accelerating G-20 actions to push for tax evasion fight (OECD initiative) and improve governance.
The US call to put “boots on the ground” to defeat ISIL might be achieve through the use of regional arm forces (Turkey, Arab countries). This will have the same consequence for the US defence sector (positive for the sector stocks) because weapons and knowledge will be provided by the Western countries (specifically the US).
Oil prices continue to come under pressure (in line with our recent energy update note). However, the situation on the ground continue to be fragile, with a new threats to the security of many countries from Egypt to US. The quickest the West recognises that the fight against ISIL and terrorists necessitate a fight against mistrust which spread not only in the jihadist internet web but also in the extreme right and gold bugs forums, the more the risk of isolated radicalised youth actions will decrease.
The fight against mistrust is likely to accelerate with the global governance improvement. Furthermore, any advance in Iran nuclear talks will help Iran joining the fight against ISIL. The recent news flow out of ISIL indicates that the terrorist organisation is getting isolated and its power is weakening. Furthermore, the recent strikes have reduced Al-Qaeda operatives which were preparing attacks against the West (according to informations out of the intelligence community).
Last but not least, UAE fighter pilot Mariam al-Mansouri shot to fame last week for her role in a US-led bombing campaign in Syria might be a game changer for the Muslim world. It’s becoming a communication war between ISIL (a XVI century like barbaric group for which women are to be rapped, and lands are to be destroyed) and the idea that Muslim Women can be empowered and help defeat the terror. The self-proclaimed Califat calls him name from Abu Bakr (first Califat of Saidouna Prophet Muhamed). It’s a shame to link Abu Bakr, one of the first followers of the Prophet, to Califat Ibrahim who is a muppet in the hand of the interests groups. But Mariam al-Mansouri is remanding Muslims that the first teacher of Coran was a Woman, Prophet’s Saidouna Muhamed daughter.
Tracking the terrorist money trail
It might seem small beer, what money can be raised from a suburban backyard in Melbourne.
But consider the price tag for executing the September 11, 2001 attacks in New York and Washington was at most US$500,000 – a paltry amount spent for cost endured.
When small amounts of cash for nefarious purposes can be collected from hundreds, if not thousands, of separate sources across the world, tracking the money and potential dangers becomes exceptionally difficult.
A classified risk assessment produced this month by Australia’s money laundering watchdog, AUSTRAC, found charities working overseas were especially vulnerable to exploitation by terrorists’ supporters.
Money raised legitimately to help people suffering in conflict zones can be « commingled with funds raised specifically to finance terrorism », a publicly released version of the report warned.
The funds might not be intended for specific plots but instead used for what the report called « the less violent or obvious aspects of a group’s operations – daily living expenses, travel, training, propaganda activities, organisational costs, and compensation for wounded fighters or the families and dependants of terrorists who have died ».
Analysis: Why Turkey matters in anti-ISIL war
Turkey wants to persuade the anti-ISIL coalition that military solution alone will not be enough.
Turkey has been under the spotlight since US President Barack Obama’s announcement to form an international alliance to fight the Islamic State in Iraq and the Levant (ISIL). Political geography and US foreign policy imperatives mean that any Turkish role will be invaluable to the success of any such effort to combat ISIL.
Ultimately, it is not a question of if there will be a role for Turkey, but more about the limits of possible Turkish involvement, the type of involvement anticipated and the obstacles which face the future mission.
Turkey has its own motives for joining this newly formed coalition that go beyond the way in which the US’ announcement was a fait-accompli. As Turkey’s President Recep Tayyip Erdogan recently made clear: Turkey « cannot stay outside of that coalition » because « we share 1,200km-long borders, we are being targeted and we have a million and half refugees on our land ».
ISIS could become ‘world’s first truly terrorist state’: Theresa May
ISIS could acquire nuclear and biological weapons to launch attacks on Britain, the UK Home Secretary warned yesterday as she set out new measures to clamp down on extremist groups.
In a speech to the Tory party conference that concentrated almost entirely on the threat from terrorism at home and abroad, Theresa May warned that the jihadist group could become the “world’s first truly terrorist state“ in Iraq and Syria.
“If [ISIS] succeed in firmly consolidating their grip on the land they occupy in Syria and Iraq, we will see the world’s first truly terrorist state established within a few hours flying time of our country,” she said.
“We will see terrorists given the space to plot attacks against us, train their men and women, and devise new methods to kill indiscriminately.”
Oil Prices Hit Fresh Lows on Saudi Price Cut
Oil prices tumbled to more-than-one-year lows Wednesday on news that Saudi Arabia lowered the official selling prices for its crude oil.
The price cuts suggest the Kingdom may not reduce output in the coming months to keep prices high.
Ample global oil supplies have weighed on prices in recent months, sending Brent, the global benchmark, to below $100 a barrel for the first time in 16 months Sept. 9. Brent futures haven’t traded above that level since.
Some investors have bet that the Organization of the Petroleum Exporting Countries, especially Saudi Arabia, will cut production to keep prices above $100 a barrel.
Saudi Arabia did reduce output in August, and the OPEC Secretary-General said in recent weeks that the group might lower its production target by 500,000 barrels a day when it meets in November.
But more drastic cuts would be needed to rebalance the market, analysts say, as North American production soars and Libyan exports continue to grow.
Saudi Arabia’s oil company cut its November oil prices, Reuters reported Wednesday, marking the fourth straight month of price cuts. For Arab Light crude being sold in Asia, the Kingdom lowered its selling price by $1 a barrel compared with the prior month, according to Reuters. The country also lowered its prices for oil sold in Europe and the U.S., Reuters reported.
Russia
Russia: Ukrainian situation continues to calm down (BUT NOT deescalate – Merkel recognised that Cold War II has started – a view we expressed in our Feb 27th note -). Ukraine continues to increase its ties with EU and NATO, despite Putin threat last week. The Cease fire in Eastern Ukraine is coming under pressure. Our contacts on the ground are indicating that the situation is very fragile and self-proclaimed Eastern Republics are willing to pursue the pressure.
Lavrov pressed during the weekend the global coalition against ISIL to seek authorisation at the UN security council. Under such a scenario , Russia could use its veto to buy some time to ISIL to strengthen its power, or to provide Assad legitimacy through having him participating to the coalition (which would crack the coalition which “implied” objective is to change the Syrian regime).
The Eastern Ukraine region self proclaimed republics autonomy perimeter continue to be the name of the game. Too much autonomy (the current self proclaimed government are calling for a full fledge independence – which could give legitimacy to Crimea annexation-) would make Ukraine IMF program dead born (as Kiev government would be in the incapacity to deliver on governance improvement and structural reforms). At the other end, an autonomous regions which would bind by the IMF program reform will increase the ability of Kiev government to strengthen the Ukrainian economy along with the governance improvement. Thus, it would increase the likelihood of joining NATO. Russia is unlikely to let this scenario take place without a fight. We continue to see some Ukraine debt restructuring very likely though the timing will depend on the autonomous republics aggression.
Therefore, the Kremlin is putting a lot of emphasis on how badly an isolated Russia would impact the global economy (and specifically would constitute a Eurozone existential threat), while the Russian economy is preparing for this outcome (e.g. Russian corporations are considering spinning of their US subsidiaries, Wealth Fund is considered to be used to self-finance needed infrastructure investment, international experts are rushing to find financial solutions for the New Russia political strategy, outside the West energy deals – e.g. with Turkey – ). From the political spectrum, the opposition is organising itself should oil prices drop sustainably below $75bbl – this scenario is possible should the geopolitical blue sky scenario take place -. But the Kremlin is “threatening” oligarchs to keep them away from joining the opposition. For more analysis on this matter, please see our recent “Russia update note”. Meanwhile, Russia accelerates the construction of Eurasia, which is seen by many analysts (incl. “gold bugs”) as a better replacement of the EU Union (because it enables to avoid improving governance and fight against corruption).
UPDATE 3-Russia hopes for Ukraine gas deal this week
* Russia stopped gas flow to Kiev in price, debts row
* Hopes of a deal rose after talks last week
* Moscow wants some debts paid before supplies resume (Adds comment by Ukraine’s energy ministry)
ATYRAU, Kazakhstan, Sept 30 (Reuters) – Russia’s energy minister said on Tuesday he hoped to reach a deal in a gas dispute with Ukraine this week, but Kiev must pay some of its large debts before Moscow resumes gas supplies.
Kiev is under pressure from the European Union, which is mediating the talks and worried about possible disruptions to its own supplies, to agree on a price for the Russian gas and accept a timetable for paying $5.3 billion in gas debts.
Efforts to end the row have collapsed at the last minute several times, and are complicated by a wider political crisis between Moscow and Kiev, but prospects of securing a deal have risen since progress was made at talks last week in Berlin.
Russia halted gas flows to Ukraine in June because of the dispute but said it would continue to supply the rest of Europe, which receives about a third of its gas needs from Russia, some 40 percent of which is pumped via Ukraine.
BOOM: US shale surge sinks demand for Saudi petrol
US liquefied petroleum output is set to overhaul Saudi Arabia in September or October, for the first time since 1991. In terms of crude oil production, the US is still in third, with Russia in the lead.
US production of liquid petroleum reached 11.5 million barrels per day, on track to outpace Saudi Arabia’s 11.6 million barrels in the next few months, according to August data from the International Energy Agency, published on September 10.
Saudi Arabia is the second-largest petroleum exporter to the US, but as domestic production increases in America, less is needed from abroad.
The shale oil boom in the US began in 2008 and has increased US crude output by 60 percent. In 2012, the United States became a net exporter of liquefied petroleum gases for the first time.
Between January and March 2014, Saudi Arabia exported an average of 1.5 million barrels per day to the US.
Saudi Arabia is the largest exporter of petroleum liquids in the world and is home to the world’s largest proven crude oil reserves, 16 percent of the world’s total.
UNHCR Sticks to Refugee Data Provided by Governments: Representative to Council of Europe
STRASBOURG, September 30 (RIA Novosti), Daria Chernyshova – A representative of the UN High Commissioner for Refugees (UNHCR) told RIA Novosti Tuesday the agency referred to governments for any statistical data it used to analyze a refugee situation in a country.
“We stick to the data governments give us. We are a governmental agency, so our first most logical counterparts are governments,” UNHCR’s representative to the Council of Europe Gert Westerveen told RIA Novosti Tuesday.
“So if a government tells us a number X and unless we have presence on the spot6 where we did our counting, we accept these figures,” Westerveen said following the hearing on the situation of refugees and internally displaced persons in Ukraine.
According to the information provided by Russia’s Federal Migration Service, the number of Ukrainian refugees in Russia has exceeded 800,000.
Hong Kong
Hong-Kong political reforms protest
Pro-democracy protests gained more traction this weekend. 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.
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.
China censors target Hong Kong protests, but don’t always succeed
BEIJING – Chinese censors and opponents of the protests sweeping Hong Kong are engaging in a cat-and-mouse game with demonstrators and commentators in a bid to stop news of the unrest spreading online and, in particular, reaching the mainland.
Tens of thousands of pro-democracy protesters have braved police tear gas to make their views known.
Spreading the word over Western and Chinese social networks is a lot safer, but it is becoming increasingly difficult as mobile phone networks are disrupted and concerns about possible surveillance grow.
The intervention is beyond what is normal for the usually free-talking Hong Kong, even as people are used to Chinese censors scrubbing the Internet in the mainland when mass demonstrations erupt.
On Sunday, users reported that Facebook Inc.’s photo-sharing app Instagram was inaccessible on China’s mainland.
Hong Kong protesters jeer Chinese flag
HONG KONG — With turned backs and loud jeers as the Chinese flag was flown over the harbor, protesters on Wednesday kicked off the National Day holiday they hope will see the biggest display yet of their mass civil disobedience campaign for greater democracy.
Student leader Joshua Wong, the 17-year-old founder of the influential Scholarism protest movement, led 30 people who turned their backs on the flag near the government’s official flag-raising ceremony in the Wanchai district, « to show our disagreement towards the CCP (Chinese Communist Party), especially for the decision made on political reform in Hong Kong, » he said.
The party’s restrictive plans for the 2017 election for Hong Kong’s leader sparked weeks of occasional protest culminating in a mass occupation of several key business areas.
Hong Kong protesters stockpile supplies for long haul
Tens of thousands of pro-democracy protesters extended a blockade of Hong Kong streets on Tuesday, stockpiling supplies and erecting makeshift barricades ahead of what some fear may be a push by police to clear the roads before Chinese National Day.
Riot police shot pepper spray and tear gas at protesters at the weekend but withdrew on Monday to ease tension as the ranks of demonstrators swelled.
Protesters spent the night sleeping or holding vigil unharassed on normally busy roads in the global financial hub.
Throughout the night, rumours rippled through crowds of protesters that police were preparing to move in again. As the sun rose many remained wary, especially on the eve of Wednesday’s anniversary of the Communist Party’s foundation of the People’s Republic of China in 1949.
« Many powerful people from the mainland will come to Hong Kong. The Hong Kong government won’t want them to see this, so the police must do something, » Sui-ying Cheng, 18, a freshman at Hong Kong University’s School of Professional and Continuing Education, said of the National Day holiday.
Is US being weak – or careful – on Hong Kong protests?
As pro-democracy protests continue in Hong Kong, critics are calling for US sanctions on China. But, as long as the demonstrations remain largely peaceful, some US-China experts counter that the US is right to take a cautious approach, especially publicly.
Hong Kong protests holding strong through lightning, rain
Little sign of momentum flagging as ‘umbrella revolution’ enters its 6th day
‘We are not afraid of riot police, we are not afraid of tear gas, we are not afraid of pepper spray. We will not leave until Leung Chun-ying resigns.’
– Lester Shum, Hong Kong student leader
As concern mounted over how the standoff might eventually end, Chinese President Xi Jinping, who has taken a hard line against any perceived threat to the Communist Party’s hold on power, vowed in a National Day speech to « steadfastly safeguard » Hong Kong’s prosperity and stability.
Catalonia
Catalonia: 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.
Catalonia suspends formal campaign on Spain independence vote
(Reuters) – Catalonia’s regional government said on Tuesday it would temporarily suspend campaigning for a vote on independence from Spain, after Madrid filed a legal block to the referendum.
Spain’s central government argues that the vote, called by Catalan leader Artur Mas for Nov. 9, would breach the country’s rule of law because it would be held in Catalonia alone, rather than in the whole of Spain.
The Constitutional Court suspended the planned referendum on Monday after the government filed its legal appeal, a move Catalan officials now want to try and overturn.
The legal suspension of Catalonia’s plans had been expected for months, although Mas defied Madrid by calling the vote anyway, and is still pushing for ways for it to go ahead.
« In the next few hours we will file our arguments to overturn the suspension of the vote, » Francesc Homs, spokesman for the Catalan government, told reporters on Tuesday. « Although we have withdrawn our campaign, we are not pulling out. »
With official campaigning halted for now, secessionist grassroots movements, which have swelled in recent years in the wealthy northeastern region and set the political agenda there, are likely to take center stage.
A Reuters reporter saw hundreds of people braving driving rain outside Barcelona’s town hall on Tuesday evening to protest at the Constitutional Court ruling and demand the right to vote.
Spain ‘s Catalonia region heeds top court, halts independence vote plans but vows to press on
MADRID – The regional government of Catalonia says it will heed a decision by Spain’s top court suspending its plans to hold an independence referendum but vows to continue efforts to hold a vote.
Regional government spokesman Frances Homs said Tuesday the Catalan government would present arguments in defense of the Nov. 9 referendum and seek to have the suspension lifted.
The Constitutional Court agreed Monday to study appeals challenging the legality of the referendum that were filed by the Spanish government. The decision automatically suspended the vote and campaigning until the court makes a ruling.
Pro-secession supporters have called for demonstrations outside town halls later Tuesday to protest the suspension.
Polls suggest most Catalans favor holding the vote, but are roughly evenly split on independence.
Journalism renaissance
Piers Morgan hire by Daily Mail may indicate the start of a new era in journalism. While robot are replacing the day-to-day reporting, analysis, global picture (10,000 feet view) are likely to be on the demand. « As editor-at-large (U.S.) [Piers Morgan] plan on breaking down the biggest stories that matter to Americans and analysing them in a way that will generate discussion and create debate, » he said in a MailOnline story on Tuesday. Why it will work? Because it aims simplifying things and help make a sense of the inflating data / stories. What’s the key of success? “trust-wordiness”. Many news media websites are coming under intense existential threat because of their biases. Using big data to link ideologies and believes with how media report stories show that as soon as a news media become biased, it’s stagnate. This is the single reason why in SNBDL we have only one bias – hate terror and extremism – except that we think that both moderate right and left parties have many things to say. When Internet started to reach our day-to-day lives, many though that we were heading to George Oswell 1984 society. While this film, explains what ISIL-like organisations could lead us to, should they succeed, it’s far from being possible in a connected world. No conspiracy can pass the data test. This is why any media which chooses to be trust-wordy will make a killing (in investor parlance) because it answers the question Why before focusing on the other things.
Britain’s Daily Mail website hires Piers Morgan as U.S. editor-at-large
(Reuters) – MailOnline, the website of Britain’s Daily Mail tabloid, has hired Piers Morgan as its U.S. editor-at-large, signing the outspoken journalist to the most visited, and often controversial, English-language newspaper website.
MailOnline, owned by Daily Mail and General Trust and known for its articles and photographs of celebrities, said on Tuesday that Morgan would write several times a week and would start immediately.
The MailOnline website, which Morgan called « an addictive pleasure », is visited by 180 million people every month, including 60 million in the United States.
« As editor-at-large (U.S.) I plan on breaking down the biggest stories that matter to Americans and analysing them in a way that will generate discussion and create debate, » he said in a MailOnline story on Tuesday.
Morgan, 49, said on Twitter this month that he was leaving CNN, six months after the network cancelled the « Piers Morgan Live » show he had presented for three years.
US News
PM Modi visit to US: Positive for India economically, Positive for the US in its fight against terror
Emails from the Fed (which constitute an important historical source on how Fed and US government dealt with the Great Financial Crisis), have shown that they have not been elite collusion (very positive to defeat the on-going mistrust). However, after analysing pros-cons, it became evident that refraining from bailing out AIG would have cost much more to our global economy and financial system (which although I believe that it should be reformed is a wonderful social development if one look at it from the Big History prospect – i.e. how Mankind has adapted its organisation to prosper -).
Afghanistan political solutions (at last) cleared the way to a comprehensive agreement. This is very positive for securing peace in the region and defeating the global terrorism (though the global terrorism terminology is a weak definition because its the combination of different groups which have different agenda and ideologies).
Zalando’s IPO is proving that a corporation could combine: 1) profits, 2) return to shareholders, 3) empowering its workers, 4) behaving nicely with consumers. Food for thoughts.
From Sept 30th Daily Briefing:
US Tax inversion: As we were expecting since the announcement of Burger King deal (which has been widely reported as being solely pursuing tax inversion objective) we’ve indicated that this would sign the end of the system. US Treasury took actions to make it harder to execute such deals, while the tax reform seems in limbo due to DC gridlock. Administrative actions taken by Treasury Secretary Lew makes it harder to execute tax inversion but does not derail it entirely. We consider that G-20 initiative to undertake OECD proposal to reform the rule of “double non-taxation” (see our previous daily briefing) will help improve the tax governance (and incidentally the rise in the mistrust in the public institutions – which are seen to be colluding with businesses -). Markets have reacted negatively to the actions taken against tax loopholes, because these are seen to be the only remaining way for Corporations to improve their EPS (while demand continue to be subdued). We disagree with this view because G-20 initiatives to tackle “tax optimisation” will come along with more investments and fiscal stimuli which would help spur more economic demand.
US Economy: high frequency economic data continue to show a mixed message. The widely common economic forecast models have been weak understanding the current economic evolution. We have indicated in our article “Perceptions & realities : closing the gap between the two” that while the growth and inflation continue to be subdued to justify any urgent action from the Fed, there are genuine signs which indicates that growth potential will improve. In a nutshell, big data, technology, energy transition, lower commodity prices and better governance are the driver we see for the creation of goldilock conditions – not too hot, not too cold – which would enable spur sustainable growth and create the conditions for central banks to normalise (in a couple of years) the monetary policy without triggering a new financial crisis or excessive financial bubbles. Gas prices decrease, a reflect of the on-going oil prices decrease, is likely to provide the Fed with some support to postpone acting too quickly normalising monetary policy.
Bill Gross – PIMCO: On Friday, Bill Gross announced that he will leave PIMCO to join Janus. Markets have reacted to the short term fixed income force selling, which may take place, as investors may reconsider their mandate (as a result of the change in management of the funds “U.S. Stocks Rebound on GDP as Bonds Fall on Pimco Concern”). While this pressure is likely to be short lived, it may bring opportunity to go long rates when the market is realising that inflation is subdued and help the Fed to delay normalising rates. There have been many speculations regarding the reason of Mr. Gross departure from PIMCO. We see the shift in Bill Gross rhetoric to defy the Fed, by criticising the Fed attitude – using arguments going from asset frothiness to central bank deficit financing -, as being the most likely good reason of this departure. By being short fixed income since mid last year, PIMCO has reported weak returns spurring an increase in redemptions (which cost PIMCO profits and Bill Gross his job).
WASHINGTON (AP) – Facing blistering criticism from Congress, Secret Service Director Julia Pierson acknowledged on Tuesday that her agency failed in executing its plan to protect the White House when a man with a knife entered the mansion and ran through half the ground floor before being subdued.
« It’s unacceptable, » Pierson told lawmakers. But her promised review of how the storied but blemished agency carries out its mission of protecting the president — and how it failed to intercept the intruder much earlier — left lawmakers from both parties cold.
« I wish to God you protected the White House like you protected your reputation here today, » Democratic Rep. Stephen Lynch told her at a hearing.
Victoria and Australian Federal Police conduct terror raids on homes in Melbourne and Seabrook
A 23-year-old man has been charged with making funds available to a terrorist organisation, after Victorian Police and the AFP swooped on homes across suburban Melbourne.
Australian Federal Police assistant commissioner Neil Gaughan said the man, from Seabrook on Melbourne’s outskirts, allegedly provided $12,000 in funds to support a US citizen fighting in Syria.
Ahead of talks Modi, Obama say ‘Chalein saath saath’
@narendramodi Tweet: With President @BarackObama. We had a wonderful meeting and talked about a wide range of issues.
« We have a vision that the United States and India will have a transformative relationship as trusted partners in the 21st century, » said the paper, « Chalein Saath Saath: Forward Together We Go ».
It read a bit like a joint statement, but was minus the officialese of one and, crucially, came ahead of the talks, instead of after, as the densely worded documents do typically.
« Together, we will combat terrorist threats and keep our homelands and citizens safe from attacks, while we respond expeditiously to humanitarian disasters and crises, it added.
US President Barack Obama and Prime Minister Narendra Modi have for the first time interacted digitally to come out with a joint editorial.
External Affairs Ministry Spokesperson said both Prime Minister Modi and President Obama have written a joint editorial in a US newspaper to be published Tuesday.
Officials on both sides have been very secretive about the joint op-ed and have not even disclosed the name of the newspaper that will publish it.
FEW SIGNS OF PROGRESS AS OBAMA MEETS INDIA’S MODI
WASHINGTON (AP) — President Barack Obama showered praise on India’s new prime minister in an Oval Office meeting Tuesday that sought to infuse new energy into the two countries’ sluggish relationship. Yet for all the pomp and pageantry, there were few signs that Obama and Narendra Modi had resolved vexing issues that have often kept the two democracies at arm’s length.
Following their first formal meeting, Obama hailed Modi for his energetic approach to addressing India’s challenges since taking office. The president singled out the prime minister’s focus on addressing « the needs of the poorest of the poor, » as well as making India a source of peace and stability in the region.
« We have so much in common, it is critical for us to deepen and broaden the existing framework and partnership that already exists, » Obama said.
Modi, speaking through a translator, said he expected the economic partnership between the U.S. and India to « grow rapidly in the coming years. » He offered optimism that the two governments could work through trade disputes and obstacles to nuclear energy cooperation with American companies.
The visit « has reinforced my conviction that India and the United States are natural global partners, based on our shared values, interests and strengths in the digital age, » said Modi, who was elected with broad support in May pledging to help reform India’s economy.
Secret Service director promises full security review after White House breach
Just 18 months after taking the helm at the Secret Service, Director Julia Pierson spent hours Tuesday on Capitol Hill facing sharp questioning from House lawmakers incensed about a recent security breach at the White House and the misleading information the agency initially released about it.
After the hearing, top lawmakers on the House Oversight and Government Reform Committee said they would request that the Department of Homeland Security impanel a team of independent investigators to conduct a comprehensive probe of the agency.
The tense grilling followed days of revelations about security breaches that have triggered mounting criticism of the elite law enforcement agency, which is charged with protecting the president, his family and visiting foreign leaders.
Pierson sat stone-faced as several members of the House committee declared that they had lost confidence in her stewardship. Some went further, depicting the Secret Service as adrift and plagued by shortcomings after a cascade of security breakdowns that allowed a knife-wielding veteran believed to be suffering from post-traumatic stress disorder to hop the White House fence, enter through an unlocked door and dash deep into the executive mansion before being stopped.
U.S. signs pact to keep troops in Afghanistan past 2014
(Reuters) – Officials from Afghanistan and the United States on Tuesday signed a long-delayed security agreement to allow American troops to stay in the country after the end of the year, filling a campaign promise by new President Ashraf Ghani.
National security adviser Hanif Atmar and U.S. Ambassador James Cunningham signed the bilateral security agreement in a televised ceremony at the presidential palace, one day after Ghani was inaugurated.
« As an independent country … we signed this agreement for stability, goodwill, and prosperity of the our people, stability of the region and the world, » Ghani said in a speech after the signing.
Ghani’s predecessor, Hamid Karzai, had long refused to agree to the deal, souring his ties with the United States. Karzai cited his anger over civilian deaths and his belief that the war was not fought in the interests of his country.
Cunningham said the pact showed the United States remained committed to Afghanistan, where foreign forces have helped provide security since the 2001 toppling of the radical Islamist Taliban government over its sheltering of planners of the Sept. 11 attacks.
« It is a choice by the United States to continue cooperating with our Afghan partners on two important security missions: training and equipping Afghan forces and supporting cooperation against terrorism, » Cunningham said.
Afghan president’s ascension paves way for signing of U.S. military pact
KABUL – Afghanistan swore in Ashraf Ghani Ahmadzai as its second elected president on Monday, embarking on a new era with a national unity government poised to confront a resilient Taliban insurgency by signing an agreement with the United States that would guarantee a continuing American military presence.
As Hamid Karzai left the political stage, the new president was locked into an uneasy partnership with his defeated rival, Abdullah Abdullah, who became the country’s first chief executive. With a hug for the cameras, both sides appeared determined to reach across factions and avoid a descent into an abyss similar to what has happened in Iraq, where the government’s failure to mend lingering sectarian divisions following a full U.S. withdrawal helped give rise to the brutal Islamic State group.
White House moves to deal with child migrant issue
(Reuters) – The White House announced its intention on Tuesday to establish refugee processing in Honduras, El Salvador and Guatemala to try to deter unaccompanied children from resorting to crossing the U.S.-Mexico border on their own.
The announcement was made in a memorandum to U.S. Secretary of State John Kerry that also said the admission of up to 70,000 refugees to the United States in fiscal year 2015 is justified by humanitarian concerns.
Over the summer, President Barack Obama struggled to contain a border crisis where tens of thousands of children from Guatemala, El Salvador and Honduras showed up illegally, often without parents or relatives, at the Texas border.
Some U.S. lawmakers had recommended the step that the White House took on Tuesday, saying that establishing refugee application programs in the three Central American countries was key to defusing the border crisis.
The 70,000 would be allocated among refugees who are judged to have specific humanitarian concern. Of these, 4,000 would be from Latin America and the Caribbean, the White House said.
Of the total, 2,000 refugee slots were not allocated to a particular region. The memo authorized the State Department to accept up to a total of 2,000 people from Cuba, Eastern Europe and the Baltics, Iraq, Honduras, Guatemala and El Salvador.
Bring your own: California bans single-use plastic bags
SACRAMENTO, Calif. — Gov. Jerry Brown has signed legislation imposing the nation’s first statewide ban on single-use plastic bags, driven to action by a buildup of litter and damage to aquatic ecosystems.
A national coalition of plastic bag manufacturers immediately said it would seek a voter referendum to repeal the law, which is scheduled to take effect in July 2015.
Under SB270, plastic bags will be phased out of large grocery stores starting next summer and convenience stores and pharmacies in 2016. The law allows grocers to charge a fee of at least 10 cents for using paper bags.
State Sen. Alex Padilla, D-Los Angeles, credits the momentum for statewide legislation to the more than 100 cities and counties, including Los Angeles and San Francisco, that already have such bans.
UPDATE 4-U.S. judge holds Argentina in contempt over bond payment plan
(Reuters) – In a rare move, a U.S. judge held Argentina in contempt on Monday, saying the country is taking « illegal » steps to evade his orders in a longstanding dispute with hedge funds over defaulted debt.
A source at Argentina’s central bank nevertheless said the country plans to deposit an interest payment at a local bank on Tuesday, in direct defiance of U.S. District Judge Thomas Griesa’s admonitions.
Griesa, who has overseen the litigation in New York for years, put off a decision on whether to impose sanctions on the South American country, which defaulted in July for the second time in 12 years after failing to reach a deal with the hedge funds.
But he issued a clear warning that Argentina must stop efforts to get around his rulings by making payments locally.
« These proposed steps are illegal and cannot be carried out, » Griesa said, his voice rising, during a court hearing in lower Manhattan.
Those steps, he said, include legislation Argentina passed that would allow it to replace Bank of New York Mellon Corp as trustee for some restructured debt with Banco de la Nacion Fideicomiso while allowing a swap of that debt for bonds payable in Argentina under its local laws.
Fed Didn’t Want to Make 2008 AIG Bailout Loan, Lawyer Says
Sept. 30 (Bloomberg) — The Federal Reserve Board of Governors didn’t want to bail out American International Group Inc. with an $85 billion loan, preferring that the insurer find a savior in the private marketplace, the Fed’s top lawyer told a judge.
“We were telling AIG we were not interested in making this loan,” Scott Alvarez, the Fed’s general counsel, testified in the lawsuit brought by Maurice “Hank” Greenberg’s Starr International Co.’s lawsuit alleging the U.S.’s assumption of 80 of AIG’s equity was illegal. “We did everything we could to encourage them to pursue other options.”
The Fed board would “just as soon not have made this loan if they could have avoided it,” Alvarez testified.
In the days leading up to the mid-September 2008 bailout, Donald Kohn, the vice-chairman of the Fed at the time, “was generally discouraging” to AIG officials about prospects for a central bank lifeline “because he believed they should pursue a private sector solution,” Alvarez testified.
Alvarez also told the court he “had no doubt” that the Fed had the legal authority to take an equity position in a company as it did with AIG.
Alvarez made his comments during cross-examination by Justice Department lawyer Scott Austin after more than nine hours of questioning by Starr’s lawyer, David Boies. Starr lawyers had estimated that Alvarez would be on the witness stand for 2 1/2 hours at the nonjury trial at the Federal Court of Claims in Washington.
Zalando Valued at Up to $6.8 Billion in Online Retailer IPO
Sept. 30 (Bloomberg) — Zalando SE priced its initial public offering near the top end of its range, valuing Europe’s largest online fashion retailer at as much as 5.35 billion euros ($6.8 billion), kicking off the biggest week in German technology stock sales in a decade.
The shares were priced at 21.50 euros a piece, raising 605 million euros by selling as much as 11.3 percent of share capital, the company said late yesterday. The offering is one of Germany’s most significant e-commerce IPOs to date.
Zalando’s start of trading Oct. 1 and the Frankfurt debut of Rocket Internet the following day marks a coming of age for Europe’s startup industry and a coup for the Samwer brothers, the Berlin entrepreneurs who control e-commerce holding company Rocket. Zalando, started by the Samwers in 2008, is a product of the Rocket startup mill.
Demand for e-commerce stocks is heating up after Alibaba Group Holding Ltd. rose 38 percent in its trading debut this month in the biggest initial public offering of all time. The company overtook Amazon.com Inc. as the world’s largest online retailer by market capitalization.
Zalando had marketed the shares at a range of 18.00 euros to 22.50 euros a share.
Europe News
EU: the glass half empty view is that unemployment rate is still very elevated (23.3% in August) but it’s coming down, even before EU Commission President elected Juncker’s infrastructure plan, digital initiative, EU Council President elected Tusk’s energy union, are not in place. Though this story combined with Catalonia independence can lead, mistakenly, people to believe that “la Bastille” will be taken in days, we disagree with this view, as those who see a bloody revolution are being hired by ISIL and alike, while the overwhelming youth are working genuinely to improve their lives (alike their ancestors, Youth are adapting to the XXI Century to survive).
From another subject, Russia continue to dream that it’s communication, it’s EU-skeptics allies in the parliament and its fake-cease-fire in Ukraine will help lift sanctions. But the Chancellor Merkel said it all “Merkel Evokes Cold War in Warning of Long Ukraine Crisis”. Chancellor Merkel description is very important because she is amongst the few EU leaders which have experienced the cold war from inside the other camp, she speaks Russian and has a deep understanding of KGB methods.
France starts to reveal 2015 budget measures. Local municipalities spending to be reduce by 3.7bn. More news are due in the coming days, we will keep you posted as the information is announced. Designated Economy Commissioner Moscovici Vows to Objectively Examine France’s Budget Deficit. Although the French Assemblee Nationale vote will be close, MPs will do the necessary to avoid the nuclear threat of a “dissolution” (even Fmr. Pres. Sarkozy does not want it because it could trigger a political crisis). The threat is genuinely coming from FN Marine Le Pen which could provide a considerable help to Russia in its struggle to lift sanctions.
EU regulator pushes inquiry on tax deals
Focuses on arrangements such as Apple’s in Ireland
BRUSSELS — Europe’s antitrust regulator is expected to provide fuller details on why it suspects Ireland and some other low-tax countries have made special deals with multinationals such as Apple that helped the companies avoid billions in taxes and created unfair advantages over other EU countries.
As soon as Tuesday, the antitrust regulator is expected to publish a formal report on the scope of the investigation and why it is worth pursuing. While the case is still in its early stages, any eventual decision could force the Irish government to recoup back taxes from Apple.
Apple has said it met with Irish officials to discuss taxes and provided information about its operations so it could pay the correct amount. The European Commission’s investigation raises the question of whether Apple and the Irish government cut a deal, allowing the company to enjoy benefits that others do not.
The report will also outline a case involving Luxembourg’s tax dealings with Fiat Finance and Trade, a unit of the Italian automaker Fiat. The investigation, revealed in June, also involves the US multinational Starbucks and the Netherlands. That report will be released at a later date.
UPDATE 1-EU says Ireland tax deal with Apple was state aid
BRUSSELS, Sept 30 (Reuters) – The European Union has accused Ireland of giving Apple Inc. illegal state aid through tax arrangements that had « no scientific basis » but which helped the iPhone maker shelter tens of billions of dollars in international revenues from tax.
In a letter written in June but published only on Tuesday, European Competition Commissioner Joaquin Almunia told the Dublin government that tax deals agreed in 1991 and 2007 appeared, in his preliminary view, to amount to state aid that broke EU laws and could be clawed back from the U.S. company.
« The Commission is of the opinion that through those rulings the Irish authorities confer an advantage on Apple, » Almunia wrote to Ireland in the letter, which was dated June 11.
Publication of the letter had been expected this week.
Analysts said the Irish tax arrangements saved Apple, the world’s most valuable corporation, billions of dollars in tax.
The Irish government and Apple have long denied any sweetheart deals were agreed. There was no immediate comment on Tuesday on from either Dublin or Apple.
China News
China:Manufacturing data support our view that China is soft landing while rebalancing. Labor statistics showed 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. The government seems fearing 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, 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 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 -.
Chinese Health Authorities Launch Campaign to Fight Dengue Fever Outbreak
MOSCOW, September 30 (RIA Novosti) – Chinese health authorities have launched a campaign to fight the current outbreak of dengue fever, which is believed to be the worst in 20 years, by outlining the major preventive measures against the disease, Xinhua news agency reported on Tuesday.
« The [National Health and Family Planning Commission (NHFPC)] commission called for efforts to cut numbers of mosquitoes, including by sealing puddles of stagnant water, common breeding grounds for the insects. It also suggested people wear trousers and long sleeves to cover their skin, » the report read.
According to the NHFPC almost 14,000 dengue fever cases have been reported in China this year, as the abnormally hot and wet summer provoked a five-fold increase in mosquito population.
Earlier this week, the Chinese Center for Disease Control and Prevention (CDC) has warned the Chinese citizens against possible dengue risks, prior to the country’s one-week National Day holiday starting on October 1.
Dengue fever is a tropical disease spread by mosquitoes causing symptoms such as severe joint pain and high fever, potentially developing into a lethal complication called severe dengue, according to the World Health Organization (WHO).
Currently there are no vaccines or drugs to combat dengue fever and experts claim that preventive measures are the only cure.
Juneyao Group, Alibaba finance arm to pilot new lending platforms
The China Banking Regulatory Commission announced on Monday that it has approved the launch of two new private banks in an effort to promote innovation models for the country’s financial reform.
Back in July, the regulator gave consent to three such banks, which was considered a landmark effort for the government to open up the State-controlled financial market to private investors.
One of the two newly approved private lenders, MYbank, boasts the recently listed Alibaba Group Holding Ltd as a major founder.
Based in Hangzhou, Zhejiang province, MYbank has registered capital of 4 billion yuan ($651 million), with Zhejiang Ant Small and Micro Financial Services Group of Alibaba holding 30 percent of its shares. Other leading private companies such as Shanghai Fosun Industrial Technology Development Co Ltd under the conglomerate Fosun Group will hold 25 percent of its shares.
In a written statement sent to China Daily, MYbank said it will use the Internet as its major means of operation and will provide financial services and products with relatively simple structures to micro and small enterprises as well as individual customers on e-commerce platforms.
Australia News
Australia: 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 – ).
UPDATE 1-Australia frets as property blows hot at home, cold in China
SYDNEY, Sept 30 (Reuters) – Australian policy makers have two housing markets to worry about, and it’s a toss up which carries the most risk.
One is too cold, the other too hot. One they can’t do anything about as it is in China, the other is a home grown headache the authorities are just starting to wrestle with.
How they unfold will have lasting ramifications for Australia’s economy and interest rates.
« There are two prices that matter for Australia right now, those for homes and those for commodities, said Paul Bloxham, chief economist for Australia at HSBC.
« Since the Chinese housing market is such a driver of demand for commodities, it matters just as much in the big picture as the domestic market, » he added. The property sector accounts for about 15 percent of China’s economy and impact some 40 industries from furniture to steel, is of increasing concern to Beijing as it drags on growth. The alarm is shared by Australia as over 35 percent of its exports go to China, giving it an annual trade surplus worth around A$50 billion with the Asian giant.
The Chinese embassy has not denied claims its government issued ‘veiled threats’ to the ABC over an upcoming Foreign Correspondent episode.
Fairfax Media today reported the Chinese government issued threats to Australia’s national broadcaster that diplomatic relations could be damaged if the ABC broadcasts a report from its Beijing-based correspondent Stephen McDonell on Tuesday night.
The report deals with the Chinese government’s increasingly harsh crackdown on the Uighurs, a small Muslim community in the far-western province of Xinjiang. The Uighurs have been the subject of a brutal crackdown by Chinese authorities.
Uighur report: ABC journalist Stephen McDonell.
Uighur report: ABC journalist Stephen McDonell.
A fortnight ago, the Chinese embassy in Canberra contacted ABC managing director Mark Scott to express its concerns about the program and requested it not be aired.
A meeting was later held between two senior embassy officials and ABC director of communications Michael Millett.
New Zealand News
New Zealand: Fontera payout cuts fuel concerns over NZ economic prospects. This increases the pressure on new PM Key Cabinet to accelerate rebalancing the economy and reforms. We have been indicating that NZ has already started a genuine shift toward new Tech agriculture, health and education services directed to Asian neighbours. The fact that PM Key secured another term supports our constructive scenario on NZ.. This constructive scenario narrative is currently overshadowed by the “search for yield” (or interest rates differential) and RBNZ fight against excessive carry trade effects.
PM steering New Zealand to military action in Iraq: opposition parties
WELLINGTON, Sept. 30 (Xinhua) — Pressure mounted on the New Zealand government Tuesday to seek parliamentary approval for any decision to send troops to help fight Islamic State (IS) insurgents in Iraq and Syria.
United States-led forces are solely using air strikes against IS positions, but Prime Minister John Key told Radio New Zealand Tuesday that U.S. generals were saying that troops on the ground would be needed if the insurgents are to be defeated.
Key would not rule out helping with the fight, but the government would treat any request for military help cautiously.
« I’m not going to commit one way or the other to anything, other than to say we’ll get some advice, we’ll see how it goes, but New Zealanders can take a high degree of confidence that we’ll be very considered about what we do, » said Key.
Key has repeatedly said he would not send troops to Iraq and rejected suggestions that by asking for advice he was signalling a change of mind.
Is the Kiwi dollar at risk of a free fall?
The New Zealand dollar’s precipitous drop, triggered by the central bank’s disclosure that it had intervened aggressively in the FX market, has investors questioning whether it faces a free fall.
On Monday, the kiwi dollar plunged nearly 2 percent to a 14-month low of $0.77 against the U.S. dollar, after data showed the Reserve Bank of New Zealand (RBNZ) sold a net 521 million New Zealand dollars in August. The sale – the largest in seven years – was a bid to lower the exchange rate, which has been a headwind for exporters.
With the RBNZ on a campaign to weaken the New Zealand dollar, the currency is appears to be a one-way bet over the longer-run, say strategists, but declines are likely to be orderly and gradual.
« Clearly, the risks are heavily skewered to downside, but I’m not expecting a free fall, » Ray Attrill, global head of FX strategy at National Australia Bank (NAB) told CNBC on Tuesday.
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.
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 push back to reopening nuclear plans, ahead of Japan-Russian talks (about sanctions, energy agreement, and disputed territories).
Japan volcano: Search suspended as eruption intensifies
Efforts to recover the bodies of at least 24 climbers have been suspended again after the eruption on Japan’s Mount Ontake intensified.
A BBC correspondent near the mountain on Tuesday said the volcano was shooting out even more ash, smoke and rocks than before.
At least 36 people are thought to have died in Saturday’s unexpected eruption.
Dozens of other people were injured in the incident on the mountain, which is about 200km (125 miles) west of Tokyo.
Hundreds of firefighters, police and troops have been involved in search operations.
Twelve bodies have been recovered so far. Another 24 are reported to be on the mountain, including five more located on Monday.
Japanese authorities only declare fatalities once the body has been examined by a doctor.
Luck, instinct determined fates of volcano hikers
TOKYO (AP) — Huge boulders falling from the sky. Billowing gray smoke that cast total darkness over the mountain. Volcanic ash piling on the ground and fumes filling the air.
Japan’s Output Unexpectedly Slumps as Retail Sales Rise
Japan’s output unexpectedly fell while stronger retail sales and an improving job market showed resilience in the world’s third-biggest economy as Prime Minister Shinzo Abe weighs another sales-tax increase.
Industrial production declined 1.5 percent in August from July, compared with the median estimate of economists surveyed by Bloomberg News for a 0.2 percent gain. Retail sales increased 1.9 percent and the jobless rate slid to 3.5 percent.
The data underscore headwinds for manufacturers as the yen trading near a six-year low fails to lift output, even as domestic demand crawls back after a blow from April’s tax hike. Abe’s government has signaled it’s prepared to boost stimulus to help consumers and businesses weather any further increase in the levy next year.
North Korea proposes Japan abduction talks in Pyongyang
TOKYO (Reuters) – North Korea has told Japan it would not pass on findings from an investigation into the fate of Japanese people abducted by North Koran agents and proposed that Japan sends representatives for talks, Japan’s prime minister said on Tuesday.
The fate of Japanese people abducted and taken to North Korea decades ago to help train spies has soured relations between the two countries and Japan’s prime minister, Shinzo Abe, has made a resolution of the dispute a top priority.
A senior Japanese Foreign Ministry official, Junichi Ihara, met Song Il-ho, North Korea’s ambassador for normalisation of ties with Japan, on Monday in China for an update on the North’s investigation.
« Ambassador Song said a scientific and objective investigation was being carried out steadily, but that the probe was in an initial stage and there were no concrete results to report, » Abe told reporters.
« Also, the North Korean side asked director-general Ihara to come to Pyongyang and meet with the members of the special investigation committee face-to-face for the detailed status of the probe, » Abe said.
Japan eased some sanctions on North Korea in July in return for the North reopening its investigation and said it expected an initial report to come out between late summer and early autumn, prompting hopes for progress.
Japan Former Prime Ministers Call for Nuclear-Free Country During Rock Festival: Reports
MOSCOW, September 30 (RIA Novosti) – Former Japanese Prime Ministers Junichiro Koizumi and Morihiro Hosokawa have taken to the stage as anti-nuclear campaigners during the country’s No Nukes 2014 rock festival, the Japan Times reported Tuesday.
« We must create a country where nuclear power generation is zero, » Koizumi shouted onstage to some 2,500 people attending the event, according to the newspaper.
« Let’s develop our country without nuclear power, » he added.
Both former prime ministers expressed their strong opposition to nuclear power generation during the event held on September 29 to September 30, the Japan Times reported.
Koizumi spoke with reporters about the dangers of nuclear power plants particularly in natural disaster-prone Japan stating, « In Japan, earthquakes, tsunami and volcanic eruptions could occur in various locations. It’s a country that’s not allowed to have nuclear power plants, » he stressed.
Though Koizumi and Hosokawa do not have any plans to take part in the gubernatorial election in Fukushima Prefecture on October 26, both feel hopeful of the country’s anti-nuclear mentality trending.
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