Oct 21: Daily briefing: Adapting to new oil prices, Fed likely to postpone QE, ISIL shifting away from Kobane

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SNBDL Daily Briefing

Report prepared using big data solution Quid

Our take away from the last 24 hours news

 

Central banks news take away: Since Bullard’s comment about postponing ending asset-purchase program known as QE3, many FOMC members (though not all voters) have started to discuss the topic. There are three main topics discussed. First, market should correct if that’s needed. However, Dallas Fed President has not indicated whether all correction are equal and what would be Fed adequate reaction should this correction be the result of excessive fear about Ebola, a fear “originated” by vested interests groups. Second, short term low inflation should not be a reason to postpone QE ending. But neither Rosengreen nor Fischer has indicated how the Fed should react to a plummeting oil prices, and Saudi’s declaration “get use to it”. Should oil prices continues to stabilise in the range $70-$80 a barrel, inflation might be low for a substantial period of time. This is obviously a positive factor but should be translated into inflation expectations, we might see wages stagnating even for a longer period. Third, although the “classic” media has reduced their focus on asset prices frothiness and the bubble-mania (naming everything a bubble from Real Estate to Stocks), the social media is pressing not go change course of stimuli reduction because otherwise we might inflate bubbles and increase inequalities. This third point is the most interesting because there is a important discrepancy between those who said that they want to reduce inequalities and the actual group of organisation which reduces inequalities. We have been indicating that we disagree with the view that we are heading toward a new XIX century style revolution. Why? Because people are getting empowered and the revolution is much more active on patents, new business creation etc. Obviously this “revolution” would cost the incumbent Elite to suffer some inflation in some “good and services” such as luxury or high end real estate. But would the Fed hike rate, refrain from avoiding a crash, for the benefit of some? I doubt it and I have confidence in the FOMC to take the right decision.

We stick to our call for next week. We see the likelihood of delaying the end of QE-3 to be around 60%. In the case the stress around Ebola and ISIL get reduced, the Fed might end QE and hint that more could come should it be needed (an announcement close to the one made by President Draghi of ECB). Otherwise, we see the likelihood of the delay increasing with the possibility of some more QE or credit easing by December. The development of Ebola is one of the most important factors to take into consideration.

 

On October 1st, we said that USD strength and US yield increase will reverse course by mid-October. This is in line with the development so far. We have seen that the EUR has stopped its free fall and the narrative is improving to reduce the existential threat. We foresee the news about AQR and the new assessment of Greece solvency to come with further support to our constructive European scenario. Bundesbank growth projection revision for Germany is sufficient to spur some changes at the Chancellery. We see the development of the EU budget discussion in line with the fact that Germany and France are getting together to avoid any catastrophe while preparing EU to undertake a genuine shift in narrative (EcoMin Macron and FinMin Sapin of France were visiting Germany yesterday). 

 

China Q3 growth was slightly better than expected (7.3% vs. 7.2% consensus). This validated that the Chinese economy is rebalancing and soft landing. The development is in line with our own scenario that China will succeed to soft land, should President Xi government continue to stick to ; 1) fight corruption, bad governance and red tapes, 2) create the conditions for business to reallocate the labor intensive parts to other countries (Africa) or replace them by robots, 3) create the condition for a sound Rule of Law (for the first time scholars are pressing government to write explicitly the separation between justice and other government branches), 4) move toward “free religion” acceptance (talks with Tibet) and new form of political reforms (as a response to the “Umbrella Revolution” in Hong Kong). These four topics are likely to help China move from its investment, heavily credit reliance, growth model to a more innovation driven model.

The new globalisation (what we simplify by calling WTO 2.0) continues with the recent talks between PM Abbott and newly elected Joko Widodo. But new globalisation ties come with the responsibility to correct what went wrong after WTO 1.0. This is why we are very optimistic that Australia will succeed in pushing for more better governance in the forthcoming G-20. Amongst the important measures, the G-20 countries are likely to support an investment program while undertaking OECD recommendation to reduce “tax avoidance and tax optimisation”.

 

The Earning season just started by the overall view is not as “depressing” as many have been painting for months (we have disagreed with this view at many occasion). Except some important misses due to idiosyncratic reasons, such as IBM, the profit margins look still healthy.

But the corporation continue to see “challenging” top line. In fact the “balance sheet deleveraging” dynamics continue to be at play. In a nutshell, corporation anticipates less top line growth, the protect margins, using tax initiatives, financial engineering (such as buy-backs) or rationalise their staff. This dynamic is usually used by some populists groups to point to the class-struggle between Rich (shareholders) and Poor (workers). But there is an untold story, which explains that even with the very high level of inequalities we have not seen a XIX Century revolution *though many would love to see it to challenge the current governance improvement trend*. The untold story is that among people leaving big corporation, there is an overwhelming number of entrepreneurs, innovators and good professionals which have reached the level of intolerance vis-a-vis some crony capitalism phenomenon. This is what we like to call “Stalinism Capitalism”: it works like capitalism for large shareholders and management while its Stalinism for workers, small shareholders (including Pension Funds). Should big corporation move away from Stalinism Capitalism, a trend which is already in place, we would with more than 75% probability: 1) improve profit margins, 2) improve workers pay and conditions, 3) improve gender equality – which empowers workers -, 4) improve consumer services. This trend is a certainty because political activism has been focusing on criticising states actions, it has just get organised to challenge private sector bad behaviour.

 

Ebola take away:

We will circulate in the coming hours a specific report on Ebola which analysis the Tweets related to this matter. This analysis provided more support to our initial views but adds some new data points which could convince our readers.

President Obama picked a global coordinator Ron Klain. Many criticised this decision because M. Klain is not a doctor. But both medical and crisis management experts agree that the US needs a global coordinator which will help reduce the bureaucracy cacophony and someone who can communicate with the public to reduce the on-going fear. WHO came under criticism from a UN report. The criticism is mainly directed to the bureaucracy organisation.

From the field, Senegal and Nigeria have been declared Ebola Free by WHO (source here). The US health worker currently in a Cruse has been put in quarantine. With the current Conservative supported “paranoia” about Ebola (Senator Rand Paul indicated that the virus could be contracted in a Cocktail – letting the view that the virus could become airborne is a serious possibility), the response seem to lead to result. We are confident that the outbreak could be overcome, should the administration succeed in its communication war.

 

Iraq & Syria take away:

As fight intensifies in Kobani (Syrian-Turkish border) with the evolvement of Turkey (we were expecting as the situation in Kobani deteriorated), ISIL shifted it focus to Raqa, terrorists plots in Baghdad and intensifies its propaganda that it might take it fight to the sky. Several reports indicate that former Iraqi pilots might be training ISIL fighters to pilot MIG planes. This report is worrying should it be proven right. However, we would like to be cautious here because ISIL objective is to overestimate its abilities and capabilities in the very important communication battle taking place now. By showing strengths ISIL pushes other terrorists group to radicalise even further (the barbaric “ugly” contest). The global pictures show that Western countries are taking the fight in term own countries by bringing to justice those who facilitate hiring of Jihadists. By winning the communication war and cutting ISIL from attracting young fighters the coalition increases its chances to ultimately defeat ISIL.

We would like to remain our readers that ISIL is three groups: 1) psychopaths – drug addicted fighters  who are leading the fight because their illness have reduced their fear of death, 2) Some sunni army groups which have been betrayed by Al-Maliki government (these include Ba’aht party), 3) Some sunni tribes. The “non-psychopaths” are using ISIL as a threat to push the global community to pressure Iraqi government to be more genuinely inclusive and reduce bad governance. We would not be surprised that Iraqi army would spur the information that they would be helping ISIL to take it fight to the sky, but let’s face facts, unless ISIL gets some government support, it’s very difficult to imagine how ISIL could have any chances vis-a-vis US and coalition airforces.

IHS confirmed the estimates we had that ISIL was making ~$2millions per day from oil, before US Strikes. But the combination of the oil facilities strikes and the plummeting oil prices are likely to bring this financial source down. Furthermore there is a genuine need to cut ISIL oil from market through a better oversight and regulation of the oil markets (to avoid money laundering and terrorism financing).

Two factors are important to watch in the coming days: 1) how President Ergodan will change is position when Kobani situation will deteriorate, 2) how the coalition will withstand two events (Iran nuclear negotiation and Saudi decision to let Oil prices stabilise at 70-80$). On the first topic, President Erdogan seems to be willing to provide help – sufficient help to keep ISIL away from Turkey where Muslim Brotherhood are reallocating after being “asked to leave” by Qatar. Second, the coalition is strong and seems to have accepted low oil prices.

 

On a non-directed related matter, we have learned overnight with great sadness the death of Christophe de Margerie in a plane crash. Our pry goes to his family and to Total S.A. staff. RIP.

 

Russia – Ukraine tension take away:

Russia and Ukraine reached a tentative gas deal during the Milan talks. But this did not come with less tension, Merkel has been very critical to President Putin, while Germany BND (spies) have reported that MH-17 has been shot down by Pro-Russian rebels. The Chancellor attitude is in line with our view that Angela Merkel is using Putin threat to push EU to undertake more reforms and more integration, while keeping the threat of Russia isolation very high. Meanwhile, Russia economy continues to tank.

Reports out of Sweden relative to underwater activities indicate that Sweden is shifting away from its “neutral” stands and is heading to put some additional pressure on Putin. Should Sweden change stands as the recent evidence are starting to show, Ukraine tension might increase because it will leave President Putin without any example of neutrality Ukraine should be bind by. We continue to see only two possible outcomes: 1) Russia pursue its aggressive attitude and pushed for a separation of Ukraine at the expense of a full-fledge isolation, or 2) Russia opposition start to “challenge” President Putin to return to reforms. The second outcome is unlikely for now because intelligence from the ground is indicating that while the opposition is willing to change the trend, there is a serious lack of appetite to challenge President Putin be in openly or behind the scenes.

We foresee the situation to continue to deteriorate while Oil prices continue to plummet. Russian economy is likely to suffer a lot, while EU narrative is likely to change because the “communication war” which have been spurred by Russia and its supporters in the Western political groups is loosing traction (facts have no religion).

 

Catalonia: referendum called off, Rajoy opened discussion to give more autonomy to Catalonia, Russia’s RT News is pressing Catalonian to revolt. We were expecting it and we add Catalonia to the numerous subjects were big data has proven its accuracy.

We were saying “calls for independence referendum is increasing pressure on both Madrid and EU to move forward to offer better conditions and better narrative to the public. We see PM Rajoy taking constitutional actions to deter Catalonia from conducting the referendum, at a moment where more the referendum is gaining support from the independence forces all over the world. Madrid may accept to open discussion to devote additional autonomy to Catalonia in order to reduce the pressure. This story is likely to push EUR existential threat higher short term, but we consider that EUR is likely to rebound by the end of this year, when these threats will be repriced as less likely.” (daily briefing Sept. 30 2014). Catalonia decision to suspend formal campaign is the first step in our constructive scenario. However, Artur Mas uses the threat of going ahead with the referendum, though the constitutional court has specified that’s un-constitutional. This threat is urging PM Rajoy to act which he did in Saturday by opening discussion of some kind of PM Cameron solution to Scotland independence call (i.e. more fiscal autonomy). Catalonia government will decide by October 15 on whether to hold referendum. We see the most likely scenario to be some deal with Madrid which would : 1) help Artur Mas to claim victory – he would have secured more autonomy – and 2) help PM Rajoy to de-escalade the tension over Catalonia. We see the next region to start a fight for more autonomy to be Bavaria (Germany’s most wealthy region which is pushing Alternative fur Deutschland – AfD – anti-EZ party wants to reduce its contribution to other regions – “lazy” EZ members states, in their parlance -. Business interest (Football Clubs) are starting to indicate the cost of a secession. Novo-Russia continue to support Catalonia, as a secession could help justify Crimea. Many have been talking about war in the East, the War against Russia is also taking place in Catalonia. The relations between populists parties in EU and Russia speaks volume. Czar Putin should make no mistake EU is one and indivisible. Populism is a cancer, EU is recovering from it.

Ferguson – Missouri: replace Catalonia, HK Occupy with Ferguson, keep calm and carry on.

Ferguson-Missouri tension resumed during the weekend after a new fatal shooting. The Tea Party caucus is using these events as a way to increase the racial tension, while Sen. Rand Paul wants to use the spread of African-American anger vis-a-vis President Obama administration as a way to bring these voters to the GOP. Sen. Rand Paul has used exactly the same strategy with the youth, which suffers the most from the global financial crisis consequences. The administration needs to increase it rhetoric against disinformation, mistrust and pessimism should it want to avoid that the voters turn to those who are placing the most emphasis on pessimism with the help of donors which interest is to keep status quo (at a moment when the US need urgently to undertake structural reforms – immigration, taxes etc. -). Furthermore, not only Tea Party caucus is using this strategy, the moderate Chris Christie whom have suffered from the Bridge scandal, is using the same strategy to change his image.

Ferguson, HK Occupy, Scotland Independence, Catalonia share the same problem: inequality. Many are considering that Inequality will bring a class struggle and some kind of XIX century like revolution. Notwithstanding that depending on where someone seats, we might think that these mass protests (1000 for Ferguson, much more in Catalonia) are sufficient to start the revolution. But like we were saying in our earlier notes, we genuinely believe that Occupy and Anonymous groups have been hijacked by “commodity interest groups” (it suffice to look at the links between investment portfolio’s advise of those groups – Gold and Commodities – and the consequence of a derailed soft power to move toward better governance).

However, unlike in the old “organised revolutions” in LatAM, this time around the social media is in charge and the overwhelming majority wants to see soft power – and Ferguson is part of that – but the chaos and Apocalypses imagined by the 3G group (the most radical group within libertarians and their name stands for Gold, Guns and God) are unlikely to take place. Of course Ebola, and ISIL are genuine threats but 1) the on-going improvement in governance (cf. Australia G-20), 2) the work to reduce disinformation and skepticism (EU, Gaza), 3) military and medical action against the two deadly diseases ISIL and Ebola, are supportive to the positive scenario. Furthermore, there is a win-win scenario which is taking place and which could help: workers, shareholders and consumer to benefit from.

 

US midterms elections: US Midterms elections: GOP step up demands for Ebola travel ban. It’s interesting that this is in line with the views expressed by both Front National Marine Le Pen (the daughter of M. Le Pen who said “Saint Ebola would help us get rid of immigration in 3months”). The economic rational behind this call is to derail globalisation by spurring fear. This obviously can derail the trend we are forecasting for commodity prices. In nutshell, an economic crisis can postpone some of the investment needed to improve energy efficiency transition. But we do believe, it can delay but NOT derail the process.

November 4th midterm elections is coming with many uncertainties. Should GOP win the Senate, the US administration is likely to find itself stuck with a divided government which could make : debt ceiling, budget negotiation, Fed Transparency Bill negotiation, very hard. Some humorists have called the Tea Party caucus to be the “no-negotiators”. Without leaning toward a liberal Tea Party bashing, we would like to remind our readers of October 2013 debt ceiling talk. These period have created too much fear that the US might default that some Sovereign Wealth Funds (SWF) have been considering challenging the USD reserve currency privilege status. The average polls are giving 55% chance to the GOP to secure a win in the Senate. However, these polls do not track the weak signals narrative nor participation variable (a model we’ve built for Scotland Independence and which has proven a very good results). Koch donors story (politico here) is very interesting because it shows that Oil interest groups are busy trying to reduce the speed at which their wealth is evaporating. $1bn is the amount invested, hope that this investment does not include any link to gestures to destabilise the Homeland security. We are confident that private initiative such as Super Pac of Super Pacs (using public donation to cut interest groups campaign financing) would take over in the short term because Pension Funds and Investors will soon recognise that “Greed is NOT good” and better have a functioning democracy.

We continue to side with the consensus. But we consider that as soon as investors will start looking at the consequence of a GOP Senate majority win we might see some change in the dynamics. We have the opportunity to use a new source of big data information. We will be using it to bring the change in the narrative in the coming 3 weeks. Stay tuned and thanks for your support.

The recent polls which show a GOP turnout advantage, should be taken with a pinch of salt. The reason is that turnout is a very volatile variable and depend on the consequence of not showing in the polls. Countries differ in their reaction function to election. As a general view, the more a country struggles to get rights the more the public is fearing the return of any dark days. The more the media will focus on the fact that GOP are winning (with the consecutive effects) the more the voters might increase their turnout. We believe that this “reversibility of votes” is the “magic” bullet which might help save some efficacy for the second half of President Obama tenure as well as avoid an incredible economic headwinds (see here Ted Cruz agenda for GOP Senate). Should one add Senator Ted Cruz comments, those of Senator Rand Paul (which spur fear about Ebola), we might find ourselves in situation which would have many similarities to  Nero burning Rome (click here).

These are the reasons why we are less confident than many commentators in the US that GOP has had the Senate majority.

 

US markets continue to behave between repricing downward growth prospect (as we were expecting) and reassign Fed policy going forward. Although VIX has moved up it’s still below the high stresses period we have experienced. The Mid-Term elections prospect is not discussed as one reason which could create more crisis: GOP are likely to tight Fed hands, should they secure the Senate majority, while the recovery is still underway. We see the next two weeks to focus on the narrative on the negative consequences of a GOP Senate win. A strategy the UK has followed to secure the Scotland independence vote. Meanwhile, recent Clinton Presidency document release shows the stress around the impeachment risk (a gesture GOP has been considering until recently and which may resume after mid-term elections). Furthermore, the political mistrust continues to be on focus in DC while policymakers discussing inappropriate conduct during the 2012 prostitution scandal in Colombia. Finally on this topic we see the push from H. Clinton (and the #GirlPower team) could change the election because the first casualty of a Tea Party Caucus win in November would be women.

Earnings season kicked started with mixed bags for the moment. However, chatters are starting to pencil down tax benefit (ahead of changes which are expected to take place during the G-20). While lower tax benefit is already in our scenario, we consider that analytics and new technology will help corporate America to keep profit margins high (please see our recent reports on robotics and big data).

 

EU is suffering from the combination of negative general sentiment (Ebola, ISIL etc.) and the negative press conducted by both populists when Russian media provides very good argument to drive the tensions between creditors and debtors higher. But the trend in EU continue to be supportive and as we were indicating the more markets will recognise the short term risk of US midterms elections, the more constructive they’ll become on EU and EUR. Markets were upset by questions about how quick Greece will exit from the program. The glass half full part of this story is that Greece, a country which once was considered to be doomed with the only hope for it is to become 2001 Argentina (according to some Nobel Prize laureates), is considering the idea of normalisation 5 years after its program. That’s in itself a strong argument which supports looking at the glass half full. France and Germany have started discussion about investment growth project (Juncker plan). We continue to see the most likely solution would be a EIB financed loans guaranteed by either the ESM or by states directly. The discussion are still on-going as EcoMin Macron and FinMin Sapin of France have been visiting the German cabinet on Monday. 

 

Br-exit: Knowing that EU is changing its narrative, UKIP call for an early Br-exit vote doesn’t come as a surprise. Actually, we were expecting it to come earlier because the populist are likely to loose the supports they are having now. Populists parties are using investment advisory businesses to spread their mistrust. A recent study conducted by the AMF (France SEC), showed that 9 web-traders over 10 are loosing money when investing in FX. This is mainly due to the fact that 9 over 10 are investing like they vote: buy Gold, USD and sell EUR because it’s doomed (this is their beliefs not ours). By better regulating the internet retail investment sector, we are likely to see less spread of mistrust. These internet retail websites are widely spreading mistrust and advising ‘moms and pops’ to make easy money when the doom scenario will come. Again our legal have forbidden us from spreading some website adds (because they consider these are non respecting SEC and other regulations). These attract their “victims” by claiming making $8,000 a month by becoming a trader. The 9 over 10 are usually exposed to the next big splash in the markets. This is exactly how our research have found ISIL portfolio to be invested. While the first is betting that our institutions are rotten to the core and are listing to the doom and gloom widely spread, the former is speaking its own books. No one can be held accountable for making wrong investment decisions. However, by stressing the losses many individual investors are likely to change their strategy and diversify their views. This financial market war is likely to leave only those which bet on ISIL success largely exposed to the doom and gloom scenario. Please not the announcement by the UK that “trolls” might face as high as 2years in prison.

 

China : The IV-th plenum was expected to focus on improving governance and reducing corruption but it came with two other game changing announcement : focus on “rule of law” and the introduction of separation between juridical power and the other branches of the government.

We will focus in the coming day on the decision as they come. By the meantime, the development is very supportive to our constructive view on China. The country is genuinely rebalancing while soft landing.

We see any stimuli to be small and targeted because the government continues to fear that the economic rebalancing has not taken momentum yet  although 1) labor intensive manufacturers are relocating in cheaper labor countries, 2) businesses are upgrading their business models [while becoming environmental friendly], 3) President Xi has conducted many trade – investment agreement with Neighbours (after Premier Li did the same in Africa) to secure investment projects which use Chinese manpower – engineers know-how in this domaine, 4) China is gaining more military presence and has fluxed it mussels – e.g. China “Top Gun” intercept by a US fighter jet -, 5) China has signed many RMB agreement which reinforce the currency usage and prepare its full liberalisation – after Free Trade Zones (FTZ) have proven to be a success -, 6) China has undertaken a genuine fight against bad governance and better regulation – many examples in our recent daily briefings of fight against corruption and bad governance-. 

While the recent decisions strengthen President Xi power, we foresee the first objective of the Chinese President to be rebalancing the Chinese economy while cooling the pressure which have developed in China.

 

Australia:  Australia struggles with the labor statistics glitches. Treasurer Hockey offered the private sector to check the information and help to correct that data. While this information does not change drastically our view that the RBA will stay put (due to the fear of a housing bubble, which the central bank is dealing with through macro prudential tools). However, the glitches reduces the “view” in the market that countries such as China are manipulating their figures. While our work on macro eco data has pushed us to take the economic figures with a pinch of salt (due to the methodology which could create some issues), we do not side with camp mistrusting everything. However, we believe that the big data analytics is likely to help improve the accuracy and the frequency of the high frequency data. However, the statistic office may take time before undertaking the experiment.

Australia continues to be seen, by markets, as a derivative to the old Chinese model (i.e. commodity provider). This view explains the high beta between Australian assets and commodity prices (or China demand for commodities). Banks shares are suffering from the combination of the increase perception of increase in risks and additional macro prudential constants to curb housing prices frothiness. Small business defined the “goldilock range” for AUDUSD to be [.90-.94]. This level is much higher than RBA own assessment (based on PPP models). We have been criticising PPP models because they do not factor any structural changes.

These assume that neither China nor Australia are conducting their rebalancing agenda. We do believe that the current weaknesses offers genuine opportunity to benefit from the other drivers to the Australian economy which are not related to commodities. We see the current Australian Dollar weakness to continue at least until the USD start to weaken again when markets will realise that it has beaten too much on a quick rate normalisation. Meanwhile, from our previous daily briefing, we have gathered sufficient support to the view that the drivers of the Australian GDP are moving toward: 1) education, health and finance services provider to Asian neighbours, 2) innovation and digital sector, 3) energy resources export to Japan (the later contributes to our constructive view that the current negative Japan Energy Trade deficit will rebalance in the medium term – reducing Japanese Government bonds solvency risk – ).

 

Japan: Although two cabinet ministers resign over scandal, creating more questions about Abenomics, we do not see this derailing PM Abe objectives. METI Chief Obuchi is seen to resign over irregularities in the political funds. This put some pressure on PM Abe administration which was seen to be “different” from previous government which have tried to defeat deflation. Furthermore, Mrs. Obuchi was one of the strong female figures in the new cabinet because her participation was intended to prepare Japanese public to embrace a woman as PM. We believe that the recent news have delayed PM Abe objective but have not derailed them. We continue to see Japan undertaking genuine third arrow reforms because other evidences are supportive to this trend. The resignation might open questioning within western investors that whether Japan Abenomics is still working. 

Futhermore, BoJ continues to behave as we expected: Cautious while the rebalancing is taking place in the country (e.g. GPIF upward allocation to equities).

We consider that whatever pressure or sell-off should be an opportunity to strengthen positioning.

 

Central banks News

 

Central banks news take away: Since Bullard’s comment about postponing ending asset-purchase program known as QE3, many FOMC members (though not all voters) have started to discuss the topic. There are three main topics discussed. First, market should correct if that’s needed. However, Dallas Fed President has not indicated whether all correction are equal and what would be Fed adequate reaction should this correction be the result of excessive fear about Ebola, a fear “originated” by vested interests groups. Second, short term low inflation should not be a reason to postpone QE ending. But neither Rosengreen nor Fischer has indicated how the Fed should react to a plummeting oil prices, and Saudi’s declaration “get use to it”. Should oil prices continues to stabilise in the range $70-$80 a barrel, inflation might be low for a substantial period of time. This is obviously a positive factor but should be translated into inflation expectations, we might see wages stagnating even for a longer period. Third, although the “classic” media has reduced their focus on asset prices frothiness and the bubble-mania (naming everything a bubble from Real Estate to Stocks), the social media is pressing not go change course of stimuli reduction because otherwise we might inflate bubbles and increase inequalities. This third point is the most interesting because there is a important discrepancy between those who said that they want to reduce inequalities and the actual group of organisation which reduces inequalities. We have been indicating that we disagree with the view that we are heading toward a new XIX century style revolution. Why? Because people are getting empowered and the revolution is much more active on patents, new business creation etc. Obviously this “revolution” would cost the incumbent Elite to suffer some inflation in some “good and services” such as luxury or high end real estate. But would the Fed hike rate, refrain from avoiding a crash, for the benefit of some? I doubt it and I have confidence in the FOMC to take the right decision.

We stick to our call for next week. We see the likelihood of delaying the end of QE-3 to be around 60%. In the case the stress around Ebola and ISIL get reduced, the Fed might end QE and hint that more could come should it be needed (an announcement close to the one made by President Draghi of ECB). Otherwise, we see the likelihood of the delay increasing with the possibility of some more QE or credit easing by December. The development of Ebola is one of the most important factors to take into consideration.

 

On October 1st, we said that USD strength and US yield increase will reverse course by mid-October. This is in line with the development so far. We have seen that the EUR has stopped its free fall and the narrative is improving to reduce the existential threat. We foresee the news about AQR and the new assessment of Greece solvency to come with further support to our constructive European scenario. Bundesbank growth projection revision for Germany is sufficient to spur some changes at the Chancellery. We see the development of the EU budget discussion in line with the fact that Germany and France are getting together to avoid any catastrophe while preparing EU to undertake a genuine shift in narrative (EcoMin Macron and FinMin Sapin of France were visiting Germany yesterday). 

 

Treasuries Rise as Global Economy, Earnings Weakness Spur Demand

Oct. 20 (Bloomberg) — Treasuries rose as investors sought the safety of U.S. government debt amid speculation corporate earnings may be restrained as the global economy faces headwinds.

Bond yields rose in Spain and Italy even as the European Central Bank began its purchases of covered bonds. Federal Reserve Bank of Boston President Eric Rosengren said the central bank shouldn’t overreact to turmoil in financial markets as it approaches its Oct. 28-29 policy meeting. U.S. debt rallied last week amid the most turbulent period for U.S. bonds in more than three years

“We’re hypersensitive now to bad news as to risk assets,” said David Ader, head of U.S. government-bond strategy at CRT Capital Group LLC in Stamford, Connecticut. “This is a very jittery market.”

The U.S. 10-year yield fell three basis points, or 0.03 percentage point, to 2.16 percent at 9:56 a.m. in New York, according to Bloomberg Bond Trader prices. The 2.375 percent note due in August 2024 rose 9/32, or $2.81 per $1,000 face amount, to 101 7/8.

 

Quantitative easing reduced inequality, a top Fed official says

Markets are panicking, but Boston Federal Reserve Bank President Eric Rosengren, one of the central bank’s leading doves, thinks monetary policy should stay steady-as-she-goes.

Specifically, he thinks the Federal Reserve should end its quantitative easing, or QE, as planned — although he wouldn’t rule out the possibility that they could do more of it if inflation falls further. Instead, he thinks the Fed should keep interest rates low for as long as wage and price inflation are too, even if that means unemployment falls below what the Fed thinks « full employment » might be. He also said that, now that the Fed’s bond-buying is drawing to a close, that the evidence shows it’s helped the economy, and, in his opinion, helped reduce inequality, too. And finally, he said that if interest rates get stuck at zero during the next recession, it might be time for the Fed to think about increasing its 2 percent inflation target.

CORRECTED-Fed’s Fisher: could see full employment, 2-pct inflation by 2015

Oct 20 (Reuters) – The U.S. economy could be fully recovered from the effects of the financial crisis and recession as early as next year, a top Federal Reserve official said, flagging the possibility the U.S. central bank will need to raise interest rates sometime soon.

« There are good reasons to believe that we’ll achieve our full-employment and price-stability objectives fairly soon, perhaps as early as next year, » Dallas Federal Reserve Bank President Richard Fisher wrote in an Economic Letter released Monday. « Do we keep the accelerator pedal to the floor right up to the point where we reach our destination? Or do we ease up as we near our goal? »

Fisher, who co-wrote the Letter with his policy advisor Evan Koenig, did not answer those rhetorical questions directly.

But they warned against being too patient on interest rates and allowing the economy to blow past the Fed’s twin employment and inflation goals.

 

ECB Said to Start Purchase Program With French, Spanish Debt

The European Central Bank bought covered bonds for the first time since President Mario Draghi unveiled an asset purchase program last month.

The ECB acquired short-dated French notes from Societe Generale SA (GLE) and BNP Paribas SA as well as Spanish securities from other lenders, according to two people familiar with the matter who asked not to be identified because the information is private. Draghi said he intends to expand the bank’s balance sheet by as much as 1 trillion euros ($1.3 trillion) to stave off deflation in the euro area.

Policy makers are under pressure to take action as euro-area inflation slowed to 0.3 percent in September and the International Monetary Fund said the region has as much as a 40 percent chance of entering its third recession since 2008. Growth will reach 1.3 percent next year, slower than he 1.5 percent pace predicted in July, after a 0.8 percent gain this year, the IMF said Oct. 7.

“From today we will begin to know how aggressive the ECB will be in bidding for bonds,” said Agustin Martin, head of European credit research at Banco Bilbao Vizcaya Argentaria SA in London.

 

ECB review will clarify Greece’s needs – bailout fund head Regling

(Reuters) – A review of the European banking sector due to be released on Oct. 26 should bring clarity on Greece’s funding needs, the head of the monetary union’s bailout fund said on Monday.

Klaus Regling, head of the European Stability Mechanism (ESM), also said the euro zone should keep the funds it is allocating for crisis resolution for future use rather than invest them in the economy now.

Regling said the European Central Bank’s asset quality review (AQR) of 130 leading banks would show how much money Greece has left in its existing bank bailout fund and how much more it would need from emergency sources.

 

BOE’s Cunliffe Says U.K. Banks Will Have to Lower Pay Costs

Banks will have to cut pay costs as they adjust to a world of lower returns, according to Jon Cunliffe, the Bank of England’s deputy governor for financial stability.

Speaking in London today, Cunliffe said shareholders have seen their earnings relative to employee compensation drop since the financial crisis. Employees are getting a “larger share of a smaller pie” and the effect has been “particularly pronounced” in the U.K., he said.

 

Cunliffe said that one driver of low returns on assets and equity is pay not adjusting to the smaller returns banks are now earning.

“The sluggish adjustment in pay may well reflect the expectation that returns in banking are set to increase in the future,” Cunliffe said. “There are good reasons why they may do so. But, given lower levels of leverage, it is unlikely that we will see, or want to see again, the returns on equity that we saw before the crisis. In the new world, pay bills may well have further to adjust.”

 

UPDATE 1-Germany risks recession, in Bundesbank’s bleak outlook

* Bundesbank predicts little if any improvement for Germany

* German economy shrank slightly in second quarter

* Central bank forecasts ‘modest’ end to year (Adds background, detail, analyst comment)

By John O’Donnell

FRANKFURT, Oct 20 (Reuters) – Germany risks coming dangerously close to recession, the central bank said on Monday in a forecast that predicted little or no economic growth in the second half of the year.

In the Bundesbank’s gloomy assessment, the euro zone’s biggest economy will stay weak, compounding the problems of the 18-country bloc, where the economy is already slowing to a virtual halt.

 

Economics News

 

China Q3 growth was slightly better than expected (7.3% vs. 7.2% consensus). This validated that the Chinese economy is rebalancing and soft landing. The development is in line with our own scenario that China will succeed to soft land, should President Xi government continue to stick to ; 1) fight corruption, bad governance and red tapes, 2) create the conditions for business to reallocate the labor intensive parts to other countries (Africa) or replace them by robots, 3) create the condition for a sound Rule of Law (for the first time scholars are pressing government to write explicitly the separation between justice and other government branches), 4) move toward “free religion” acceptance (talks with Tibet) and new form of political reforms (as a response to the “Umbrella Revolution” in Hong Kong). These four topics are likely to help China move from its investment, heavily credit reliance, growth model to a more innovation driven model.

The new globalisation (what we simplify by calling WTO 2.0) continues with the recent talks between PM Abbott and newly elected Joko Widodo. But new globalisation ties come with the responsibility to correct what went wrong after WTO 1.0. This is why we are very optimistic that Australia will succeed in pushing for more better governance in the forthcoming G-20. Amongst the important measures, the G-20 countries are likely to support an investment program while undertaking OECD recommendation to reduce “tax avoidance and tax optimisation”.

 

Majority Of Companies Increased Community Investments, Focused Giving Programs Since End Of Global Recession

NEW YORK, Oct. 20, 2014 /PRNewswire/ —  From 2010 to 2013, giving increased for 64% of companies, and it grew by more than 10% for 52% of companies. Companies that increased giving since 2010 improved business performance; companies that increased giving by more than 10% since 2010 also increased median revenues by 11% from 2010 to 2013, and pre-tax profits increased for 59% of those companies. CECP, in association with The Conference Board, released Giving in Numbers: 2104 Edition report, an in-depth analysis of corporate giving trends based on Giving in Numbers Survey data from a record 261 of the world’s largest companies.

 

UK Interest Rate Hike Unlikely in Early 2015 as Economic Growth Slows

A hike in UK interest rates is unlikely to happen in the first quarter of 2015 as Britain’s economy is set to only expand by 2.4% next year, which is significantly below the 3.1% growth expected in 2014.

According to the EY Item Club, the political uncertainty surrounding the general election next year will lead to businesses holding off investments until the results are announced and therefore slow economic growth.

« The forecast for GDP growth is still relatively good. What has changed is the global risks surrounding the forecast and the headwinds facing investment by firms, » said Peter Spencer, EY Item Club’s chief economic adviser.

« The UK’s export outlook continues to look dreadful. The glimpse of economic rebalancing that we saw in the early part of this year has turned out to be a false dawn.

 

UPDATE 8-Oil falls below $86 as oversupply, global economy worries weigh

* OPEC ministers to meet in Vienna on Nov. 27

* Market waits for Chinese GDP data

* Key oil producers resist output cuts despite glut

* Oil price in graphics: here (Updates price, adds comment)

By Nia Williams

CALGARY, Alberta, Oct 20 (Reuters) – Brent crude fell on Monday, dropping below $86 a barrel as worries about booming supply and sluggish demand pushed the global oil benchmark back toward last week’s four-year low. U.S. crude hovered below $83 a barrel.

Brent tumbled more than a dollar in early U.S. trade, but bounced off session lows as global equities markets gained.

Oil prices are down more than 25 percent since June on concern about a saturated global oil market and a gloomy economic outlook from Europe to China. Last week, Brent slid below $83, its lowest since 2010.

Energy economists have slashed forecasts of world oil demand growth for next year.

It was also not clear whether the Organization of the Petroleum Exporting Countries will decide to cut output to support prices when OPEC members meet on Nov. 27.

Saudi Arabia, Kuwait and Iran have all indicated reluctance to change supply policy, while Venezuela has requested an extraordinary meeting ahead of the Nov. 27 gathering to discuss how to arrest the price plunge.

 

China’s economic growth slows to 7.3 pct in Q3, near 6-year low

Oct 21 (Reuters) – China’s economic growth cooled to 7.3 percent between July and September from a year earlier, the weakest expansion since the global financial crisis and reinforcing expectations that Beijing will need to roll out more stimulus to avert a sharper slowdown.

With a faltering property market increasingly dragging on manufacturing and investment, the reading was the slowest for the world’s second-largest economy since early 2009, when the growth rate tumbled to 6.6 percent.

Economists polled by Reuters had expected third-quarter growth to cool to 7.2 percent from 7.5 percent in the second quarter, adding to worries about flagging global growth which have sent financial markets tumbling in recent weeks.

On a quarter-on-quarter basis, growth eased to 1.9 percent versus expectations of 1.8 percent and down from 2.0 percent in the second quarter.

 

Tony Abbott invites Joko Widodo to G20 as Indonesia’s new President promises to strengthen maritime

Jakarta: Tony Abbott met the new Indonesian President Joko Widodo late on Monday night and personally invited him to Brisbane to the G20 meeting next month, but received a non-committal reply.

As foreshadowed in an exclusive interview with Fairfax Media recently, Mr Joko is waiting for advice before deciding to make the trip to Australia on November 15 and 16.

« He invited us to attend G20. It was the main topic, » Mr Joko told reporters after his bilateral meeting with Mr Abbott at the presidential palace into which he had moved just hours earlier.

 

Earnings News

 

The Earning season just started by the overall view is not as “depressing” as many have been painting for months (we have disagreed with this view at many occasion). Except some important misses due to idiosyncratic reasons, such as IBM, the profit margins look still healthy.

But the corporation continue to see “challenging” top line. In fact the “balance sheet deleveraging” dynamics continue to be at play. In a nutshell, corporation anticipates less top line growth, the protect margins, using tax initiatives, financial engineering (such as buy-backs) or rationalise their staff. This dynamic is usually used by some populists groups to point to the class-struggle between Rich (shareholders) and Poor (workers). But there is an untold story, which explains that even with the very high level of inequalities we have not seen a XIX Century revolution *though many would love to see it to challenge the current governance improvement trend*. The untold story is that among people leaving big corporation, there is an overwhelming number of entrepreneurs, innovators and good professionals which have reached the level of intolerance vis-a-vis some crony capitalism phenomenon. This is what we like to call “Stalinism Capitalism”: it works like capitalism for large shareholders and management while its Stalinism for workers, small shareholders (including Pension Funds). Should big corporation move away from Stalinism Capitalism, a trend which is already in place, we would with more than 75% probability: 1) improve profit margins, 2) improve workers pay and conditions, 3) improve gender equality – which empowers workers -, 4) improve consumer services. This trend is a certainty because political activism has been focusing on criticising states actions, it has just get organised to challenge private sector bad behaviour.

 

U.S. shares gain despite IBM hit, build on Japan stocks surge

(Reuters) – A measure of global equity markets rose on Monday after strong U.S. corporate results lifted Wall Street, despite a quarterly earnings miss from IBM, building on positive sentiment that grew out of a surge in Japanese shares.

On Wall Street, IBM (IBM.N) shares closed down 7.1 percent at $169.10. While IBM’s miss limited the Dow’s gains, the index turned modestly higher before the end of the U.S. session, while the S&P 500 and Nasdaq advanced.

« The fact that the Dow has been able to get positive with IBM’s 13-point decline is pretty significant. It shows the overall strength in the market, » said Philip Orlando, chief equity market strategist at Federated Investors in New York. « We’re continuing to rebound off of oversold levels, » he said.

U.S. corporate earnings season will ramp up this week, with nearly 130 S&P 500 companies scheduled to report. Apple Inc (AAPL.O) posted a better-than-expected 12 percent jump in revenue after Monday’s close . Shares in Apple were roughly flat at about $100 in after-hours trade.

 

IBM on earnings: We’re disappointed with performance

IBM on Monday posted earnings that fell well short of analysts’ expectations, with the company saying it is « disappointed » with its performance.

The tech giant reported earnings excluding items of $3.68 a share on revenue of $22.40 billion.

 

Apple Q4 Earnings LIVE! Revenues Soar To $42B On Strong iPhone, Mac Sales

Apple reported fourth-quarter revenues of $42.1 billion and earnings per share of $1.42, both well ahead of consensus forecasts looking for a shade under $40B and $1.31. The revenue number was more than 12% ahead of last year’s $37.5 billion while the EPS crushed the $1.18 from 2013 by 20%. Net income itself was up 13% to $8.5B, with the greater increase in EPS explained by Apple’s aggressive stock repurchase plan.

 

Ebola

 

Ebola take away:

We will circulate in the coming hours a specific report on Ebola which analysis the Tweets related to this matter. This analysis provided more support to our initial views but adds some new data points which could convince our readers.

President Obama picked a global coordinator Ron Klain. Many criticised this decision because M. Klain is not a doctor. But both medical and crisis management experts agree that the US needs a global coordinator which will help reduce the bureaucracy cacophony and someone who can communicate with the public to reduce the on-going fear. WHO came under criticism from a UN report. The criticism is mainly directed to the bureaucracy organisation.

From the field, Senegal and Nigeria have been declared Ebola Free by WHO (source here). The US health worker currently in a Cruse has been put in quarantine. With the current Conservative supported “paranoia” about Ebola (Senator Rand Paul indicated that the virus could be contracted in a Cocktail – letting the view that the virus could become airborne is a serious possibility), the response seem to lead to result. We are confident that the outbreak could be overcome, should the administration succeed in its communication war.

 

CDC TO REVISE EBOLA PROTOCOL, PENTAGON PREPS TEAM

ATLANTA (AP) — Revised guidance for health care workers treating Ebola patients will include using protective gear « with no skin showing, » a top federal health official said Sunday, and the Pentagon announced it was forming a team to assist medical staff in the U.S., if needed.

Dr. Anthony Fauci, head of the National Institute of Allergy and Infectious Diseases, said those caring for an Ebola patient in Dallas were vulnerable because some of their skin was exposed.

The Centers for Disease Control and Prevention is working on revisions to safety protocols. Earlier ones, he said, were based on a World Health Organization model in which care was given in more remote places, often outdoors, and without intensive training for health workers.

« So there were parts about that protocol that left vulnerability, parts of the skin that were open, » Fauci said.

The CDC guidance was expected as early as Saturday, but its release has been pushed back while it continues to go through review by experts and government officials.

Health officials had previously allowed hospitals some flexibility to use available covering when dealing with suspected Ebola patients. The new guidelines are expected to set a firmer standard: calling for full-body suits and hoods that protect worker’s necks, setting rigorous rules for removal of equipment and disinfection of hands, and calling for a « site manager » to supervise the putting on and taking off of equipment.

 

Ebola Spread Limited as Texas, Nigeria See Relief

The outlook for the spread of Ebola outside of West Africa improved today as 43 people who had contact with a deceased Ebola patient in Texas were cleared of risk and health officials declared Nigeria free of the disease.

The global developments suggest Ebola can be controlled in nations with stronger health systems than the three West African countries still being ravaged by the disease. Nigeria is the continent’s most populous country, so controlling Ebola there will make it easier to stop the spread. Texas has been shaken by the announcements that two nurses who cared for the patient in Dallas have been infected.

The nurses have been moved to medical centers with special containment facilities, including Emory University Hospital in Atlanta. There, an unnamed Ebola patient was released yesterday after clearing the virus, the hospital said today in a statement. The patient was declared to not be a public health threat after more than a month of care.

 

WHO declares Nigeria officially Ebola free

The World Health Organization on Monday declared Nigeria officially Ebola-free, after 42 days — or two incubation periods — without any new confirmed cases of the deadly virus.

« The virus is gone for now. The outbreak in Nigeria has been defeated, » WHO country representative Rui Gama Vaz said in Abuja.

« This is a spectacular success story that shows to the world that Ebola can be contained. »

The arrival of Ebola in Nigeria, which is Africa’s most populous nation, leading economy and top oil producer, sparked fears of its rapid spread throughout the country of 170 million people.

But the doomsday scenario did not happen and health experts involved in tackling the outbreak praised the authorities for their rapid response and comprehensive contact tracing.

In all, eight people died out of 20 confirmed cases in Nigeria’s biggest city, Lagos, and the oil hub of Port Harcourt, while nearly 900 people were monitored for signs of the disease.

Nigeria’s official Ebola-free status comes after Senegal was given the all-clear on Friday.

 

EU prepares possible coordinator on Ebola, says foreign policy chief

BRUSSELS, Oct. 20 (Xinhua) — The European Union foreign policy chief Catherine Ashton said on Monday that the EU was preparing terms of reference for a possible coordinator who can ensure the most effective engagement between the bloc, its member states and the United Nations.

She made the remarks in Luxembourg following the European Foreign Affairs Council, noting that the Council recognized that Ebola represents an unprecedented crisis which requires an unprecedented response.

She said the EU and its member states had pledged over 500 million euros (about 640 million U.S. dollars) in assistance to the fight against Ebola, and recognized the need to make an increased effort.

Ashton confirmed the necessity of getting additional health workers on the ground as soon as possible, saying « we are providing a guarantee that international health workers who volunteer will be provided with appropriate care. »

 

Spanish nurse tests negative as Liberia makes plea for help to stop Ebola

 

Lebanon at high risk for Ebola: health minister

BEIRUT, Oct. 20 (Xinhua) — Lebanon’s health minister cautioned Monday that his country is at a high risk for the deadly Ebola virus, which has ravaged parts of West Africa and prompted a world- wide health scare.

However, Minister Wael Abou Faour also said in a press conference that « a set of measures to prevent the disease from entering the country has been adopted by the ministry. »

Lebanese business people who travel to West Africa put Lebanon at a high risk for Ebola, he said, warning that « due to the large number of Lebanese expatriates in infected countries, Lebanon should be exceptionally cautious. »

The minister said a number of measures had been taken to prevent the disease from entering Lebanon by working with embassies, airports and hospitals.

He pointed « measures will be taken with the administrations of ports, which will be responsible for notifying the ministry whenever a ship coming from a West African country heads to Lebanon. »

 

Gaza

 

Gaza: During the last 20years, we have not been as optimistic that Palestine – Israel peace process to move forward as today. Why? Because this time, the global community has to get rid of ISIL – which uses Palestine’s and Assad’s victims as a justification for their hiring of new Jihadists *usually the use the definition of “humanitarian work” to get in contact with their victims*-. British parliament voted on Monday to recognize Palestine as a state, a move that will not alter government policy, but carries symbolic value as Palestinians pursue international recognition. Britain does not classify Palestine as a state, but says it could do so at any time if it believed it would help promote peace between the Palestinians and Israel. These development in addition to the aid decided by donors during the weekend and UN Chief Ban Ki-moon call for peace process to be discussed are bringing all the conditions to move forward. FM Fabius says that recognising Palestine should help ‘2-state-solution’ as French parliament mulls a bill.

Behind the scenes, Muslim brotherhoods are loosing the ideological fight, Hamas is splitting between moderate (which decided to participate to a coalition government) and extremists (which are struggling to look even more barbaric than ISIL to attract “talents”). Iran and Saudi are heading toward a peaceful Sunni-Shia schism etc.

What are the consequences for global markets? Less geopolitical risk premium and lower energy prices (low inflation, and higher profit margins for corporations).

 

UN Head Ban Ki-moon: ‘Jews and Muslims Provoking Violence at Jerusalem’s Holiest Sites Must Stop’

UN General Secretary Ban Ki-moon has spoken out about tensions on Jerusalem’s holy Temple Mount, saying the « provocations » by Israelis and Arab Muslims must stop.

Speaking to reporters in New York, Ban said: « I express my deep concern over the provocations on the holy sites in Jerusalem, which only cause tension at a time both sides need to make their way towards the negotiating table ».

Temple Mount is one of the holiest and most aggressively-charged sites in the world, with fights between Muslims and Jews occurring weekly.

Earlier this month, dramatic scenes broke out when Israeli police stormed a riot by Palestinian youths after morning prayers, and barricaded them inside the mosque.

 

UN questions Israel on Palestinians’ rights

(Reuters) – U.N. experts questioned Israeli officials on Monday over alleged rights abuses ranging from the demolition of Palestinian houses to mistreatment of detainees and limited Palestinian access to water.

Israel’s delegation defended its record before the United Nations Human Rights Committee, which examined respect for civil and political rights in Israel, the Gaza Strip and the West Bank. Each U.N. member state is reviewed every four years.

Israel says that its obligations under international covenants do not extend to the two Palestinian territories but the U.N. panel and International Court of Justice disagree.

Committee member Cornelis Flinterman noted that the committee was meeting soon after the latest Gaza conflict, when Israeli forces killed about 2,000 Palestinians, including 500 children, and displaced hundreds of thousands in July and August.

Israeli ambassador Eviator Manor said the Jewish state was forced to launch air strikes after Hamas militants fired 300 rockets and kidnapped three Israeli teenagers, later found dead.

 

Hamas Leader Ismail Haniyeh’s Daughter Receives Medical Treatment in Israel

An Israeli hospital has confirmed that the daughter of Hamas’ top leader in the Gaza Strip, Ismail Haniyeh, has received treatment for a week in the country after complications during a standard medical procedure in the territory.

The Ichilov Hospital in Tel Aviv said that Haniyeh’s daughter « is one of more than cfrom the Gaza Strip and Palestinian Authority territories, children and adults, who we treat every year. »

Palestinian officials and members of Hamas are yet to comment on the girl’s stay in the country but a spokeswoman for the Israeli military confirmed her time spent in an Israeli hospital.

Israeli and Palestinian sources with knowledge of the situation refused to name Haniyeh’s daughter nor give further details about her condition as with any medical admissions from the Gaza Strip.

An Israeli official did reveal that patients from the Gaza Strip were admitted when a request was made by a Palestinian doctor for urgent treatment but did not suggest that Haniyeh was involved in his daughter’s transfer.

 

Recognizing Palestine

It’s a slow process, this business of getting recognized as an independent state, but the Palestinians are making progress. In September of last year, Mahmoud Abbas, the long-overdue-for-an-election president of the Palestinian National Authority, was given permission to sit in the « beige chair, » the one that is reserved for heads of state waiting to go to the podium and address the U.N. General Assembly. 

And now, another Great Leap Forward. Last week, the British Parliament voted by 274 to 12 to recognize Palestine as a state. It was a private member’s bill, however, and ministers in Prime Minister David Cameron’s cabinet were ordered to abstain. The bill cannot compel Cameron to actually recognize Palestine, a decision which the British government will only take « at a moment of our choosing and when it can best help bring about peace. » 

More hot air and empty symbolism, then, or so it would seem. But the parliamentary vote is better seen as a very large straw in the wind. After half a century when Israel could count on reflexive support from the United States, Canada and the big Western European countries no matter what it did, public opinion in the countries of the European Union is shifting. 

 

Iraq & Syria

 

Iraq & Syria take away:

As fight intensifies in Kobani (Syrian-Turkish border) with the evolvement of Turkey (we were expecting as the situation in Kobani deteriorated), ISIL shifted it focus to Raqa, terrorists plots in Baghdad and intensifies its propaganda that it might take it fight to the sky. Several reports indicate that former Iraqi pilots might be training ISIL fighters to pilot MIG planes. This report is worrying should it be proven right. However, we would like to be cautious here because ISIL objective is to overestimate its abilities and capabilities in the very important communication battle taking place now. By showing strengths ISIL pushes other terrorists group to radicalise even further (the barbaric “ugly” contest). The global pictures show that Western countries are taking the fight in term own countries by bringing to justice those who facilitate hiring of Jihadists. By winning the communication war and cutting ISIL from attracting young fighters the coalition increases its chances to ultimately defeat ISIL.

We would like to remain our readers that ISIL is three groups: 1) psychopaths – drug addicted fighters  who are leading the fight because their illness have reduced their fear of death, 2) Some sunni army groups which have been betrayed by Al-Maliki government (these include Ba’aht party), 3) Some sunni tribes. The “non-psychopaths” are using ISIL as a threat to push the global community to pressure Iraqi government to be more genuinely inclusive and reduce bad governance. We would not be surprised that Iraqi army would spur the information that they would be helping ISIL to take it fight to the sky, but let’s face facts, unless ISIL gets some government support, it’s very difficult to imagine how ISIL could have any chances vis-a-vis US and coalition airforces.

IHS confirmed the estimates we had that ISIL was making ~$2millions per day from oil, before US Strikes. But the combination of the oil facilities strikes and the plummeting oil prices are likely to bring this financial source down. Furthermore there is a genuine need to cut ISIL oil from market through a better oversight and regulation of the oil markets (to avoid money laundering and terrorism financing).

Two factors are important to watch in the coming days: 1) how President Ergodan will change is position when Kobani situation will deteriorate, 2) how the coalition will withstand two events (Iran nuclear negotiation and Saudi decision to let Oil prices stabilise at 70-80$). On the first topic, President Erdogan seems to be willing to provide help – sufficient help to keep ISIL away from Turkey where Muslim Brotherhood are reallocating after being “asked to leave” by Qatar. Second, the coalition is strong and seems to have accepted low oil prices.

 

On a non-directed related matter, we have learned overnight with great sadness the death of Christophe de Margerie in a plane crash. Our pry goes to his family and to Total S.A. staff. RIP.

 

Turkey to let Iraqi Kurds reinforce Kobani as U.S. drops arms to defenders

(Reuters) – Turkey said on Monday it would allow Iraqi Kurdish fighters to reinforce fellow Kurds in the Syrian town of Kobani on Turkey’s border, and the United States air-dropped arms to help the Kurds there resist an Islamic State assault.

Foreign Minister Mevlut Cavusoglu said Turkey was facilitating the passage of Iraqi Kurdish peshmerga forces, themselves fighting Islamic State in Iraq. He stopped short of saying whether Ankara backed the U.S. air-drop of weapons.

Turkey’s refusal to intervene in the fight with Islamic State has frustrated the United States and sparked lethal riots in southeastern Turkey by Kurds furious at Ankara’s failure to help Kobani or at least open a land corridor for volunteer fighters and reinforcements to go there.

 

Islamic State insurgents advance into Iraqi town of Qara Tappa

BAGHDAD – Islamic State militants advanced on the Iraqi town of Qara Tappa on Monday disguised as Kurdish peshmerga fighters, Kurdish security sources said.

They seized two Kurdish villages after surprising the Kurdish fighters before launching the attack on Qara Tappa, 120 km (75 miles) north of Baghdad, seeking to expand their territory and heap pressure on Kurdish forces in disputed areas.

« The terrorists were wearing peshmerga uniforms and this tactic helped them to easily infiltrate our defenses near Qara Tappa, » a peshmerga officer said on condition of anonymity.

Reinforcements were sent from the Kurdish-controlled city of Khanaqin to repel the insurgents and prevent the town of Qara Tappa from falling, the sources said.

 

Kobane: US drops arms and aid to Kurds battling IS

US military aircraft have dropped weapons, ammunition and medical supplies to Kurdish fighters battling Islamic State (IS) militants in the key Syrian town of Kobane.

US Central Command said C-130 transport aircraft made « multiple » drops of supplies provided by Kurdish authorities in Iraq.

US air strikes have helped push back IS in the town near the Turkish border.

Correspondents say the airdrops are likely to anger key US ally Turkey.

The drops of supplies provided by Kurdish authorities in Iraq were « intended to enable continued resistance against Isil’s attempts to overtake Kobane, » Centcom said in a statement. IS is also referred to as Isil and Isis.

 

Islamic State oil output was $2 million/day before air strikes – IHS

(Reuters) – Islamic State militants were producing about $2 million (1.24 million pound) worth of crude oil per day in Iraq and Syria before recent U.S.-led air strikes, possibly more than double the amount heard in U.S. congressional testimony last month, the research firm IHS said on Monday.

The group of Sunni extremists controlled as much as 350,000 barrels per day of crude oil, but was able to produce only about 50,000 bpd to 60,000 bpd, said IHS, a provider of global market and economic information.

« This fraction of pre-war capacity is the result of warfare, shut-ins and (Islamic State’s) limited technical prowess operating the fields, » IHS said in a paper called « Spoils of War: Who’s in charge of what oil resources in the conflict zones of northern Iraq and Syria. »

 

Total’s CEO de Margerie Dies in Plane Crash, Interfax Says

Christophe de Margerie, the Total SA (FP) chief executive officer who oversaw the biggest increase in reserves at the French oil explorer in at least 15 years, died in a Moscow plane crash, Interfax reported.

The 63-year-old CEO died at Moscow’s Vnukovo Airport when a business jet crashed, Interfax said, citing an unidentified law enforcement official. Four people aboard a Dassault Aviation SA Falcon jet died when it crashed into a snowplow late yesterday, Elena Krylova, a spokeswoman for the airport, said by phone, adding it’s against policy to name the victims.

Russian officials started an investigation into the crash of the plane, which was headed to Paris, the Moscow regional transport prosecutor’s office said in a statement. Calls to Total spokesman Charles-Etienne Lebatard and to the French Foreign Ministry weren’t immediately returned.

 

Turkey’s Erdogan rejects arm transfer to Syrian Kurdish party

ANKARA, Oct. 19 (Xinhua) — Turkish President Recep Tayyip Erdogan on Sunday rejected the notion of allowing the transfer of arms to the Kurdish Democratic Union Party (PYD) in Syria, saying it is a « terrorist group. »

 

« The PYD, for us, is equal with the outlawed Kurdish Worker’s Party (PKK). It is a terrorist organization. It would be very wrong for the U.S., a NATO ally, to openly talk of such support to the PYD and expect us to agree, » semi-official Anadolu Agency quoted Erdogan as saying.

He also criticized the Western countries for not supporting other groups in Syria which also have been fighting against Islamic State (IS) militants.

Erdogan’s remarks came after a U.S. statement last week revealed that Washington directly met with representatives of the PYD.

Ankara considers the PYD as affiliated with the PKK, and keeps a distance with the group despite some meetings with its co-chair Saleh Moslim.

In a recent meeting with Turkish officials, Moslim asked Ankara to allow the crossing of arms provided by third parties to the Kurdish city of Ayn al-Arab, also known as Kobane, in northern Syria, which has been venue for clashes between military wing of PYD and the IS militants.

 

Russia

 

Russia – Ukraine tension take away:

Russia and Ukraine reached a tentative gas deal during the Milan talks. But this did not come with less tension, Merkel has been very critical to President Putin, while Germany BND (spies) have reported that MH-17 has been shot down by Pro-Russian rebels. The Chancellor attitude is in line with our view that Angela Merkel is using Putin threat to push EU to undertake more reforms and more integration, while keeping the threat of Russia isolation very high. Meanwhile, Russia economy continues to tank.

Reports out of Sweden relative to underwater activities indicate that Sweden is shifting away from its “neutral” stands and is heading to put some additional pressure on Putin. Should Sweden change stands as the recent evidence are starting to show, Ukraine tension might increase because it will leave President Putin without any example of neutrality Ukraine should be bind by. We continue to see only two possible outcomes: 1) Russia pursue its aggressive attitude and pushed for a separation of Ukraine at the expense of a full-fledge isolation, or 2) Russia opposition start to “challenge” President Putin to return to reforms. The second outcome is unlikely for now because intelligence from the ground is indicating that while the opposition is willing to change the trend, there is a serious lack of appetite to challenge President Putin be in openly or behind the scenes.

We foresee the situation to continue to deteriorate while Oil prices continue to plummet. Russian economy is likely to suffer a lot, while EU narrative is likely to change because the “communication war” which have been spurred by Russia and its supporters in the Western political groups is loosing traction (facts have no religion).

 

Sweden: We Are Certain That A Foreign Vessel Is In Our Waters

Sweden released on Sunday a grainy photo of a mysterious vessel in Stockholm’s archipelago, as the military hunted for a foreign submarine or divers in the country’s biggest such mobilization since the Cold War.

The search in the Baltic Sea less than 30 miles (50 km) from Stockholm began on Friday and reawakened memories of the final years of the Cold War when Sweden repeatedly sought out suspected Soviet submarines along its coast with depth charges.

The military showed one picture of what appeared to be a craft surrounded by white ripples. The witness who took the photograph said the vessel then submerged — one of three sightings that the military said were credible reports.

The Swedish armed forces have consistently labeled their hunt one of investigating « foreign underwater activity » but elaborated on what that might entail on Sunday.

« It could be a submarine, or a smaller submarine, » Rear Admiral Anders Grenstad told a news conference. « It could be divers using some form of moped-like underwater vehicle, and it could be divers that don’t have any business on our territory. »

 

Russia Won’t Accept Terms to End Sanctions Over Ukraine

Russia’s top diplomat said his country won’t accept conditions to end sanctions after talks in Italy produced no breakthrough over the truce in Ukraine as the German chancellor criticized implementation of the peace plan.

Russia has been told to comply with various criteria before the U.S. and its allies revoke the penalties, Foreign Minister Sergei Lavrov said in a transcript of an NTV interview posted yesterday on the ministry’s website. German Chancellor Angela Merkel said it wasn’t yet possible to “speak about a real implementation” of last month’s agreement for any change in the restrictions levied against Russia.

The cease-fire in Ukraine’s easternmost regions, sealed Sept. 5, was broken several times during the past 24 hours, with two soldiers and 14 pro-Russian fighters killed, the military said today. The U.S. and the European Union slapped restrictions on Russian officials and companies after the March annexation of Crimea and July’s downing of a Malaysian passenger plane over eastern Ukraine. Russia denies stoking its neighbor’s conflict, which the United Nations estimates has cost more than 3,500 lives.

 

Russia Seen Pausing on Interventions as Ruble Stays in Corridor

Russia refrained from interventions to support the ruble for the first time in more than two weeks, according to BCS Financial Group and OAO Alfa Bank.

The currency retreated 0.7 percent to 46.1581 against the central bank’s target basket of dollars and euros by 6 p.m. in Moscow, 14 kopeks short of the level where the regulator steps in. It weakened 0.7 versus the dollar to 41.0415 as Brent crude oil fell for the first time in three days.

Russia has spent more than $13 billion of its foreign currency reserves to slow the ruble’s decline this month as sanctions over Ukraine exacerbated a dollar shortage and falling oil prices dimmed the outlook for the world’s biggest energy exporter. The currency closed 0.4 percent higher against the basket on Oct. 17 amid a rally in emerging-market assets spurred by optimism global central banks will provide more stimulus.

 

German spies say MH17 was shot down by Russian-backed Ukraine militia

GERMAN intelligence has pointed the finger of blame at pro-Russian rebels for shooting down a Malaysian passenger jet over Ukraine using missiles captured from government forces, a media report said Sunday.

Kiev and the West have previously charged that Malaysia Airlines Flight MH17 was blown out of the sky in July by separatist fighters using a BUK surface-to-air system supplied by Russia.

Moscow has denied the charge.

But the head of Germany’s BND foreign spy agency Gerhard Schindler said intelligence gathered by his network indicated the rebels had captured a BUK system from a Ukrainian base and fired a missile that exploded directly next to the plane, Spiegel magazine reported.

 

Is the oil price fall more than just a coincidence?

The recent drop in oil prices could be due to more than just lower demand, according to some analysts, who have suggested that the U.S. could be deliberately manipulating the market to hurt Russia at a time of geopolitical stress.

Patrick Legland, the global head of research at Societe Generale, conceded that he had no in depth knowledge of the situation but claimed that it was an « interesting coincidence » that the two events were happening at the same time.

« Is it lower demand or is it the U.S. clearly maneuvering?, » he told CNBC Monday.

« I’m not so sure that it is lower demand, it might be some sort of tactical move….I don’t know, but as someone from markets I’m always surprised by these kind of coincidences. » 

 

EU’s Barroso to Britain – Don’t alienate your friends in Europe

(Reuters) – European Commission President Jose Manuel Barroso will on Monday issue a plea to Britain not to isolate itself in Europe by picking fights over immigration, saying that European Union membership boosts British international clout.

Britain’s future in the 28-country trading bloc has been thrown into question by Prime Minister David Cameron, who has adopted an increasingly defiant stance on immigration to tackle the threat of the anti-EU UK Independence Party. UKIP’s rising popularity threatens his bid for re-election in 2015.

Barroso, whose 10-year term as head of the EU’s executive body comes to an end next month, issued a warning to Cameron on Sunday against trying to seek changes to the EU’s freedom of movement rules, saying they were essential to the bloc’s internal market.

 

Hong Kong

 

Hong Kong take away:

Hong Kong protests are calming down, as we were expecting, while a recent poll showed that 68% are opposing protests. But Mainland sticks to its view that any political reform should bind by the “basic law”. We do not see HK and Mainland China governments to accept any substantial change in the short term (“Government ready to talk but rejects key concessions”). China wary of HK protests ease pain of Macau Casinos (a pain organised by China to reduce corruption). This is 100% in line with our first comment on HK protests please find below some of what we were saying.

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. The recent decision to suspend HK police for use of pepper spray on protesters is an indication that the level of tolerance to police action has came down substantially. What’s pepper spray relative to Tian’anmen tanks? Please don’t read this comparison as an acceptance for any police abuse but we might recognise that the tolerance level has shift downward substantially and this is a positive development for the Chinese political stability. Furthermore, we would like to emphasise that the views from the ground are indicating that the IV-Plenum will bring some new juridical reform, a prerequisite toward democracy.

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 to 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 seems willing to open discussion with Tibet. We are not surprised because we were expecting it, but it’s a game changer in China Mainland willingness to improve ; acceptance of others beliefs (President Xi Decision was clear about that), acceptance of democracy… However, this is a very difficult path, we see President Xi willing to undertake the changes but at a speed he considers it can avoid hard landing and apocalyptic scenarios.

 

Hong Kong students, officials set for first talks on political crisis

(Reuters) – Senior Hong Kong government officials will meet student leaders for the first time on Tuesday in an attempt to defuse more than three weeks of pro-democracy protests which have brought parts of the Asian financial center to a standstill.

Hopes are low for any breakthrough during the evening talks, which will be broadcast live, with both sides refusing to give ground in resolving the worst political crisis in the former British colony since it was handed back to China in 1997.

Protesters are calling for free elections when Hong Kong chooses its next leader in 2017, but China insists on screening candidates first. Beijing believes it has offered enough concessions to Hong Kong in the past and will give no ground to pro-democracy protests, sources say.In blunt remarks that could inflame students ahead of the talks, Hong Kong’s Beijing-backed leader, Leung Chun-ying, told some foreign media on Monday that free elections were unacceptable partly because they risked giving Hong Kong’s poor and working class a dominant voice in politics.

 

Hong Kong leader blames ‘external forces’ for protests

Hong Kong’s chief executive has blamed “external forces” for the democracy protests that have rocked the territory in recent weeks as both government and students gear up for talks aimed at resolving the deadlock over universal suffrage.

Angry at the Chinese government’s decision to vet candidates for the leadership polls in 2017, student protesters are calling for fully democratic elections in Hong Kong.

After weeks of umbrellas, songs from Les Miserables, yellow ribbons and street art, protesters in Hong Kong have added the Liverpool FC anthem You’ll Never Walk Alone to their repertoire.

Police officers are reflected on reflective materials held by a pro-democracy protesters on a blocked road at Mongkok shopping district in Hong Kong.More violent clashes in Hong Kong despite prospect of talks

Police draw batons against pro-democracy protesters during a clash in the Mong Kok district of Hong Kong last night. Photograph: Rolex Dela Pena/EPAClashes in Hong Kong as pro-democracy protesters regroup

Runners participate in a 5km run in support of pro-democracy protesters around a blocked area outside the government headquarters in Hong Kong yesterday. Photograph: Carlos Barria/Reuters  Hong Kong’s embattled leader reaches out to students with talks offer

Hong Kong’s chief executive Leung Chun-ying, who is backed by Beijing, has said the territory’s government was unwilling to compromise on China’s restrictions.

Discussions between protesters and government are set to begin today, Chief Secretary Carrie Lam, the city’s No. 2 official, said.

China’s National People’s Congress has said that the city’s next leader can be elected by universal suffrage, but that the shortlist of candidates must be approved by a 1,200-strong panel of government supporters.

 

HSBC Ad Hijacked as Poster Art Underlines Hong Kong’s Divisions

Darren Boey and Richard FrostOct 20, 2014 5:23 am ET

(For more on the Hong Kong protests, see EXT3 <GO>)

Oct. 20 (Bloomberg) — HSBC Holdings Plc, Europe’s biggest bank, was unwittingly drawn into Hong Kong’s democracy debate after activists hijacked one of the lender’s advertising campaigns to spread their message.

A poster featuring two identical pictures of a young woman holding a yellow umbrella aloft — one emblazoned with the word “patriot,” the other marked “traitor” — was at the entrance of a subway station close to the main protest area in the Admiralty district today.

The images underline divisions within Hong Kong, where support for the pro-democracy protesters is mixed with concern by those who say the demonstrations are hurting the economy or fomented from abroad. The poster, at least one meter (3.3 feet) high and more than two meters wide, mimics HSBC advertisements from a global campaign.

“The more you look at the world, the more you recognize what really matters to people,” the mock advertisement says. It features HSBC’s logo and the slogan “the world’s local bank.”

Gareth Hewett, a spokesman for HSBC in Hong Kong, declined to comment on the advertisement or whether his company had taken any steps to remove the poster.

 

Hong Kong chief executive claims ‘external forces’ behind pro-democracy protests

HONG KONG –  Hong Kong’s leader has claimed that « external forces » are participating in student-led pro-democracy protests that have occupied parts of this financial capital for more than three weeks, but provided no evidence to back his accusation.

Chief Executive Leung Chun-ying’s statement in a televised interview Sunday was the first time he has alleged foreign involvement in the unrest, echoing accusations by China’s central government, which also has not backed them with any evidence. Leung’s statement comes just before his government is scheduled to hold talks with student leaders on Tuesday.

When asked on the « Newsline » program about a Chinese official’s comments on outside involvement, Leung said, « There is obviously participation by people, organizations from outside of Hong Kong. » Leung added that the foreign actors came from « different countries in different parts of the world, » but didn’t specify which countries.

The Hong Kong Federation of Students immediately rejected the accusations, with Secretary General Alex Chow saying Leung was « just making it up. »

« He’s the chief executive, he’s an accountable official, » Chow told reporters. « If he’s putting forward these accusations, then we hope he also puts forward the evidence. But he shouldn’t just say that foreign powers are meddling without evidence. »

 

Catalonia

Catalonia: referendum called off, Rajoy opened discussion to give more autonomy to Catalonia, Russia’s RT News is pressing Catalonian to revolt. We were expecting it and we add Catalonia to the numerous subjects were big data has proven its accuracy.

We were saying “calls for independence referendum is increasing pressure on both Madrid and EU to move forward to offer better conditions and better narrative to the public. We see PM Rajoy taking constitutional actions to deter Catalonia from conducting the referendum, at a moment where more the referendum is gaining support from the independence forces all over the world. Madrid may accept to open discussion to devote additional autonomy to Catalonia in order to reduce the pressure. This story is likely to push EUR existential threat higher short term, but we consider that EUR is likely to rebound by the end of this year, when these threats will be repriced as less likely.” (daily briefing Sept. 30 2014). Catalonia decision to suspend formal campaign is the first step in our constructive scenario. However, Artur Mas uses the threat of going ahead with the referendum, though the constitutional court has specified that’s un-constitutional. This threat is urging PM Rajoy to act which he did in Saturday by opening discussion of some kind of PM Cameron solution to Scotland independence call (i.e. more fiscal autonomy). Catalonia government will decide by October 15 on whether to hold referendum. We see the most likely scenario to be some deal with Madrid which would : 1) help Artur Mas to claim victory – he would have secured more autonomy – and 2) help PM Rajoy to de-escalade the tension over Catalonia. We see the next region to start a fight for more autonomy to be Bavaria (Germany’s most wealthy region which is pushing Alternative fur Deutschland – AfD – anti-EZ party wants to reduce its contribution to other regions – “lazy” EZ members states, in their parlance -. Business interest (Football Clubs) are starting to indicate the cost of a secession. Novo-Russia continue to support Catalonia, as a secession could help justify Crimea. Many have been talking about war in the East, the War against Russia is also taking place in Catalonia. The relations between populists parties in EU and Russia speaks volume. Czar Putin should make no mistake EU is one and indivisible. Populism is a cancer, EU is recovering from it.

Ferguson

 

Ferguson – Missouri: replace Catalonia, HK Occupy with Ferguson, keep calm and carry on.

Ferguson-Missouri tension resumed during the weekend after a new fatal shooting. The Tea Party caucus is using these events as a way to increase the racial tension, while Sen. Rand Paul wants to use the spread of African-American anger vis-a-vis President Obama administration as a way to bring these voters to the GOP. Sen. Rand Paul has used exactly the same strategy with the youth, which suffers the most from the global financial crisis consequences. The administration needs to increase it rhetoric against disinformation, mistrust and pessimism should it want to avoid that the voters turn to those who are placing the most emphasis on pessimism with the help of donors which interest is to keep status quo (at a moment when the US need urgently to undertake structural reforms – immigration, taxes etc. -). Furthermore, not only Tea Party caucus is using this strategy, the moderate Chris Christie whom have suffered from the Bridge scandal, is using the same strategy to change his image.

Ferguson, HK Occupy, Scotland Independence, Catalonia share the same problem: inequality. Many are considering that Inequality will bring a class struggle and some kind of XIX century like revolution. Notwithstanding that depending on where someone seats, we might think that these mass protests (1000 for Ferguson, much more in Catalonia) are sufficient to start the revolution. But like we were saying in our earlier notes, we genuinely believe that Occupy and Anonymous groups have been hijacked by “commodity interest groups” (it suffice to look at the links between investment portfolio’s advise of those groups – Gold and Commodities – and the consequence of a derailed soft power to move toward better governance).

However, unlike in the old “organised revolutions” in LatAM, this time around the social media is in charge and the overwhelming majority wants to see soft power – and Ferguson is part of that – but the chaos and Apocalypses imagined by the 3G group (the most radical group within libertarians and their name stands for Gold, Guns and God) are unlikely to take place. Of course Ebola, and ISIL are genuine threats but 1) the on-going improvement in governance (cf. Australia G-20), 2) the work to reduce disinformation and skepticism (EU, Gaza), 3) military and medical action against the two deadly diseases ISIL and Ebola, are supportive to the positive scenario. Furthermore, there is a win-win scenario which is taking place and which could help: workers, shareholders and consumer to benefit from.

 

New Michael Brown details just one piece of probe, law enforcement official says

(CNN) — Blood from Michael Brown that was found on the uniform and in the police car of Officer Darren Wilson appears to back the officer’s version of events, but still leaves questions unanswered, law enforcement sources told CNN.

Those sources corroborated to CNN details first reported by The New York Times about the officer’s version of events in Wilson’s shooting of the unarmed teen on August 9 in Ferguson, Missouri.

Brown’s blood was found on Wilson’s gun, on the squad car’s interior and on the officer’s uniform, according to a U.S. law enforcement official and a second source with knowledge of the forensics presented to the grand jury.

The source corroborated what the Times reported.

At least one of the wounds Brown suffered is consistent with a struggle and appeared to be fired at close range, according to a different source with first-hand knowledge of the investigation.

 

Obama Returns to Trail With a Blue State Focus

UPPER MARLBORO, Md. — President Obama jumped back on the campaign trail Sunday after a week of grim Ebola news, with a rally at a high school here aimed at lifting the fortunes of Anthony G. Brown, the state’s lieutenant governor and Democratic candidate for governor.

In a jam-packed gymnasium, Mr. Obama urged the mostly African-American crowd of 8,000 to shake off any midterm malaise and show up on Nov. 4 to put Mr. Brown in the governor’s mansion.

“There are no excuses. The future is up to us,” the president said, his voice rising above the roar of the enthusiastic crowd. “If you want better policies out of Washington, you’ve got to vote for them. If you want better policies in Maryland, you have to go vote for them.”

Mr. Obama accused Republicans of betting that Democrats will not show up in November. But, he insisted, “I’m banking that strategy is not going to work.”

 

Protesters defiant after High Court orders them to leave Mong Kok and Admiralty sites

Defiant protesters refused to budge from their occupied zones in Admiralty and Mong Kok yesterday despite court orders requiring them to leave.

The High Court granted three injunctions last night to transport groups and the owner of a commercial building. The orders do not cover the third occupied site, Causeway Bay.

Protesters noted their civil disobedience sit-ins were illegal in any case, and vowed to hold out until talks between the government and student leaders finally take place tonight.

« The injunctions will not scare me, » electronics engineer Larry Choi, 28, said in Mong Kok. « I will wait for the outcome of the meeting to decide on my next step. If nothing emerges from the negotiations, I will stay on. »

Marketing officer Heiman Chan, 25, said she had joined the Harcourt Road crowds almost every night after work since Occupy Central began on September 28. « It doesn’t matter if one more offence is added, » she said.

 

US midterms elections

 

US midterms elections: US Midterms elections: GOP step up demands for Ebola travel ban. It’s interesting that this is in line with the views expressed by both Front National Marine Le Pen (the daughter of M. Le Pen who said “Saint Ebola would help us get rid of immigration in 3months”). The economic rational behind this call is to derail globalisation by spurring fear. This obviously can derail the trend we are forecasting for commodity prices. In nutshell, an economic crisis can postpone some of the investment needed to improve energy efficiency transition. But we do believe, it can delay but NOT derail the process.

November 4th midterm elections is coming with many uncertainties. Should GOP win the Senate, the US administration is likely to find itself stuck with a divided government which could make : debt ceiling, budget negotiation, Fed Transparency Bill negotiation, very hard. Some humorists have called the Tea Party caucus to be the “no-negotiators”. Without leaning toward a liberal Tea Party bashing, we would like to remind our readers of October 2013 debt ceiling talk. These period have created too much fear that the US might default that some Sovereign Wealth Funds (SWF) have been considering challenging the USD reserve currency privilege status. The average polls are giving 55% chance to the GOP to secure a win in the Senate. However, these polls do not track the weak signals narrative nor participation variable (a model we’ve built for Scotland Independence and which has proven a very good results). Koch donors story (politico here) is very interesting because it shows that Oil interest groups are busy trying to reduce the speed at which their wealth is evaporating. $1bn is the amount invested, hope that this investment does not include any link to gestures to destabilise the Homeland security. We are confident that private initiative such as Super Pac of Super Pacs (using public donation to cut interest groups campaign financing) would take over in the short term because Pension Funds and Investors will soon recognise that “Greed is NOT good” and better have a functioning democracy.

We continue to side with the consensus. But we consider that as soon as investors will start looking at the consequence of a GOP Senate majority win we might see some change in the dynamics. We have the opportunity to use a new source of big data information. We will be using it to bring the change in the narrative in the coming 3 weeks. Stay tuned and thanks for your support.

The recent polls which show a GOP turnout advantage, should be taken with a pinch of salt. The reason is that turnout is a very volatile variable and depend on the consequence of not showing in the polls. Countries differ in their reaction function to election. As a general view, the more a country struggles to get rights the more the public is fearing the return of any dark days. The more the media will focus on the fact that GOP are winning (with the consecutive effects) the more the voters might increase their turnout. We believe that this “reversibility of votes” is the “magic” bullet which might help save some efficacy for the second half of President Obama tenure as well as avoid an incredible economic headwinds (see here Ted Cruz agenda for GOP Senate). Should one add Senator Ted Cruz comments, those of Senator Rand Paul (which spur fear about Ebola), we might find ourselves in situation which would have many similarities to  Nero burning Rome (click here).

These are the reasons why we are less confident than many commentators in the US that GOP has had the Senate majority.

 

Will Democrats show up to vote? Polls point to GOP turnout advantage

A trend-line is emerging in the polls that is buoying Republicans’ spirits for the Nov. 4 midterms – beyond President Obama’s unpopularity and a few key races turning in their favor, the numbers show GOP voters simply care about this election more than Democrats.  

And that could translate to a sizable advantage in turnout next month.

A Fox News poll released last week showed 45 percent of Republicans described themselves as “extremely” interested in the election, compared with 30 percent of Democrats.

The results aligned with a recent Gallup poll also showing Republican and Republican-leaning voters far more interested in the midterms. Forty-four percent of Republicans described themselves as “extremely” motivated to vote, compared with just 25 percent of Democrats.

Surveys also indicate that, compared with past elections, interest among voters of both parties is low this year, making for an unpredictable election night. But GOP strategists say dissatisfaction among Americans with the direction of the country ultimately will boost their candidates.

“That’s why you see Republican candidates having real momentum right now,” said Andrea Bozek, the National Republican Congressional Committee’s communications director.

 

IN CHICAGO, A WARM HOMECOMING FOR UNPOPULAR OBAMA

CHICAGO (AP) — They say you can never truly go home again, but for Barack Obama, perhaps the old adage doesn’t apply.

Across the country, far more Americans say they disapprove of the president than approve. He’s so politically toxic that Democratic candidates in tough races are practically begging Obama to stay away.

But this is Chicago, where support for the town’s favorite son still runs high. Just ask the throngs of Chicagoans who craned their necks and shouted cheers in Obama’s direction during his brief trip home.

Obama arrived here late Sunday and headed straight to an evening campaign rally for Illinois’ Democratic Gov. Pat Quinn. After a night’s sleep, he hit the town for a day of campaign-themed events aimed at turning out the Democratic vote before an evening flight back to Washington.

 

What can Ebola czar Ron Klain do?

My colleague Ed Rogers wonders what Ron Klain is supposed to do about Ebola. He rightly observes: “If you want to appoint someone to help stop the spread of a lethal contagion, you would never think of Klain. But if you want to contain the Ebola episode so it stays as quiet as possible until after the election, he is the right guy for the job.” Granted, Klain is not the ideal person to lead the response to a health crisis, but Klain nevertheless could help President Obama and the country in any number of ways.

 

What does Ted Cruz want a Republican congress to do?

The Texas Republican took it upon himself to lay out the vision of what he thinks a Republican-led Congress should do in 2015 if they retake the Senate after the midterms, outlining a 10-point agenda in a USA Today op-ed published Sunday.

With plans to abolish the IRS and repeal Obamacare, Cruz acknowledged that Republicans would likely face vetoes from President Barack Obama and filibusters from Senate Democrats. But the potential 2016 presidential candidate appeared to look further than next month’s election, saying obstruction from Democrats would drive Republican success in 2016.

« We should lead boldly. No Washington games, » Cruz said. « We will either pass a serious agenda to address the real priorities of the American people … or the Democrats will filibuster or veto these bills. And, if they do so, we will have transparency and accountability for the very next election. »

Cruz’s Op-ed marks a shift in the 2014 elections, which Republicans have sought to define as a referendum on Obama. Now, Republicans are being pressed to say what taking back the Senate would be — rather than focusing on what it wouldn’t be — and Cruz is offering that vision.

 

Clinton: Midterm elections should motivate women

SAN FRANCISCO (AP) — Hillary Rodham Clinton urged Democratic voters not to be complacent about the November midterm elections, saying Monday that working women and their families will lose out on a better future if Republicans gain control of both houses of Congress.

 

US News

 

US markets continue to behave between repricing downward growth prospect (as we were expecting) and reassign Fed policy going forward. Although VIX has moved up it’s still below the high stresses period we have experienced. The Mid-Term elections prospect is not discussed as one reason which could create more crisis: GOP are likely to tight Fed hands, should they secure the Senate majority, while the recovery is still underway. We see the next two weeks to focus on the narrative on the negative consequences of a GOP Senate win. A strategy the UK has followed to secure the Scotland independence vote. Meanwhile, recent Clinton Presidency document release shows the stress around the impeachment risk (a gesture GOP has been considering until recently and which may resume after mid-term elections). Furthermore, the political mistrust continues to be on focus in DC while policymakers discussing inappropriate conduct during the 2012 prostitution scandal in Colombia. Finally on this topic we see the push from H. Clinton (and the #GirlPower team) could change the election because the first casualty of a Tea Party Caucus win in November would be women.

Earnings season kicked started with mixed bags for the moment. However, chatters are starting to pencil down tax benefit (ahead of changes which are expected to take place during the G-20). While lower tax benefit is already in our scenario, we consider that analytics and new technology will help corporate America to keep profit margins high (please see our recent reports on robotics and big data).

 

Obama White House Finds Ebola and ISIS Crises Silver Lining

An excuse for why he’s not campaigning for more Democrats.

President Barack Obama has found a silver lining in months of global crises: an excuse for why he’s not out on the campaign trail for Democrats this fall.

Asked Monday if it was odd two weeks before the midterm elections that Obama was not spending more time on the road for Democrats, Principal Deputy Press Secretary Eric Schultz pointed to all the president’s other commitments, including the twin crises of Ebola and ISIS, which have upended Senate campaigns around the country.

“I don’t think it’s weird given everything that we are trying to manage,” he told reporters in Chicago, where Obama cast an early ballot this morning and held one of just seven pre-Election Day rallies last night. “As I think we’ve said now for some time there’s a lot of significant, complex situations going on both around the world and here at home and I think a lot of those issues have dominated the president’s time. Given that the elections are a few weeks away, obviously that is a priority as well. So I think you’ll see the president as he did yesterday campaign when he can.”

 

U.S. stocks end higher despite drag from IBM

(Reuters) – U.S. stocks ended higher on Monday on investor hopes for a strong earnings season, but IBM’s disappointing results limited gains.

Earnings reports from Halliburton (HAL.N), Gannett Co (GCI.N), and others, helped ease the worries over global growth and falling commodity prices that last week helped drive stocks close to correction territory.

« Some of the concerns of last week have subsided, » said Jack Ablin, chief investment officer at BMO Private Bank in Chicago.

« The more people just focus on the fundamental values and earnings and revenues and less on headlines, the more stocks have an opportunity to move higher. »

IBM shares (IBM.N) slumped 7.1 percent to $169.10, the biggest drag on both the Dow and S&P 500, after third-quarter earnings fell well short of Wall Street expectations. IBM abandoned its 2015 operating earnings target and said it would pay Globalfoundries $1.5 billion over three years to take its loss-making semiconductor unit.

 

Hedge Funds Cut Bullish Bets on Crude as Prices Tumble

Plunging oil prices spurred hedge funds to cut bullish wagers by the most in six weeks, losing confidence in the willingness of producers to constrict supply.

Money managers cut net-long positions in West Texas Intermediate by 8.1 percent in the week ended Oct. 14. Short positions jumped to the highest level in 22 months, U.S. Commodity Futures Trading Commission data show.

WTI tumbled 8.8 percent this month as U.S. production expanded to a 29-year high. That added to signs of a global supply glut just as the International Energy Agency cut its forecast for demand growth. Crude is now trading in a bear market, underpinned by speculation that OPEC members are favoring market share over prices.

 

A third of U.S. shale output uneconomical if oil hits $80 – Bernstein

Oct 20 (Reuters) – About a third of U.S. shale production would be uneconomical if oil prices fell to $80 per barrel, Bernstein Research analysts said, differing widely from the International Energy Agency’s estimate of a little over 4 percent.

A tumble in the price from the year’s high above $115 per barrel to below $90 per barrel has focused investors and oil companies on the breakeven level – the point at which net return on a project turns positive.

Based on every well drilled horizontally in the first quarter in the United States, Bernstein analyst Bob Brackett concluded that about a third of the total number of wells would not be economically viable at $80 per barrel for West Texas Intermediate crude.

The IEA, however, estimates that slightly more than 4 percent of U.S. shale oil production requires a breakeven price of more than $80 per barrel.

« We disagree with other estimates, including those cited by the IEA, which suggest the vast majority of shale oil production is robust at such prices, » Brackett said in a note to investors.

« Our expectation is that oil price will revert back to a level where a much smaller portion of production is uneconomic, said Brackett, who believes prices are near the bottom of the cycle.

 

Europe News

EU is suffering from the combination of negative general sentiment (Ebola, ISIL etc.) and the negative press conducted by both populists when Russian media provides very good argument to drive the tensions between creditors and debtors higher. But the trend in EU continue to be supportive and as we were indicating the more markets will recognise the short term risk of US midterms elections, the more constructive they’ll become on EU and EUR. Markets were upset by questions about how quick Greece will exit from the program. The glass half full part of this story is that Greece, a country which once was considered to be doomed with the only hope for it is to become 2001 Argentina (according to some Nobel Prize laureates), is considering the idea of normalisation 5 years after its program. That’s in itself a strong argument which supports looking at the glass half full. France and Germany have started discussion about investment growth project (Juncker plan). We continue to see the most likely solution would be a EIB financed loans guaranteed by either the ESM or by states directly. The discussion are still on-going as EcoMin Macron and FinMin Sapin of France have been visiting the German cabinet on Monday. 

 

Br-exit: Knowing that EU is changing its narrative, UKIP call for an early Br-exit vote doesn’t come as a surprise. Actually, we were expecting it to come earlier because the populist are likely to loose the supports they are having now. Populists parties are using investment advisory businesses to spread their mistrust. A recent study conducted by the AMF (France SEC), showed that 9 web-traders over 10 are loosing money when investing in FX. This is mainly due to the fact that 9 over 10 are investing like they vote: buy Gold, USD and sell EUR because it’s doomed (this is their beliefs not ours). By better regulating the internet retail investment sector, we are likely to see less spread of mistrust. These internet retail websites are widely spreading mistrust and advising ‘moms and pops’ to make easy money when the doom scenario will come. Again our legal have forbidden us from spreading some website adds (because they consider these are non respecting SEC and other regulations). These attract their “victims” by claiming making $8,000 a month by becoming a trader. The 9 over 10 are usually exposed to the next big splash in the markets. This is exactly how our research have found ISIL portfolio to be invested. While the first is betting that our institutions are rotten to the core and are listing to the doom and gloom widely spread, the former is speaking its own books. No one can be held accountable for making wrong investment decisions. However, by stressing the losses many individual investors are likely to change their strategy and diversify their views. This financial market war is likely to leave only those which bet on ISIL success largely exposed to the doom and gloom scenario. Please not the announcement by the UK that “trolls” might face as high as 2years in prison.

 

 

Britain Urged to Step Back in Feud With E.U.

LONDON — The departing president of the European Commission warned Britain on Monday about the dangers of isolating itself within the European Union, saying that the nation’s confrontational stance was backfiring and hurting its chances of winning the policy changes it was seeking.

The commission president, José Manuel Barroso, who leaves office at the end of this month, delivered his message in the midst of an intensely political period in Britain, with Prime Minister David Cameron seeking to beat back a challenge from the anti-Europe U.K. Independence Party heading into a general election next spring.

 

Thank Ancient Scottish Fish Fossils for Joy of Sex, Scientists Say

Scientists studying fossils have discovered that the intimate act of sexual intercourse used by humans was pioneered by ancient armored fishes, called placoderms, about 385 million years ago in Scotland. In an important discovery in the evolutionary history of sexual reproduction, the scientists found that male fossils of the Microbrachius dicki, which belong to a placoderm group, developed bony L-shaped genital limbs called claspers to transfer sperm to females. Females, for their part, developed small paired bones to lock the male organs in place for mating.

 

Placoderms are the earliest vertebrate ancestors of humans. « Placoderms were once thought to be a dead-end group with no live relatives, but recent studies show that our own evolution is deeply rooted in placoderms and that many of the features we have — such as jaws, teeth and paired limbs — first originated with this group of fishes, » said John Long, a paleontologist at Flinders University in South Australia who led the research. This new finding, he added, shows that « they gave us the intimate act of sexual intercourse as well. »

 

Germany, France Vow Investment, Sidestep Who Will Pay for It

German and French cabinet members pledged to boost investment and speed economic reforms as the euro area economy sags, while sidestepping the question of how to finance the drive.

French Finance Minister Michel Sapin and Economy Minister Emmanuel Macron said after talks in Berlin today with German Finance Minister Wolfgang Schaeuble and Economy Minister Sigmar Gabriel that they agreed steps aimed at budget consolidation and investment. Yet German lawmakers say they see little scope to alter the country’s draft 2015 budget to boost state spending on infrastructure projects.

Germany and France aim to present “very precise” investment plans on Dec. 1, while France will try to cut its deficit, Sapin told reporters after the talks. Amid euro bloc economic growth that’s “too low,” both nations “need to act,” said Macron, adding that “Germany has more capacity to invest than France.”

 

France urges Germany to boost investment spending

Oct 20 (Reuters) – French Economy Minister Emmanuel Macron has called on Germany to spend an additional 50 billion euros on investments over the next three years to support the European economy, according to comments that appeared in the Monday edition of the Frankfurter Allgemeine Zeitung (FAZ) daily.

Macron and French Finance Minister Michel Sapin are due to visit Berlin on Monday for talks with their German counterparts.

France is under pressure to secure EU backing for its 2015 budget, which flouts its past deficit-cutting commitments, while Germany faces criticism for failing to spend more and support the faltering euro zone economy.

In the FAZ, Macron urged Germany to offset the 50 billion euros in savings that Paris has announced.

 

UK online “trolls” face 2 years behind bars

Britain’s internet « trolls » found spreading abuse on social media could face up to two years in jail under laws proposed by the U.K.’s justice minister.

The move against what Justice Secretary Chris Grayling described as online « cowards » will see a quadrupling of the current maximum sentence of six months.

« These internet trolls are cowards who are poisoning our national life, » Grayling told British newspaper the Mail on Sunday.

« This is a law to combat cruelty – and marks our determination to take a stand against a baying cyber-mob. We must send out a clear message: if you troll you risk being behind bars for two years. »

 

Israel to testify on Gaza before UN in Geneva

Israeli officials are expected to testify before the United Nations in Geneva on Monday with regard to its military activities in Gaza this summer during Operation Protective Edge. 

 

“At this stage it is the only UN forum to which Israel will provide information with regard to Operation Protective Edge,” a Justice Ministry spokeswoman said on Sunday.

Its delegation will answer questions on Gaza when it appears before the UN’s Human Rights Committee, which is holding its periodic review of Israel’s compliance with the International Covenant on Civil and Political Rights.

Israel ratified the covenant in 1991 and was one of the initial signatories to the covenant when the UN first adopted it in 1966. 

 

China News

 

The IV-th plenum was expected to focus on improving governance and reducing corruption but it came with two other game changing announcement : focus on “rule of law” and the introduction of separation between juridical power and the other branches of the government.

We will focus in the coming day on the decision as they come. By the meantime, the development is very supportive to our constructive view on China. The country is genuinely rebalancing while soft landing.

We see any stimuli to be small and targeted because the government continues to fear that the economic rebalancing has not taken momentum yet  although 1) labor intensive manufacturers are relocating in cheaper labor countries, 2) businesses are upgrading their business models [while becoming environmental friendly], 3) President Xi has conducted many trade – investment agreement with Neighbours (after Premier Li did the same in Africa) to secure investment projects which use Chinese manpower – engineers know-how in this domaine, 4) China is gaining more military presence and has fluxed it mussels – e.g. China “Top Gun” intercept by a US fighter jet -, 5) China has signed many RMB agreement which reinforce the currency usage and prepare its full liberalisation – after Free Trade Zones (FTZ) have proven to be a success -, 6) China has undertaken a genuine fight against bad governance and better regulation – many examples in our recent daily briefings of fight against corruption and bad governance-. 

While the recent decisions strengthen President Xi power, we foresee the first objective of the Chinese President to be rebalancing the Chinese economy while cooling the pressure which have developed in China.

 

Xinhua Insight: CPC convenes first plenum on « rule of law » in reform, anti-graft drive

BEIJING, Oct. 20 (Xinhua) — When elite members of the Communist Party of China (CPC) gather this week for a key annual policy-setting meeting, their presence alone will be enough to make history.

The fourth plenary session of the 18th CPC Central Committee – slated for Oct. 20-23 – is billed as a milestone in China’s political reforms and progress, as it will be devoted to the central theme of « rule of law » for the first time in the Party’s history.

The meeting will deliberate on a draft decision of the CPC Central Committee on « major issues concerning comprehensively advancing rule of law, » sources close to the meeting said.

The decision is widely expected to set the tone for the CPC to promote rule of law in China in an all-rounded manner under new circumstances.

Seldom has any other political concept been assigned the same gravity – rule of law is, as many analysts have noted, the cornerstone of the modernization of China’s state governance and national rejuvenation.

 

Basic facts about the fourth plenum of the 18th CPC Central Committee

 

 

China’s Ebola aid « timely, » additional help needed: WFP

BEIJING – The Chinese government’s contribution to the Ebola emergency operation of the United Nations World Food Programme (WFP) was « timely », but more financial and food assistance is needed to combat the unprecedented epidemic outbreak, a WFP official said on Monday.

Earlier this month, China pledged $6 million to assist 1.3 million people impacted by the Ebola virus outbreak in the three most-affected countries – Guinea, Liberia and Sierra Leone.

The donation made China one of the five largest donors for the WFP operation together with the World Bank, United States, UN Central Emergency Response Fund and Japan, said Brett Rierson, WFP’s Representative in China.

The contribution will be divided equally between the three countries, enabling WFP to purchase vital food supplies — mainly rice, lentils, yellow peas and blended fortified cereals– for emergency rations for more than 300,000 people for one month, as well as specialized nutrition products to help prevent malnutrition.

 

APEC leaders’ meeting to kick off on Nov. 10

BEIJING, Sept. 30 (Xinhua) — The Asia-Pacific Economic Cooperation (APEC) Economic Leaders’ Meeting will be held in Beijing from Nov. 10 to 11, Chinese Foreign Ministry spokeswoman Hua Chunying said on Tuesday.

During APEC leaders’ week, China will host a series of meetings, including the final senior officials’ meeting from Nov. 5 to 6, the 26th ministerial meeting from Nov. 7 to 8, the 22nd APEC Economic Leaders’ Meeting from Nov. 10 to 11 as well as APEC business and leader spouses’ events.

APEC leaders’ week is the biggest APEC event throughout the year.

All the parties hope the upcoming meetings will be productive, Hua said at a regular news briefing.

« As the host, China will continue to work with other APEC economies to ensure the meeting is successful, » she added.

 

Step up the battle against HIV/AIDS, urges first lady

China should do more in the fight against HIV/AIDS despite the disease affecting only 0.06 percent of its population, first lady Peng Liyuan said on Monday.

Peng said efforts should be stepped up to help sufferers, especially those in hard-hit areas.

There were 810,000 people with HIV/AIDS living in China at the end of last year, according to the latest update issued on Monday by the National Center for AIDS/STD Control and Prevention. But only 490,000 of these sufferers have been detected to date and the remainder are unaware of their status.

The estimate is updated every two years, and the previous one stood at 780,000.

Peng said efforts must be promoted in caring for those with the disease, in fighting discrimination, in giving patients access to medical care and in ensuring social justice. She was speaking at the 2014 National Conference on HIV/AIDS in Beijing.

Peng, the World Health Organization’s goodwill ambassador for HIV/AIDS and tuberculosis, said she will continue to meet the obligations of her WHO role.

 

Australia News

Australia:  Australia struggles with the labor statistics glitches. Treasurer Hockey offered the private sector to check the information and help to correct that data. While this information does not change drastically our view that the RBA will stay put (due to the fear of a housing bubble, which the central bank is dealing with through macro prudential tools). However, the glitches reduces the “view” in the market that countries such as China are manipulating their figures. While our work on macro eco data has pushed us to take the economic figures with a pinch of salt (due to the methodology which could create some issues), we do not side with camp mistrusting everything. However, we believe that the big data analytics is likely to help improve the accuracy and the frequency of the high frequency data. However, the statistic office may take time before undertaking the experiment.

Australia continues to be seen, by markets, as a derivative to the old Chinese model (i.e. commodity provider). This view explains the high beta between Australian assets and commodity prices (or China demand for commodities). Banks shares are suffering from the combination of the increase perception of increase in risks and additional macro prudential constants to curb housing prices frothiness. Small business defined the “goldilock range” for AUDUSD to be [.90-.94]. This level is much higher than RBA own assessment (based on PPP models). We have been criticising PPP models because they do not factor any structural changes.

These assume that neither China nor Australia are conducting their rebalancing agenda. We do believe that the current weaknesses offers genuine opportunity to benefit from the other drivers to the Australian economy which are not related to commodities. We see the current Australian Dollar weakness to continue at least until the USD start to weaken again when markets will realise that it has beaten too much on a quick rate normalisation. Meanwhile, from our previous daily briefing, we have gathered sufficient support to the view that the drivers of the Australian GDP are moving toward: 1) education, health and finance services provider to Asian neighbours, 2) innovation and digital sector, 3) energy resources export to Japan (the later contributes to our constructive view that the current negative Japan Energy Trade deficit will rebalance in the medium term – reducing Japanese Government bonds solvency risk – ).

 

Communication with Australia vital: Joko

Indonesia’s new president Joko Widodo has encouraged open lines of communication with Australia in his first meeting with Prime Minister Tony Abbott.

Mr Joko was sworn in on Monday, giving a vision of Indonesia rising as a mighty maritime power.

The former Jakarta governor’s ascent was met with jubilant celebrations in the capital, where the 53-year-old has cemented his reputation as a reformist and man of the people.

He made time in the evening to briefly meet visiting foreign leaders including Mr Abbott.

« If we have problems … speak to my ambassador because for me, communication is important, » Mr Joko said.

Mr Abbott said he expected the relationship to go « from strength to strength ».

He acknowledged the long importance of the relationship to Australia, noting his Liberal predecessor John Howard had attended the inauguration of Susilo Bambang Yudhoyono.

Earlier, he remarked on the « wave of confidence » he witnessed in Indonesia during his brief stay.

« I’m very encouraged by everything President Jokowi has said up to now, I really am encouraged, » he told reporters before the president’s inauguration, using the Indonesian leader’s nickname. In his maiden speech, Mr Joko detailed his vision of the archipelago as a great maritime nation in line with the navy’s motto: « in the sea we are victorious ». In his evening speech to thousands of citizens at the national monument, known as Monas, he celebrated the everyday Indonesians.

 

Nazi dumping: US paid millions in social security pensions to expelled war crime suspects

 

Shares rise for fifth straight session

The share market has closed firmer for a fifth consecutive session as concerns about global economic growth appear to fade.

Global markets bounced back from heavy falls on Friday, which proved the main driver for Australian investors, City Index senior market analyst Kara Ordway said.

« At the moment, it’s all about global markets, » she said.

« We’re having to take our leads from the US equity markets just because they’ve been so volatile. »

The banks were a key area of strength, although most sectors, apart from gold, posted gains.

Commonwealth Bank gained 72 cents to $77.26, ANZ added 52 cents to $32.45, Westpac lifted 47 cents to $33.57 and National Australia Bank was 29 cents higher at $33.44.

Among the miners, BHP Billiton added 44 cents to $33.84, Rio Tinto climbed 36 cents to $59.73 and Fortescue Metals was two cents higher at $3.46.

Shares in Ten Network and Fairfax Media were boosted by reports the broadcaster and publisher have held merger talks.

Ten added 1.5 cents to 22 cents and Fairfax gained 2.5 cents at 80.5 cents.

Mining services provider Ausdrill lost 10.5 cents, or 12 per cent, to 76.5 cents after it warned its annual earnings will slump by up to 13 per cent.

 

$A unmoved by Reserve Bank minutes

The Australian dollar is hovering below 88 US cents in anticipation of the latest economic data from China.

At 1200 AEDT on Tuesday, the local currency was trading at 87.84 US cents, up from 87.75 cents on Monday.

The Australian dollar has traded within a narrow range this week, ahead of major economic events including local inflation figures and Chinese growth data.

Traders had also been waiting to hear what the Reserve Bank had to say about house prices and the recent depreciation of the Australian dollar, but minutes from its October meeting added nothing new, TD Securities head of Asia-Pacific research Annette Beacher said.

« We were left empty-handed, save for the Australian dollar ‘remained high by historical standards’ and house prices were consistent with `strong conditions’ in the established housing market, » Ms Beacher said.

The lack of fresh insight left the Australian dollar unmoved, and traders were now looking ahead to the release later on Tuesday of Chinese economic growth, retail sales and industrial production figures, Ms Beacher said.

Meanwhile, Australian bond futures prices were higher.

 

 

 

Japan News

 

Japan: Although two cabinet ministers resign over scandal, creating more questions about Abenomics, we do not see this derailing PM Abe objectives. METI Chief Obuchi is seen to resign over irregularities in the political funds. This put some pressure on PM Abe administration which was seen to be “different” from previous government which have tried to defeat deflation. Furthermore, Mrs. Obuchi was one of the strong female figures in the new cabinet because her participation was intended to prepare Japanese public to embrace a woman as PM. We believe that the recent news have delayed PM Abe objective but have not derailed them. We continue to see Japan undertaking genuine third arrow reforms because other evidences are supportive to this trend. The resignation might open questioning within western investors that whether Japan Abenomics is still working. 

Futhermore, BoJ continues to behave as we expected: Cautious while the rebalancing is taking place in the country (e.g. GPIF upward allocation to equities).

We consider that whatever pressure or sell-off should be an opportunity to strengthen positioning.

 

Japan’s Abe to meet hardship as two cabinet ministers resign over scandal

TOKYO, Oct. 20 (Xinhua) — Japanese Prime Minister Shinzo Abe’s newly launched cabinet on Monday was jolted by resignations of two female ministers over their political funds scandal, with the prime minister seeing the appointments of the two resigning officials as his responsibilities.

Earlier in the day, Economy, Trade and Industry Minister Yuko Obuchi submitted her resignation letter to Abe at his official residence and get a nod from the prime minister to quit from her post that she took early in September.

Obuchi’s resignation marked the first resignation of a cabinet minister at the Abe’s administration since the prime minister returned to power late December in 2012.

The minister’s political fund reports were found contained large shortage of about tens of millions yen for theater outing related to her cabinet appointee’s activities and money irregularly used to a design office and clothing shop run by her relatives.

Spotlight was immediately put on Justice Minister Midori Matsushima after Obuchi’s quit as a senior official of the Japan’ s major opposition Democratic Party of Japan (DPJ) filed a criminal complaint with prosecutors on Friday against Matsushima for the alleged election law violation.

 

Bank of Japan stays upbeat on economy

Most Japanese regional economies continue to recover as the pain from a sales tax increase in April starts to ease, the Bank of Japan said in a quarterly report, maintaining its optimism on the outlook despite growing signs growth may be losing momentum.

Bank of Japan governor Haruhiko Kuroda also stuck to his upbeat tone at a meeting of the central bank’s regional branch managers yesterday, saying the economy was set to recover moderately as a trend, although there were some weaknesses in factory output.

« As for the outlook, the economy will continue to recover moderately as a trend, with the effect [of the sales tax increase] likely to gradually subside, » Kuroda said.

In a quarterly report on the regional economy, the Bank of Japan maintained its assessment for eight of the country’s nine regions, saying they continued to recover moderately as a trend.

 

Abenomics hits a speed bump, not a road block

Shinzo Abe’s plan to lure more women into the Japanese workforce just suffered a symbolic but high-profile setback. Two female ministers resigned on Oct. 20 just two months after they were elevated in a cabinet reshuffle. It’s another headache for the current Japanese prime minister, who is already grappling with stuttering economic growth. Yet some of his other reforms are moving ahead.

Two years after his return to political prominence, Abe’s plan to revive Japan’s economy is facing its most serious challenges. The prime minister’s decision to hike the sales tax by 3 percentage points to 8 percent in April has had a worse-than-expected impact on growth and consumer confidence. The broader slowdown in the euro zone and the rest of Asia has added to fears that Japan may slip back into deflation.

 

Nikkei soars on U.S. data, GPIF; Abenomics in focus after resignations

* News GPIF raising stock allocation to 25 pct underpins sentiment

* Resignation of two cabinet members a big blow to Abe – analyst

TOKYO, Oct 20 (Reuters) – Japan’s Nikkei share average surged 3.8 percent on Monday afternoon and was on track for its biggest daily rise in more than a year as investors took heart from upbeat U.S. data and as the weaker yen lifted exporters such as Toyota Motor Corp and Honda Motor Co. Also underpinning the market was news that Japan’s $1.2 trillion public pension fund will likely raise its allocation to domestic stocks to about 25 percent from 12 percent at present.

People familiar with the process told Reuters that a weighting in the middle of the 20-30 percent range is the main proposal for the coming reallocation and is under final discussion within GPIF. The Nikkei share average rose 551.64 points to 15,087.30 in early afternoon trade, recovering most of last week’s losses. Upbeat U.S. consumer sentiment gave relief to investor sentiment and lifted risk appetites. The Thomson Reuters/University of Michigan index of consumer sentiment unexpectedly rose in early October to its highest level since July 2007. Separate data showed groundbreaking for new homes rose more than expected last month. Traders said investors were scooping up recently-battered stocks after the Nikkei tumbled 5 percent last week on concerns about faltering global growth and the stronger yen. « Selling in some of the stocks was overdone. Investors are buying them on the dips, » a trader at a Japanese brokerage said. But some analysts remained cautious, and said any rebound may be short-lived. « With Halloween just around the corner, the market was spooked by ‘ghosts’ and these ghosts will probably stick around longer, » said Hiroyuki Nakai, chief strategist at Tokai Tokyo Research Center, citing persistent concerns about the sputtering European economy, worries about what could happen after the U.S. Federal ends tapering and the Ebola epidemic. Toyota jumped 5.4 percent, Honda soared 3.8 percent and Panasonic Corp surged 4.7 percent after the dollar rose 0.2 percent at 107.18 yen, moving further from a five-week low of 105.90 hit the previous week. NEC Corp rose 5.3 percent after the Nikkei business daily reported its operating profit for the April-September period was likely to be about 20 billion yen, compared to just shy of 400 million yen in the previous year.

 

 

 

 

 

About this report

 

The report and analysis have been prepared using Quid a big data solution. This report focuses on the most important issues out of 10,000 articles produced by top contributors amongst 35,000 sources during the last 24hours (or from Friday 3am LDN to Monday 3am for Monday’s reports).

 

 

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