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SNBDL Daily Briefing
Report prepared using big data solution Quid
Our take from the last 24 hours news
Central banks news:
EU banks Asset Quality Review (AQR) results will be published next Sunday (1100 GMT). Our expectation is that while the ECB will come up with some additional capital needs, the total amount of capital needed would be manageable relative to the size of the solvency improvement undertaken by banks this year.
We expect the communication to focus on two facts: 1) this time is different and AQR review enables to strengthen confidence in the banking system, 2) banks and government can handle the needed capital which will free banks from using ECB tools to resume lending.
This is a very important data point in our EZ constructive scenario. Both creditors and debtors countries need the banking sector to resume lending to support the growth initiatives the EU is currently discussing (digital, infrastructure investment, etc.).
A report leaked relating a Coeure secretive visit to the German chancellery when he seeks less German policymakers open critics. The report confirmed to us that Germany politicians are un-easy to undertake more monetary stimuli without securing more reforms and fiscal responsibility from the French and Italian sides. To save the Eurozone, countries have to strike the right balance for a Grand Bargain. We do believe that this Grand Bargain has been decided last August 30th 2014. Our conviction rises when we consider the event which took place after the Aug. EU Council meeting: 1) Strengthening of No campaigning by the 3 major british parties in the Scotland independence (an alternative result would have increase the risk of a br-exit based on the polls), 2) France’s Hollande started with the help of PM Valls a shift toward “new Partie Socialiste” (New Labor), 3) Italy’s Renzi speeded up Labor reform, 4) Juncker commission has been formed by highly ranking domestic policymakers – with some of them incumbents ministers or Prime Ministers -, 5) Britain got a clear sign that EU will reform and some negotiation would be opened to guarantee defeating and reverting UKIP grip on UK politics. These are the most important evidence which supports our view that a Grand Bargain has been decided and is put in place. But in order to work, creditors (Germany) need to keep the existential threat alive – which explains the critics and the pressure on the ECB – while debtors (France and Italy) have to be pressed to use the nuclear option as a genuine threat: you have the choice between reforms or doom & gloom. We have interpreted Chancellor Merkel attitude toward Russia since then as another indication that Germany aims pressing EU to move toward more integration while reducing the cost of transfers.
After months of pressure out of the regional banking system to renegotiate Dodd Franck regulation, Gov. Tarullo will meet with 12 CEO of U.S. regional banks, today Friday. This is likely to lead to some “relaxation” to the overkilling regulation which have been created for bigger banks. By dividing the critics of the banking regulation (less burden for regional banks relative to big banks), the Fed is likely to secure a broader support for its initiatives to avoid hiking rates, while keeping asset prices from excessive frothiness through macro prudential. We remain our readers that the banking sector has been even, in 2014, more critical to the Fed than all the “narrative » brought by the Austrian school since the collapse of Lehman Brothers. Nearly 90% of the sell-side economists have called wrong the development of the U.S. economy and the need of rate hikes. We have been indicating, during this period, where the sell-side economists have been dismissing informations and making, for some of them, 101 economics mistakes. We still unclear whether 9 economists over 10 have been out of touch in 2014 and have inadequate understanding of the current environment or whether their call were politically motivated. Our regular contact with some of these economists have enabled us to point at least to some which had clearly an agenda.
Britain government slams EU budget as a first attempt to push for negotiation with the EU commission ahead of the Br-exit referendum, as the Tories prepare for next year General Election pressed by the recent political gains made by UKIP (defection or direct wins). But a recent consumer confidence survey showed that the UK economy is not stable enough to ease the low-paid sectors worry about losing jobs. This survey did not come to us as a surprise because we were advocating cautious when the markets were pressing the BoE to hike quickly its rates. We continue to see the BoE downplaying excessive “optimism” about the economy while inflation is genuinely on the downside thanks to the recent development in the energy prices front.
France and Italy have been pressed by the EU commission to clarify their 2015 budget. While we consider that this is part of the political game between Brussels, Berlin, Paris and Rome we do believe that France and Italy will respond by speeding up structural reforms (unemployment allowances, unique labor contract etc.) which help to avoid growth headwinds. France and Italy are likely to provide more clarifications in the coming days.
IMF pressed Japan to move ahead of a second VAT hike. This is in line with our views that a VAT hike although it might be delivered in small steps, is genuinely needed to improve the Japanese government finances and reduce any risk which could arise from a Japanese Government Bonds crisis.
China: private firms have overtaken state-owned companies this year for the first time as the biggest drivers of investment banking revenues in China – a sign of how Beijing’s reforms are transforming private capital’s role in the world’s second-largest economy. This is in line with our constructive view on China : soft landing and rebalancing.
Fight against bad governance: In a report issued on Oct. 23, the OECD’s Working Group on Bribery expressed concern about Turkey’s efforts to combat foreign bribery, citing a Transparency International study that showed that only four OECD countries were actively enforcing the group’s anti-bribery convention: the United States, Germany, Great Britain and Switzerland. While there are genuine signs that the world economy is undertaking a real shift toward governance improvement and the reduction in indirect taxation (bottlenecks, red tapes etc.) we do believe that the international institutions are likely to continue to press for better governance to meet the increased pressure from different activist groups.
Earnings news: earnings continue to help calming the excessive markets’ nervousness that corporations profit margins will be unsustainable and will push stocks prices into a depressed territories.
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 occasions). Except some important misses due to idiosyncratic reasons, the profit margins look still healthy.
But the corporations 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, they protect their 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, there is a very low probability for a XIX Century style 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. Furthermore, G-20 in Australia is likely to press government to move toward good governance.
We would like to take the opportunity here to repeat that this trend toward the good governance is in place and supported by many policymakers (China, Australia, France etc.). But, reports on bad governance practices overshadow the changes. But we continue to see a need to accelerate the change in governance in other to regain the public trust (the most important “asset” of the XXI Century).
Ebola: A new case in NY, while the US introduced systematic screening of visitors from 3 Ebola nations. Over the nearly 500 tests conducts one case has been taken to hospital. The CDC has required to check health development of the visitors during the 21 days after their arrival. Such a tracking will reduce even further the risk of an outbreak. Should any of the visitors experience health deterioration, the CDC could be quick in responding and in putting in quarantine the possible people infected. We do believe that the mistakes made in Dallas, and the increase of fear consecutive to these mistakes, have pushed the administration to take the necessary steps.
We are likely to see some reduction in the fear as the number of cases decreases. However, outbreak take place in waves. While we might have very good news during the coming 2 weeks, the cases are likely to increase again. There is no time to reduce vigilance until the virus is getting controlled and Ebola vaccines would have proven their effectiveness. WHO sees a new treatment in the coming 2 weeks.
But the GOP continue to point to more measures such as Visa ban. But while Visa ban, alike travel ban, serves interests which want to inflict more pain to the economy (less trade, more pressure on an already fragile airline industry) it does not help reduce the outbreak.
In our special note on Ebola (Ebola a communication war) we stressed that Ebola virus will be more about communication issues than a medical problem. On one hand, we pointed to the excessive fear spurred by politically motivated participants on Twitter. On the other, we stressed that while spreading fear about Ebola could help short term interest groups such as increasing financial markets volatility which could help put the blame on excessive regulation. It does show how the Tea Party caucus and less moderate GOP are unprepared to take over the executive branch. If I was advising Marco Rubio or Rand Paul, I would have advised them to fire their communication and strategic teams. Why? For one simple reason, by emphasising the mistrust, both the two Senators are showing how unprepared, un-experienced they are to pretend running for office in 2016.
1. Would anyone trust a leader who will start trashing all the administration and pushing the public to panic while they have to be focus finding solutions?
2. Would anyone trust Marco Rubio, who continue to fight a XVI Century war against Science, to take the right decision while over sighting CDC operations?
3. Would anyone trust Sen. Rand Paul to be the leader to calm the public when he was indicating that Ebola could be airborne (NB: this is not the case please see our report)?
Should the Senate goes to the GOP, it would be the first time in my 20 years career analysing politics that I would have seen a group wining on the ground that : 1) they will spur fear instead of calming public nervousness and show they would be working, 2) they will trigger an economic crisis because they might be some highly hypothetical fear that Chair Yellen will be behind the curve, 3) they might call for President impeachment trial when the country is leading a coalition against terrorists (inc. ISIL). Will the US public prefer voting to help some private interests which have invested ~$1bn in ads? I doubt. I continue to believe that Tocqueville is right: the US is the best democracy invented so far.
The arrival of Ron Klain as a coordinator of the US administration efforts is likely to lead to a reduction in the excessive fear we have reached last week. WHO announcements, that some western african countries are free from Ebola and that a Vaccine should be ready by January 2015, are contributing to overcoming the outbreak.
Russia – Ukraine tension take away:
PM Yatsenuk warns that Russia may destabilise Ukraine again ahead of elections, while pro-Russian rebels vow to retake cities. Escalation in Ukraine is coming while Merkel has been very critical to President Putin, and Germany BND have reported that MH-17 has been shot down by Pro-Russian rebels.
The head of the State Duma’s Foreign Affairs Committee, Mr. Pushkov, has denied Russia’s involvement in the downing of Malaysian Airlines flight MH17 following the publication of BND report. This communication war is likely to keep any trust about MH17 always challenged.
Chancellor Merkel attitude is in line with our view that she 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.
We would like to remain our reader that when it comes to whether Russia will cut gas delivery to Europe, we believe that it’s not a matter of “if” but “when”. Our study of Putin chess game enables us to see that a moment where fear over Ebola will reach the level where any non-lethal flu could become a source of panic and paranoia , would be the genuine timing for cutting gas. This will help populists (supported by Putin) to criticise Europe even more.
Actually, many other political groups are using the strategy of making allegiance to Putin in order to push some domestically driven agenda.
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.
Comments by Swedish PM Lofven “[Sweden] have already say [it] will stay out of NATO” hint that the recent events are bringing the question back to the table (at least from the Russian prospective). The recent “tension” over military planes violating Estonia air space is another example of the fact that the situation is unlikely to settle before the beginning of next year.
Finally, U.S. is intensifying the pressure on Iran to move ahead with a deal, at a moment when Iranian media reported the dead of Ayatollah Mohammad Reza Mahdavi Kani, the head of Iran’s top clerical body after lying in a coma for months, leaving a gap in the only institution that has the authority to elect and dismiss the country’s Supreme Leader. This does not create any short term change in the negotiation but it’s closing the window of opportunity for striking a deal. The fight between “hard-liners” and “conservatism” (supporters of Hassan Rohani) is likely to intensify going into 2016 election.
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.
Hong Kong take away:
Hong Kong protests talks with HK’s government failed while violence coming from opponents to Umbrella Revolution increased. We believe that the situation is likely to continue to ebb and flow between some “tension” and discussions with HK government. The IV-Plenum communique indicated, as we were expecting, that the Chinese government is moving ahead with an agenda which should please the Occupy movement in Hong Kong as well as in other countries: 1) improve governance, 2) crack down on Corruption, 3) introduction of the rule of law and 4) independence of justice. These steps are likely to help President Xi government to start finding a way out of the current “crisis”. While we consider the reforms path is pointing to the right direction, we consider that China can accelerate because the new normal is getting understood by the public, the business community though the financial markets are still lagging behind. President Xi might use HK as a platform for political reform experiment. In nutshell, we see Occupy and Umbrella Revolution to be a green shot toward helping government understand that accountability, democracy, and the rule of law need to be strengthened and that there is no other ways but political reforms.
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. However, any delay in negotiation between Catalonia and Madrid could reverse the tied. Unfortunately, many politicians have been used to procrastination and may try to promise reforms without delivering them. This time Spain has to face the reality: all over the world, the public awareness of “moral faults” has increased. Not solving Catalonia problem is giving more argument to the mistrust camp. It suffices that one sees the overwhelming indication that mistrust helps to radicalise the public, to conclude that procrastination would be responsible for public radicalisation. The Elite in Spain does not understand that the old days of the Spanish Monarchy without accountability is ending. They’re better get used to that and move forward.
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: One word take Replace Catalonia, HK Occupy with Ferguson, keep calm and carry on.
An independent commission will be created to study issues that have surfaced since the fatal police shooting of Michael Brown in Ferguson, Missouri Gov. Jay Nixon said Tuesday. This commission aims de-escalating a situation which could easy surge. The risk of surging is increasing as a newly leaked autopsy of Michael Brown, the unarmed 18-year-old black man shot by a white police officer in Ferguson, Missouri more than two months ago, indicates a gunshot wound to the hand from close range, the St. Louis Post-Dispatch reported.
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.
In general, 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 a 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 use soft power – and Ferguson is part of that – to press institutions to reforms. 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:
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 and go to the polls. 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 Senate majority is a given.
US other news: Oil prices have reached our second target $80 much quickly than anticipated. However, we consider that they’ll plateau in the short term at these level until Iran nuclear negotiations go through. In the case of success we might see prices resuming their downward trend. U.S. administration just started to take seriously numerous report of ISIL funding through Oil trade. The administration threatened to take sanctions measures against those who buy Oil from ISIL. This may create some tension with Turkey.
We share below an interesting paper on why ISIS excels at recruiting American teens. This trend is the most worrying while the terrorists propaganda based, on the Apocalypse and the spread view that “institutions are rotten to the core”, is gaining traction is more forums (libertarians blogs for example). I was puzzled by the number of blogs and how some Hedge Funds have been financing libertarians views although they repeat all of them the same information, data, reasoning etc. This become clearer with the recent rush to sell to small investors energy funds, while the overwhelming data and news are supportive to do the opposite. It’s frustrating that the US SEC does not protect sufficiently investors by requiring to check how these funds are sold. From a 20 years marketing experience in finance, I witnessed at least one case of two deals where the investor has not been given the full information although salesmen knew it. In a world where data are everywhere and the tools to make the sense of it are already very efficient. I do believe that financial institutions have better to be cautious. As we have been saying many times: last time financial institutions suffers multi-billions sanctions, next time (if these do not take the genuine actions to improve governance and marketing practices) it may end up into jail time. I doubt that oil funds salesmen discussed with their clients the situation in Iran negotiation and how this could take the oil into another plunge.
Informations out of North Korea have proven our thoughts right: Kim Jong Un has personally ordered to free the M. Jowle. This is a weak signal that North Korea leadership is willing to soften its stands when its old partners are moving toward a new strategy. We see this development increasing the chances of a reunification with South Korea. This story should accelerate when President XI and PM Abe will meet and reduce the seemingly tension over the disputed regions.
EU other news: While the EU member states 2015 budget discussion is on-going, EU struck two important deals: 1) European Union leaders agreed early Friday to cut greenhouse gas emissions in the 28-nation bloc to at least 40 percent below 1990 levels by 2030 (while before the meeting Chancellor Merkel was indicating that the challenge was great and the negotiation would not be easy), 2) better coordination in the Ebola outbreak front (this is likely to provide the path toward so form of EU – CDC which would have to coordinate efforts -.
We have been indicating that we consider that EZ narrative has shifted to more positive dynamic. Indeed, an European Union accounting change has improved Cyprus’s public-finance outlook more than any other euro-zone nation, raising the prospects it will exit a bailout program ahead of schedule and sell bonds this year.
The Chancellor of the Exchequer is to promise to get up to half a million more women into the workplace as part of a new Conservative push on the economy and to regain women votes which have been defecting to other mainstream parties.
China: PMI rose in October, adding to signs a resilient labor market and export demand are helping the world’s second-largest economy weather a housing market downturn. At the same time, SOE (state own enterprises) have been suffering from: lower profits and investments.
This is in line with the rebalancing objective to move away from the old growth drivers and focus on economic reforms. News out of the corporate sector shows that even in this field China is delivering the reforms announced (shift toward “Social Capitalism” model).
As the economy continue to soft land, we see the Chinese leadership continuing to support governance improvement and crack down on corruption. For example, Australian police have agreed to assist China in the extradition and seizure of assets of corrupt Chinese officials who have fled with hundreds of millions of dollars in illicit funds, the Sydney Morning Herald newspaper reported (see more below).
We believe that Chinese leadership will continue to drive the growth lower but smoothly to avoid triggering a hard landing chock. 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 (banking, housing etc.).
Australia: As we were expecting, Australia CPI remains low and enables RBA to stay put (due to the fear of a housing bubble, which the central bank is dealing with through macro prudential tools). However, 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 scandals, creating more questions about Abenomics, we do not see this derailing PM Abe objectives. Recent decision to crack down on tax dodgers is another piece of evidence that Japan is heading toward reforms and improving governance. Furthermore, as Japan trade deficit deteriorate (cf. our comments on this in Economics news) increase the pressure to reform.
North Korea decision to free Jeffrey Fowle, a US Citizen, is a positive indication that the relations with NK are improving in what we see as first genuine steps toward a reunification solution which would involve China, South Korea and Japan. We see the next China – Japan summit (discussed by FinMin Aso in Finance APEC Summit) as instrumental for reducing the tension between the two countries and to move ahead with reunification talks.
Central banks News
Central banks news:
EU banks Asset Quality Review (AQR) results will be published next Sunday (1100 GMT). Our expectation is that while the ECB will come up with some additional capital needs, the total amount of capital needed would be manageable relative to the size of the solvency improvement undertaken by banks this year.
We expect the communication to focus on two facts: 1) this time is different and AQR review enables to strengthen confidence in the banking system, 2) banks and government can handle the needed capital which will free banks from using ECB tools to resume lending.
This is a very important data point in our EZ constructive scenario. Both creditors and debtors countries need the banking sector to resume lending to support the growth initiatives the EU is currently discussing (digital, infrastructure investment, etc.).
A report leaked relating a Coeure secretive visit to the German chancellery when he seeks less German policymakers open critics. The report confirmed to us that Germany politicians are un-easy to undertake more monetary stimuli without securing more reforms and fiscal responsibility from the French and Italian sides. To save the Eurozone, countries have to strike the right balance for a Grand Bargain. We do believe that this Grand Bargain has been decided last August 30th 2014. Our conviction rises when we consider the event which took place after the Aug. EU Council meeting: 1) Strengthening of No campaigning by the 3 major british parties in the Scotland independence (an alternative result would have increase the risk of a br-exit based on the polls), 2) France’s Hollande started with the help of PM Valls a shift toward “new Partie Socialiste” (New Labor), 3) Italy’s Renzi speeded up Labor reform, 4) Juncker commission has been formed by highly ranking domestic policymakers – with some of them incumbents ministers or Prime Ministers -, 5) Britain got a clear sign that EU will reform and some negotiation would be opened to guarantee defeating and reverting UKIP grip on UK politics. These are the most important evidence which supports our view that a Grand Bargain has been decided and is put in place. But in order to work, creditors (Germany) need to keep the existential threat alive – which explains the critics and the pressure on the ECB – while debtors (France and Italy) have to be pressed to use the nuclear option as a genuine threat: you have the choice between reforms or doom & gloom. We have interpreted Chancellor Merkel attitude toward Russia since then as another indication that Germany aims pressing EU to move toward more integration while reducing the cost of transfers.
After months of pressure out of the regional banking system to renegotiate Dodd Franck regulation, Gov. Tarullo will meet with 12 CEO of U.S. regional banks, today Friday. This is likely to lead to some “relaxation” to the overkilling regulation which have been created for bigger banks. By dividing the critics of the banking regulation (less burden for regional banks relative to big banks), the Fed is likely to secure a broader support for its initiatives to avoid hiking rates, while keeping asset prices from excessive frothiness through macro prudential. We remain our readers that the banking sector has been even, in 2014, more critical to the Fed than all the “narrative » brought by the Austrian school since the collapse of Lehman Brothers. Nearly 90% of the sell-side economists have called wrong the development of the U.S. economy and the need of rate hikes. We have been indicating, during this period, where the sell-side economists have been dismissing informations and making, for some of them, 101 economics mistakes. We still unclear whether 9 economists over 10 have been out of touch in 2014 and have inadequate understanding of the current environment or whether their call were politically motivated. Our regular contact with some of these economists have enabled us to point at least to some which had clearly an agenda.
Europe’s banks face moment of truth from ECB review
LONDON/FRANKFURT (Reuters) – The euro zone’s 130 biggest banks received the European Central Bank’s final verdict on their finances on Thursday after a review aimed at drawing a line under persistent doubts about the health of the region’s banking sector.
Most lenders already had a good idea of how they had fared in the region’s most comprehensive-ever bank tests before the results landed around noon, after getting « partial and preliminary » figures from the ECB in recent weeks. But the final numbers were only agreed by senior regulators and supervisors late on Wednesday.
They will not be made public until 1100 GMT (7 a.m. EDT) on Sunday, and the ECB has asked banks not to make any disclosures until this point. The results will end months of uncertainty on what measures they will be forced to take to prove they can weather another economic crash.
(Reuters) – In early October, European Central Bank board member Benoit Coeure paid a discreet visit to the Chancellery in Berlin to express concerns about rising criticism of the bank from German politicians.
The Frenchman, one of ECB President Mario Draghi’s closest allies in Frankfurt, hoped for reassurances that the bank bashing, led by Finance minister Wolfgang Schaeuble, would stop.
But the message from Chancellor Angela Merkel’s advisers was not entirely comforting, according to one official familiar with the discussion.
Merkel would continue to refrain from questioning the ECB’s policies in public. But the broader backlash would be difficult to contain, especially if Draghi pressed ahead with unconventional measures to bolster the European economy, for example buying mass quantities of government bonds.
UPDATE 3-Fed to host meeting with regional bank CEOs to discuss regulatory relief
Oct 23 (Reuters) – Officials from the Federal Reserve plan to meet with chief executives from 12 U.S. regional banks next Friday to discuss ways to reduce regulatory burdens for banks that avoid riskier activities, a Fed spokeswoman said on Thursday.
The meeting is the latest effort by regulators to determine whether rules that were put in place after the financial crisis are burdening banks without making the system safer.
Fed Governor Daniel Tarullo, who oversees bank regulation, invited CEOs from a group of banks with between roughly $50 billion and $150 billion of assets, the spokeswoman said.
Under the 2010 Dodd-Frank regulatory reform law, banks that have more than $50 billion of assets must show how they would fare in stressful situations before they can increase dividends or buy back more shares. Completing these « stress tests » can be expensive and time-consuming for banks.
Inflation Shy of Goal Means Fed Can Keep Rates Low
The cost of living in the U.S. barely rose in September, restrained by decelerating prices for a broad array of goods and services that signal the Federal Reserve can keep interest rates low well into 2015.
The consumer-price index climbed 0.1 percent after decreasing 0.2 percent in August, a Labor Department report showed today in Washington. Over the past year, costs increased 1.7 percent, the same as in the 12 months through August.
While plunging fuel costs are one reason for the restraint in pricing, clothing retailers, medical-care providers and airlines are also among those keeping a lid on charges. With inflation falling short of the Fed’s goal, policy makers need not rush to raise rates even as the world’s largest economy shows no sign of succumbing to a slowdown in global growth.
BoE’s Broadbent says market outlook for ‘neutral’ rates broadly right
(Reuters) – Market expectations for the levels of interest rates needed to stabilise Britain’s economy seem reasonable, Bank of England Deputy Governor Ben Broadbent said on Thursday.
Broadbent said at an economics conference in London that the so-called ‘neutral’ interest rate – which affect investment returns and BoE policy decisions – were likely to stay low for some time but then eventually to rise.
Asked if the neutral interest rate was currently positive, Broadbent said it was probably negative when adjusted for inflation, though he declined to put a figure on it.
« Keeping (BoE) interest rates in nominal terms where they are is roughly right. Even with official interest rates priced to rise very gradually, it looks roughly where you’d want it to be, » he said.
Broadbent reiterated the BoE’s existing position that it would not reduce its 375 billion pounds of bond holdings until it had raised interest rates some way above their current record-low level.
Futures Discount Fed Hikes as Markets Rebound: Chart of the Day
The rebound in the outlook for improving economic growth and higher Federal Reserve policy rates seen in share prices isn’t as prevalent in money markets.
The top panel of the CHART OF THE DAY shows Eurodollar futures, which traders use to speculate on the path of the Fed policy rate, suggest rates in three years almost 0.75 percentage point below where they predicted in mid-September. At the same time, market indexes such as the Standard & Poor’s 500, as picture in the lower panel, have rebounded.
Global share price slide last week and debt yields tumbled as disappointing economic data from the U.S. to China damped growth prospects and pushed back how long the market projects it will take until the Fed likely increases its zero to 0.25 percent policy target range.
Economic News
Britain government slams EU budget as a first attempt to push for negotiation with the EU commission ahead of the Br-exit referendum, as the Tories prepare for next year General Election pressed by the recent political gains made by UKIP (defection or direct wins). But a recent consumer confidence survey showed that the UK economy is not stable enough to ease the low-paid sectors worry about losing jobs. This survey did not come to us as a surprise because we were advocating cautious when the markets were pressing the BoE to hike quickly its rates. We continue to see the BoE downplaying excessive “optimism” about the economy while inflation is genuinely on the downside thanks to the recent development in the energy prices front.
France and Italy have been pressed by the EU commission to clarify their 2015 budget. While we consider that this is part of the political game between Brussels, Berlin, Paris and Rome we do believe that France and Italy will respond by speeding up structural reforms (unemployment allowances, unique labor contract etc.) which help to avoid growth headwinds. France and Italy are likely to provide more clarifications in the coming days.
IMF pressed Japan to move ahead of a second VAT hike. This is in line with our views that a VAT hike although it might be delivered in small steps, is genuinely needed to improve the Japanese government finances and reduce any risk which could arise from a Japanese Government Bonds crisis.
China: private firms have overtaken state-owned companies this year for the first time as the biggest drivers of investment banking revenues in China – a sign of how Beijing’s reforms are transforming private capital’s role in the world’s second-largest economy. This is in line with our constructive view on China : soft landing and rebalancing.
Fight against bad governance: In a report issued on Oct. 23, the OECD’s Working Group on Bribery expressed concern about Turkey’s efforts to combat foreign bribery, citing a Transparency International study that showed that only four OECD countries were actively enforcing the group’s anti-bribery convention: the United States, Germany, Great Britain and Switzerland. While there are genuine signs that the world economy is undertaking a real shift toward governance improvement and the reduction in indirect taxation (bottlenecks, red tapes etc.) we do believe that the international institutions are likely to continue to press for better governance to meet the increased pressure from different activist groups.
Britain slams EU budget demand
(Reuters) – British Prime Minister David Cameron has challenged a demand from the European Union for an additional 2.1-billion-euro payment into the EU budget in the coming weeks following a revision of economic statistics.
A British spokesman at an EU summit in Brussels on Friday said Cameron discussed the issue, triggered by a revision of EU data for national income and hence for countries’ contributions to EU funding, with his Dutch counterpart Mark Rutte. His country also faced a large bill, to be paid by Dec. 1.
« This is money the European Commission was not expecting and does not need, and we will be working with other countries to do all we can to challenge this, » the British spokesman said.
UK consumer confidence tumbles in October on job insecurity – survey
(Reuters) – Consumer confidence in Britain took its biggest tumble in four years this month as workers in low-paid sectors worry about losing their jobs in an economic slowdown, a survey published on Thursday showed.
The Consumer Confidence Index, produced by polling firm YouGov and economic forecasters CEBR, slid by 2.9 points to 111.2 points, its lowest level since January and its biggest monthly fall since October 2010.
« While employment levels are up, many jobs are low-paid and unsecure, and it is these workers that are looking ahead to the coming year with some trepidation, » Charles Davis, director at the Centre for Economics and Business Research, said.
Britain’s unemployment rate fell to 6.0 percent in the three months to August, its lowest since late 2008, but job creation has slowed and wage growth remains very weak.
EU Commission asked France for 2015 budget clarification – Hollande
(Reuters) – The European Commission has asked France for more information on its 2015 budget draft, President Francois Hollande said on Friday, after Paris had sent the EU executive arm a fiscal plan that falls well short of its earlier commitments.
France had promised in 2013 to cut its structural deficit — a measure that is independent of the rate of economic growth — by 0.8 percent in 2014 and the same in 2015, while the 2015 budget envisages a cut of only 0.2 percent.
This is a breach of EU rules that is likely to make the Commission reject the French draft and ask Paris for amendments.
Hollande told reporters after the first day of an EU summit that France would not make bigger savings next year than the 21 billion euros already envisaged. But there could be other ways to comply with the structural deficit requirements, he said.
EU asks Italy to clarify 2015 budget
ROME, Oct. 23 (Xinhua) — Italy was asked by the European Commission for clarifications on its 2015 draft budget, the Italian Economy Ministry confirmed Thursday.
In a letter sent from Brussels on Wednesday, Rome was asked to clarify why its financial plan for next year does not comply with European Union (EU) goals of debt reduction.
Italy’s Economy Ministry said in a statement that « the government will respond to the request by tomorrow (Friday). »
European Economic Commissioner Jyrki Katainen asked to consult Italian Economy Minister Pier Carlo Padoan specifically about « the reasons why Italy plans non-compliance with the Stability and Growth Pact (SGP) in 2015, » and « how Italy would ensure full compliance with its budgetary policy obligations under the same Pact » for next year.
Katainen, who is in charge of budget evaluations, wrote that Italy is planning a « significant deviation » from its previous plans towards a balanced budget in structural terms.
Euro-Area Recession Risk Eases as German Factories Grow: Economy
Oct. 23 (Bloomberg) — The euro-area economy may have moved one step away from another recession.
A Purchasing Managers’ Index showed manufacturing in the region unexpectedly grew this month, while Spain’s economy showed signs of a further recovery, with third-quarter unemployment dropping to the lowest level since 2011. In Germany, factories rebounded from a slump in September.
“The euro-zone recovery still has some legs,” said Martin van Vliet, an economist at ING Bank in Amsterdam. “However, even if the recovery has not ground to a complete halt, growth remains much too weak for anyone’s comfort.”
The 18-region economy failed to grow in the second quarter, and European Central Bank President Mario Draghi has warned of a deflationary spiral of falling prices, with households postponing spending. While the PMI reports lifted stocks and the euro, they also highlighted weak spots as manufacturing demand fell and French factories continued to struggle.
The euro-region factory PMI rose to 50.7 in October from 50.3, London-based Markit said. Economists surveyed by Bloomberg News predicted a drop to 49.9. A reading below 50 indicates contraction. The measure for services held at 52.4.
IMF urges Japan to go ahead with planned tax hike next year
(Reuters) – Japan should go ahead with a second sales tax hike next year in order to maintain credibility of its fiscal framework, an International Monetary Fund official said on Thursday.
« Going ahead with the tax (hike) is very important, » said Roberto Guimaraes-Filho, deputy division chief of the Regional Studies Division at the IMF’s Asia Pacific Department.
Speaking at a seminar, the official said the IMF expects Japan’s economy to grow by an annualised 3.4 percent in July-September, rebounding from the deepest slump since the 2009 global financial crisis in the previous quarter after April’s tax hike.
Japan’s national sales tax rose to 8 percent from 5 percent in April and the government is due to decide by year-end whether to proceed with a second tax increase to 10 percent next year.
Private capital gets more bang in China as economic reforms step up
Private firms have overtaken state-owned companies this year for the first time as the biggest drivers of investment banking revenues in China – a sign of how Beijing’s reforms are transforming private capital’s role in the world’s second-largest economy.
Nimble and boasting efficient management, these private firms are taking advantage of the internet industry boom and business expansion ambitions to take a bigger share of the deal activity compared with state-owned enterprises (SOEs).
So far this year, about 78 per cent of the total value of Chinese sharemarket listings, rights issues and other deals has come from the private sector, Dealogic data shows.
This is up from last year, when the private sector accounted for less than half the total value of these deals. Between 2005 and 2010, when China’s four largest banks and a slew of large SOEs were listed, private deals made up one third of the value.
Private firms are also increasingly favouring foreign banks to advise on deals, undercutting the likes of China International Capital Corp (CICC) and China Galaxy Securities, which had built their fortunes on helping public entities to list and buy rivals.
OECD seriously concerned about Turkey’s foreign bribery probe level
The OECD has stated that it remains seriously concerned about Turkey’s low level of foreign bribery law enforcement, as well as certain aspects of its corporate liability legislation.
In a report issued on Oct. 23, the OECD’s Working Group on Bribery expressed concern about Turkey’s efforts to combat foreign bribery, citing a Transparency International study that showed that only four OECD countries were actively enforcing the group’s anti-bribery convention: the United States, Germany, Great Britain and Switzerland.
“Turkey is a significant and geopolitically critical economy. Its companies, like those from many other countries, operate in corruption-prone sectors and countries. Turkey’s level of enforcement of its foreign bribery laws, with just a single prosecution leading to an acquittal in 11 years, is considerably low. The Working Group is therefore concerned that Turkey is insufficiently proactive in its enforcement efforts,” the OECD Working Group on Bribery stated in the report.
Earnings News
Earnings news: earnings continue to help calming the excessive markets’ nervousness that corporations profit margins will be unsustainable and will push stocks prices into a depressed territories.
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 occasions). Except some important misses due to idiosyncratic reasons, the profit margins look still healthy.
But the corporations 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, they protect their 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, there is a very low probability for a XIX Century style 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. Furthermore, G-20 in Australia is likely to press government to move toward good governance.
We would like to take the opportunity here to repeat that this trend toward the good governance is in place and supported by many policymakers (China, Australia, France etc.). But, reports on bad governance practices overshadow the changes. But we continue to see a need to accelerate the change in governance in other to regain the public trust (the most important “asset” of the XXI Century).
Ebola
Ebola: A new case in NY, while the US introduced systematic screening of visitors from 3 Ebola nations. Over the nearly 500 tests conducts one case has been taken to hospital. The CDC has required to check health development of the visitors during the 21 days after their arrival. Such a tracking will reduce even further the risk of an outbreak. Should any of the visitors experience health deterioration, the CDC could be quick in responding and in putting in quarantine the possible people infected. We do believe that the mistakes made in Dallas, and the increase of fear consecutive to these mistakes, have pushed the administration to take the necessary steps.
We are likely to see some reduction in the fear as the number of cases decreases. However, outbreak take place in waves. While we might have very good news during the coming 2 weeks, the cases are likely to increase again. There is no time to reduce vigilance until the virus is getting controlled and Ebola vaccines would have proven their effectiveness. WHO sees a new treatment in the coming 2 weeks.
But the GOP continue to point to more measures such as Visa ban. But while Visa ban, alike travel ban, serves interests which want to inflict more pain to the economy (less trade, more pressure on an already fragile airline industry) it does not help reduce the outbreak.
In our special note on Ebola (Ebola a communication war) we stressed that Ebola virus will be more about communication issues than a medical problem. On one hand, we pointed to the excessive fear spurred by politically motivated participants on Twitter. On the other, we stressed that while spreading fear about Ebola could help short term interest groups such as increasing financial markets volatility which could help put the blame on excessive regulation. It does show how the Tea Party caucus and less moderate GOP are unprepared to take over the executive branch. If I was advising Marco Rubio or Rand Paul, I would have advised them to fire their communication and strategic teams. Why? For one simple reason, by emphasising the mistrust, both the two Senators are showing how unprepared, un-experienced they are to pretend running for office in 2016.
- Would anyone trust a leader who will start trashing all the administration and pushing the public to panic while they have to be focus finding solutions?
- Would anyone trust Marco Rubio, who continue to fight a XVI Century war against Science, to take the right decision while over sighting CDC operations?
- Would anyone trust Sen. Rand Paul to be the leader to calm the public when he was indicating that Ebola could be airborne (NB: this is not the case please see our report)?
Should the Senate goes to the GOP, it would be the first time in my 20 years career analysing politics that I would have seen a group wining on the ground that : 1) they will spur fear instead of calming public nervousness and show they would be working, 2) they will trigger an economic crisis because they might be some highly hypothetical fear that Chair Yellen will be behind the curve, 3) they might call for President impeachment trial when the country is leading a coalition against terrorists (inc. ISIL). Will the US public prefer voting to help some private interests which have invested ~$1bn in ads? I doubt. I continue to believe that Tocqueville is right: the US is the best democracy invented so far.
The arrival of Ron Klain as a coordinator of the US administration efforts is likely to lead to a reduction in the excessive fear we have reached last week. WHO announcements, that some western african countries are free from Ebola and that a Vaccine should be ready by January 2015, are contributing to overcoming the outbreak.
NY DOCTOR BACK FROM GUINEA HAS EBOLA, 1ST IN CITY
NEW YORK (AP) — An emergency room doctor who recently returned to the city after treating Ebola patients in West Africa has tested positive for the virus, becoming the first case in the city and the fourth in the nation.
Mayor Bill de Blasio and Gov. Andrew Cuomo on Thursday urged residents not to be alarmed by the doctor’s Ebola diagnosis. De Blasio said all city officials followed « clear and strong » protocols in their handling and treatment of Craig Spencer, a member of Doctors Without Borders.
« We want to state at the outset that New Yorkers have no reason to be alarmed, » de Blasio said. « New Yorkers who have not been exposed are not at all at risk. »
Spencer, who had been working in Guinea, returned six days ago and reported Thursday morning coming down with a 103-degree fever and diarrhea. He was being treated in an isolation ward at Manhattan’s Bellevue Hospital, a designated Ebola center.
The Centers for Disease Control and Prevention, which will do a further test to confirm the initial results, has dispatched an Ebola response team to New York, and the city’s disease detectives have been tracing Spencer’s contacts to identify anyone who may be at risk. The city’s health commissioner, Mary Bassett, said Spencer’s fiancee and two friends had been quarantined but showed no symptoms.
In the days before Spencer fell ill, he went on a 3-mile (5-kilometer) jog, went to the High Line park, rode the subway and, on Wednesday night, got a taxi to a Brooklyn bowling alley. Bassett said he felt fatigued Wednesday but not feverish until Thursday morning.
Ebola, ‘fear-mongering’ dominate New Hampshire debate
Concord, New Hampshire (CNN) — Republican Scott Brown used the latest potential Ebola case — this time, a doctor in New York — to blast President Barack Obama’s handling of the virus outbreak in a debate against New Hampshire Democratic Sen. Jeanne Shaheen Thursday night.
It was a local debate that turned on national issues as Brown called for a ban on travel from the West African epicenter of the outbreak and defended his suggestion that Ebola could come across the border with Mexico.
He blasted Obama’s appointment of Ron Klain as the nation’s Ebola response coordinator as someone « with no experience in his field. » He criticized Shaheen for not voting to close the U.S. border with Mexico. And he complained that the New York doctor should have been quarantined when he returned to the United States.
UPDATE 7-U.S. tightens Ebola monitoring for West African visitors
Oct 22 (Reuters) – The United States imposed new constraints on Wednesday on people entering the country from three nations at the center of West Africa’s Ebola epidemic, mandating that they report their temperature daily and stay in touch with health authorities.
President Barack Obama expressed cautious optimism about the situation in the United States after meeting with his Ebola response coordinator, Ron Klain, and other top officials on Klain’s first day on the job since being named on Friday.
The U.S. Centers for Disease Control and Prevention’s new restrictions on travelers arriving from Liberia, Sierra Leone and Guinea marked the latest precautions put in place by the Obama administration to stop the spread of the virus. The steps stopped short of a ban on travelers from those countries demanded by some lawmakers.
Ebola: Ikea ‘Pledged More Money than 40 European Countries, Including Spain’
Swedish furniture company IKEA has pledged more money to fight the Ebola virus than at least 40 European countries.
According to a report by the UN, the home furnishing giant has so far pledged $6.7m (£4.3m, €5.3m) to combat the disease. The funds are more than the ones provided by countries such as Austria, Luxemburg and Italy.
Spain, also included in the list of donors who pledged less money than Ikea, has reported a few cases of Ebola.
« Ikea has given more, or about the same as Italy, » UK Shadow Secretary for International Development Jim Murphy, who uncovered the UN data, said. « There are countries that need to do better, we have to say that publicly. If countries won’t do their bit, we’ve got to embarrass them. This is going to affect us all unless we check it in West Africa. »
« This is the single biggest threat since the emergence of HIV. The world acted together once the scale of HIV became clear, and that’s just not happening here. We can’t have an attitude, surely, saying that these are three countries people rarely visit, that people couldn’t point to on a map, saying it’s happening a long way away. »
Ebola treatment likely in 2 weeks?
A new blood serum treatment for Ebola made from the blood of survivors could be available in Liberia within two weeks, the World Health Organization has revealed. The serum will be formulated with antibodies extracted from the blood.
Plans for two vaccines are also under way.
Teresa Romero, a Spanish nurse who became the first person to contract Ebola outside West Africa this year, tested negative for the virus after reportedly receiving human blood serum containing antibodies. The epidemic has killed more than 4,500 people, mostly in Liberia, Guinea and Sierra Leone, since the outbreak started 10 months ago.
Experts have said the world could see 10,000 new cases a week in two months if authorities did not do more to tackle the virus.
Dr Marie Paule Kieny, assistant director general at the WHO, said: « There are partnerships which are starting to be put in place to have capacity in the three countries to safely extract plasma and make preparation that can be used for the treatment of infective patients.
« The partnership which is moving the quickest will be in Liberia where we hope that in the coming weeks there will be facilities set up to collect the blood, treat the blood and be able to process it for use. »
Donor blood will need to be screened for diseases such as HIV, malaria and hepatitis before red blood cells are removed so that there are only the infection-fighting antibodies in the plasma left.
Two vaccines for the viral disease are also planned to be tested in West Africa by January, the UN health agency announced. The trials will start in the new year on more than 20,000 frontline health care workers, however Dr Kieny said there is a risk the vaccines could fail. « These are quite large trials, » she said.
Gaza
Gaza: The closest we get to opening a discussion for a two-state solution, the more tension is likely to increase. A Palestinian resident of East Jerusalem drove his car into a crowded light-rail station Wednesday, killing a 3-month-old baby and wounding eight people, two of them seriously, according to Israeli police. The driver was identified as Abd al-Rahman al-Shaludi, a resident of the Silwan neighborhood who, according to police spokesman Micky Rosenfeld, has been previously jailed in Israel for involvement in terrorist activities.
But, the global community should separate between terrorist who’s sole aim is to derail any peace process (Turkeys usually don’t vote for Christmas) and the overwhelming palestinians which have been suffering for too long and deserve an opportunity for peace. This is not a hope it’s a forecast. The global community understand very well that it has no chance to ultimately defeat ISIL if it does not solve the issues which are used by terrorists to hire jihadists. At the top of these issues the palestinian situation.
Returning from a Middle East visit, UN Secretary General Ban called for more collaborative work between Palestinian authorities and Israel government for peace.
Yesterday, we were pointing to China which has joined the call for creating conditions for peace talks. Although this did not come as a surprised to us, we see in the global call for peace as an additional evidence that Israeli-Palestine problem is heading toward an unique opportunity to settle a renewed peace process. UN Secretary General Ban is pressing both Hamas and IDF to recognise excesses. First, the UN is refocusing the attention on facts we were indicating during the summer, that some Hamas weapons have been hidden in UN sites during Gaza war. This adds more evidence to the fact that Hamas has been using palestinian civilians as shields. Second, the UN is pressing the Israel Defence Forces (IDF) inquiry about the excessive use of force.
We have been expressing worries after the decision to reconstruct Gaza because there is a genuine lack of traceability of funding. Hamas confirmed that some funds are redirected to re-militarize. This is in line with the fact that as Hamas is losing its political capital to Fatah of President Abbas. The organisation announcement is a gesture to regain some of its “lieutenants” defecting to other “hard liner” organisations.
We have been saying for some time that a fight against terrorism and radical Islam required to genuinely rebuild trust which would phrase in 3 steps. First, reopen Palestine Israel peace process. Second, sell the narrative that this process is intend to be a win-win scenario (i.e. peace, jobs, and growth for the 2 countries). Third, reduce the speed of Jihadists hiring because those are getting radicalised by the feeling of “injustice” and a perceived war against palestinian and muslims in general.
Recent Secretary of State Kerry comments that a Palestinian – Israel two-state solutions will help derail ISIL are in line with the convictions we expressed since the start of Gaza war and the “fight for talents” terrorists organisation have been organising. Please see our comments on Iraq & Syria will indicate that the terrorists are loosing battle in the ground but want to keep their narrative alive in order to keep hiring (when the western countries are just realising that defeating ISIL will require defeating its hiring process).
IDF closely monitoring Hamas attempts to rearm
Security source says Hamas began rebuilding its weapons program moments after the August 26 ceasefire went into effect.
Two months after the end of the 50-day conflict with Hamas and Islamic Jihad, the IDF continues to closely monitor attempts by Gazan terrorists organizations to stock up on rockets and rebuild a network of offensive tunnels.
A security source told The Jerusalem Post on Thursday that it would be safe to assume that Hamas embarked on a force buildup and weapons program the moment after a ceasefire went into effect on August 26.
The source made it clear that on the Israeli side too, military preparations are under way for the event of a renewed clash.
Nevertheless, he added, Israeli deterrence remains very much in effect, preventing Gazan terrorist factions from violating the truce.
Charlie Rose Talks to Israeli Defense Minister Moshe Ya’alon
When you look at groups like Islamic State, do you believe there’s something in Islam that motivates them?
First of all, not all Muslims are jihadists. But all jihadists are Muslims. This is a clash between civilizations. You can see poverty exploited by their leaders. And they know how to approach these frustrated people in their societies. And how to motivate them to become either [Islamic State] followers, al-Qaeda followers, or with al-Nusra or Muslim Brotherhood. It is a vicious circle. I don’t believe that a society that certifies death might prevail. They deteriorate the situation regarding the economy, regarding everything, because they certify death rather than life.
There appears to be a growing level of discontent, especially in Europe, with Israeli policy regarding the Palestinians.
We were ready for compromise. But with this experience with the Palestinians, in which any piece of territory which was delivered to their responsibility had become either a safe haven for terrorists or rocket launching pads, as we witness now in the Gaza Strip, do you believe that the only way is to withdraw? What did we get from our withdrawal from Gaza and from Jenin and Nablus, the areas that we delivered to their responsibility in the West Bank? They choose the way of the rockets. That’s why we have to take the security measures.
Gaza rebuilding slowed by trickle of aid, rivalry
Only one shipment of 400 tons of cement sent since Gaza rebuild program launched, prompting Palestinian allegations of political foot-dragging.
Several dozen tons of cement bags stored in a warehouse are one of the few tangible achievements so far of a $2.7 billion plan to rebuild war-wrecked Gaza Strip.
The program was launched with high expectations at an international conference in Cairo on Oct. 12, but has run into obstacles, including wrangling between the rival Palestinian factions Hamas and Fatah for control in Gaza and what officials say has been a trickle of promised aid.
Iraq & Syria
Iraq & Syria: Canada parliament shooting was confirmed to be an isolated act of IS terrorists. This indicates that ISIL risk is much important and the global coalition response is still inadequate. The coalition has focused on the urgency: stoping ISIL from spreading in Middle East. But the coalition should be held accountable for its continuing lack of response to the more important reason behind the jihadists hiring: MISTRUST. We are puzzled by how media is giving airtime to ISIL by spreading videos, messages and communiques while moderate muslims have no voice (even when US President made reference to #NotInMyName community in his UN General Assembly speech). From a game theory prospective, we understand very well the reasons behind giving airtime to murders. By spurring the fear, some interests groups could imagine that they can derail the current trends toward good governance. In 2009, we were indicating : to solve today’s problems (financial, economic, ecological crisis), there is no way but improving governance. These interests groups will be defeated not because Terrorism is bad, but because terrorism and ISIL is an unstable equilibrium. Some are justifying this situation because it serves as a wake up call to move forward. We believe that the time has came to accelerate the G-20 initiatives and get rid of bad governance, because terrorism needs “dark” money to flourish and anyone who is link to these channels should be brought to justice.
Last week we were saying that, as soon as Turkey will have assurances that the Kurds will not use the current tension at Kobane to increase the tension over the Kurdish independence, ISIL is likely to start to loose this symbolic battle. We were indicating that Kobane is a must win for ISIL in order to pursue their “marketing campaign” borrowed from Spartacus and David & Goliath.
During the recent days, ISIL was loosing ground in Kobane and diverting its to-become-jihadists attention to Baghdad, Raqa / Anbar province to show how barbaric ISIL can be. These actions intend to keep the “to-become-Jihadists” (like Australian Abdullah Emir – click here-) attention on joining their fight. We have been witnessing that many non-affiliated groups have pledge allegiance to ISIL in order to keep hiring. We have seen for example that Algeria salafists groups have renamed themselves to “Califat fighters” to channel funding, weapons, supports etc. We would not be surprised if ISIL continues to spur disinformation that they can take their fight to the sky or that the have got access to US arms (as indicated by the US thanks message channeled by some extremists twitters.
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. Reports over the nomination of the new government interior minister are one of the numerous example of the aftermath of Al-Maliki legacy.
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 ~$2millions per day from oil, before US Strikes. Recent reports, unconfirmed by Turkey, indicate that the oil transactions were going through Turkey. We would not be surprised because Muslim Brotherhood a radical political islam group have left Qatar to Turkey. These groups might be of help. Furthermore “money laundering” and terrorism financing is usually much easier in countries which lack high standards in term of governance. We do believe that the more data on this issues will be leaked the more the pressure on President Ergodan will intensify to find a solution to the Muslim Brotherhood ideology and to improve governance.
Two factors are important to watch in the coming days: 1) how President Ergodan will change is position when the situation deteriorates, 2) how the coalition will withstand two events (Iran nuclear negotiation and Saudi decision to let Oil prices stabilise at 70-80$). 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.
Canada Parliament gunman had planned to travel to Syria: police
(Reuters) – The gunman in Wednesday’s attack on Canada’s capital had a criminal record and recently applied for a passport, planning to travel to Syria after undergoing a « radicalization process, » police said on Thursday.
Michael Zehaf-Bibeau, 32, was a Canadian who may also have held Libyan citizenship, said Bob Paulson, commissioner of the Royal Canadian Mounted Police (RCMP). He said the suspect had no apparent links to another Canadian who killed a soldier in Quebec earlier in the week.
Zehaf-Bibeau fatally shot a soldier at a national war memorial in the capital Ottawa on Wednesday before racing through the parliament building where he was shot dead near where Prime Minister Stephen Harper was meeting with lawmakers.
Born in Montreal to a father from Libya and a Canadian mother, Zehaf-Bibeau had gone on to live in Calgary and Vancouver, police said.
Coalition airstrikes in Syria killed over 500
MURSITPINAR, Turkey (AP) — U.S.-led coalition airstrikes in Syria have killed more than 500 people since they began last month, mainly Islamic militants, activists said Thursday, as fighting flared yet again in the northern Syrian border town of Kobani.
Iraqi Leader’s Security Team Shows Him Boxed in by Nation’s Sectarian Feuds
With his links to a Shiite militia accused of torturing Sunnis during Iraq’s last descent into sectarian conflict, Mohammed Salem al-Ghabban wasn’t the obvious pick for interior minister in a government meant to heal religious rifts.
His appointment last weekend after earlier candidates were rejected showed the limits of Prime Minister Haidar al-Abadi’s power as he seeks to bridge sectarian divisions that helped propel Islamic State’s onslaught in Iraq.
Two months into Abadi’s premiership, political analysts say he’s dealing with both the messy legacy of his predecessor and political realities: An entrenched Shiite dominance of the security forces, Iranian influence over decision making and rampant distrust between communities.
“Abadi doesn’t have full control over what decisions he can and can’t make, he has to work within the confines of party politics, sectarian politics and regional politics,” said Ramzy Mardini, a Jordan-based non-resident fellow at the Atlantic Council research group. In analyzing Iraq, “too much emphasis is given to the power of individual personalities rather than the influence the environment has in shaping their behavior.”
David Ignatius: Iraq and the U.S. are losing ground to the Islamic State
Jalal al-Gaood, one of the tribal leaders the United States has been cultivating in hopes of rolling back extremists in Iraq, grimly describes how his home town in Anbar province was forced this week to surrender to fighters from the Islamic State.
The extremists were moving Wednesday toward Gaood’s town of Al-Zwaiha, the stronghold of his Albu Nimr clan just east of the Euphrates River. The attacking force had roughly 200 fighters and about 30 armed trucks. Al-Zwaiha’s defenders were running out of ammunition and food and wondered whether they should make a deal with the marauding jihadists.
Gaood, a 53-year-old businessman in Amman, talked through the night with tribal elders back home. He says he tried repeatedly to reach Gen. John Allen, the U.S. special envoy for Iraq and Syria, to plead for emergency help. By the time Allen got the message, it was too late. Urgent warnings that the town was about to be overrun also went to the Iraqi army commander at nearby Al-Asad Air Base. There was no response except for a helicopter that took surveillance pictures and then left.
ISIS Inc.: US official reveals how terror network makes its millions
Islamic State militants are amassing a fortune through their web of criminal activity, including earning roughly $1 million a day from oil smuggling alone, according to a Treasury Department official who on Thursday provided unprecedented details about the illicit financial network.
David Cohen, who leads the department’s effort to undermine the Islamic State’s finances, described the organization as one of the best-financed terror groups in the world.
« It has amassed wealth at an unprecedented pace,” Cohen said.
Cohen said the Islamic State, which the U.S. and its allies have been pounding with airstrikes in Iraq and Syria, is earning millions from a combination of oil sales, ransoms and extortion schemes.
Cohen said kidnappings and ransom payments have brought in at least $20 million this year. He said the extortion and other criminal activity is bringing in several million per month.
Cohen, undersecretary for terrorism and financial intelligence, spoke at the Carnegie Endowment for International Peace in Washington, and later at the White House.
Oil Sales Through Turkey Help Fuel Islamic State: US Treasury Department
WASHINGTON, October 23 (RIA Novosti) – The Islamic State (IS) earns approximately $1 million a day by selling oil into a black market in Turkey and the region, a US Treasury Department official said on Wednesday.
« So who, ultimately, is buying this oil? According to our information, as of last month, ISIL was selling oil at substantially discounted prices to a variety of middlemen, including some from Turkey, who then transported the oil to be resold, » said David S. Cohen, Undersecretary for Terrorism and Financial Intelligence, during a speech at the Carnegie Endowment of International Peace. He added that the illegal operations with oil bring IS militants up to $1 million a day.
Cohen explained that smugglers transport oil extracts outside of IS-controlled territory through a range of vehicles, from large tankers to small containers. He added that oil revenue is not relegated to raw extracts as IS also derives profits from the sale of processed materials.
Russia
Russia – Ukraine tension take away:
PM Yatsenuk warns that Russia may destabilise Ukraine again ahead of elections, while pro-Russian rebels vow to retake cities. Escalation in Ukraine is coming while Merkel has been very critical to President Putin, and Germany BND have reported that MH-17 has been shot down by Pro-Russian rebels.
The head of the State Duma’s Foreign Affairs Committee, Mr. Pushkov, has denied Russia’s involvement in the downing of Malaysian Airlines flight MH17 following the publication of BND report. This communication war is likely to keep any trust about MH17 always challenged.
Chancellor Merkel attitude is in line with our view that she 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.
We would like to remain our reader that when it comes to whether Russia will cut gas delivery to Europe, we believe that it’s not a matter of “if” but “when”. Our study of Putin chess game enables us to see that a moment where fear over Ebola will reach the level where any non-lethal flu could become a source of panic and paranoia , would be the genuine timing for cutting gas. This will help populists (supported by Putin) to criticise Europe even more.
Actually, many other political groups are using the strategy of making allegiance to Putin in order to push some domestically driven agenda.
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.
Comments by Swedish PM Lofven “[Sweden] have already say [it] will stay out of NATO” hint that the recent events are bringing the question back to the table (at least from the Russian prospective). The recent “tension” over military planes violating Estonia air space is another example of the fact that the situation is unlikely to settle before the beginning of next year.
Finally, U.S. is intensifying the pressure on Iran to move ahead with a deal, at a moment when Iranian media reported the dead of Ayatollah Mohammad Reza Mahdavi Kani, the head of Iran’s top clerical body after lying in a coma for months, leaving a gap in the only institution that has the authority to elect and dismiss the country’s Supreme Leader. This does not create any short term change in the negotiation but it’s closing the window of opportunity for striking a deal. The fight between “hard-liners” and “conservatism” (supporters of Hassan Rohani) is likely to intensify going into 2016 election.
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.
Ukraine Rebels Vow to Retake Cities as Vote Nears
Pro-Russian insurgents vowed to keep battling Ukrainian forces and retake eastern cities, including the port of Mariupol as general elections near.
Ukrainian Prime Minister Arseniy Yatsenyuk warned today of Russian provocations ahead of the Oct. 26 ballot. Ukraine, the European Union and the U.S. say President Vladimir Putin has backed the rebels with arms and troops, charges Russia denies.
Ensuring security for Ukraine’s more than 40 million citizens is the government’s main concern before the vote, the first time lawmakers will be picked since Russia annexed Crimea in March. The fighting in eastern Ukraine has left at least 3,660 dead, according to United Nations estimates. A Sept. 5 truce has been violated almost daily.
Ukrainian prime minister Arseniy Yatseniuk warns Russia may try to disrupt election
Ukraine’s prime minister Arseniy Yatseniuk has warned Russia may attempt to disrupt the country’s parliamentary elections on Sunday.
Mr Yatseniuk has ordered a full security mobilisation for the weekend to prevent « terrorist acts », as violence between government forces and pro-Russian separatists simmers in eastern Ukraine despite a ceasefire.
« It is clear that attempts to destabilise the situation will continue and be provoked by the Russian side, » Mr Yatseniuk told a meeting of top security chiefs and election monitors.
« They did not succeed during the presidential election in May but their plans have remained.
« We need … full mobilisation of the whole law-enforcement system to prevent violations of the election process and any attempts at terrorist acts during the elections. »
Russia detains four over Total boss plane crash
Russia has detained four Moscow airport employees over a crash which killed the head of French oil giant Total when his jet hit a snowplough, investigators said Thursday.
The authorities at Vnukovo airport where the accident occurred also announced the resignations of its general director and his deputy after the management was accused of « criminal negligence » by investigators.
Total chief executive Christophe de Margerie was killed along with the plane’s three-member crew in Monday’s late night crash.
The detained snowplough driver, who has said he accidentally strayed on to the runway, also arrived at a Moscow district court on Thursday for a hearing to decide whether he should be placed under formal arrest.
The other four employees detained include the intern air traffic controller in charge of directing the doomed plane, her supervisor, the head of air traffic controllers and the chief of runway cleaning, Russia’s investigative committee said in a statement.
« The investigation suggests that these people did not respect the norms of flight security and ground operations, which led to the tragedy, » it said. « They have been detained as suspects. »
Escalation Likely If Iran Talks Fail, U.S. Official Says
The alternatives to an international accord preventing Iran from producing nuclear weapons are “quite terrible,” the chief U.S. negotiator in talks with Iran said.
Even so, Under Secretary of State for Political Affairs Wendy Sherman said today, the U.S. won’t accept “a bad deal or even a half-bad deal” to avoid failure.
Sherman said in Washington that she can’t predict the outcome of the negotiations as they head toward a Nov. 24 deadline with six nations and Iran still jockeying over constraints on the Islamic Republic’s nuclear activities and the terms for lifting economic sanctions.
U.S. lawmakers on key committees are preparing legislation to impose tougher economic sanctions on Iran if there’s no deal by that date, and Iran’s interim commitment to curtail uranium-enrichment would expire with the end of the negotiations. Barring an agreement to extend the talks for a second time, the stage would be set for events that could lead to military attacks on Iran’s nuclear facilities by the U.S. or Israel.
“There’s no question that, if everything goes away, escalation will be the name of the game on all sides, and none of that is good,” Sherman said at a conference on Iran held in Washington by Syracuse University’s Moynihan Institute of Global Affairs and the Norwegian Institute of International Affairs. “It’s why I say the stakes are high.”
Lower oil prices push Russia toward recession
MOSCOW — If sanctions, inflation and political risk weren’t enough, falling oil prices are pushing Russia’s already beleaguered economy toward recession.
The price of Brent crude oil, a global benchmark, hit a four-year low last week, plunging to below $83 per barrel from $116 in June. While it was just under $85 on Wednesday, there is considerable risk it could dip well below $80, costing Russia, whose budget gets half its revenue from oil and gas exports, billions of dollars, analysts said. Geopolitics and oil prices have already reduced Russia’s budget by an amount equal to 4% of its gross domestic product.
A loss of « $10 per barrel costs (Russia) 500-600 billion rubles a year » — equivalent to $12.2 billion to $14.6 billion, said Natalia Orlova, chief economist at Alfa Bank, by telephone.
A two-day summit of EU leaders is supposed to focus on climate and energy policy including efforts to enhance energy security following the threat of interruptions to gas supplies from Russia.
That is no small issue. Russia and Ukraine have failed so far to reach an accord on gas supplies for the coming winter but agreed to meet again in Brussels in a week in the hope of ironing out problems over Kiev’s ability to pay.
An agreement was reached on the price Ukraine would pay Russia’s Gazprom as long as it paid in advance for the deliveries. But Moscow is still seeking assurances on how Kiev would find the money to pay. It’s likely the EU will have to step in there.
Putin had threatened to cut gas supplies to Europe if Ukraine stole from the transit pipeline to cover its own needs this winter. Any interruption to flows to western Europe, via Ukraine from Russia, would deal another blow to already struggling EU economies.
The EU summit, held a day after the European Parliament confirmed the line-up of the new European Commission under Jean-Claude Juncker, will urge Russia to do more to stabilise Ukraine, according to a draft statement seen by Reuters, but diplomats expect no change in sanctions on Moscow in the near future.
Has Putin Already Won in Ukraine? Sure Looks That Way
Vladimir Putin has won in Ukraine. The only question now is what he wants next. That’s the sobering conclusion of some veteran Kremlin-watchers who say the Russian president has already achieved his goal of crippling Ukraine while consolidating his power in Moscow. Among those speaking out:
George Soros. The Hungarian-born billionaire investor says Putin has outmaneuvered Western governments in the conflict, taking advantage of their desire to avoid military confrontation with Russia. “Putin’s Russia has proved to be in some ways superior to the European Union—more flexible, and constantly springing surprises,” Soros writes in a forthcoming article for the New York Review of Books. The U.S., Soros says, has offered Ukraine “a façade of support with little substance behind it,” as the country skids toward economic collapse.
Hong Kong
Hong Kong take away:
Hong Kong protests talks with HK’s government failed while violence coming from opponents to Umbrella Revolution increased. We believe that the situation is likely to continue to ebb and flow between some “tension” and discussions with HK government. The IV-Plenum communique indicated, as we were expecting, that the Chinese government is moving ahead with an agenda which should please the Occupy movement in Hong Kong as well as in other countries: 1) improve governance, 2) crack down on Corruption, 3) introduction of the rule of law and 4) independence of justice. These steps are likely to help President Xi government to start finding a way out of the current “crisis”. While we consider the reforms path is pointing to the right direction, we consider that China can accelerate because the new normal is getting understood by the public, the business community though the financial markets are still lagging behind. President Xi might use HK as a platform for political reform experiment. In nutshell, we see Occupy and Umbrella Revolution to be a green shot toward helping government understand that accountability, democracy, and the rule of law need to be strengthened and that there is no other ways but political reforms.
China won’t budge on Hong Kong poll decision, plenum statement shows
The Communist Party’s key meeting ended yesterday with a pledge to guarantee implementation of « one country, two systems » and maintain the long-term prosperity of Hong Kong in accordance with law.
Analysts said it suggested Beijing was unlikely to yield on its decision over Hong Kong’s political reform.
The remarks came with protests against Beijing’s restrictive framework for the 2017 election for the city’s chief executive well into their fourth week.
Academics said the remarks were in line with Beijing’s stance on Hong Kong’s political development – that electoral reform must be carried out within the framework of the Basic Law.
« It is not common for Beijing to elaborate on the ‘one country, two systems’ policy from the perspective of law, » Shenzhen University law Professor Ye Haibo said.
« It shows that Beijing wants to reiterate the importance of handling the relationship between the central government and Hong Kong and the city’s political reforms in accordance with law – both the Basic Law and the decisions by the National People’s Congress Standing Committee. »
Party’s leadership « most fundamental guarantee » for rule of law in China: communique
BEIJING, Oct. 23 (Xinhua) — The Communist Party of China (CPC) leadership is « the most fundamental guarantee » for comprehensively advancing the rule of law and building a country under the socialist rule of law, leaders said at a key meeting Thursday.
The effectiveness of implementing rule of law will be a significant index in judging the work of officials at various levels and will be added to their performance appraisal system, the Party said, according to a communique of the fourth plenary session of the 18th CPC Central Committee held from Monday to Thursday.
The communique called for governing by law, and all cadres taking the lead to abide by law, warning against illegally exercising powers, allow replacement of law with words, pressing law with powers, and bending law for personal gains.
Party organizations in the people’s congresses, governments, political advisory bodies, judicial apparatus and procuratorates at all levels should lead and monitor their units in abiding by Constitution and laws, and all legal violations in exercising powers, the communique said.
The communique also called for improved regulations and system of the Party to strengthen self-discipline and promote Party members to take the lead in abiding by state laws.
Local Support for Hong Kong Protesters Grows, Survey Says
Public support for Hong Kong’s pro-democracy protesters has grown, particularly among younger people, a survey shows, underlining the difficulty for the government to resolve four weeks of demonstrations.
A public opinion poll conducted Oct. 8 to Oct. 15 by the Chinese University of Hong Kong and released yesterday showed 37.8 percent of respondents support the Occupy movement, an increase from 31.3 percent in mid-September.
“This is not surprising because the government has so mishandled the protest with police using tear gas and a sense that the government doesn’t represent Hong Kong,” said Michael Davis, a law professor at the University of Hong Kong.
The results come after Hong Kong Chief Executive Leung Chun-ying said that public patience for the demonstrations, which have blocked buildings and roads and snarled traffic, is wearing thin. Student leaders have pledged to continue their street occupation after a first round of talks this week failed to address their demands for a freer election in 2017.
Facebook’s Zuckerberg Conducts Q&A in Chinese, Charms Beijing Students
MOSCOW, October 23 (RIA Novosti) – Mark Zuckerberg, co-founder of the world’s largest social network Facebook, was determined to win over the hearts and minds of Beijing, when he surprised students by conducting an entire question-and-answer session in Mandarin, AFP reports Thursday.
The 30-year-old head of the US-based company kicked off his half-hour session at the prestigious Tsinghua University with the words « Hello, everyone » in heavily accented Chinese. The crowd was charmed and responded to Zuckerberg with cheers and applause.
Zuckerberg’s pronunciation was far from perfect, but he managed to maintain a 30-minute intelligible conversation on various topics.
He spoke about founding and running a company, his opinion on Chinese innovation, as well as more personal matters such as his favorite color, his favorite Chinese dish and the Chinese-American family of his wife, Priscilla Chan.
HK Occupy movement impedes democracy: newspaper
BEIJING, Oct. 23 (Xinhua) — A newspaper commentary warned that the « Occupy Central » movement in Hong Kong is actually impeding the region’s democratic development.
By resorting to the extreme « occupy » measures to hijack Hong Kong public opinion and express their own views, the illegal movement is running counter to legal procedures and the democratic spirit, said a commentary carried by Thursday’s People’s Daily, the flagship newspaper of the Communist Party of China.
« Without the rule of law, so-called ‘democracy’ may be led astray into peril, » the commentary said.
The commentary said that the occupy movement has deviated from the Basic Law and other laws of Hong Kong and the « civil nomination » concept proposed by the organizers is a breach of the framework of the « One Country, Two Systems » policy.
Their appeals and activities are also contrary to the mainstream opinion among Hong Kong citizens and seriously impacts social order in Hong Kong, according to the commentary.
« The organizers’ attempt to arouse social conflict and incite illegal activities under the name of election issues will definitely undermine the cornerstone of Hong Kong’s democracy and rule of law. The movement is actually impeding the realization of universal suffrage in Hong Kong, thwarting the region’s democratic development, » the commentary said.
The article noted that after Hong Kong’s return to the motherland in 1997, the region’s democracy has continued to progress under the support of the central government.
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. However, any delay in negotiation between Catalonia and Madrid could reverse the tied. Unfortunately, many politicians have been used to procrastination and may try to promise reforms without delivering them. This time Spain has to face the reality: all over the world, the public awareness of “moral faults” has increased. Not solving Catalonia problem is giving more argument to the mistrust camp. It suffices that one sees the overwhelming indication that mistrust helps to radicalise the public, to conclude that procrastination would be responsible for public radicalisation. The Elite in Spain does not understand that the old days of the Spanish Monarchy without accountability is ending. They’re better get used to that and move forward.
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: One word take Replace Catalonia, HK Occupy with Ferguson, keep calm and carry on.
An independent commission will be created to study issues that have surfaced since the fatal police shooting of Michael Brown in Ferguson, Missouri Gov. Jay Nixon said Tuesday. This commission aims de-escalating a situation which could easy surge. The risk of surging is increasing as a newly leaked autopsy of Michael Brown, the unarmed 18-year-old black man shot by a white police officer in Ferguson, Missouri more than two months ago, indicates a gunshot wound to the hand from close range, the St. Louis Post-Dispatch reported.
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.
In general, 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 a 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 use soft power – and Ferguson is part of that – to press institutions to reforms. 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.
Protesters Clash With Ferguson Cops After Michael Brown Autopsy Leaked
Protests heated up in Ferguson, Missouri, overnight Wednesday following the leak of a new autopsy report detailing the shooting death of unarmed teenager Michael Brown. A crowd of about 200 gathered near the city’s police department as some protesters knocked down barricades and pelted police with objects. Five officers were hit by either rocks, bottles or a metal rod, although no injuries were reported, St. Louis County police said Thursday.
Five people were arrested and charged with either disturbing the peace or failure to disperse, police added. The crowd dwindled down significantly by 2 a.m. Video taken at the scene shows people chanting, “Hands up, don’t shoot,” as officers in riot gear lined up along the sidewalk.
The protests were apparently fueled by the leak of Brown’s autopsy report this week to media outlets. An earlier autopsy conducted for the Brown family revealed the 18-year-old was shot at least six times, including twice in the head, during the incident with Ferguson Police Officer Darren Wilson. The official autopsy suggests that Brown was shot at close range and may have been reaching for Wilson’s firearm. A grand jury is deciding whether to indict Wilson on criminal charges, and an attorney for the Brown family has asked protesters “to take their frustrations to the ballot box, not the streets” once a decision is reached.
Darren Wilson’s lawyer speaks out on leaked Brown autopsy
After details from an official autopsy on Michael Brown were exposed to reporters, legal counsel for Darren Wilson, the officer who shot and killed the slain teen, spoke out for the first time since the investigation, saying “we were not responsible for any leaks to any media including those published in the NY Times and the St. Louis Post Dispatch.”
The Thursday morning statement went on to say: “Further, we are not in possession of any of the disclosed reports or the investigative report. Finally, as long as the Grand Jury continues to meet and the Department of Justice continues to investigate, any commentary on this matter should only be done in the appropriate judicial venue and not through the media.”
Hours after the details were published – which could bolster his killer’s claim of self-defense – one of the experts whose analysis was central to those claims told msnbc that her analysis of the findings had been taken out of context.
US midterms elections
US midterms elections:
November 4th midterm elections is coming with many uncertainties. Should GOP win the Senate, the US administration is likely to find itself stuck with a divided government which could make : debt ceiling, budget negotiation, Fed Transparency Bill negotiation, very hard. Some humorists have called the Tea Party caucus to be the “no-negotiators”. Without leaning toward a liberal Tea Party bashing, we would like to remind our readers of October 2013 debt ceiling talk. These period have created too much fear that the US might default that some Sovereign Wealth Funds (SWF) have been considering challenging the USD reserve currency privilege status. The average polls are giving 55% chance to the GOP to secure a win in the Senate. However, these polls do not track the weak signals narrative nor participation variable (a model we’ve built for Scotland Independence and which has proven a very good results). 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 and go to the polls. 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 Senate majority is a given.
Are Democrats losing their edge among women?
A notable finding in a new AP-GfK poll:
Women have moved in the GOP’s direction since September. In last month’s AP-GfK poll, 47 percent of female likely voters said they favored a Democratic-controlled Congress while 40 percent wanted the Republicans to capture control. In the new poll, the two parties are about even among women, 44 percent prefer the Republicans, 42 percent the Democrats.
In contrast, the poll found that among men, Republicans’ double-digit advantage hardly changed from their September survey, with 50 percent backing Republicans.
The Incredible Rise in Campaign Spending
The cost of running for Congress has increased more than 500 percent since 1984. Here’s an interactive look at how campaign expenditures have outrun inflation, health care, and even the rising cost of college
Poll Palooza: Illinois Gubernatorial Race Tied, GOP Still Coasting in Texas
New polls show competitive races in Illinois, New Hampshire, and Colorado but, to no one’s surprise, not in Texas.
With 12 days until the midterm elections, it’s becoming clear which races will come down to the wire and which contests aren’t competitive at all. As several new polls show, Colorado’s gubernatorial race and New Hampshire’s Senate race are still statistically tied, while Democrat Wendy Davis’s longshot run for Texas governor is as unlikely now as it was last year.
The only surprise in the list is Illinois, where a poll released Thursday by the Chicago Tribune shows Republican Bruce Rauner pulling even with Democratic Governor Pat Quinn. Here’s where the four races stand, according to fresh polls:
Lawmakers to offer bill denying Social Security benefits to former Nazis
WASHINGTON (AP) — Legislation to stop suspected Nazi war criminals from receiving U.S. Social Security benefits will be introduced soon, the latest response to an Associated Press investigation that revealed millions of dollars have been paid to former Nazis who were forced out of the United States.
Reps. Carolyn Maloney, D-N.Y., and Jason Chaffetz, R-Utah, will release details of the bill Friday. The legislation will be offered in mid-November, when Congress returns to session following the midterm elections.
Sens. Chuck Schumer, D-N.Y., and Bob Casey, D-Pa., said they will propose a similar bill in the Senate.
US News
US other news: Oil prices have reached our second target $80 much quickly than anticipated. However, we consider that they’ll plateau in the short term at these level until Iran nuclear negotiations go through. In the case of success we might see prices resuming their downward trend. U.S. administration just started to take seriously numerous report of ISIL funding through Oil trade. The administration threatened to take sanctions measures against those who buy Oil from ISIL. This may create some tension with Turkey.
We share below an interesting paper on why ISIS excels at recruiting American teens. This trend is the most worrying while the terrorists propaganda based, on the Apocalypse and the spread view that “institutions are rotten to the core”, is gaining traction is more forums (libertarians blogs for example). I was puzzled by the number of blogs and how some Hedge Funds have been financing libertarians views although they repeat all of them the same information, data, reasoning etc. This become clearer with the recent rush to sell to small investors energy funds, while the overwhelming data and news are supportive to do the opposite. It’s frustrating that the US SEC does not protect sufficiently investors by requiring to check how these funds are sold. From a 20 years marketing experience in finance, I witnessed at least one case of two deals where the investor has not been given the full information although salesmen knew it. In a world where data are everywhere and the tools to make the sense of it are already very efficient. I do believe that financial institutions have better to be cautious. As we have been saying many times: last time financial institutions suffers multi-billions sanctions, next time (if these do not take the genuine actions to improve governance and marketing practices) it may end up into jail time. I doubt that oil funds salesmen discussed with their clients the situation in Iran negotiation and how this could take the oil into another plunge.
Informations out of North Korea have proven our thoughts right: Kim Jong Un has personally ordered to free the M. Jowle. This is a weak signal that North Korea leadership is willing to soften its stands when its old partners are moving toward a new strategy. We see this development increasing the chances of a reunification with South Korea. This story should accelerate when President XI and PM Abe will meet and reduce the seemingly tension over the disputed regions.
WTI Climbs From 2-Year Low on Cut in Saudi Oil Supply
West Texas Intermediate surged from its lowest closing price in more than two years as Saudi Arabia trimmed crude oil supply in September.
Futures gained as much as 1.7 percent in New York, recording the biggest increase since Oct. 17 and erasing an earlier fall of 0.6 percent. The biggest producer in the Organization of Petroleum Exporting Countries cut supply to markets by 328,000 barrels a day last month, to 9.36 million barrels a day, from 9.69 million in August, according to a person with knowledge of Saudi Arabia’s oil policy.
Crude has collapsed into a bear market as producers including Saudi Arabia cut export prices. Global supplies are rising as the U.S. pumps the most in almost three decades and Russia’s output nears a post-Soviet record. OPEC needs to reduce output by 500,000 barrels a day because the market is oversupplied, Samir Kamal, Libya’s governor to the 12-member group, said yesterday.
“The market is reacting instantly to any news on oil fundamentals,” Gerrit Zambo, an oil trader at Bayerische Landesbank in Munich, said by phone today. “The whole market has shifted much more toward reaction on supply news on the oil market rather than political moves.”
WTI for December delivery was at $81.09 a barrel in electronic trading on the New York Mercantile Exchange, up 57 cents, at 8:56 a.m. local time. Brent for December settlement rose 85 cents, or 1 percent, to $85.56 a barrel on the London-based ICE Futures Europe exchange.
US jobless claims rise 17K, but still lowest since 2000 (+video)
Jobless claims filed by American workers rose by 17,000 to 283,000 last week, but the four-week moving average for jobless claims fell to its lowest level since May 2000.
The number of Americans filing new claims for unemployment benefits rose last week, but the underlying trend firmly pointed to strengthening labor market conditions.
Initial claims for state unemployment benefits increased 17,000 to a seasonally adjusted 283,000 for the week ended Oct. 18, the Labor Department said on Thursday.
That followed three straight weeks of declines, which had pushed claims to levels last seen in 2000. Last week’s increase was in line with economists’ expectations.
US NEGOTIATOR: SOME WANT TALKS WITH IRAN TO FAIL
WASHINGTON (AP) — The chief U.S. nuclear negotiator suggested Thursday that some U.S. allies and members of Congress hope diplomacy with Iran fails, offering a glimpse of the difficult task awaiting the Obama administration if it manages to secure a nuclear agreement with Tehran by a late November deadline.
Wendy Sherman, the undersecretary of state for political affairs, said negotiators are focused on clinching an accord that gives the world confidence that Iran’s nuclear program is exclusively peaceful. In exchange, Iran would get significant relief from the international sanctions that have crippled its economy.
Significant hurdles remain, however. For the U.S., they include selling an agreement at home and to its closest regional partners.
« We are aware, of course, that this negotiating process is, shall we say, controversial, » Sherman said in a speech at the Center for Strategic and International Studies.
« Some worry that it will fail. Others seem to fear that it will succeed. Many have questions and doubts, » she said. « The Obama administration has consulted regularly with members of Congress and with our many overseas partners, including Israel and the Gulf states. We have heard a variety of concerns and done our best to answer hard questions. »
Washington Hopes Crimea Will Participate in Ukrainian Elections: US State Department
WASHINGTON, October 23 (RIA Novosti) – The United States hopes that people from Crimea will vote in the upcoming snap parliamentary elections in Ukraine, a spokesperson for the US Department of State said Thursday.
« We hope to see wide participations in the elections by all Ukrainians including Crimea, Donetsk and Lugansk, » Jen Psaki said during a press briefing, adding that Washington would strongly condemn any interference in this legitimate democratic process and the ability of the people of Ukraine to peacefully choose their own leaders.
« We commend the Ukrainian government on its continuing preparations for free, fair and inclusive elections and look to authorities and all political parties to ensure the vote is in line with international democratic norms, » she added.
The early elections to the Ukrainian parliament, known as the Verkhovna Rada, will take place on October 26. Ukrainians will vote for the parliament’s 424 members: 225 of them are to be elected by party lists, with the election threshold set at five percent, and 199 by single-seat constituencies.
US commerce secretary says TPP is at final stage
Visiting US Secretary of Commerce Penny Pritzker said the Trans-Pacific Partnership (TPP) is in its final stage.
During her first visit to Korea since she took office in June last year, Pritzker said that that they are in « eighth or ninth inning of the process. »
« There is a real belief that the U.S. and Japan can get over the last remaining issues to weed out. There is a real focus on that effort, » she said, during the press meeting, organized by AMCHAM, at the JW Marriott Hotel in Dongdaemun, Thursday.
Korea has worked hard for the last few years to be the FTA hub and expressed interest in joining the TPP. The TPP is a proposed regional free-trade agreement and twelve countries throughout the Asia-Pacific region have participated in negotiations on the TPP including Japan, Malaysia, Mexico, Malaysia, Mexico, the United States and Vietnam.
U.S. warns of sanctions on buyers of Islamic State oil
(Reuters) – The Obama administration on Thursday threatened to slap sanctions on anyone buying oil from Islamic State militants in an effort to disrupt what it said was a $1-million-a-day funding source.
Islamic State has seized large swaths of Iraq and Syria in a brutal campaign, and could pose a threat to the United States and its allies if it is not stopped, U.S. Treasury Undersecretary David Cohen said.
« With the important exception of some state-sponsored terrorist organizations, ISIL is probably the best-funded terrorist organization we have confronted, » Cohen said, referring to another name for Islamic State. He spoke at the Carnegie Endowment for International Peace.
Islamic State, or IS, is generating tens of millions of dollars a month through a combination of oil sales, ransom, extortion and other criminal activities, and support from wealthy donors, said Cohen in laying out the most comprehensive outline yet of the U.S. financial strategy against the group.
Anti-IS Airstrike Coalition to Hold Conference in Kuwait: US State Department
MOSCOW, October 24 (RIA Novosti) – The US-led anti-Islamic State (IS) airstrike coalition will hold a conference on October 27 in Kuwait, a statement published on the US State Department’s website said.
« Under Secretary of State for Public Diplomacy and Public Affairs Richard Stengel will travel to Kuwait to lead the U.S. delegation for the October 27 conference of coalition partners focused on countering ISIL messaging and combatting violent extremism in the region, » the statement published Thursday said.
According to the statement, the conference will bring together senior officials from Bahrain, Egypt, France, Iraq, Jordan, Lebanon, Oman, Qatar, Saudi Arabia, Turkey, the United Kingdom and the UAE, enabling them to seek ways to augment the cooperation amongst the coalition partners.
ISIS excels at recruiting American teens: Here are four reasons why (+video)
Three Denver teenage girls skipped school and flew to Germany to join ISIS before being sent home. Why are American teenagers drawn to the Islamic terror group? Appeal to sense of identity, Sophisticated internet propaganda, Appeal to a sense of religious obligation, Female-targeted recruitment
According to CIA estimates, about 2,000 Westerners have traveled to Iraq and Syria (many via Turkey) to join ISIS. Of these, more than 100 have come from the US, at least 500 from the UK, and more than 700 from France, according to estimates from authorities in those countries.
Europe News
EU other news: While the EU member states 2015 budget discussion is on-going, EU struck two important deals: 1) European Union leaders agreed early Friday to cut greenhouse gas emissions in the 28-nation bloc to at least 40 percent below 1990 levels by 2030 (while before the meeting Chancellor Merkel was indicating that the challenge was great and the negotiation would not be easy), 2) better coordination in the Ebola outbreak front (this is likely to provide the path toward so form of EU – CDC which would have to coordinate efforts -.
We have been indicating that we consider that EZ narrative has shifted to more positive dynamic. Indeed, an European Union accounting change has improved Cyprus’s public-finance outlook more than any other euro-zone nation, raising the prospects it will exit a bailout program ahead of schedule and sell bonds this year.
The Chancellor of the Exchequer is to promise to get up to half a million more women into the workplace as part of a new Conservative push on the economy and to regain women votes which have been defecting to other mainstream parties.
EU Leaders Fight Over How to Spread Pain of Toughest CO2 Goals
European Union leaders are wrangling over how to spread the pain as they close in on the most-ambitious climate goals of any major economy, part of a deal that will also boost the security of energy supplies amid a natural-gas dispute between Russia and Ukraine.
Heads of government from the bloc’s 28 nations are discussing a binding target to cut greenhouse gases by at least 40 percent from 1990 levels by 2030 at a summit in Brussels today, according to draft conclusions obtained by Bloomberg News. Meeting that goal would cost about 38 billion euros ($48 billion) a year, the EU has said. The current target is a 20 percent reduction by 2020.
“We’re aiming for the same effort in 10 years as we previously had in 30,” German Chancellor Angela Merkel said before the gathering. “This is a formidable effort. That means the negotiations won’t be easy, because we also need to have our international competitiveness in mind.”
The question of how to share out the carbon cuts divides poorer, mostly ex-communist east European nations and richer countries in western Europe. France is also fighting calls from Spain and Portugal to build more gas and power connections across the Pyrenees while the U.K. resists German demands for binding targets on energy efficiency.
The agenda of the two-day meeting, the final one to be chaired by EU President Herman Van Rompuy, also features a debate on the European economy and on measures to prevent the spread of the Ebola virus.
EU reaches deal to cut greenhouse gas emissions
BRUSSELS (AP) — European Union leaders agreed early Friday to cut greenhouse gas emissions in the 28-nation bloc to at least 40 percent below 1990 levels by 2030.
The deal was aimed at countering climate change and setting an example for the rest of the world ahead of key international climate negotiations next year.
A package agreed by leaders at an EU summit in the early hours of Friday after lengthy negotiations also requires climate-friendly, renewable energy to provide at least 27 percent of the bloc’s needs and demands that energy efficiency increase by at least 27 percent in the next 16 years.
« It was not easy, not at all, but we managed to reach a fair decision, » said European Council President Herman Van Rompuy. « It sets Europe on an ambitious yet cost-effective climate and energy path. »
Osborne Plans To Get More Women In Work
The Tories have been accused of having « a problem with women » – but there will now be a focus on boosting female employment rates.
The Chancellor of the Exchequer is to promise to get up to half a million more women into the workplace as part of a new Conservative push on the economy.
With GDP figures for the third quarter released on Friday morning, George Osborne will be touring the length and breadth of Britain to try to send a message that the macroeconomic recovery is working for women.
The centrepiece of Mr Osborne’s ambition is to increase the UK female employment rate of 67% to that in Germany of 69%.
Ahead of December’s Autumn Statement, he is considering extending the Government’s Childcare Business Grant to £2m to help create 50,000 further childcare places.
EU LEADERS SEEK MORE EBOLA FUNDING AT SUMMIT
BRUSSELS (AP) — Britain pledged an additional 100 million euro ($126 million) to fight Ebola and Prime Minister David Cameron called on the other European Union leaders at a summit to step up their efforts to contain the deadly virus too.
Cameron had set an EU target of 1 billion euros ($1.26 billion) last week and prior to Thursday’s start of a two-day EU leaders’ summit, the bloc’s total anti-Ebola commitments were over halfway to that goal.
Britain said its total contribution now stood at 256 million euros ($324 million) toward fighting Ebola, more than any other EU nation.
« We need other European countries to do more, » said Cameron, exerting diplomatic pressure as he entered EU headquarters.
At the summit, the EU’s executive Commission also pledged another 24.4 million euros in research to on an Ebola vaccine.
« We are in a race against time on Ebola, » Barroso said. « We must address both the emergency situation and at the same time have a sustained medium and long-term response. »
To coordinate all the efforts of the 28 EU nations, the EU leaders appointed the incoming EU Humanitarian Aid Commissioner Christos Stylianides as its Ebola czar.
Cyprus GDP Upgrade Boosts Bailout Exit Plans: Chart of the Day
Radoslav Tomek and Marcus BensassonOct 23, 2014 5:00 pm ET
Oct. 24 (Bloomberg) — A European Union accounting change has improved Cyprus’s public-finance outlook more than any other euro-zone nation, raising the prospects it will exit a bailout program ahead of schedule and sell bonds this year.
The CHART OF THE DAY shows the Mediterranean island nation’s debt burden dropped almost 10 percentage points to 102 percent of gross domestic product after the EU announced changes on measuring national economic output and public debt on Oct. 21. The amendments, which include changes to how financial services are recorded, added more than 1.5 billion euros ($1.9 billion) to the nation’s GDP.
President Nicos Anastasiades said in an Oct. 21 interview that he plans to sell debt for a second time this year and end the country’s 10 billion-euro International Monetary Fund and EU rescue program in 2015, a year early. Cyprus became the fifth euro-area country to be bailed out in March 2013 after the region’s debt crisis left its biggest banks insolvent.
UPDATE 2-Merkel to Hollande: budget rigour, growth go together
* EU budget rules at centre of tensions over growth
* Investment fund planned, but no likely to be solution
* Italy’s Renzi says tax cuts will still go ahead (Updates with Italy’s Renzi)
By Julia Fioretti and Jean-Baptiste Vey
BRUSSELS, Oct 23 (Reuters) – Germany and France both called for economic growth to be at the heart of the euro zone’s budget strategy on Thursday but German Chancellor Angela Merkel warned against returning to the pre-crisis days of high spending to try to revive the economy.
With the euro zone flirting with stagnation and deflation, the leaders of the bloc’s two biggest economies put the emphasis on growth as they arrived for an EU summit in Brussels. But their comments betrayed starkly different visions on how to act.
At the centre of tensions are EU budget rules that force countries to control their public finances to win investor confidence. Paris says they risk suffocating money flows to businesses and projects at such a fragile time.
China News
China: PMI rose in October, adding to signs a resilient labor market and export demand are helping the world’s second-largest economy weather a housing market downturn. At the same time, SOE (state own enterprises) have been suffering from: lower profits and investments.
This is in line with the rebalancing objective to move away from the old growth drivers and focus on economic reforms. News out of the corporate sector shows that even in this field China is delivering the reforms announced (shift toward “Social Capitalism” model).
As the economy continue to soft land, we see the Chinese leadership continuing to support governance improvement and crack down on corruption. For example, Australian police have agreed to assist China in the extradition and seizure of assets of corrupt Chinese officials who have fled with hundreds of millions of dollars in illicit funds, the Sydney Morning Herald newspaper reported (see more below).
We believe that Chinese leadership will continue to drive the growth lower but smoothly to avoid triggering a hard landing chock. 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 (banking, housing etc.).
China state firms’ profit growth slows in January-September
(Reuters) – Profit growth of China state-owned firms slowed in the first nine months of 2014, adding to signs of fragility in the world’s second-largest economy as factories struggle to cope with falling prices and sluggish demand.
State-owned non-financial companies made combined profits of 1.85 trillion yuan (188.84 billion pounds) between January and September, up 5.9 percent from the first nine months of 2013, the Ministry of Finance said on Thursday.
That slowed from a rise of 8 percent in year-on-year profits in the January-August period. The increase was also below the 10.5 percent rise seen in January-September 2013 from the same period of the previous year.
Data this week showed China’s annual economic growth slowed to 7.3 percent in the third quarter – the weakest pace since the depths of the global financial crisis, and down from 7.5 percent in the previous quarter.
Meanwhile, China’s producer price index (PPI) fell 1.8 percent in September from a year earlier, its 31st consecutive monthly decline, highlighting increasing strains on companies.
China Home-Price Drop Spreads as Easing Fails to Halt Slide
China’s new-home prices fell in all but one city monitored by the government last month as the easing of property curbs failed to stem a market downturn amid tight credit.
Prices dropped in 69 of the 70 cities in September from August, the National Bureau of Statistics said in a statement today, the most since January 2011 when the government changed the way it compiles the data. They fell in 68 cities in August.
The central bank on Sept. 30 eased mortgage rules for homebuyers that have paid off existing loans, reversing course after a four-year campaign to contain home prices as Premier Li Keqiang seeks to prevent economic growth from drifting too far below the government’s 7.5 percent annual target. Home sales slumped 11 percent in the first nine months of this year.
China Factory Gauge Rises as Workers Weather Slowdown
A Chinese manufacturing gauge rose in October, adding to signs a resilient labor market and export demand are helping the world’s second-largest economy weather a housing market downturn.
The preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was at 50.4, exceeding the median estimate of 50.2 in a Bloomberg News survey, which was also the level of September’s final reading. Numbers above 50 indicate expansion.
Chinese policy makers are trying to avoid a deeper slowdown after gross domestic product expanded 7.3 percent in the third quarter from a year earlier, the weakest pace in more than five years. While the government has relaxed home-purchase controls and pumped liquidity to lenders, the economy also got support from a pick-up in exports in September.
Guangdong gives all-clear to 43 people monitored for Ebola
Guangdong has given the all-clear to 43 people under observation for Ebola amid growing efforts by mainland health authorities to prevent an outbreak.
Hong Kong architects can now open businesses in mainland
Hong Kong architectural companies can finally open their own divisions on the mainland, a decade after a landmark free trade agreement was signed between Hong Kong and the mainland.
UPDATE 1-China end-Sept refined fuel stocks down 2.7 pct on month
BEIJING, Oct 23 (Reuters) – China’s commercial crude oil inventories rose for a third straight month in September as refiners focused on drawing down refined fuel stocks, which fell 2.7 percent over the previous month, the official Xinhua news agency said on Thursday.
Diesel led the fall with a 5.12 percent decline, as harvesting and fishing activity pushed consumption into its prime season, China Oil, Gas & Petrochemicals (OGP), a Xinhua oil and gas newsletter reported.
Gasoline recorded a drop of 2.18 percent, as refiners cut wholesale prices to boost sales, the newsletter said.
Kerosene, used mostly as aviation fuel, jumped 5 percent from last month, after edging up 0.56 percent the previous month.
Crude stocks, excluding the country’s strategic reserves, edged up 0.47 percent from the month before. Cuts in benchmark prices, as well as the lead-up to the weeklong Oct. 1 National Day holiday helped boost demand around the end of September, China OGP said.
Australia News
Australia: As we were expecting, Australia CPI remains low and enables RBA to stay put (due to the fear of a housing bubble, which the central bank is dealing with through macro prudential tools). However, 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 – ).
Electricity Companies Didn’t Pass On Full Benefit Of Carbon Tax Repeal To Aussie Consumers
Prime Minister Tony Abbott may have won votes when as Opposition leader he promised to repeal the carbon tax pushed by then PM Julia Gillard. While he succeeded in repealing the measure after the coalition got the majority in the September 2013 federal election, Aussie voters now appear to get the short end of his electoral promise.
This is because electricity companies are apparently not passing in full to households and businesses the reduction in their cost despite the law’s repeal.
When the carbon tax, at $23 per tonne, was introduced in the third quarter of 2012, power prices in Australia went up by an average of 15.3 per cent. Three months after its repeal in July, electricity prices declined by only 5.1 per cent.
Clean energy jobs and investments are at risk, says industry group
NSW stands to lose as much as $2.5 billion in investment in 10 approved wind farms that won’t proceed if the federal government achieves its goal of slashing the renewable energy target, an industry group said.
The warning comes as optimism within the government grows that it can secure a compromise with Labor on a revised target for 2020 even as Keppel Prince, a maker of towers for wind turbines, announced it will cut 100 jobs in Victoria.
Fairfax Media understands Labor hardheads believe the industry needs certainty more than anything else.
A Coalition-Labor deal – which would strand the Greens and the Palmer United Party who oppose any RET reduction – could see the current target of 41 terawatt-hours a year by 2020 from sources such as wind and solar lowered to the mid-30 range, sources said.
Lachlan Murdoch hits out at new anti-terror laws saying they threaten press freedom
News Corp co-chairman Lachlan Murdoch used a presentation in honour of his war correspondent grandfather Sir Keith Murdoch in Melbourne last night to hit out at new anti-terror laws.
The laws passed this month mean anyone who discloses information about a « special intelligence operation » could face up to 10 years in jail.
However, what constitutes a « special intelligence operation » is not yet clear.
Mr Murdoch said the new legislation put press freedoms under attack.
« Censorship should be resisted in all of its insidious forms, » he said.
« We should be vigilant of the gradual erosion of our freedom to know, to be informed, and to make reasoned decisions in our society and our democracy and like Sir Keith have the courage to act when our freedoms are threatened. »
Japan News
Japan: Although two cabinet ministers resign over scandals, creating more questions about Abenomics, we do not see this derailing PM Abe objectives. Recent decision to crack down on tax dodgers is another piece of evidence that Japan is heading toward reforms and improving governance. Furthermore, as Japan trade deficit deteriorate (cf. our comments on this in Economics news) increase the pressure to reform.
North Korea decision to free Jeffrey Fowle, a US Citizen, is a positive indication that the relations with NK are improving in what we see as first genuine steps toward a reunification solution which would involve China, South Korea and Japan. We see the next China – Japan summit (discussed by FinMin Aso in Finance APEC Summit) as instrumental for reducing the tension between the two countries and to move ahead with reunification talks.
At U.N., China asked to back human rights case against North Korea
(Reuters) – The chief U.N. investigator into human rights cases in North Korea said on Wednesday he has appealed to China to support calls to refer Pyongyang’s actions to The Hague on suspicion of crimes against humanity.
Western diplomats say China, North Korea’s principal protector on the U.N. Security Council, will likely use its veto power there to knock down any attempt to refer North Korea to the International Criminal Court.
But Michael Kirby, a former Australian judge who led the independent U.N. inquiry into alleged human rights abuses in North Korea, told reporters at U.N. headquarters that it was by no means certain Beijing would block an ICC referral.
Japan PM’s new minister hit by scandal over racy bar bill
Japan’s new trade minister said on Thursday a political support group spent money at a racy bar, a blow for Prime Minister Shinzo Abe after his cabinet suffered two high-profile resignations over separate funding scandals.
Yoichi Miyazawa, a veteran politician and nephew of a former prime minister, was picked to head the trade ministry on Tuesday after the resignation of his predecessor, Yuko Obuchi, after allegations that her support groups misused political funds.
Justice Minister Midori Matsushima resigned the same day over unrelated allegations of election-law irregularities.
Miyazawa, 64, said he learned from news reports of the 18,230 yen ($170) that the support group spent at the sadomasochism-themed bar in his political district of Hiroshima.
« It is true such expenses were made, » Miyazawa told reporters. « But I myself did not go there at all. That’s true as well. »
Kyodo News said the support group Miyazawa-kai had made the payment on Sept. 6, 2010, labelled « entertainment expense », according to a political finances report.
South Korean foreign minister urges Japan to end ‘comfort women’ issue
South Korean Foreign Minister Yun Byung-se on Thursday urged Japan to resolve the issue of “comfort women” forced into the wartime brothels for the Japanese military, according to Yonhap News Agency.
IOC relaxes host bidding process
The IOC is pushing forward with plans to revamp the troubled Olympic bidding process by making it more of an « invitation » rather than an « application » – but the ban remains on member visits to candidate cities.
The International Olympic Committee executive board also pressed ahead on Thursday with proposals to make the sports program more flexible – including the possibility of adding baseball and softball to the 2020 Tokyo Games – and backed plans to set up an Olympic television channel.
The issues were debated at a two-day meeting in Montreux, Switzerland, where the board finalised proposals that will be put to a vote by the full IOC membership in Monaco from December 8-9.
The package of reforms form the core of IOC president Thomas Bach’s « Olympic Agenda 2020, » his blueprint for the future of the Olympic movement.
Member visits to bid cities were barred following the 1999 vote-buying scandal involving Salt Lake City’s winning bid for the 2002 Winter Games. Ten IOC members resigned or were expelled for taking cash, gifts, travel and other inducements.
A possible reinstatement of visits was discussed by the executive board as part of Bach’s agenda. While he declined to give specifics of recommendations on other matters before informing IOC members, Bach directly ruled out a return of visits.
« I hope my executive board members and other members will forgive me if I say here already, but there will be no recommendation for a change in this regard, » Bach said in a conference call with reporters.
CORRECTED-Japan prosecutors set to rule on possible Fukushima indictments
Oct 22 (Reuters) – Japanese prosecutors must decide this month whether to charge Tokyo Electric Power Co former executives for their handling of the 2011 Fukushima disaster, in a process that could drag the wrecked nuclear plant’s operator into criminal court.
The judicial review is unlikely to see the former Tepco executives go to jail, legal experts say, but rehashing details of the meltdowns and explosions that followed an earthquake and tsunami will cast a harsh light on the struggling utility and will not help Prime Minister Shinzo Abe’s unpopular effort to restart Japan’s nuclear reactors.
The Tokyo’s District Prosecutors Office last year declined to charge more than 30 Tepco and government officials after investigating a criminal complaint from residents, who said officials ignored the risks to the Fukushima Daiichi plant from natural disasters and failed to respond appropriately when crisis struck.
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