[image:1,s]
SNBDL Daily Briefing
Report prepared using big data solution Quid
Table of contents:
Our take away from the last 24 hours news
US: Markets continue to be puzzled by how quickly the Fed will normalise it’s monetary policy. We consider today the boundaries of this discussion: 1) tightening has already started – end of QE program and higher macro prudential requirements -, 2) Fed likely to focus on VE (verbal easing) in the same fashion Draghi did with OMT but VE requires a credible central bank – credibility is in process to be rebuilt again -, 3) growth is softening, inflation and wage growth are subdued, 4) markets have called wrong many market excitement (2000, 2004) this time around they are over anticipating bubbles -at a moment where disturbing technologies, which could bring genuine improvement in productivity and efficiency, are getting studied-, 5) markets are too much focus on the idea that we are at the bring of a bloody revolution in Catalonia, HK etc. this is a total non-sense because Occupy is a movement with a very important soft power (social media has already pushed China leadership to speed crack down on bad governance and US to crack down on financial sectors bad behaviour). Finally, we consider that many sell-side economists have not totally factored in their model three important evolution: 1) a new war against terror, 2) new disturbing technologies – such as internet of things and analytics – and 3) the end of “Gordon Grekko finance” (Wall Street film characters please see here): Greed is NOT good for business. Many asset managers are mistakenly using old economics (un-calibrated Philipps Curve) or using fear to speak their own books, while budget deficit is coming down, Philipps Curve has genuinely shifted downward – thanks to robotics and new jobs -. Solvency is improving and the inter-temporal disequilibrium is getting fixed. The overwhelming pessimism in the market may be the result of the excessive focus on negative news flow. Facebook has conducted a study which shows that the more Facebook profile are populated with negative news the more people become depressed and vis-versa. At SNBDL we look at the news differently without skewing too much one idea of ideology.
We consider that market is likely to acknowledge that sell-side economist have been doing a “very bad job” analysing the situation and their advise have been loss making (remember that consensus was looking for 3.25%+ on the 10Y yield).
Eurozone: No-one liked Draghi recent meeting announcements: 1) he postponed Sovereign QE talks until the current actions (QE ABS, Covered Bonds & T-LTRO) effects are genuinely studied, 2) hawks analysed QE ABS like“sub-prime” or junk bond buying. Both these two views are a complete non-sense to us. We consider that Draghi-nomics is all about finding the Goldilock conditions (not too cold, not too hot): 1) QE ABS, Covered Bonds & T-LTRO intend to reduce the cost of finding for SMEs mainly in Italy and Spain at a moment where banks are ending their asset quality review (AQR) and are willing to restart a new page (this is exactly what US banks did post TARP) while SMEs demand is picking up (many SMEs are considering automation as a way to improve their efficiency issue), 2) Draghi needs to avoid returning moral hazard (a risk should ECB undertake Sovereign QE) while keeping the hawks happy and pressing France and Italy to execute reforms (PM Valls was in London, as expected, he said “my government is pro-business” which is the correct English translation to “j’aime les entreprises » France has changed and recognising it creates many opportunities). PM Renzi is pushing labor market regulation to help structural reforms.
« All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.” said Arthur Schopenhauer. We consider that markets are still in the first and second stage, We are in the third. The recent weak signals are showing that markets is moving from the first and second stage to the third (this one will quick start a strong rally).
BoJ: Governor Kuroda indicated that the JPY weakness is positive if in sync with fundamentals. This hints that any other genuine stimuli will be delayed until Japan reduces a JGB solvency crisis risk. We have been saying in many occasions that we see the trigger of a new QQE to be a second VAT hike, more indications of 3rd arrow structural reforms and a reduction in investors short Japanese fixed income. Markets consensus is likely to be disappointed again in its January forecast. We see a too close to call decision by January should the 3 triggers not introduced. The recent JPY, EUR, GBP weaknesses seem to be the result of an excessive excitement about monetary divergence. We consider that going to December the market will revise down these expectations, while the economists are penciling down their high growth forecast.
IMF revised down its global growth forecast. Since the Great Financial Crisis, XX economists have ben missing their forecast. Why? The main objective reason is that the statistical models have broken because many economies are rebalancing. Is a Philipps Curve calibrated on 1990s data accurate in the face of the new technologies (IoT, robotics, mobile, self-employment etc.)? We believe that it’s not. Not only the Philipps Curve is not accurate, the PPP models seem outdated as well. When it comes to asset frothiness, we have different definition to where frothiness lies. We see commodity prices heading toward new lows, while stocks and fixed income present value. Furthermore, we believe that the carry trade is loosing its interest because central banks are likely to reduce financing of moral hazard to push countries (e.g. Brazil) to undertake urgently needed reforms.
Ebola:
Ebola infection has started to spread to Europe. CDC estimated to 100 the number of people who might have been affected in the US. This number is likely to increase in the coming day, before it decelerated. This is the Contagion effect as know in Mathematics. In order to avoid the paranoia, the CDC, as we were expecting, have used the power of social media and @twitter, to : improve the information (fight disinformation) and spur the motivation for social media to help reduce the outbreak. The need to get prepared is very important in a period where our institutions are seen as lacking credibility. We have been indicating that having Russia cut gas delivery to Europe could make any non-lethal flu a cause of paranoia and create more economic headwinds (consumer confidence etc.). But unlike many commentators we consider that our institutions – WHO, CDC and others – are up to the task and mankind is more resilient that many think. The media pressure around Ebola is making it easier to dedicate budget for this fight (Pentagon has dedicated $750mn).
The most widely spread FALSE belief is that Ebola can mutate easily. This is possible but highly unlikely. In films and TV-shows, scenarists like to make their stories appealing but the reality is sometimes (fortunately) less scary.
From our Thursday Oct. 1st daily
Days after the WHO and the CDC revised upward their estimates for the development of the outbreak to as high as 1.4 millions by beginning 2015, the First Ebola case has been diagnosed in Texas. The 1st patient (i.e. 1st person known affected in a region – not brought affected from other places -) arrived to the US in September 20th from Liberia. The CDC has started an intensive search for anyone who might have come in contact with the patient while the person was infectious. While the spread of Ebola is less viral than Cat pictures on the internet, the fear is likely to edge up before CDC and WHO will show how capable and efficient are these two institutions. We have been discussing Apps and big data which would help report any symptoms to the public. Japan nationals and internet have been very effective mapping real-time the consequence of March 2011 Fukushima nuclear catastrophe. The same tools can be used today, although a very wide understanding of the symptoms is genuinely and urgently needed to make it succeed. We have been saying that even a non-lethal epidemic can spur fear, confidence collapse and economic headwinds. Unlike in the very good film “Contagion”, the tech tools and social media help can be very effective in reducing the spread of the disease and reporting the infectious agents. Doctors, which have been affected in Africa and brought to the US, have been saved. The experimental vaccine, which has a 100% hit ratio for primates, is likely to limit the casualties. Our only genuine fear, is that one of the affected has a political or ideological agenda and tries to spread the disease more widely. To our readers, there is no need to be stressed but please stay safe.
But more importantly, the first US case is likely to intensify, the global coordinated response which have started during the recent weeks. We have highlighted that the global coordination has been intensifying to: 1) fight disinformation (we were talking about it in our recent daily briefings), 2) provide short term medical assistance (France, US, Israel, etc.) with the help of military expertise – when numerous Western African countries are indicating the lack of medical personnel – , 3) provide financial support (wealthy donors, government funding, NGO help etc.), and 4) fast track the Ebola drug trial (the drug has had a very good result in the experimental tests).
Notwithstanding the on-going difficulties, and the short term negative economic effect, we continue to believe that the fight against Ebola will succeed and will clear the way to the increase in Africa investment and economic support (cf. our note “This time for Africa” which stressed that Africa is heading to experience the same development China had experienced when it joined the WTO in 2001 with positive consequences for both Africa and the world economy). The global coordination triggered by the response to the terrorist risk might help responding to the Ebola risk as well (due to the threat a dirty weapon using Ebola virus constitute). We disagree with the bet of Cocoa upward spiral because many analysis assumes the doom-and-gloom scenario which is unlikely to happen. We see the intensification of the worrying rhetoric as a part of the genuine action to keep the subject high in the leaders to do list.
Israel and Palestine continue to head into the right direction.
While Gaza war settle down, recognition of the economic cost increases. As we were expecting, the national coalition between Fatah and Moderate Hamas is taking place. This is likely to increase President Abbas political capital which would help the country to: 1) secure more economic aids – though these aids have to be channelled to the people in need, not to terrorist financing -, 2) increase the pressure on the international community to speed up a two-states solution negotiated with neighbours, 3) be seen as a credible partner with whom Israel can negotiate. As we are heading toward more peace, Hezbollah and Hamas spin-offs are looking to become more barbaric in order to keep their militants (in the Silicon Valley parlance we call this “retaining talents”). While in the short term, the Hezbollah is likely to become more barbaric long-term we may settle agreeing with President Hassan Rohani view, expressed in his UN General Assembly address, Terrorists are in a global coalition, the world should unite to fight them.
But PM Netanyahu said it all during his visit to the US: a nuclear Iran should not come with an increase in the existential threat to Israel. While we are heading to a peace process, Israel needs to secure the goldilock conditions of such a scenario. This goes through a genuine commitment by Ayattolah Khamanei that Israel should continue to flourish in peace, leaving the existential threat to ISIL and the Califat-of-Paper Abu Bakr El Baghdadi. Make no mistake : Israel will never be destroyed. Because, Israel is one of the greatest idea, in my opinion, which human brain invented during our common 13.8bn years history in creating institutions and laws to reduce universe entropy. It has nothing to do with religion or ideology, this is just pure rational thinking and science. The idea of Israel remains me that while facing adversity one move on an try to empower himself to bring: prosperity (in our parlance: jobs, growth, adequate inflation, wealth, solvency etc.). This is what, I believe, Moses did: creating the promised land of prosperity and peace. This is why Israel can never be destroyed. Even Hitler failed, Abu Bakr El Baghdadi is doomed and Ayattolah Khamanei have to play his cards well now. He can empower his people, improve Iran economy and growth, by recognising the obvious. In 20years finance careers I’ve never seen an investment as obvious as this one. [Don’t hesitate to ask for details as usual].
Sweden recognition of Palestine constitute a first step into the right direction. External pressure on Israel, comes as a genuine help for the government to fight its hard liners and bring them to a peace solution. We see this process to last one to two years but we are convinced that peace will happen not because it’s a nice thing but because it’s where economic prosperity lies for Iran, Palestine, and Israel.
The likelihood of defeating ISIL continue to increase, though short term ISIL seems winning battles such as Kobani (at the Turkish borders).
Turkey and Canada decided to join the 40 countries coalition to fight ISIL. We were saying that Herve Gourdel beheading (to which we need to add Alan Henning since Friday) and the Philippines militant threat to ham a German were sufficiently evil behaviour in 2014 to create the wake up call that each of us should make something to stop these unacceptable atrocities.
We are surprised by Turkey’s attitude toward Kobani. This attitude could only be explained by the fact that Turkey and Kurdistan have not settle yet on a strategy to defeat Assad without giving too much power to the Kurds (which may ask for an independent Kurdistan). Yesterday, Kurds have been protesting as Turkish ground forces stay out of battle for Kobani. Should Turkey join the Peshmerga fighting forces, it would target Assad as well as ISIL.
According to Theresa May, ISIL could acquire a dirty weapon. Saudi’s high cleric ceased the opportunity of Hajj pilgrim to call all muslims – Shia, Sunni, Maliki, Wahabi etc. – to defeat the Murderers In Iraq & Syria (known as ISIL). What we commonly name ISIL is not Islam (not I) and not a state (not S). It would be helpful to replace these two letter by “M” for Murderers. I bet that the Jihadists hiring will collapse after this simple action. The fight against the Murderers will be easy should we decrease the number of their new followers. This work like contagion or viral system. The final fight will come along with the genuine actions G-20 is saying it will undertake in Australia to improve governance. This time there is no way to escape with half-backed solution: G-20 needs to get rid of bad governance to reduce the spread of the view that “institutions are rotten to the core” (a view which helps Jihadists to hire youth on the internet). We discussed it since 2009, we have increase the data to track this bad governance since 2012. This power have moved from states to the public. Fortunately, anecdotal evidences (from UK to China) indicate that lawmakers have the same goal reducing bad governance. This is not because that’s a nice thing to do but because this were profits, shareholders values, pensioners interests, workers interests, consumer interests are. PM Abbott has joined the call to stop Hate Preacher from spreading their hate beliefs. But the global community needs to fight these preaches by showing that there are many young muslims which while offered to be hired by Terrorist groups have preferred fighting the hateful ideology, saying that this ideology should not be called Islam (#NotInMyName).
Again, we tend to reduce Entropy, this since our first day 13.8 billions years ago (Oil prices development and the number of violent deaths are an amazing reflect this fact).
Finally, as part of the evidence that data will help fight terror, France 24 broke Sunday that Zabihullah Mujahid (Taliban spokesman) revealed mistakenly his localisation in twitter (here)
European Union’s incoming foreign affairs head Federica Mogherini hinted her strategy with the “bear” Russia: firmness and tact. Actually, we believe that firmness is coming from EU Council President Donald Tusk, while tact needs to come from the EC. EU’s Mogherini hinted that others in Brussels know better to deal with bears (in politics that mean “I know that you have vested interests with Russia”). Many political parties have to drop their support to Russia and start think about EU public interests. Otherwise, many will start questioning whether these are not conducting treason (betraying those who have voted for them). The list is long and no one have interest to name names. In an environment where Iran wants to secure the negotiation without upsetting Russia (a long term ally which have helped provide a back-door to Iran oil), Rouhani said that Iran negotiation should not derailed any political solution with Russia. Unfortunately for Russia this will not help lift sanctions. Because, many commentators are watching: EU should make no mistake, vested interest will not go away with the crimes Russia is responsible for (and that goes beyond annexing Crimea).
From yesterday report
Oil prices plummeting continue to constitute an existential threat to President Putin administration. A policy document of the Islamic State discovered at one of the raids brings forth some alarmingly ambitious plots of the jihadist outfit. The plan includes bribing Russia with access to oilfields in exchange for Iran’s nuclear technology. This document confirmed that ISIL is looking to Russia to increase it force. We have been worry that vested interests would align their force with those of the barbaric. Should they do so, they would be no place to hide. Make no mistake, if ISIL got the technology Putin and Russia (with interest groups which have been supporting them) will be held accountable.
While Russia continue to prepare its isolation (VTB’s says consider that capital control is not the end of the world), Putin stays put and keep his narrative: the cost will be more harsher for EU than for Russia. Unfortunately, for President Putin, facts have no political bias or religion. Russia economy is collapsing and the Saudi oil prices cut, Iran negotiation amongst other thing are pushing oil prices to a free fall spiral and threatening the stability of the government (an Oil price at $75 will push Putin out). In our Energy Update (our call that oil might go as low as $80 for WTI) we’ve highlighted the trends we observe now. These are not only providing a boost to EU (currently mistakenly analysed by many XX Century economists as a deflationary risk) but also increasing the current Russian administration existential threat. We forecasted last February that Russia will have to go through a period of isolation, will create Eurasia by annexing Eastern Europe (we still unsure where the division will take place). We stick to this scenario. However, we are working on an alternative scenario, where the speed of oil prices collapse may over through Putin administration and oligarchs before President Putin reached his messianic goal (many economists agree with the view that some of Russian President speeches are messianic – 2007 Munich is a very telling speech-).
Ukraine President is taking the “good governance bill” to the floor. This on one hand increase the likelihood of our scenario that Ukraine – West will become a new Poland but it increases short term the risk of more actions of “bad governance agents: the self designated Eastern Republics”). I wonder what kind of economic prospect will have these Russian federation satellite. Old USSR satellite (Latvia and Bulgaria) are fighting political crisis spur by the widely spread mistrust in their government. Like during the Cold War, Russia continue to use the spread of disinformation (in the internet). But we see these posturing likely to fail, should EU Commission President pursue his genuine plan to change EU narrative (more jobs, more investment – specially in digital -). The emergence of new media companies helped by big data is likely to be another leap in defeating the disinformation and mistrust spread.
Catalonia: We were saying “calls for independence referendum is increasing pressure on both Madrid and EU to move forward to offer better conditions and better narrative to the public. We see PM Rajoy taking constitutional actions to deter Catalonia from conducting the referendum, at a moment where more the referendum is gaining support from the independence forces all over the world. Madrid may accept to open discussion to devote additional autonomy to Catalonia in order to reduce the pressure. This story is likely to push EUR existential threat higher short term, but we consider that EUR is likely to rebound by the end of this year, when these threats will be repriced as less likely.” (daily briefing Sept. 30 2014). Catalonia decision to suspend formal campaign is the first step in our constructive scenario. 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.
We have been covering the US using mainly 6 axes: 1) immigration reforms, 2) tax reforms – tax inversion, 3) institutional mistrust, 4) net neutrality, 5) mid-term election, 6) new gold standard. Today we focus on Institutional mistrust, as we are fed up of how this mistrust is derailing growth.
Institutional mistrust: In order to reduce the widely spread mistrust, Twitter sued FBI and DOJ to release NSA information requests regarding surveillance of its users. Let’s start by indicating that it does not need to be NSA to get a large sense of who is thinking what and supporting whom on twitter. This is the most fascinating thing I’ve been working on since I joined Twitter. A specific research work will be published in the coming weeks. It will show that not only we know localisation, but also we know what people believe in, what camp they are working for. We have already spotted one or two spies as well… At SNBDL we like to say: if you’re cheating on your partner, tell him the truth. There is no way you can hide it in a globally shared data. When it comes to privacy – security balance, we have been indicating many times that the “Casablanca Test” said it all (this is the name given by the US Supreme Court).
Economy: While job creation continue to be well supported, the wages are muted. This is the most exciting story because the Fed can continue to support job creation while the US economy is rebalancing. We understand those who want quick rate normalisation rational, but this rational is not for the benefit of the many – because inflation is subdued and is likely to continue to be -. In the housing sector, the US is confirming the trend that it’s heading toward “Germanisation” *becoming Germany with housing*. Indeed, income and wealth inequality is pushing many americans to consider renting. When one can carry books, music, films, paperwork, IDs etc. on one small devise such as a phone or a tablet, renting become a genuine solution to focus one’s wealth to empower oneself.
President Obama gave a speech on the Economy to help Democrats to keep the Senate majority. The speech did not come with any new news. However, the agenda presented could be derailed and even create a doom scenario should GOP won the Senate majority. It would jeopardise reforms (when China and EU are reforming) such as immigration, education, infrastructure etc. The doom scenario would take place should they resumed their aim to impeach the US President. We are not siding here against GOP from any ideological prospect. We do believe that it’s in GOP interest to loose, to focus on it’s internal civil war against the Tea Party. The GOP without Tea Party can be a very important driver to bi-partisan reforms agenda. With the Tea Party, not only GOP threatens the US economy but it does also threaten its own future. Remember : GOP abolished slavery. It’s now seen as in a War against Women. We disagree with Mohamed El-Erian view that mid-term elections are a non-even for markets. Mr. El-Erian explains in a private communication that he does not see GOP dragging its feet into a non-sense economic politics (gridlocks). We disagree with this because Tea Party is far from being rational and its objective is to help its own financial supporters interests: Commodities (through Koch industries which has “invested” $125m in this mid-term ads so far) and Gold bugs (ask if you disagree with this we can share with you tens of thousands of website and evidences).
US Tax inversion: Salix Pharmaceuticals Ltd , citing a « changed political environment, » said on Friday it had scrapped a deal with Italy’s Cosmo Pharmaceuticals SpA that would have allowed it to shift its tax base from the United States to Europe.
From Sept 26th Daily Briefing: As we were expecting since the announcement of Burger King deal (which has been widely reported as being solely pursuing tax inversion objective) we’ve indicated that this would sign the end of the system. US Treasury took actions to make it harder to execute such deals, while the tax reform seems in limbo due to DC gridlock. Administrative actions taken by Treasury Secretary Lew makes it harder to execute tax inversion but does not derail it entirely. We consider that G-20 initiative to undertake OECD proposal to reform the rule of “double non-taxation” (see our previous daily briefing) will help improve the tax governance (and incidentally the rise in the mistrust in the public institutions – which are seen to be colluding with businesses -). Markets have reacted negatively to the actions taken against tax loopholes, because these are seen to be the only remaining way for Corporations to improve their EPS (while demand continue to be subdued). We disagree with this view because G-20 initiatives to tackle “tax optimisation” will come along with more investments and fiscal stimuli which would help spur more economic demand.
EU: the glass half empty view is that unemployment rate is still very elevated (23.3% in August) but it’s coming down, even before EU Commission President elected Juncker’s infrastructure plan, digital initiative, EU Council President elected Tusk’s energy union, are not in place. Though this story combined with Catalonia independence can lead, mistakenly, people to believe that “la Bastille” will be taken in days, we disagree with this view, as those who see a bloody revolution are being hired by ISIL and alike, while the overwhelming youth are working genuinely to improve their lives (alike their ancestors, Youth are adapting to the XXI Century to survive). Although PM Valls said out loud “My government is pro-business” (he translated it in English because in literal translation is sound like a french lover talk), many media continue to bash France and EU (even Mickey needs a bailout). But the same story about Euro-Disney shows that US corporation are still believing in EU and EZ (let’s face it the 2 – wake up call have pushed leaders to change the course – it’s the EC commission of the last chance -). Italy is speeding up Labor market reform. This is likely to clear the way from more institutional reforms to defeat bad governance (or corruption).
Ahead of Br-exit negotiation, Britain is fighting against bad governance in Finance. This is as a game changer as has been President Xi actions to fight corruption. We are constructive on EU scenario because policymakers are taking the right decision.
UK PM Cameron is expressing his say in the forthcoming negotiation ahead of Br-Exit referendum. Amongst these European Court of Human Rights ruling is considered as an important step. As we were saying, since Aug. 30th EU Council, we consider that the UK will gain some changes in order to give PM Cameron enough political capital to campaign for the Yes. We consider that the EU Commission success will be the best tool to defeat UKIP and EU-Skeptics in the forthcoming ballots.
From the economic prospective, the UK housing market is cooling off while the services sector is softening. This supports our view that BoE will not deliver the rates hike priced by markets
China: World Bank new forecast confirmed that China is soft landing while rebalancing. Labor statistics have been showing that the manufacturers have started to rebalance their activities away from labor intensive (an objective already stressed by the Chinese leadership). These are in line with the objective to rebalance the economy away from credit driven investment. “BHP Billiton has raised the stakes in the ongoing war of attrition in global iron ore with a plan to slash costs and lift production” confirms our view that commodity companies are starting to adapt to the new normal, while China is cutting the road to nowhere and excessive bureaucracy (China removes 160,000 phantom staff on payroll, China Today). Acknowledging that there is “phantom staff” out loud is an event for those who have been following China for years (this could have cost some China Today’s managers their jobs a couple of years ago).
Furthermore, the west is helping China to change it’s “narrative” from being anti-democracy (China has not gone back on its agreements with Britain over the future of Hong Kong, whose autonomy is far greater than what Britain expected three decades ago, a former aide to late British Prime Minister Margaret Thatcher has said.).
The government continues to fear that the economic rebalancing has not taken momentum yet although 1) labor intensive manufacturers are relocating in cheaper labor countries, 2) businesses are upgrading their business models [while becoming environmental friendly], 3) President Xi has conducted many trade – investment agreement with Neighbours (after Premier Li did the same in Africa) to secure investment projects which use Chinese manpower – engineers know-how in this domaine, 4) China is gaining more military presence and has fluxed it mussels – e.g. China “Top Gun” intercept by a US fighter jet -, 5) China has signed many RMB agreement which reinforce the currency usage and prepare its full liberalisation – after Free Trade Zones (FTZ) have proven to be a success -, 6) China has undertaken a genuine fight against bad governance and better regulation – many examples in our recent daily briefings of fight against corruption and bad governance-. We see in FinMin Lou Jiwei recent comment an indication that not only China wants to create a reserve currency it does want it to be strong when Chinese leaders perceive the heavy pressure place on USD by a category of investors to avoid debasing the currency through deficit financing – although we consider that this worry is misplaced -.
Australia: Australia continues to be seen, by markets, as a derivative to the old Chinese model (i.e. commodity provider). This view explains the high beta between Australian assets and commodity prices (or China demand for commodities). Banks shares are suffering from the combination of the increase perception of increase in risks and additional macro prudential constants to curb housing prices frothiness. Small business defined the “goldilock range” for AUDUSD to be [.90-.94]. This level is much higher than RBA own assessment (based on PPP models). We have been criticising PPP models because they do not factor any structural changes.
These assume that neither China nor Australia are conducting their rebalancing agenda. We do believe that the current weaknesses offers genuine opportunity to benefit from the other drivers to the Australian economy which are not related to commodities. We see the current Australian Dollar weakness to continue at least until the USD start to weaken again when markets will realise that it has beaten too much on a quick rate normalisation. Meanwhile, from our previous daily briefing, we have gathered sufficient support to the view that the drivers of the Australian GDP are moving toward: 1) education, health and finance services provider to Asian neighbours, 2) innovation and digital sector, 3) energy resources export to Japan (the later contributes to our constructive view that the current negative Japan Energy Trade deficit will rebalance in the medium term – reducing Japanese Government bonds solvency risk – ).
New Zealand: Fontera payout cuts fuel concerns over NZ economic prospects. This increases the pressure on new PM Key Cabinet to accelerate rebalancing the economy and reforms. We have been indicating that NZ has already started a genuine shift toward new Tech agriculture, health (please see below recent promising advance in Asthma treatment) and education services directed to Asian neighbours. The fact that PM Key secured another term supports our constructive scenario on NZ.. This constructive scenario narrative is currently overshadowed by the “search for yield” (or interest rates differential) and RBNZ fight against excessive carry trade effects.
Japan: inflation softening along with economic downgrade was widely expected as a result of the 1st VAT hike (cf our strategic note Dec 26th 2013). We see BoJ to keep the bazooka of QQE-2 un-tested until the JPY excessive depreciation and JGB solvency risk came down * investors are still short JGB expecting a Japan crisis *. The 2nd VAT hike will require some stabilisation at the current levels, though we expect that PM Abe will undertake the 2nd hike in steps, because BoJ is unlikely to be sufficiently confident to move ahead with more QQE while JPY is accelerating its depreciation. PM Abe voiced concerned over the JPY rapid depreciation, as he pointed (rightly in our opinion) to the increase in energy cost, which deteriorate further the energy trade deficit – and increase the risk of JGB solvency -. The Prime Minister confirmed in his Diet address to pursue Abenomics 3rd arrow. Japan is said to resume discussion with US on TPP, while energy sector is heading toward energy transition away from Nuxe. Physics Nobel price attribution to energy efficient and environmental friendly technology is a game changer because it does support the view that the Win-Win scenario is feasible, if only the consensus stop being pessimistic for no reason.
However, BoJ might do some adjustment to its monetary program but nothing excessive. The news flow out of this weekend G20 meeting shows that the global community is gently pressing the government and the BoJ to pursue structural reforms, economic rebalancing, solvency improvement (through VAT 2nd hike commitment) and adequate monetary policy (not too hot – to avoid a crisis – not too cool – to avoid derailing the on-going portfolio rebalancing approach -). Japan continues to face heavy public pressure to rebalance its energy reliance to nuclear. While we believe that Japan will continue to press for reopening nuclear plants (when Nuclear Watchdog gives his green light), the medium to long term trend is that Japan will use Trade negotiation with neighbours to secure new energy sources while using this pressure to deregulate and move forward with Abenomics 3rd arrow (please see our Japan update for more on our views). We are not surprise by the fact that Russian news media are reporting the pushback to reopening nuclear plans, ahead of Japan-Russian talks (about sanctions, energy agreement, and disputed territories).
As China, Japan, and South Korea heads toward a constructive talks (as we were reporting in our previous daily briefings) and Japan and North Korea are heading toward a solution on Japanese civilians abduction, North Korea leaders close to Kim Jong Un held last weekend high level talks with South Korea minister of reunification. This indicates that the scenario of an unified Korea is advancing. We have been considering that the reunification will ultimately take place but it requires normalised relation amongst the 3 important players: China, Japan, South Korea.
Central banks News
US: Markets continue to be puzzled by how quickly the Fed will normalise it’s monetary policy. We consider today the boundaries of this discussion: 1) tightening has already started – end of QE program and higher macro prudential requirements -, 2) Fed likely to focus on VE (verbal easing) in the same fashion Draghi did with OMT but VE requires a credible central bank – credibility is in process to be rebuilt again -, 3) growth is softening, inflation and wage growth are subdued, 4) markets have called wrong many market excitement (2000, 2004) this time around they are over anticipating bubbles -at a moment where disturbing technologies, which could bring genuine improvement in productivity and efficiency, are getting studied-, 5) markets are too much focus on the idea that we are at the bring of a bloody revolution in Catalonia, HK etc. this is a total non-sense because Occupy is a movement with a very important soft power (social media has already pushed China leadership to speed crack down on bad governance and US to crack down on financial sectors bad behaviour). Finally, we consider that many sell-side economists have not totally factored in their model three important evolution: 1) a new war against terror, 2) new disturbing technologies – such as internet of things and analytics – and 3) the end of “Gordon Grekko finance” (Wall Street film characters please see here): Greed is NOT good for business. Many asset managers are mistakenly using old economics (un-calibrated Philipps Curve) or using fear to speak their own books, while budget deficit is coming down, Philipps Curve has genuinely shifted downward – thanks to robotics and new jobs -. Solvency is improving and the inter-temporal disequilibrium is getting fixed. The overwhelming pessimism in the market may be the result of the excessive focus on negative news flow. Facebook has conducted a study which shows that the more Facebook profile are populated with negative news the more people become depressed and vis-versa. At SNBDL we look at the news differently without skewing too much one idea of ideology.
We consider that market is likely to acknowledge that sell-side economist have been doing a “very bad job” analysing the situation and their advise have been loss making (remember that consensus was looking for 3.25%+ on the 10Y yield).
Eurozone: No-one liked Draghi recent meeting announcements: 1) he postponed Sovereign QE talks until the current actions (QE ABS, Covered Bonds & T-LTRO) effects are genuinely studied, 2) hawks analysed QE ABS like“sub-prime” or junk bond buying. Both these two views are a complete non-sense to us. We consider that Draghi-nomics is all about finding the Goldilock conditions (not too cold, not too hot): 1) QE ABS, Covered Bonds & T-LTRO intend to reduce the cost of finding for SMEs mainly in Italy and Spain at a moment where banks are ending their asset quality review (AQR) and are willing to restart a new page (this is exactly what US banks did post TARP) while SMEs demand is picking up (many SMEs are considering automation as a way to improve their efficiency issue), 2) Draghi needs to avoid returning moral hazard (a risk should ECB undertake Sovereign QE) while keeping the hawks happy and pressing France and Italy to execute reforms (PM Valls was in London, as expected, he said “my government is pro-business” which is the correct English translation to “j’aime les entreprises » France has changed and recognising it creates many opportunities). PM Renzi is pushing labor market regulation to help structural reforms.
« All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.” said Arthur Schopenhauer. We consider that markets are still in the first and second stage, We are in the third. The recent weak signals are showing that markets is moving from the first and second stage to the third (this one will quick start a strong rally).
BoJ: Governor Kuroda indicated that the JPY weakness is positive if in sync with fundamentals. This hints that any other genuine stimuli will be delayed until Japan reduces a JGB solvency crisis risk. We have been saying in many occasions that we see the trigger of a new QQE to be a second VAT hike, more indications of 3rd arrow structural reforms and a reduction in investors short Japanese fixed income. Markets consensus is likely to be disappointed again in its January forecast. We see a too close to call decision by January should the 3 triggers not introduced. The recent JPY, EUR, GBP weaknesses seem to be the result of an excessive excitement about monetary divergence. We consider that going to December the market will revise down these expectations, while the economists are penciling down their high growth forecast.
Goldman Asset Management, Pimco See Treasuries Falling at QE End
Goldman Sachs Asset Management and Pacific Investment Management Co. say Treasuries are poised to fall as the Federal Reserve approaches the end of its bond-buying stimulus program.
The completion of the Fed’s quantitative easing plan may add interest-rate risk to U.S. debt, paving the way for possible declines in Treasuries, said Philip Moffitt, head of fixed income for Asia and the Pacific at Goldman Sachs Asset in Sydney. Investors will demand a concession to buy longer-dated debt as the Fed withdraws from a market where it bought 41 percent of this year’s gross issuance of Treasuries due in more than 20 years, Pimco said in a report.
“Effectively duration is being added into the market” each month as the Fed’s bond purchases come to an end, Moffitt said today in a Bloomberg Television interview. “There’s not been enough concentration on what that addition of duration means to the supply and demand balance in the market and we actually think that’s likely to have as big an impact as anything else.”
Spanish yields rise as Madrid tests demand for inflation-tied debt
Oct 7 (Reuters) – Spanish bond yields nudged up on Tuesday as Madrid tested investor demand for inflation-protected debt against an outlook of ultra-low price pressures in the euro zone.
Spain is selling an inaugural five-year inflation-linked bond via syndication, the second time this year the country is issuing debt linked to euro zone inflation. It successfully sold five billion euros of a 10-year linker in May that drew more than 20 billion euros in demand. {ID:nL6N0S13HG]
Since then, annual euro zone inflation has slumped to 0.3 percent and investors have become increasingly doubtful whether the European Central Bank’s latest policy measures, including purchases of covered bond and asset-backed securities, will revive growth and inflation.
ECB Quietly Pins Its Hopes On Falling Euro
FRANKFURT (Reuters) – Grappling with an ailing euro zone economy and stagnant prices, the European Central Bank is hoping that help will come from something it cannot control: the value of the euro.
As Washington prepares to stopper the supply of cheap money that has been helping it revive the United States, the euro has started to fall steeply against the dollar.
And that’s just how the ECB likes it.
With prices in Europe rising at their slowest in five years and its economy stubbornly dormant, Frankfurt is starting to use similar tactics to those used by the Federal Reserve – pumping cheap money into the system in the hope of awakening it.
But those efforts have at best an uncertain outcome. Now, however, the divergence of approach on either side of the Atlantic has presented the euro zone with an alternative that works – a weaker currency.
« The one sure-fire way to get things moving is to get the exchange rate down, » said RBS economist Richard Barwell. « It’s the best antidote to disinflation known to man. »
FORGET QE: The Next Move From The Fed Is Going To Be ‘VE’
For years, since the financial crisis, the Fed has used « Quantitative Easing » as a means of easing monetary policy.
Quantitative Easing (or « QE ») is the process by which the Fed buys government bonds in order to push down yields, add liquidity to the market, and encourage holders of assets to move into riskier investments.
But QE is almost coming to an end. The Fed has been « tapering » its purchases of government bonds (reducing the amount it purchases every month) and the purchases are about to cease completely.
But suddenly the market is looking wobbly.
The dollar is surging, and the stock market is taking it on the chin. The Dow fell over 270 points today, the latest in a series of volatile days.
What’s even more important than stocks is what the market is saying about inflation prospects. This chart shows the market’s expectations of inflation over the next five years, and as you can see, it’s been diving lately. In fact, it’s nearly dropped to levels at which the Fed has done new easing in the past. Falling inflation expectations are cause for worry at the Fed .
Traders Are Convinced This Indicator Means More Fed Easing Is Coming
At its policy meeting at the end of this month, the Federal Reserve is expected to announce the end of its latest quantitative easing program.
Ostensibly, this begins the countdown to the Fed’s first interest rate hike since 2006, but the market doesn’t look quite ready for this.
In a research report on Monday, Bank of America Merrill Lynch’s Priya Misra highlighted the following chart of five-year breakevens, which are indicators of future inflation expectations.
Breakevens are calculated by subtracting the yield on Treasury Inflation-Protected Securities notes from Treasury bonds of the same duration. The result is what the market thinks inflation levels will be that far out.
Kansas City Fed Chief says central bank must be ‘vigilant’ on inflation
Oct 6 (Reuters) – Inflation measures remain relatively stable, but the Federal Reserve needs to move to raise interest rates if price pressures increase quickly, a top Fed official said on Monday.
« I don’t think inflation is a risk today, » said Kansas City Federal Reserve Bank President Esther George in response to a question after delivering a speech in Albuquerque, New Mexico. « But it’s the one thing the central bank must keep its eye on. We must remain vigilant on that front. »
George, who does not have a vote on the Fed’s policy-setting committee this year, has consistently called for tighter monetary policy even as the Fed expanded its stimulus over the last few years. On Monday, George repeated her view that the Fed needs to move sooner rather than later to raise interest rates.
The Fed has kept short-term interest rates near zero since 2008, and has quadrupled its balance sheet to $4.5 trillion with purchases of bonds aimed at pushing down borrowing costs further.
UPDATE 1-Fed’s Dudley sees mid-2015 rate rise, continued US rebound
Oct 7 (Reuters) – The Federal Reserve could reasonably be expected to raise U.S. interest rates in mid-2015, an influential Fed policymaker said on Tuesday in a speech that cautiously predicted a rebound in U.S. economic growth and inflation.
William Dudley, president of the New York Fed, pointed to the stronger U.S. dollar as a key reason why growth and inflation are unlikely to substantially overshoot his forecasts.
He predicted about 3 percent growth in both the second half of this year and in 2015, and a slow rise in inflation to about 1.9 percent by the end of next year. Both are toward the optimistic end of the array of Fed policymakers’ forecasts.
« The consensus view is that (rates) lift-off will take place around the middle of next year. That seems like a reasonable view to me, » Dudley told students and professors at Rensselaer Polytechnic Institute.
A policy tightening then, he said, would be « very good news » even if it caused a « bump or two in financial markets. »
Wall Street awaits earnings slew; ‘Fed speak’ eyed
U.S. stock-index futures indicated a lower open on Tuesday, as investors anxiously await the start of third-quarter earnings season.
The International Monetary Fund downgraded its global growth forecast for this year and 2015, with the organization that represents 188 countries now projecting world growth to come in at 3.3 percent in 2014, down 0.1 percent from its July forecast. Next year, it expects growth of 3.8 percent.
Results from aluminium-producer Alcoa will kick off the latest slew of earnings on Wednesday, and a further eight S&P 500 companies will post results before the week is out.
On Tuesday, International Speedway rose in early New York trading after reporting quarterly results. Yum! Brands reports after the market close. Mining stocks will also be in focus, after rising in Europe’s early trade, following Rio Tinto’s announcement that it rejected a merger approach from Glencore in August.
Sterling Drops After Industrial Output Data as Fed Likely to Hike Rates Sooner Than BoE
The British pound dropped on Tuesday as the industrial output data surprised on the lower side while a view that the Federal Reserve is likely to start hiking rates sooner than the Bank of England led speculators to add downside bets on the UK currency.
Industrial production in the UK grew 2.5% from a year earlier in August, faster than the July growth of 2.2%, but trailing market expectations of 2.6%. Month-on-month, there was no change in the output after a 0.4% rise in July.
The manufacturing output showed faster growth of 3.9% year-on-year from 3.5% in July, but the month-on-month growth slowed from 0.3% to 0.1%. GBP/USD slipped to 1.6026 after the data, from the previous close of 1.6083. The pair seems heading back to the 11-month low of 1.5954 touched on Monday.
U.S. dollar falls against yen amid Bank of Japan stimulus plan
NEW YORK, Oct. 7 (Xinhua) — The U.S. dollar fell against most major currencies Tuesday and retreated the second day against the Japanese yen after the Bank of Japan (BOJ) pledged to keep its asset-purchase stimulus program unchanged.
The dollar index, which tracks the greenback against six major currencies, slipped for a second consecutive session, but was still trading near four-year highs. The index was down 0.32 percent at 85.650 in late trading.
The Japanese yen advanced 0.78 percent to 108.15 per dollar in late trading after BOJ Governor Haruhiko Kuroda said in a meeting Tuesday that the central bank would continue its buying of 64.4 billion U.S. dollars government bonds monthly to stimulate the economy.
Moreover, the International Monetary Fund (IMF) lowered its forecast for global economy growth this year and next on Tuesday, fueling market demand for haven assets like Japanese yen.
In its updated economic outlook, the IMF expected the global economy to grow 3.3 percent in 2014 and 3.8 percent in 2015, down 0.1 percentage points and 0.2 percentage points from its July forecasts, respectively. However, IMF said the U.S. economy is seen to expand 3.1 percent this year, higher than its forecast of 3 percent in July.
Economic News
IMF revised down its global growth forecast. Since the Great Financial Crisis, XX economists have ben missing their forecast. Why? The main objective reason is that the statistical models have broken because many economies are rebalancing. Is a Philipps Curve calibrated on 1990s data accurate in the face of the new technologies (IoT, robotics, mobile, self-employment etc.)? We believe that it’s not. Not only the Philipps Curve is not accurate, the PPP models seem outdated as well. When it comes to asset frothiness, we have different definition to where frothiness lies. We see commodity prices heading toward new lows, while stocks and fixed income present value. Furthermore, we believe that the carry trade is loosing its interest because central banks are likely to reduce financing of moral hazard to push countries (e.g. Brazil) to undertake urgently needed reforms.
UPDATE 2-BOJ stands pat on policy, warns of weak factory output
* No policy change expected, debate begins on new forecasts
BOJ cuts view on output as sales tax weighs on economy
* BOJ member Shirai says inflation expectations turning flat
* Governor Kuroda to brief media 0630 GMT
TOKYO, Oct 7 (Reuters) – The Bank of Japan on Tuesday maintained its massive asset buying programme but offered a bleaker view on factory output, following signs that the world’s third-largest economy was hit harder than expected by a sales tax increase in April.
Policymakers stuck to their view that the economy will resume a moderate recovery and achieve the bank’s 2 percent inflation target next year without more monetary easing, but also acknowledged that weak consumer spending is hurting output and business sentiment.
BOJ Governor Haruhiko Kuroda maintained that optimism earlier in the day, telling parliament that a positive economic cycle remained in place, with households and companies increasing spending as they see incomes rising.
Greek yields rise, Athens denies abrupt end to EU/IMF visit
* Greece denies reports that EU/IMF visit ends abruptly
* Spain sells 5-year inflation-linked bond via syndication
* Weak German data revives ECB easing bets
LONDON, Oct 7 (Reuters) – Greek government bond yields rose to a one-week high on Tuesday after a newspaper reported that the country’s EU/IMF lenders had interrupted their bailout review over a disagreement with Greek officials. The government denied the report.
The Greek newspaper To Vima had reported that the EU/IMF troika was leaving a day ahead of schedule, having failed to agree on any outstanding issues, and before a vote of confidence expected later this week.
IMF Cuts Global Outlook as Risk of ‘Frothy’ Stocks Raised
The International Monetary Fund cut its outlook for global growth in 2015 and warned about the risks of rising geopolitical tensions and a financial-market correction as stocks reach “frothy” levels.
The world economy will grow 3.8 percent next year, compared with a July forecast for 4 percent, after a 3.3 percent expansion this year, the Washington-based IMF said. U.S. growth is helping lead a worldwide acceleration that’s weaker than the fund predicted 2 1/2 months ago as the outlooks for the euro area, Brazil, Russia and Japan deteriorate.
“In advanced economies, the legacies of the precrisis boom and the subsequent crisis, including high private and public debt, still cast a shadow on the recovery,” the IMF said in its latest World Economic Outlook. “Emerging markets are adjusting to rates of economic growth lower than those reached in the precrisis boom and the postcrisis recovery.”
The outlook buttressed the case made by IMF Managing Director Christine Lagarde, who warned last week that officials need to act to prevent a prolonged period of sluggish growth, a trend she called the “New Mediocre.” Raising growth in emerging and advanced economies “must remain a priority,” the IMF report stated.
Stocks slump worldwide, bonds rally on growth concerns
(Reuters) – Global equity markets fell sharply on Tuesday and oil slipped to near 27-month lows as investors shifted funds into safe-haven government debt after more poor economic data from Europe heightened concerns about worldwide demand.
Wall Street’s primary benchmark, the S&P 500 .SPX, fell 1.5 percent to close at its lowest level in nearly two months. The small-cap Russell 2000 .TOY ended near a one-year low as investors reined in riskier bets ahead of this week’s start of third-quarter earnings reports.
The primary catalyst for the equity market weakness was more bad news out of Germany, the euro zone’s largest economy. After news on Monday of the biggest monthly drop in German industrial orders since the global financial crisis in 2009, data showed the country’s industrial output plunged 4 percent in August in the biggest fall in more than five years.
U.S. markets fell throughout the session, ending near the day’s lows. The 10-year U.S. Treasury note US10YT=RR rallied, dropping its yield to 2.34 percent, the lowest since late August
Mantega Says IMF Forecasts for Brazil Economy Seem Pessimistic
Oct. 7 (Bloomberg) — Brazilian Finance Minister Guido Mantega said the International Monetary Fund’s reduced growth estimate for the country’s economy was “too pessimistic” and that a lack of credit has curtailed expansion this year.
The world economy will grow 3.8 percent next year, compared with a July forecast for 4 percent, after a 3.3 percent expansion this year, the Washington-based IMF said. The fund estimates Latin America’s biggest economy will expand 0.3 percent this year, down from July’s estimate of 1.3 percent.
“I see the IMF estimate as too pessimistic,” Mantega told reporters in Brasilia today. “We had a weaker first semester, but the economy is showing signs of recovery in the second half and we expect credit to rise.”.
Ebola
Ebola:
Ebola infection has started to spread to Europe. CDC estimated to 100 the number of people who might have been affected in the US. This number is likely to increase in the coming day, before it decelerated. This is the Contagion effect as know in Mathematics. In order to avoid the paranoia, the CDC, as we were expecting, have used the power of social media and @twitter, to : improve the information (fight disinformation) and spur the motivation for social media to help reduce the outbreak. The need to get prepared is very important in a period where our institutions are seen as lacking credibility. We have been indicating that having Russia cut gas delivery to Europe could make any non-lethal flu a cause of paranoia and create more economic headwinds (consumer confidence etc.). But unlike many commentators we consider that our institutions – WHO, CDC and others – are up to the task and mankind is more resilient that many think. The media pressure around Ebola is making it easier to dedicate budget for this fight (Pentagon has dedicated $750mn).
The most widely spread FALSE belief is that Ebola can mutate easily. This is possible but highly unlikely. In films and TV-shows, scenarists like to make their stories appealing but the reality is sometimes (fortunately) less scary.
From our Thursday Oct. 1st daily
Days after the WHO and the CDC revised upward their estimates for the development of the outbreak to as high as 1.4 millions by beginning 2015, the First Ebola case has been diagnosed in Texas. The 1st patient (i.e. 1st person known affected in a region – not brought affected from other places -) arrived to the US in September 20th from Liberia. The CDC has started an intensive search for anyone who might have come in contact with the patient while the person was infectious. While the spread of Ebola is less viral than Cat pictures on the internet, the fear is likely to edge up before CDC and WHO will show how capable and efficient are these two institutions. We have been discussing Apps and big data which would help report any symptoms to the public. Japan nationals and internet have been very effective mapping real-time the consequence of March 2011 Fukushima nuclear catastrophe. The same tools can be used today, although a very wide understanding of the symptoms is genuinely and urgently needed to make it succeed. We have been saying that even a non-lethal epidemic can spur fear, confidence collapse and economic headwinds. Unlike in the very good film “Contagion”, the tech tools and social media help can be very effective in reducing the spread of the disease and reporting the infectious agents. Doctors, which have been affected in Africa and brought to the US, have been saved. The experimental vaccine, which has a 100% hit ratio for primates, is likely to limit the casualties. Our only genuine fear, is that one of the affected has a political or ideological agenda and tries to spread the disease more widely. To our readers, there is no need to be stressed but please stay safe.
But more importantly, the first US case is likely to intensify, the global coordinated response which have started during the recent weeks. We have highlighted that the global coordination has been intensifying to: 1) fight disinformation (we were talking about it in our recent daily briefings), 2) provide short term medical assistance (France, US, Israel, etc.) with the help of military expertise – when numerous Western African countries are indicating the lack of medical personnel – , 3) provide financial support (wealthy donors, government funding, NGO help etc.), and 4) fast track the Ebola drug trial (the drug has had a very good result in the experimental tests).
Notwithstanding the on-going difficulties, and the short term negative economic effect, we continue to believe that the fight against Ebola will succeed and will clear the way to the increase in Africa investment and economic support (cf. our note “This time for Africa” which stressed that Africa is heading to experience the same development China had experienced when it joined the WTO in 2001 with positive consequences for both Africa and the world economy). The global coordination triggered by the response to the terrorist risk might help responding to the Ebola risk as well (due to the threat a dirty weapon using Ebola virus constitute). We disagree with the bet of Cocoa upward spiral because many analysis assumes the doom-and-gloom scenario which is unlikely to happen. We see the intensification of the worrying rhetoric as a part of the genuine action to keep the subject high in the leaders to do list.
How the world let Ebola spread
Tom Frieden remembers the young woman with the beautiful hair, dyed a rusty gold and braided meticulously, elaborately, perhaps by someone who loved her very much. She was lying face down, half off the mattress. She had been dead for hours, and flies had found the bare flesh of her legs.
Two other bodies lay nearby. Bedridden patients who had not yet succumbed said of the dead, « Please get them out of here. »
Frieden, the director of the US Centres for Disease Control and Prevention (CDC), knew it was no simple matter to properly carry away a body loaded with Ebola virus. It takes four people wearing protective suits, one at each corner of a body bag. On that grim day near the end of August, in a makeshift Ebola ward in Monrovia, Liberia, burial teams already had lugged 60 victims to a truck for the trip to the crematorium.
Four hospitalized in Spain after first Ebola transmission outside Africa
(Reuters) – Four people have been hospitalized in Spain to try to stem the spread of Ebola after a Spanish nurse became the first person in the world known to have contracted the virus outside of Africa, health authorities said on Tuesday.
The nurse, who tested positive for the virus on Monday, her husband, who is showing no symptoms of the disease, and two other people are being closely monitored in hospital, health officials told a news conference in Madrid.
One of those hospitalized is a health worker who has diarrhea but no fever. The other is a Spaniard who traveled from Nigeria, said Rafael Perez-Santamaria, head of the Carlos III Hospital where the infected nurse treated two Spanish missionaries who contracted the disease in Africa.
Journalist with Ebola Being Evaluated at U.S. Hospital
An American journalist diagnosed in Liberia with the Ebola virus has returned to the United States for treatment. Ashoka Mukpo is in an isolation unit at the University of Nebraska Medical Center in Omaha, Nebraska, where a spokesman said his condition is being evaluated to determine the course of his treatment.
At a news conference Monday a hospital official said Mukpo walked off an airplane under his own power and was wheeled into the hospital on a gurney.
Another hospital official said the patient is suffering from fever and nausea and his symptoms have not changed significantly in the past 24 hours.
Mukpo is receiving treatment at the Nebraska Medical Center’s specialized isolation unit, the largest of four such facilities in the United States.
The freelance photojournalist is the fifth American diagnosed with the Ebola virus.
Spain ramps up Ebola response; Norwegian tests positive in Sierra Leone
Madrid (CNN) — Four more potential cases of Ebola were under observation Tuesday in Spain, health authorities said Tuesday, a day after a nurse’s assistant became the first person known to have contracted the deadly virus outside Africa in the current outbreak.
The woman helped treat two Spanish missionaries, both of whom had contracted Ebola in West Africa, one in Liberia and the other in Sierra Leone. Both died after returning to Spain.
Spain has outbreak’s 1st known case of contracting Ebola outside of Africa
The developments come just as the organization Medecins Sans Frontieres (Doctors Without Borders) reports that a Norwegian staff member has contracted the deadly virus. The staffer had been working in the Sierra Leone city of Bo and was placed in isolation Sunday after developing a fever, the organization said.
The worker is being sent to a treatment center in Europe.
Fight against Ebola « top national security priority »: President Obama
HOUSTON: US President Barack Obama has declared fight against Ebola « a top national security priority » and said that authorities would increase screening for the virus at airports both in America and in West Africa.
Obama made the announcement yesterday after being briefed by Dr Thomas Frieden, the director of the Centers for Disease Control and Prevention (CDC). However, Obama did not specify how screening would be changed. Frieden said that officials would explore a variety of options.
Ebola in US: Has America Run out of ZMapp Drug to Fight Ebola?
It has emerged that the experimental drug, ZMapp, believed to have cured two Ebola-stricken Americans, may be out of stock for now. This comes as the first American to be diagnosed with the disease in the United States is battling for life and as another who has contracted the virus is heading to Nebraska….
Pentagon Budgets $750 Million for Ebola Over 6 Months
The U.S. military says its efforts to help end the Ebola crisis in Liberia will cost $750 million over six months.
General David Rodriguez, who commands U.S. troops in Africa, told reporters the Pentagon put two more mobile medical labs into operation last week, increasing the capacity to quickly diagnose Ebola.
He also said he is confident the 4,000 service members being deployed as part of the anti-Ebola effort are sufficiently trained to avoid infection.
Rodriguez said the troops are providing logistics, training, diagnostic, and engineering support.
In Spain, officials are investigating how a nurse in Madrid contracted the Ebola virus. Health officials say the woman helped to treat two Spanish missionary priests who died last month after being flown back from Liberia and Sierra Leone.
Experimental drug the ‘best choice’ for American journalist with Ebola
An American journalist who contracted Ebola while working in Liberia is now being treated with an experimental drug, the same drug the first Ebola patient diagnosed in the U.S. is receiving.
On Tuesday, Nebraska Medical Center announced Ashoka Mukpo, 33, is being treated with brincidofovir, made by biopharmaceutical company Chimerix.
“After looking at the data on this drug, collaborating with the Centers for Disease Control and Prevention (CDC) and Food and Drug Administration (FDA) and speaking with the patient and his family, we decided this was currently our best option for treatment,” said Dr. Phil Smith, medical director of the Nebraska Medical Center’s Biocontainment Unit. “Every patient is somewhat different, and we believe brincidofovir is the best choice.”
Gaza
Israel and Palestine continue to head into the right direction.
While Gaza war settle down, recognition of the economic cost increases. As we were expecting, the national coalition between Fatah and Moderate Hamas is taking place. This is likely to increase President Abbas political capital which would help the country to: 1) secure more economic aids – though these aids have to be channelled to the people in need, not to terrorist financing -, 2) increase the pressure on the international community to speed up a two-states solution negotiated with neighbours, 3) be seen as a credible partner with whom Israel can negotiate. As we are heading toward more peace, Hezbollah and Hamas spin-offs are looking to become more barbaric in order to keep their militants (in the Silicon Valley parlance we call this “retaining talents”). While in the short term, the Hezbollah is likely to become more barbaric long-term we may settle agreeing with President Hassan Rohani view, expressed in his UN General Assembly address, Terrorists are in a global coalition, the world should unite to fight them.
But PM Netanyahu said it all during his visit to the US: a nuclear Iran should not come with an increase in the existential threat to Israel. While we are heading to a peace process, Israel needs to secure the goldilock conditions of such a scenario. This goes through a genuine commitment by Ayattolah Khamanei that Israel should continue to flourish in peace, leaving the existential threat to ISIL and the Califat-of-Paper Abu Bakr El Baghdadi. Make no mistake : Israel will never be destroyed. Because, Israel is one of the greatest idea, in my opinion, which human brain invented during our common 13.8bn years history in creating institutions and laws to reduce universe entropy. It has nothing to do with religion or ideology, this is just pure rational thinking and science. The idea of Israel remains me that while facing adversity one move on an try to empower himself to bring: prosperity (in our parlance: jobs, growth, adequate inflation, wealth, solvency etc.). This is what, I believe, Moses did: creating the promised land of prosperity and peace. This is why Israel can never be destroyed. Even Hitler failed, Abu Bakr El Baghdadi is doomed and Ayattolah Khamanei have to play his cards well now. He can empower his people, improve Iran economy and growth, by recognising the obvious. In 20years finance careers I’ve never seen an investment as obvious as this one. [Don’t hesitate to ask for details as usual].
Sweden recognition of Palestine constitute a first step into the right direction. External pressure on Israel, comes as a genuine help for the government to fight its hard liners and bring them to a peace solution. We see this process to last one to two years but we are convinced that peace will happen not because it’s a nice thing but because it’s where economic prosperity lies for Iran, Palestine, and Israel.
Gaza farmers struggle in war aftermath
Israel’s war on Gaza has taken its toll on all economic sectors, with the agriculture industry hit especially hard.
Deir al-Balah, Gaza – Only days after a ceasefire was declared in Gaza, ending a 51-day bombardment by Israel, hundreds of farmers showed up at a distribution center in al-Zawayda outside Deir al-Balah in central Gaza to receive sacks of fodder.
« We are distributing fodder and barley for all the sheep and goats in Gaza, » said Ciro Fiorillo, local head of the UN Food and Agriculture Organisation (FAO), to the crowd of assembled farmers. « For every herding family, we will be able to give the fodder needed to feed each animal for a month and a half. »
Funded by the Canadian government, the fodder distribution was aimed at sustaining the remaining livestock in the area. Two major Israeli military operations within the past three years have drastically reduced Gaza’s number of sheep and goats: A census in 2010 registered 73,500 animals, while only 58,000 were enlisted for fodder distribution this summer.
« This means that more than 15,000 animals are missing. We don’t know if these have died because there is no fodder or water. We just know that they are no longer there, which means that something like 20 percent of the animal population has been lost. This is a huge value, » Fiorillo told Al Jazeera.
Palestinian unity cabinet meeting to be held at Abbas home in Gaza: Official
GAZA, Oct. 7 (Xinhua) — The first ever cabinet meeting of the Palestinian unity government will be held on Thursday at Palestinian President Mahmoud Abbas’ house in western Gaza City, a senior official unveiled on Tuesday.
Salim Sakka, Labor minister in the unity government from Gaza, told Xinhua that President Abbas’ house in Gaza city will host the first meeting ever of the cabinet, which took oath of office in June.
« Prime Minister Rami Hamdallah and all cabinet members will hold a meeting of the cabinet in the house of President Mahmoud Abbas, » said Sakka.
Abbas left the Gaza Strip shortly before Islamic Hamas movement violently seized control of the coastal enclave in the summer of 2007 following internal fighting with his security forces.
Since then, Abbas hasn’t come back to Gaza and Hamas seized control of his house. The cabinet ministers plan to hold their meeting at Abbas’ house before they head to Cairo to join the international conference to aid Gaza.
Author of IDF ethics code: Show compassion, as long as it doesn’t risk Israelis
Comparing numbers of dead in Gaza-Israel war is ‘conceptual error,’ Asa Kasher writes in Jewish Review of Books.
Asa Kasher, the philosophy professor who wrote the Israel Defense Forces’ code of ethics, strongly defended Israel’s conduct of this summer’s war in Gaza in an article published in the latest issue of the Jewish Review of Books, a U.S. quarterly.
Kasher began by asking how Israel should have behaved when confronting an enemy that made no distinction between combatants and civilians on either side.
“Hamas unscrupulously violates every norm in the book,” he wrote, citing indiscriminate rocket fire at Israeli civilians, rockets launched from or stored in residential areas, mosques and schools in Gaza, and the use of a hospital basement as an operational headquarters for Hamas.
The IDF has a post-war mission
It is clear that the IDF must devise a new path in the wake of Protective Edge; it must become quicker, more efficient, more cost-effective, and able to handle the kind of threat posed by terrorist groups. But can it do it?
Two Palestinian families – Durmush and al-Masri, had an exalted position in the tunnel industry in the southern Gaza border town of Rafah. Their « Pioneer Corps » brought them money, power and prestige. And in the middle of the last decade they smuggled through tunnels from Egypt a number of lion cubs. There was no business motivation behind it – lions were intended to show everyone their power and their importance. And thus the animals were cared for devotedly by the two families.
President Obama’s « two-state solution »
Ritual incantations as foreign policy – after Palestinian statehood, strategic circumstances in the region could become markedly less favorable to Israel and the United States.
In Washington, foreign policy has sometimes been constructed upon madness, but more commonly, upon mediocre visions, hackneyed phrases, childish metaphors, and flagrantly empty witticisms. Recently, U.S. President Barack Obama, speaking at the UN General Assembly, and addressing refractory issues of Middle East peace between Israel and the Palestinians, repeated his ritual call for a « Two-State Solution. » This tired presidential plea is plainly bound to fail.
There is also overwhelming irony to this clichéd plea. Mr. Obama remains correct in affirming determination to fight barbarous jihadi foes called Islamic State (IS), yet his corollary call for « Palestine » could create another jihadist state. The president should finally understand that it makes no sense to fight against jihadi enemies in one chaotic theater of regional conflict, while simultaneously seeking to install similar adversaries in another. Whatever final allocation of power might ultimately emerge between Fatah and Hamas forces in an evolving « Palestine, » that newly sovereign state would quickly position itself solidly against the United States.
EGYPT: ARMY OFFENSIVE KILLS 16 MILITANTS IN SINAI
El-ARISH, Egypt (AP) — Egyptian military officials say troops have killed 16 members of an al-Qaida-inspired militant group in the restive Sinai Peninsula.
The officials say four leading members of Ansar Beit al-Maqdis were arrested during the operations, which were still underway early Tuesday.
The assault was carried out against militant hideouts in three villages south of the town of Sheikh Zuweyid and in the Mahdiya village near Rafah, which is on the border between Egypt and the Gaza Strip. The officials spoke on condition of anonymity because they are not authorized to brief the media.
Ansar Beit al-Maqdis has claimed most of the major militant attacks in Egypt since the 2013 ouster of Islamist President Mohammed Morsi. It has also recently beheaded several people it accused of spying for Israel.
Iraq & Syria
The likelihood of defeating ISIL continue to increase, though short term ISIL seems winning battles such as Kobani (at the Turkish borders).
Turkey and Canada decided to join the 40 countries coalition to fight ISIL. We were saying that Herve Gourdel beheading (to which we need to add Alan Henning since Friday) and the Philippines militant threat to ham a German were sufficiently evil behaviour in 2014 to create the wake up call that each of us should make something to stop these unacceptable atrocities.
We are surprised by Turkey’s attitude toward Kobani. This attitude could only be explained by the fact that Turkey and Kurdistan have not settle yet on a strategy to defeat Assad without giving too much power to the Kurds (which may ask for an independent Kurdistan). Yesterday, Kurds have been protesting as Turkish ground forces stay out of battle for Kobani. Should Turkey join the Peshmerga fighting forces, it would target Assad as well as ISIL.
According to Theresa May, ISIL could acquire a dirty weapon. Saudi’s high cleric ceased the opportunity of Hajj pilgrim to call all muslims – Shia, Sunni, Maliki, Wahabi etc. – to defeat the Murderers In Iraq & Syria (known as ISIL). What we commonly name ISIL is not Islam (not I) and not a state (not S). It would be helpful to replace these two letter by “M” for Murderers. I bet that the Jihadists hiring will collapse after this simple action. The fight against the Murderers will be easy should we decrease the number of their new followers. This work like contagion or viral system. The final fight will come along with the genuine actions G-20 is saying it will undertake in Australia to improve governance. This time there is no way to escape with half-backed solution: G-20 needs to get rid of bad governance to reduce the spread of the view that “institutions are rotten to the core” (a view which helps Jihadists to hire youth on the internet). We discussed it since 2009, we have increase the data to track this bad governance since 2012. This power have moved from states to the public. Fortunately, anecdotal evidences (from UK to China) indicate that lawmakers have the same goal reducing bad governance. This is not because that’s a nice thing to do but because this were profits, shareholders values, pensioners interests, workers interests, consumer interests are. PM Abbott has joined the call to stop Hate Preacher from spreading their hate beliefs. But the global community needs to fight these preaches by showing that there are many young muslims which while offered to be hired by Terrorist groups have preferred fighting the hateful ideology, saying that this ideology should not be called Islam (#NotInMyName).
Again, we tend to reduce Entropy, this since our first day 13.8 billions years ago (Oil prices development and the number of violent deaths are an amazing reflect this fact).
Finally, as part of the evidence that data will help fight terror, France 24 broke Sunday that Zabihullah Mujahid (Taliban spokesman) revealed mistakenly his localisation in twitter (here)
Kurds protest as Turkish ground forces stay out of battle for Kobani
Fighting between Kurdish forces and Islamic State militants for the Syrian border town of Kobani fuelled rising tension inside Turkey yesterday as thousands of protesters took to the streets to voice anger at the Ankara government’s inaction.
Demonstrations turned violent and Turkish police used teargas and water cannon. Curfews were imposed on several towns.
Following a warning from the Turkish president, Recep Tayyip Erdogan, that Kobani was “about to fall”, one man was reported to have been killed by a bullet to the head in Varto in the eastern province of Mus when police allegedly fired live ammunition.
Mr Erdogan, speaking in the eastern city of Gaziantep, said a ground operation was needed to defeat Islamic State, sidestepping accusations that he is unwilling to allow Kurds in Turkey to help their embattled kinsfolk in Syria or to deploy the army across the border because of the country’s historic enmity towards Kurdish separatists.
“I am telling the West – dropping bombs from the air will not provide a solution,” the president said to cheers from crowds of Syrian refugees in a speech that was translated into Arabic. He also tested the readiness of the US, Britain, France and other allies by calling for a no-fly zone and a secure land zone as well as training for moderate Syrian rebels.
US, Arab Allies, Belgium Conducted Nine Anti-IS Airstrikes Since Monday: US CENTCOM
WASHINGTON, October 8 (RIA Novosti) – The US Air Force, backed by Saudi Arabia, the United Arab Emirates and Belgium, have continued airstrikes against the Islamic State (IS) targets in Iraq and Syria, carrying out nine attacks over the past 48 hours, the US Central Command said in a press release.
“US and partner nation military forces continued to attack ISIL [IS] terrorists in Syria Monday and today, using attack, bomber, fighter, and remotely piloted aircraft to conduct nine airstrikes. Separately, US military forces used attack and remotely piloted aircraft to conduct four airstrikes against ISIL [IS] in Iraq,” the statement released Tuesday read.
In Syria, two airstrikes west of the city of Hasakah struck multiple buildings occupied by the jihadists, including an air observation station. Staging areas and an improvised explosive device production facility were destroyed in an area northeast of Dayr-az-Zawr.
Hate preachers to be red-carded: PM
« Hate preachers » hoping to come to Australia to peddle extremist views will be refused entry, if Prime Minister Tony Abbott has his way.
The prime minister is frustrated a planned lecture by radical Islamic group Hizb ut-Tahrir, which will accuse the US-led coalition of attacking the Syrian revolution through combat missions in Iraq and Syria, will go ahead this week.
Mr Abbott says the group is engaged in « hate preaching » and members shouldn’t be allowed to enter Australia to attend such events.
He wants preachers spreading extremist messages to be « red-carded » and stopped at the border. « I say to people who want to come to this country from overseas to peddle their extremist ideology … don’t bother applying, » he told reporters in Sydney on Wednesday. Hizb ut-Tahrir says there are no international speakers at the lecture to be held in Sydney’s Lakema on Friday.
US Vice President Biden Apologizes to Saudi Arabia Over Terrorism Support Claims
WASHINGTON, October 8 (RIA Novosti) – Vice President of the United States Joe Biden apologized to Saudi Arabia’s Foreign Minister Saud Faisal for claiming that the Arab country had supported extremists in Syria, Biden’s office said in a statement.
« Vice President Biden spoke today with Saudi Arabia’s Minister of Foreign Affairs, Prince Saud al-Faisal. The vice president thanked the foreign minister for Saudi Arabia’s strong support in the shared fight against ISIL [the Islamic State, IS] and he clarified his recent remarks regarding the early stages of the conflict in Syria. The two agreed that the issue was closed, » Tuesday’s statement read.
On October 2, Biden in a speech at Harvard University alleged that Turkey, Saudi Arabia, and the United Arab Emirates had « poured hundreds of millions of dollars and thousands of tons of weapons into anyone, who would fight against [Syrian President Bashar] Assad, » which included extremist elements and jihadists. Saying that America’s « biggest problem is our allies, » he claimed that Turkey had been allowing foreign fighters to cross its borders.
The Vice President has already apologized for his remarks before the leaders of Turkey and the UAE over the weekend.
IS poses threat to Singapore, Deputy Premier Teo says
SINGAPORE: The escalation of violence in the Middle East as well as the expansion of the dreaded Islamic State group has raised the terror threat posed to Singapore, Deputy Prime Minister Teo Chee Hean told parliament today.
The Islamic State (IS) continues to actively recruit foreign fighters including Southeast Asians and its brutality is not confined to beheadings of Westerners, but also to the killing of other Muslims and minority communities in Syria and Iraq, said Teo, who is also Minister of Home Affairs.
« We have no information currently of any specific threat to us resulting directly from the anti-IS strikes, » he said.
« However, our assessment remains that the expansion of the IS beyond Syria and Iraq has raised the threat to Singapore.
ISIS: The street gang on steroids
Editor’s note: James Densley is Assistant Professor of Criminal Justice at Metropolitan State University and the author of How Gangs Work: An Ethnography of Youth Violence. The opinions expressed in this commentary are his.
(CNN) — As we well know, ISIS is recruiting angry young men as far afield as Minneapolis and London. The allure is much like the allure of a street gang — in part, because ISIS looks an awful lot like a street gang.
Gangs have long been understood as a collective response or « solution » to the strains encountered by their respective members. For some youth, ISIS has become the « solution. » They are searching for the same protection and respect that pull people into gangs. The difference is they are pushed by feelings of marginalization, victimization, and vulnerability that stem from the state’s purported failure to protect Muslim interests.
READ: Why is ISIS so successful at luring Westerners?
« Fear leads to anger. Anger leads to hate, » Yoda once said. Anger also incites people to action, lowers inhibitions, and fashions a desire for revenge.
Keep your courts independent, EU to tell Turkey
(Reuters) – The European Commission will criticise Turkey on Wednesday for failing to safeguard the independence of its judges and says it wants to have more discussion on rights as part of Ankara’s bid to join the European Union, according a senior EU official.
The Commission, the EU executive, will make the calls when it publishes its annual report to assess how far Turkey and other countries aspiring to EU membership have progressed in bringing their rules into line with EU standards and values.
« What has happened in Turkey has raised serious doubts about the independence of the judiciary, » said the official, who declined to be named because the report is not yet public.
« There are serious doubts about fundamental freedoms, » the official added, referring to social media and the Internet.
The remarks follow the European Union’s criticism of Ankara’s handling of anti-government protests last year but also come as the West seeks to persuade Turkey to join an international coalition to fight against Islamic State in Iraq and Syria.
The EU also risks angering Turkey less than a month after Ankara signalled a shift in tone by announcing a new programme to revive its efforts to attain EU membership, a process that has stalled after almost a decade of on-off negotiations.
Oil Price War to Hit Both Sides Amid Flat Demand
MOSCOW, October 7 (RIA Novosti) – The rapid depreciation of oil seen in the recent weeks threatens to trigger a global price war, which will eventually damage all of its participants to different extents.
Oil prices have been trending downwards for some time now as new deposits have opened up new supplies to the world. One of the biggest is the North American shale oil boom, which has given America some energy independence for the first time in many decades. However, as prices continue to drop, countries heavily dependent on oil will need to increase their production and supply so as not to let their income drop. In fact, several countries face dire consequences if the price of oil drops too far. This situation could cause a global price war, with greater consequences than we have ever seen before.
The reason for the declining oil prices is both a supply and a demand issue. The economic slowdown in China and anemic global growth have led to lagging demand. Booming extraction in North America and expanding production in Libya, Iraq and other traditional oil suppliers have created record amounts of petroleum production. Putting these two factors together has sent the price of Brent crude prices spiraling to $90, down 20 percent from its $115 highs.
Was arrested teen on his way to join ISIS?
(CNN) — Before authorities arrested him at O’Hare International Airport and accused him of attempting to provide aid to ISIS, a teen from the Chicago suburbs left behind a letter for his parents.
Mohammed Hamzah Khan, 19, wrote that he was leaving the United States and on the way to join ISIS, according to a criminal complaint. He invited his family to join him in the three-page letter, which authorities found in the bedroom he shared with a sibling in Bolingbrook, Illinois. But he warned them not to tell anyone about his travel plans, the complaint said.
« First and foremost, please make sure not to to tell the authorities, » he wrote, according to the complaint. « For if this were to happen it will jeopardize not only the safety of us but our family as well. »
Russia
European Union’s incoming foreign affairs head Federica Mogherini hinted her strategy with the “bear” Russia: firmness and tact. Actually, we believe that firmness is coming from EU Council President Donald Tusk, while tact needs to come from the EC. EU’s Mogherini hinted that others in Brussels know better to deal with bears (in politics that mean “I know that you have vested interests with Russia”). Many political parties have to drop their support to Russia and start think about EU public interests. Otherwise, many will start questioning whether these are not conducting treason (betraying those who have voted for them). The list is long and no one have interest to name names. In an environment where Iran wants to secure the negotiation without upsetting Russia (a long term ally which have helped provide a back-door to Iran oil), Rouhani said that Iran negotiation should not derailed any political solution with Russia. Unfortunately for Russia this will not help lift sanctions. Because, many commentators are watching: EU should make no mistake, vested interest will not go away with the crimes Russia is responsible for (and that goes beyond annexing Crimea).
Any lifting of sanctions would help Russia to annex more territories. Our study of oligarchy, crony-capitalism and dictatorship have lead us to believe that any genuine de-escalation requires Putin inner circle to change and this is not happening yet. But opposition against Putin is building within the reformist although they are no saying it out loud.
By the way “Happy Birthday Czar Vladimir Putin I” (we forecast that Russia Federation, will transform into Eurasia and President Putin is likely to accept the tittle of Czar if offered by the public – and this is very likely -).
From yesterday report
Oil prices plummeting continue to constitute an existential threat to President Putin administration. A policy document of the Islamic State discovered at one of the raids brings forth some alarmingly ambitious plots of the jihadist outfit. The plan includes bribing Russia with access to oilfields in exchange for Iran’s nuclear technology. This document confirmed that ISIL is looking to Russia to increase it force. We have been worry that vested interests would align their force with those of the barbaric. Should they do so, they would be no place to hide. Make no mistake, if ISIL got the technology Putin and Russia (with interest groups which have been supporting them) will be held accountable.
While Russia continue to prepare its isolation (VTB’s says consider that capital control is not the end of the world), Putin stays put and keep his narrative: the cost will be more harsher for EU than for Russia. Unfortunately, for President Putin, facts have no political bias or religion. Russia economy is collapsing and the Saudi oil prices cut, Iran negotiation amongst other thing are pushing oil prices to a free fall spiral and threatening the stability of the government (an Oil price at $75 will push Putin out). In our Energy Update (our call that oil might go as low as $80 for WTI) we’ve highlighted the trends we observe now. These are not only providing a boost to EU (currently mistakenly analysed by many XX Century economists as a deflationary risk) but also increasing the current Russian administration existential threat. We forecasted last February that Russia will have to go through a period of isolation, will create Eurasia by annexing Eastern Europe (we still unsure where the division will take place). We stick to this scenario. However, we are working on an alternative scenario, where the speed of oil prices collapse may over through Putin administration and oligarchs before President Putin reached his messianic goal (many economists agree with the view that some of Russian President speeches are messianic – 2007 Munich is a very telling speech-).
Ukraine President is taking the “good governance bill” to the floor. This on one hand increase the likelihood of our scenario that Ukraine – West will become a new Poland but it increases short term the risk of more actions of “bad governance agents: the self designated Eastern Republics”). I wonder what kind of economic prospect will have these Russian federation satellite. Old USSR satellite (Latvia and Bulgaria) are fighting political crisis spur by the widely spread mistrust in their government. Like during the Cold War, Russia continue to use the spread of disinformation (in the internet). But we see these posturing likely to fail, should EU Commission President pursue his genuine plan to change EU narrative (more jobs, more investment – specially in digital -). The emergence of new media companies helped by big data is likely to be another leap in defeating the disinformation and mistrust spread.
If Minsk Agreement is Fully Implemented, US Could Lift Sanctions Against Russia: Official
MOSCOW, October 7 (RIA Novosti) – US Assistant Secretary of State for European and Eurasian Affairs Victoria Nuland confirmed Tuesday that if the Minsk agreements are fully implemented, the United States could lift a number of sanctions against Russia.
Speaking at a meeting with the students of the Taras Shevchenko National University of Kiev, Nuland said the United States could cancel some of the sanctions it had imposed against Russia if the Minsk agreements are fully implemented and if both sides of the Ukrainian conflict observe the ceasefire.
The conflict in Ukraine started in April, when Kiev authorities launched a military operation against independence supporters in the southeastern regions of the country.
Japan, Russia leaders to meet on APEC sidelines in November
TOKYO (Reuters) – Japanese Prime Minister Shinzo Abe will meet Russian President Vladmir Putin on the sidelines of the Asia-Pacific Economic Cooperation forum in Beijing in November, the two leaders decided on Tuesday, a Japanese government official said.
The decision comes as Abe tries to walk a fine line between joining the West in sanctions over Russia’s involvement in the Ukraine conflict and forging closer economic and energy ties after five summits with Putin last year.
During a 10-minute phone conversation the two leaders also discussed Japan-Russia ties and Abe urged Russia to fulfil its role in stabilizing the situation in Ukraine, Noriaki Ikeda, of Japan’s Ministry of Foreign Affairs, told Reuters.
« During the phone call the two sides agreed to make arrangements for a summit on the sidelines of APEC, » Ikeda said.
Iran won’t replace Russia as top gas supplier – Tass quotes Rouhani
MOSCOW – Iran is not ready to replace Russia as a key gas supplier if sanctions against Tehran are removed, Itar-Tass news agency quoted Iranian President Hassan Rouhani as telling Russian TV channel Rossiya 1.
The European Union is quietly increasing the urgency of a plan to import natural gas from Iran, as relations with Tehran thaw while those with top gas supplier Russia grow chillier, a European Commission source told Reuters in September.
« We are lagging in production and think about domestic consumption first, » Rouhani told the channel in an interview. Iran has the world’s second-largest gas reserves after Russia.
« From time to time, we have problems during winter and then, you know, we have many buyers, clients around us… All our neighbors to the east, west and south want to buy gas which we are yet to produce, » he said.
Russia is currently Europe’s biggest supplier of natural gas, meeting a third of its demand worth $80 billion a year. The EU has imposed sanctions on Moscow over the conflict in Ukraine, increasing the need for gas from elsewhere.
« Conditions today are not such when everybody would think that if Russia stops gas supplies tomorrow then this gas would be supplied by Iran, » Rouhani added. « Our production is far from this stage yet. »
Ukraine Gets U.S. Help on Heating Plan as EU Warns on Winter
Oct. 7 (Bloomberg) — The U.S. is helping Ukraine plan how to keep homes and businesses heated during winter as the European Union’s incoming chief diplomat warned the government in Kiev may struggle as freezing temperatures approach.
Fighting continued today in eastern Ukraine amid moves to establish a buffer zone to help cement a wobbly truce that went into effect a little more than a month ago between government forces and pro-Russian separatists.
“We have a team in Ukraine looking at the immediate issues of this winter,” U.S. Energy Secretary Ernest Moniz said yesterday at the Council on Foreign Relations in New York. “The issues are, unfortunately, challenging.” Analysts are studying ways to heat homes with fuels other than natural gas, he said.
Ukraine is bracing for the onset of winter, when temperatures at times drop below minus 20 degrees Celsius (minus 4 degrees Fahrenheit), with Russian gas supplies shut off and energy infrastructure damaged by the fighting that’s engulfed the country’s easternmost regions. The fuel shortage has already limited access to hot water.
In Brussels, Italian Foreign Minister Federica Mogherini said yesterday that Ukraine faces a “winter that is going to be probably a nightmare from the economic point of view, from the energy point of view.” Mogherini was speaking at a hearing on her nomination to become the EU’s foreign policy chief.
Russia Spends Up to $1.75 Billion in Two Days to Buoy Ruble
Russia’s central bank spent as much as $1.75 billion to prop up the ruble over the last two trading days, its biggest market intervention since President Vladimir Putin’s incursion into Ukraine in March.
Russia’s central bank spent the equivalent of $980 million to shore up the ruble on Oct. 3, the latest data on the authority’s website showed today. The bank also said it shifted the upper boundary of the currency’s trading band by 10 kopeks yesterday, a move that may have involved spending between $420 million and $769 million that day. The exchange rate weakened 0.3 percent to 44.6234 versus the basket by 5:12 p.m. in Moscow, set for a record low for the fourth time this month.
Putin is suffering the consequences for shaking up the post-Cold War order in eastern Europe as the U.S. and European Union impose sanctions on his economy and investors pull money out of the country. Demand for dollars and euros is growing among Russian companies locked out of western debt markets as they contend with $54.7 billion of debt repayments in the next three months, according to central bank data.
Russian ‘bear’ needs firmness and tact, says EU’s Mogherini
The European Union’s incoming foreign affairs head Federica Mogherini said on Monday that the Russian « bear » needed to be handled with a mixture of firmness and tact.
Some eastern European EU states had sharply criticised Mogherini’s nomination in August, saying her record as Italian foreign minister and a centre-left politician showed she was too soft on Moscow over its role in the Ukraine crisis.
Facing European lawmakers in a confirmation hearing, she was asked how she would deal with the Russian « bear » — often used as diplomatic shorthand for a powerful and unpredictable Moscow.
« I do not have much experience of dealing with bears, » Mogherini said, suggesting her colleagues from countries closer to Russia might be better placed to answer the question.
« However, I would say we need a mix of assertiveness and diplomacy… the balance would depend on the reaction of the bear. »
The EU has imposed several rounds of tough economic sanctions on Russia over the crisis in the former Soviet state of Ukraine, the worst flare-up in tensions between Moscow and the West since the Cold War.
New York Designer Presents Collection of T-shirts With Vladimir Putin Portraits
NEW YORK, October 7 (RIA Novosti) – A young US designer Julius Kasinskis has presented his collection, called Peacemaker, in support of Russian President Vladimir Putin in the New York City on Tuesday.
The collection features several designs of T-shirts with printed portraits of the Russian president and calls for peace.
Putin Has Siberian Birthday as Russians Show Their Love
President Vladimir Putin’s 62nd birthday today prompted public displays of reverence for the Russian leader.
While Putin took a rare day off and disappeared from the public eye to celebrate in the Siberian wilderness, shoppers thronged to buy iPhone cases and sweatshirts bearing his portrait, often with military headgear, at the GUM department store on Moscow’s Red Square. Artists Anna Trifonova and Ivan Yershov, who opened a pop-up outlet at the store for Oct. 6-8, drew inspiration from Andy Warhol and “iconic” images of Che Guevara and James Bond, according to a GUM statement.
Putin’s popularity is near record highs, having soared this year as the conflict in neighboring Ukraine intensified, even as the economy teeters on the brink of recession and the ruble hovers near record lows. More than 100,000 young people in t-shirts the colors of the Russian flag formed a 2,000-meter banner in Grozny, the capital of Chechnya, according to Ramzan Kadyrov, the regional president.
Hong Kong
Hong-Kong political reforms protest: Events are developing as we were expecting
Pro-democracy protests have decided to change their strategy and open talks. Mainland sticks to its view that any political reform should bind by the “basic law”. We do not see HK and Mainland China governments to accept any substantial change in the short term. China wary of HK protests ease pain of Macau Casinos (a pain organised by China to reduce corruption). This is 100% in line with our first comment on HK protests please find below some of what we were saying yesterday.
However, unlike with Tian’anmen square protest, we see Chinese leadership being less “harsh” fighting the protests, as we acknowledge Chinese leader fear vis-a-vis social media power. In the medium term, we see China devoting more democratic say in HK. Our forecast is built on the view that the Chinese government is fearing a HK political change to threat its reform agenda. President Xi wants to be seen as the strong man to fight conservatism push back to the reform, specifically ahead of the IV-th Plenum, which will focus on improving governance (which creates an important shift of power from “princelings” to the reformists). After the IV-th Plenum we see President Xi and HK government coming with a middle ground solution, which could take the form of a split designation of leaders. Democracy comes with cost and responsibility. We consider that President Xi long-term objective of political reform to be intact, but he fears that “House of Cards” like politics could jeopardise his aim to avoid the middle-income trap risk should interest groups (Raymond Tusk character in the TV-show) to derail his genuine fight against conservatism and vested interests.
We do agree with the view that HK Occupy is not about democracy but about inequality. We do see the objective of Occupy to create the conditions to speed up reforms rather derailing them. We have been saying that Tea Party, Oligarchs and Russia have highjacked the movement for which we support the objective but not the actions. But many are fooling themselves when thinking that the populists movements want to change the current trend. Can anyone trust Russia’s Putin and Gold Bugs Tea Party in the fight against corruption? Really?
Tensions Ease in Hong Kong as Student Leaders and Government Agree to Talks
Meeting will be held with the Hong Kong government’s No. 2 official, Carrie Lam
The leadership of Hong Kong’s democracy movement agreed to engage in formal dialogue with the government on Monday night, after the ninth day of protests began with protesters visibly flagging from their prolonged occupation of three key areas of the city.
Representatives from the two student groups leading the protests — Scholarism and the Hong Kong Federation of Students — engaged in a second round of preliminary talks with a government official late Monday, Agence France-Presse reported.
“We hope there will be mutual respect shown during the meeting,” said Ray Lau, undersecretary of constitutional and mainland affairs. Lau is set to meet with the student leaders again on Tuesday, to set a time and place for talks with Chief Secretary Carrie Lam, the deputy of Chief Executive Leung Chun-ying.
Chinese Wary of Hong Kong Protests Ease Pain at Macau Casinos
As Hong Kong protesters were blocking roads and forcing shops to close, a record number of Chinese tourists were occupying the streets of Macau.
More than 750,000 mainland Chinese tourists have poured into the world’s largest gambling center since the China National Day holidays known as Golden Week began Oct. 1, with growth accelerating to 17 percent over last year. The surge came as the Occupy Central pro-democracy movement pushed Hong Kong into its worst political crisis in decades and cut its rise in Golden Week visitors to 5.4 percent, compared with 16 percent last year.
“Occupy Central has boosted the retail market and brought more mainland Chinese to Macau,” said Lei Kuok Keong, who plans casino trips for high-rollers and is also vice chairman of the Macau Gaming Industry Frontline Workers union. “Some Hong Kong people who wanted to avoid the protests also came to Macau. That has helped boost the visitor numbers to casinos.”
Hong Kong Stocks Rise Third Day as Protesters Hold Talks
Hong Kong stocks rose for a third day, with the benchmark index closing at its highest in almost two weeks, after city officials and protesters held a second round of talks.
Lenovo Group Ltd. (992), the world’s largest maker of personal computers, led gains on the Hang Seng Index after JPMorgan Chase & Co. said the company’s server market share may rise. CLP Holdings Ltd. gained 2.2 percent as the power company capped its biggest gain since February. Belle International Holdings Ltd., a seller of ladies shoes, climbed 1.8 percent after yesterday sliding to a one-week low.
Catalonia
Catalonia: We were saying “calls for independence referendum is increasing pressure on both Madrid and EU to move forward to offer better conditions and better narrative to the public. We see PM Rajoy taking constitutional actions to deter Catalonia from conducting the referendum, at a moment where more the referendum is gaining support from the independence forces all over the world. Madrid may accept to open discussion to devote additional autonomy to Catalonia in order to reduce the pressure. This story is likely to push EUR existential threat higher short term, but we consider that EUR is likely to rebound by the end of this year, when these threats will be repriced as less likely.” (daily briefing Sept. 30 2014). Catalonia decision to suspend formal campaign is the first step in our constructive scenario. 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.
CATALAN CLUBS FACE LA LIGA AXE IF REGION SECEDES
MADRID (AP) — The president of La Liga said Tuesday that Catalan clubs like Barcelona and Espanyol would be excluded from Spain’s top tier should the region succeed in its push for independence from Spain.
Javier Tebas said the country’s sports law entitles only one non-Spanish territory — Andorra — to legally participate in the league or other official competitions.
The pro-independence government of Catalonia is pushing for a referendum to see how many of the wealthy northeastern region’s inhabitants would like to secede.
The plan is overwhelmingly opposed by Spain’s parliament, where the government of Prime Minister Mariano Rajoy has a large majority.
A debate held in parliament in April vetoed the region’s request to hold a referendum by 299 votes against to 47 in favor.
Despite the veto, the Catalan government says it will hold a non-binding referendum on Nov. 9, a decision that has led to furious arguments about the ballot’s legality.
The government argues that such a move would violate the Spanish Constitution’s stipulation that only the national government can call referendums on sovereignty and that all Spaniards are entitled to vote in such a ballot.
Whatever the outcome, the fact that Andorra — a tiny state straddling the Pyrenees Mountains that separate Spain from France — is allowed to play in the league creates a precedent that could permit the Catalan clubs’ eventual inclusion.
Catalans Vow to Hand Over to Madrid Boxes Full of Pro-Vote Demands
MOSCOW, October 7 (RIA Novosti) – The Catalan government vowed on Tuesday to send four boxes full of pro-vote demands from some 900 municipalities across the independence-minded Spanish region of Catalonia to the central government and the top court, the regional government’s spokesman Francesc Homs said.
As many as 920 out of 947 municipalities in this northeastern region submitted their requests. Homs said the sheer volume of demands would be enough for the government in Madrid and the Spanish Constitutional Court to see « with their own eyes » that Catalonia’s desire to vote in the independence referendum should be taken seriously.
Catalonia govt to decide by Oct 15 whether to hold referendum
Oct 6 (Reuters) – The government of the northeastern Spanish region of Catalonia will decide by Oct. 15 whether to push ahead with a contested referendum on separation from the rest of Spain, a spokesman said on Monday.
Catalonia, with a population of 7.5 million people, its own language and accounting for a fifth of Spain’s economy, has long sought independence and was buoyed by the close result of last month’s referendum in Scotland.
But Spain’s central government says the referendum called for Nov. 9 is illegal and the country’s Constitutional Court has suspended it while it deliberates on its legality, a process that could take months or years.
« We can’t decide on this… on Nov. 7 or 8, » said Francesc Homs, spokesman for the Catalan government, in a radio interview.
Artur Mas, the leader of Catalonia, is under pressure from more radical pro-independence supporters to defy Madrid and the Constitutional Court and push ahead with the referendum.
Although his administration initially temporarily suspended campaigning for the referendum after the court ruling, it later changed its tone and said it would push on.
US News
We have been covering the US using mainly 6 axes: 1) immigration reforms, 2) tax reforms – tax inversion, 3) institutional mistrust, 4) net neutrality, 5) mid-term election, 6) new gold standard. Today we focus on Institutional mistrust, as we are fed up of how this mistrust is derailing growth.
Institutional mistrust: In order to reduce the widely spread mistrust, Twitter sued FBI and DOJ to release NSA information requests regarding surveillance of its users. Let’s start by indicating that it does not need to be NSA to get a large sense of who is thinking what and supporting whom on twitter. This is the most fascinating thing I’ve been working on since I joined Twitter. A specific research work will be published in the coming weeks. It will show that not only we know localisation, but also we know what people believe in, what camp they are working for. We have already spotted one or two spies as well… At SNBDL we like to say: if you’re cheating on your partner, tell him the truth. There is no way you can hide it in a globally shared data. When it comes to privacy – security balance, we have been indicating many times that the “Casablanca Test” said it all (this is the name given by the US Supreme Court).
Economy: While job creation continue to be well supported, the wages are muted. This is the most exciting story because the Fed can continue to support job creation while the US economy is rebalancing. We understand those who want quick rate normalisation rational, but this rational is not for the benefit of the many – because inflation is subdued and is likely to continue to be -. In the housing sector, the US is confirming the trend that it’s heading toward “Germanisation” *becoming Germany with housing*. Indeed, income and wealth inequality is pushing many americans to consider renting. When one can carry books, music, films, paperwork, IDs etc. on one small devise such as a phone or a tablet, renting become a genuine solution to focus one’s wealth to empower oneself.
President Obama gave a speech on the Economy to help Democrats to keep the Senate majority. The speech did not come with any new news. However, the agenda presented could be derailed and even create a doom scenario should GOP won the Senate majority. It would jeopardise reforms (when China and EU are reforming) such as immigration, education, infrastructure etc. The doom scenario would take place should they resumed their aim to impeach the US President. We are not siding here against GOP from any ideological prospect. We do believe that it’s in GOP interest to loose, to focus on it’s internal civil war against the Tea Party. The GOP without Tea Party can be a very important driver to bi-partisan reforms agenda. With the Tea Party, not only GOP threatens the US economy but it does also threaten its own future. Remember : GOP abolished slavery. It’s now seen as in a War against Women. We disagree with Mohamed El-Erian view that mid-term elections are a non-even for markets. Mr. El-Erian explains in a private communication that he does not see GOP dragging its feet into a non-sense economic politics (gridlocks). We disagree with this because Tea Party is far from being rational and its objective is to help its own financial supporters interests: Commodities (through Koch industries which has “invested” $125m in this mid-term ads so far) and Gold bugs (ask if you disagree with this we can share with you tens of thousands of website and evidences).
US Tax inversion: Salix Pharmaceuticals Ltd , citing a « changed political environment, » said on Friday it had scrapped a deal with Italy’s Cosmo Pharmaceuticals SpA that would have allowed it to shift its tax base from the United States to Europe.
From Sept 26th Daily Briefing: As we were expecting since the announcement of Burger King deal (which has been widely reported as being solely pursuing tax inversion objective) we’ve indicated that this would sign the end of the system. US Treasury took actions to make it harder to execute such deals, while the tax reform seems in limbo due to DC gridlock. Administrative actions taken by Treasury Secretary Lew makes it harder to execute tax inversion but does not derail it entirely. We consider that G-20 initiative to undertake OECD proposal to reform the rule of “double non-taxation” (see our previous daily briefing) will help improve the tax governance (and incidentally the rise in the mistrust in the public institutions – which are seen to be colluding with businesses -). Markets have reacted negatively to the actions taken against tax loopholes, because these are seen to be the only remaining way for Corporations to improve their EPS (while demand continue to be subdued). We disagree with this view because G-20 initiatives to tackle “tax optimisation” will come along with more investments and fiscal stimuli which would help spur more economic demand.
TWITTER SUES FBI, DOJ TO RELEASE NSA REQUEST INFO
NEW YORK (AP) — Twitter is suing the FBI and the Department of Justice to be able to release more information about government surveillance of its users.
The social media company filed a lawsuit Tuesday in a California federal court to publish its full « transparency report, » which documents government requests for user information. Twitter Inc. published a surveillance report in July but couldn’t include the exact number of national security requests it received because Internet companies are prohibited from disclosing that information, even if they didn’t get any requests.
The San Francisco-based company said in a blog post that it believes it’s entitled under the First Amendment to « respond to our users’ concerns and to the statements of U.S. government officials by providing information about the scope of U.S. government surveillance. »
The U.S. government has been able to access phone networks and high-speed Internet traffic for years to catch suspected criminals and terrorists. The FBI also started pushing technology companies like Google, Skype and others to guarantee access to their data streams and grab emails, video chats, pictures and more. It recently emerged that Yahoo was threatened with a daily fine of $250,000 by the U.S. government if it didn’t comply with demands to give up information on its users. A secret 2007 lawsuit and subsequent appeal was ultimately unsuccessful, the company said last month after a federal judge ordered some material about the court challenge to be unsealed.
Technology companies say they turn over information only if required by court order, and in the interest of transparency with their customers, want to share information about the government’s activities.
« Our ability to speak has been restricted by laws that prohibit and even criminalize a service provider like us from disclosing the exact number of national security letters (‘NSLs’) and Foreign Intelligence Surveillance Act (‘FISA’) court orders received — even if that number is zero, » Ben Lee, Twitter’s vice president of legal, wrote in a blog post.
EIA Says Crude and Gasoline to Drop as Output Advances
The U.S. Energy Information Administration cut 2014 and 2015 crude price forecasts because of rising output and reduced demand.
West Texas Intermediate will average $94.58 a barrel in 2015 versus the September projection of $94.67, the EIA said today in its monthly Short-Term Energy Outlook. The agency trimmed its Brent crude forecast for next year to $101.67 from $103. It also cut its gasoline price outlook.
The Energy Department’s statistical arm forecast production of 8.54 million barrels a day this year, up from 7.45 million last year, and 9.5 million in 2015, the most since 1970. This year’s projection was revised up 10,000 from the September report, while the 2015 forecast was reduced 30,000.
Job Openings Signal Hiring in U.S. to Be Sustained: Economy
The number of jobs waiting to be filled in the U.S. climbed in August to the highest level in 13 years as employers gained confidence to expand their workforces.
Openings (JOLTTOTL) rose to 4.84 million in August, the most since January 2001, from a revised 4.61 million the prior month, according to Labor Department data issued today in Washington. The report also showed hiring and firing cooled, while fewer people quit their jobs.
The upswing in openings helps explain the rebound in payrolls last month that pushed the jobless rate to a six-year low and signaled Americans can look forward to sustained gains in hiring into 2015. The figures form part of a package of data Federal Reserve Chair Janet Yellen and her colleagues use to measure the labor market’s health, which will help determine when the central bank starts to raise its benchmark interest.
Slower growth for US home prices in August
WASHINGTON (AP) — U.S. home prices increased in August, yet the pace of these gains continues to slow, helping to improve affordability for would-be buyers.
Rents in Southern California will climb faster in next two years, study says
Renters, get ready to pay a little more.
The cost of the average apartment in the Southland is projected to grow more than 8% over the next two years, according to a report out Tuesday.
A new study from USC’s Lusk Center for Real Estate projects that rents will climb 8.2% in Los Angeles County by mid-2016, to $1,856 a month, on average. In Orange County, the prediction is 8.6% growth, to $1,806. And in the Inland Empire, the study forecasts 9.9% rent growth to $1,246 a month. A new study projects rents will grow in Southern California by more than 8% over the next two years.
A new study projects rents will grow in Southern California by more than 8% over the next two years. (Lawrence K. Ho / Los Angeles Times)
If those forecasts pan out, rents would grow over the next two years faster than the 3% to 4% clip seen in the last 12 months. Vacancy rates are expected to decline a bit even as more new apartment buildings open.
The study is just the latest to reflect a growing housing affordability crisis, sparked by rising rents, sluggish incomes and relatively tight supply. By some measures, L.A. is the least affordable rental market in the country.
America experiencing the great wage slowdown of the 21st century
American workers have been receiving meager pay increases for so long now that it’s reasonable to talk in sweeping terms about the trend. It is the great wage slowdown of the 21st century.
The typical American family makes less than the typical family did 15 years ago, a statement that had not previously been true since the Great Depression. Even as the unemployment rate has fallen in the last few years, wage growth has remained mediocre. Last week’s jobs report offered the latest evidence
OBAMA KEEPS HIS DISTANCE FROM THE CAMPAIGN TRAIL
NEW YORK (AP) — President Barack Obama opened a weeklong fundraising spree for his party Tuesday, telling high-dollar donors in New York and Connecticut that Democrats have facts and history on their side. Yet there still were no signs that Obama planned to take that message directly to voters by appearing on the campaign trail with his party’s candidates.
Even while he raises money in private homes from coast to coast, Obama’s public campaign schedule is getting off to a late start. Although the White House says Obama will start appearing with candidates as early as next week, no events have been announced.
Obama’s absence from the campaign trail, less than a month out from Election Day, underscores the limits to Obama’s ability to help his party in the midterms, his own political baggage a potential liability for Democrats who campaign with him publicly.
« I’m profoundly optimistic about America. I need you to be also, » Obama told Democratic donors. « And then I need you to express your optimism not just by voting yourselves, but by getting involved. »
Obama’s fundraising jaunt kicked off Tuesday in New York, where police shut down streets as his motorcade rolled through Manhattan to a pair of fundraisers for the Democratic Party. Roughly two dozen donors paid up to $32,400 to attend a closed-door discussion with Obama, with another 250 donors writing $1,000 checks to see Obama at a reception.
Under crystal chandeliers at a ritzy restaurant in the Tribeca neighborhood, Obama accused Republicans of wanting to limit America’s prosperity to those at the top while obstructing his efforts to raise wages, improve education and fix immigration laws. He said Democrats would prevail if they were able to persuade enough of their voters to show up at the polls on Election Day.
HP Echoes EBay in More Than Just Corporate Split-Up
Hewlett-Packard Co. and EBay Inc. announced plans to split up their companies within a week of each other. The similarities don’t end there.
Hewlett-Packard said yesterday it would break up the business into one company that sells personal computers and printers, with a separate entity providing software, servers, storage and services. The move followed EBay’s Sept. 30 disclosure that it would spin off the PayPal payments unit into a stand-alone company, splitting off from its marketplace business by the end of 2015.
While the two Silicon Valley companies work in different areas of technology, both are dealing with the same kinds of pressures that showcase how large-capitalization companies are having to adjust to a transformed landscape. Both are facing a rush of investment in Silicon Valley that has spawned startups pushing cloud computing and mobile, causing trouble for incumbents that had built their business on PCs and licensed software. As their sales growth has tapered off, the companies have also seen activists demand better shareholder returns, pushing executives to choose focus over sprawl.
Europe News
EU: the glass half empty view is that unemployment rate is still very elevated (23.3% in August) but it’s coming down, even before EU Commission President elected Juncker’s infrastructure plan, digital initiative, EU Council President elected Tusk’s energy union, are not in place. Though this story combined with Catalonia independence can lead, mistakenly, people to believe that “la Bastille” will be taken in days, we disagree with this view, as those who see a bloody revolution are being hired by ISIL and alike, while the overwhelming youth are working genuinely to improve their lives (alike their ancestors, Youth are adapting to the XXI Century to survive). Although PM Valls said out loud “My government is pro-business” (he translated it in English because in literal translation is sound like a french lover talk), many media continue to bash France and EU (even Mickey needs a bailout). But the same story about Euro-Disney shows that US corporation are still believing in EU and EZ (let’s face it the 2 – wake up call have pushed leaders to change the course – it’s the EC commission of the last chance -). Italy is speeding up Labor market reform. This is likely to clear the way from more institutional reforms to defeat bad governance (or corruption).
Ahead of Br-exit negotiation, Britain is fighting against bad governance in Finance. This is as a game changer as has been President Xi actions to fight corruption. We are constructive on EU scenario because policymakers are taking the right decision.
UK PM Cameron is expressing his say in the forthcoming negotiation ahead of Br-Exit referendum. Amongst these European Court of Human Rights ruling is considered as an important step. As we were saying, since Aug. 30th EU Council, we consider that the UK will gain some changes in order to give PM Cameron enough political capital to campaign for the Yes. We consider that the EU Commission success will be the best tool to defeat UKIP and EU-Skeptics in the forthcoming ballots.
From the economic prospective, the UK housing market is cooling off while the services sector is softening. This supports our view that BoE will not deliver the rates hike priced by markets
German Industrial Output Drops Most Since 2009 in August
German industrial production (GRIPIMOM) fell more than economists forecast in August in the latest sign that the outlook for Europe’s largest economy is deteriorating.
Production, adjusted for seasonal swings, dropped 4 percent from July, when it expanded 1.6 percent, the Economy Ministry in Berlin said today. That’s the biggest decline since January 2009 and compares with a median estimate of 1.5 percent in a Bloomberg News survey.
Germany’s economy is losing momentum as sluggish growth in the euro area, its largest export market, and political tension with Russia weigh on confidence. The European Central Bank has enacted unprecedented stimulus to sustain the regional recovery while calling on governments to press ahead with structural reforms.
Eurozone split – Europe’s central drama
On Wednesday Europe’s leaders will gather in Milan for their on-off-on-again summit on jobs and growth.
Expectations are low. The meeting is very much the idea of the Italian Prime Minister, Matteo Renzi, wanting to demonstrate to a domestic audience that he is at the forefront of the struggle to cut Europe’s unemployment numbers.
Even as the leaders discuss how to boost growth, what will be impossible to disguise are the deep divisions within the eurozone – and that is Europe’s central drama this autumn.
Germany has proudly announced that it is running a balanced budget. In contrast France and Italy are not just struggling with their budgets; they are threatening to flout the EU’s budget rules. « France makes its own rules, » says its Prime Minister Manuel Valls. The European Commission may well challenge that assertion.
Let’s take the case of Italy. It has torn up its own forecasts. Growth this year will be -0.3%, compared with a predicted figure of 0.8%. Growth next year will be a tepid 0.6%.
Italy’s level of industrial production has fallen by a quarter in the past six years. Unemployment remains stubbornly high at near 12%. Its budget deficit is increasing, although the government says it will stay under 3%.
Brent falls away from $93 as oversupply concerns return
* Saudi rules out output cuts with lower contract prices -analyst
* Geopolitical risks stripped out of prices -analyst
SINGAPORE, Oct 7 (Reuters) – Brent crude futures slipped further away from $93 a barrel on Tuesday and partially erased the previous session’s gains, with concerns about abundant supply outweighing the positive boost to prices from the U.S. dollar’s recent weakness.
Crude oil futures reversed course on Monday with Brent ending the session higher after falling earlier, following a slump in the U.S. dollar. The dollar suffered its biggest one-day drop since January on Monday against a basket of major currencies, but steadied in the Asian time zone on Tuesday.
An increase in the U.S. dollar makes oil more costly for buyers using other currencies.
The rally in oil prices on Monday was a short-term reaction to the fall in the dollar, said Ric Spooner, chief market analyst at Sydney’s CMC Markets.
« The momentum (in oil prices) has been downward. One of the key bits of news is Saudi Arabia cutting prices. This removes any near term potential for production cuts, » leaving oversupplied oil markets to weigh on prices, Spooner said.
U.K. Wins First Guilty Plea From Banker on Libor-Rigging
A senior banker from a leading British bank pleaded guilty to conspiring to manipulate London interbank offered rates in a U.K. court last week.
The individual, who can’t be identified by order of the judge today, is the first to plead guilty in the U.K. Serious Fraud Office’s interest-rate rigging investigation. Twelve have been charged in connection to the U.K. case.
The SFO released a statement today confirming the plea and saying it couldn’t comment further on the matter for legal reasons.
French finance minister says not in EU’s powers to reject budget
(Reuters) – Europe’s executive arm does not have the authority to reject France’s budget over missed deficit-cutting targets, French Finance Minister Michel Sapin said on Tuesday as he announced that no further spending cuts would be made next year.
Euro zone officials have told Reuters that the European Commission is likely to reject the French draft budget at the end of the month and ask for a new one that would be more in line with its commitments.
French officials have said they did not expect the budget to be rejected.
Sapin said the reports were « wrong ».
Rejecting the budget « is not within the powers of the Commission, » he told RTL radio.
Emmanuel Macron, Face of France’s New Socialism
PARIS — Around 9 p.m. on a recent weeknight, all the lights in Emmanuel Macron’s cavernous offices at the French Economy Ministry were blazing. A coterie of energetic 30-something aides scurried through the hallways, fingers tapping at their iPhones as stacks of takeout dinners circulated on trays.
If not for his aura of authority, Mr. Macron might easily have been mistaken for one of his employees. The 36-year-old former investment banker, whom President François Hollande appointed in August to oversee the economy, had just ended another marathon day of meetings that began at 7 a.m. Yet his tailored suit was unrumpled and his auburn hair still perfectly in place. “We have a very long day here, but there’s a lot of work to be done,” Mr. Macron said, settling onto a black couch. “France is sick,” he said, “and we are facing difficult times. We have no choice but to reform this country.”
Barcelona faces La Liga expulsion if Catalonia splits from Spain
Italy’s Renzi Faces Key Vote on Making Firings Easier
Italian Prime Minister Matteo Renzi faces a confidence vote today on his labor-market proposal that includes rules making it easier to fire workers and more difficult to challenge dismissals in court.
Italy’s biggest labor union, CGIL, said it would send tens of thousands of workers into the streets of Rome on Oct. 25 to demonstrate against the plan. Some members of Renzi’s Democratic Party have criticized the vote, a tool used to end debate and bring dissenting allies into line by staking the government survival on its outcome.
“All the senators will of course vote yes in the confidence vote,” Renzi said yesterday, referring to legislators from his own party and their allies. “We don’t expect to be ambushed. Should that happen, we’ll deal with that.”
More cases of Ebola in Europe ‘unavoidable’, WHO says
Oct 7 (Reuters) – Europe will almost inevitably see more cases of the deadly Ebola virus within its borders but the continent is well prepared to control the disease, the World Health Organization’s regional director said on Tuesday.
Speaking to Reuters just hours after Europe’s first local case of Ebola infection was confirmed in a nurse in Spain, the WHO’s European director, Zsuzsanna Jakab, said further such events were « unavoidable ».
Spanish health officials said four people had been hospitalized to try and stem any further spread of Ebola there after the nurse became the first person in the world known to have contracted the virus outside of Africa.
« Such imported cases and similar events as have happened in Spain will happen also in the future, most likely, » Jakab told Reuters in a telephone interview from her Copenhagen office.
« It is quite unavoidable … that such incidents will happen in the future because of the extensive travel both from Europe to the affected countries and the other way around. »
China News
China: World Bank new forecast confirmed that China is soft landing while rebalancing. Labor statistics have been showing that the manufacturers have started to rebalance their activities away from labor intensive (an objective already stressed by the Chinese leadership). These are in line with the objective to rebalance the economy away from credit driven investment. “BHP Billiton has raised the stakes in the ongoing war of attrition in global iron ore with a plan to slash costs and lift production” confirms our view that commodity companies are starting to adapt to the new normal, while China is cutting the road to nowhere and excessive bureaucracy (China removes 160,000 phantom staff on payroll, China Today). Acknowledging that there is “phantom staff” out loud is an event for those who have been following China for years (this could have cost some China Today’s managers their jobs a couple of years ago).
Furthermore, the west is helping China to change it’s “narrative” from being anti-democracy (China has not gone back on its agreements with Britain over the future of Hong Kong, whose autonomy is far greater than what Britain expected three decades ago, a former aide to late British Prime Minister Margaret Thatcher has said.).
The government continues to fear that the economic rebalancing has not taken momentum yet although 1) labor intensive manufacturers are relocating in cheaper labor countries, 2) businesses are upgrading their business models [while becoming environmental friendly], 3) President Xi has conducted many trade – investment agreement with Neighbours (after Premier Li did the same in Africa) to secure investment projects which use Chinese manpower – engineers know-how in this domaine, 4) China is gaining more military presence and has fluxed it mussels – e.g. China “Top Gun” intercept by a US fighter jet -, 5) China has signed many RMB agreement which reinforce the currency usage and prepare its full liberalisation – after Free Trade Zones (FTZ) have proven to be a success -, 6) China has undertaken a genuine fight against bad governance and better regulation – many examples in our recent daily briefings of fight against corruption and bad governance-. We see in FinMin Lou Jiwei recent comment an indication that not only China wants to create a reserve currency it does want it to be strong when Chinese leaders perceive the heavy pressure place on USD by a category of investors to avoid debasing the currency through deficit financing – although we consider that this worry is misplaced -.
China has not gone back on HK agreements with UK: former Thatcher aide
LONDON, Oct. 6 (Xinhua) — China has not gone back on its agreements with Britain over the future of Hong Kong, whose autonomy is far greater than what Britain expected three decades ago, a former aide to late British Prime Minister Margaret Thatcher has said.
« Hong Kong has very extensive autonomy, far greater than we believed actually could be achieved when the Hong Kong joint declaration with China was negotiated, » Charles Powell, former private secretary to Thatcher during the 1980s, told British BBC Radio 4’s The World This Weekend on Sunday.
« They have far better conditions, including political conditions than any other city in China, but the bottom line is — they are a city in China, » said Powell, who was a key foreign policy advisor to Thatcher when Britain agreed to return Hong Kong to China.
Chinese FM urges advancement of new type of China-US relations
WASHINGTON – Chinese Foreign Minister Wang Yi on Wednesday expressed the hope that China and the United States would enhance mutual trust, expand cooperation and avoid misjudgment.
Wang met with US President Barack Obama, Defense Secretary Chuck Hagel and Secretary of State John Kerry on Wednesday.
At a meeting with Wang, Obama said he was looking forward to visiting China in November and his meeting with Chinese President Xi Jinping.
Enhancement of mutual trust
Wang said China welcomes Obama’s visit and is ready to work with the United States to deepen strategic mutual trust, expand mutually beneficial cooperation, and get real results from efforts to develop a new type of major-country relationship between the two countries.
When meeting with former US National Security Advisor Thomas Donilon on Tuesday, Wang said that, for the sake of genuinely implementing the consensus on building a new type of major-country relationship, China and the United States first need to create mutual trust, dispel mutual suspicion and prevent strategic miscalculation.
The Chinese top diplomat also expressed this viewpoint during his meeting with Hagel, saying that China and the United States should build strategic mutual trust, including mutual trust between their military forces, and reduce mistrust.
Uighurs’ travails lost in glare of Hong Kong protests
TOKYO — Amid the international media attention devoted to the student-led pro-democracy protests in Hong Kong, the struggle for human rights in China’s western Xinjiang Uighur Autonomous Region is getting short shrift.
U.S. Secretary of State John Kerry, meeting with his Chinese counterpart, Foreign Minister Wang Yi, on Oct. 1 in Washington, broached the touchy subject of the pro-democracy protests in Hong Kong, urging Beijing to allow peaceful demonstrators to express themselves. Following their meeting, Kerry’s boss, President Barack Obama, weighed in, telling Yi the Communist Party of China should listen more to the people of Hong Kong.
Wang, in essence, told the U.S. to mind its own business. The demonstrations, dubbed the « umbrella revolution » for the protesters’ favored tool for fending off tear gas, were an internal matter and illegal to boot. The people in the streets, for their part, are unhappy with the Chinese government’s decision to allow only Beijing-approved nominees to run in the 2017 election to choose the city’s next chief executive.
n the back and forth over Hong Kong’s future, the problems of the Turkic, largely Muslim Uyghurs are in danger of being overlooked.
Chinese insurer buys NYC’s Waldorf hotel
Anbang Insurance Group Co of Beijing will buy the venerable Waldorf Astoria hotel in New York for $1.95 billion. [Photo by Jack Freifelder / China Daily]
China’s Anbang Insurance Group Co has acquired the famous Waldorf Astoria New York hotel for $1.95 billion.
Hilton Worldwide Holdings Inc announced on Monday that it had reached an agreement to sell the 60,000-square-foot property that straddles Lexington and Park avenues.
It will be the largest amount ever paid for a US hotel, according to research firm Lodging Econometrics, and the highest price paid by a Chinese buyer for a US property to date, according to commercial real estate brokerage CBRE Group Inc.
When Anbang’s purchase is completed, Chinese investors will have spent $2.7 billion on New York-area real estate in 2014, exceeding last year’s total by $100 million, according to Real Capital Analytics Inc, a research firm that tracks commercial real estate sale.
The purchase is Anbang’s first major deal in the United States, and the Wall Street Journal reported on Monday that Anbang had to beat out two other bidders.
« There really are no other sales to compare it to, » Bruce Ford, senior vice-president and director of global business development at Lodging Econometrics, told Bloomberg News on Monday. « It is the most unique asset with the most unique location in the world. »
China removes 160,000 ‘phantom staff’ from government payroll
Hong Kong (CNN) — China has removed 162,629 « phantom staff » from government payrolls, as Beijing presses on with a campaign against official corruption and misuse of public money, state media reported.
Hebei province in central China was the worst offender, with 55,793 officials found to be getting paid even though they never worked, followed by Sichuan and Henan, state news agency Xinhua reported on Monday.
No « phantom employees » were found in Shanghai and Tibet, the report added.
President Xi Jinping has made rooting out corruption a top priority since taking power amid widespread suspicion that government officials use their position for personal gain.
The People’s Daily also said that 114,418 official vehicles had been scrapped out of a total of 119,846.
Firmer execution urged in China’s green efforts
TIANJIN – Facing an urgent need to stabilize growth while containing environmental drain, China needs to step up environmental protection and invite the entire public to take a green initiative, a group of panelists at the Summer Davos concluded.
Aiming at greener growth, China ramped up efforts to curb overcapacity and reorganize polluting industries. In the first half of 2014, per unit GDP energy consumption dropped by 4.2 percent year on year and carbon intensity was cut by about 5 percent, both representing the largest drops in years, Premier Li Keqiang said Wednesday at the Summer Davos forum.
« China is fulfilling its promises and taking action, » Xie Zhenhua, deputy chief of the National Development and Reform Commission and the country’s top official on climate change, commented during a panel session on Thursday.
He said the carbon market, a market-based approach to pollution reduction still absent in China, needs long-term, powerful and stable targets to cut emissions, in addition to policy support, to assure entrepreneurs and encourage them to innovate and invest.
« Executive force is not enough and the market is not stable now. » Xie said.
Gong Ke, president of Tianjin-based Nankai University, said legislation of environmental-protection-related issues in China is making headway but the law enforcement has been weak.
Legislation has to be more transparent, data-based and address the concerns of multiple parties, said Gong at a separate panel on Thursday.
Other analysts at the Summer Davos agreed on a multi-dimensional mechanism that invites the government, enterprises and individuals to collaborate.
Australia News
Australia: Australia continues to be seen, by markets, as a derivative to the old Chinese model (i.e. commodity provider). This view explains the high beta between Australian assets and commodity prices (or China demand for commodities). Banks shares are suffering from the combination of the increase perception of increase in risks and additional macro prudential constants to curb housing prices frothiness. Small business defined the “goldilock range” for AUDUSD to be [.90-.94]. This level is much higher than RBA own assessment (based on PPP models). We have been criticising PPP models because they do not factor any structural changes.
These assume that neither China nor Australia are conducting their rebalancing agenda. We do believe that the current weaknesses offers genuine opportunity to benefit from the other drivers to the Australian economy which are not related to commodities. We see the current Australian Dollar weakness to continue at least until the USD start to weaken again when markets will realise that it has beaten too much on a quick rate normalisation. Meanwhile, from our previous daily briefing, we have gathered sufficient support to the view that the drivers of the Australian GDP are moving toward: 1) education, health and finance services provider to Asian neighbours, 2) innovation and digital sector, 3) energy resources export to Japan (the later contributes to our constructive view that the current negative Japan Energy Trade deficit will rebalance in the medium term – reducing Japanese Government bonds solvency risk – ).
Markets Live: Banks in wild swings
Shares ease after banks recover most of steep early losses, while Rio leads miners higher on takeover talk and the RBA stays pat on rates.
UPDATE 1-Australia c.bank sits on rates, says A$ still high
RBA holds rates at 2.5 pct, sticks to stable policy outlook
* Says A$ still high historically despite recent fall
* Markets priced for no move in rates until well into 2015
SYDNEY, Oct 7 (Reuters) – Australia’s central bank kept interest rates at record lows for a 13th straight policy meeting on Tuesday, saying the economy was to run a little below par for some time yet.
The local dollar eased a touch after the Reserve Bank of Australia (RBA) reiterated that the currency was still high by historic standards, even though it has fallen sharply in the past month.
« Overall, the Bank still expects growth to be a little below trend for the next several quarters, » said RBA Governor Glenn Stevens, in what was largely a re-run of recent statements.
« On present indications, the most prudent course is likely to be a period of stability in interest rates. »
Federal Government to face budget pressure despite domestic economic recovery
The central bank kept rates at a record low for a 14th straight month and is promising to keep them there for some time.
The RBA says the economy is growing at a moderate pace, albeit below trend, and « the most prudent course is likely to be a period of stability in interest rates. »
« If they’re saying that they don’t expect unemployment to start coming down until the first half of 2016, they’re also saying, if history is any guide, that they don’t expect to lift interest rates until then, » said Bank of America Merrill Lynch’s chief economist Saul Eslake.
However, across the economy, there are signs the RBA’s long awaited transition from mining to non-mining activity is gathering pace.
Dunn and Bradstreet says retailers are looking forward to their best Christmas in several years and a survey by the Australian Chamber of Commerce and Industry shows business owners’ feelings about their firms are positive for the first time in nine months.
« Excess capacity is starting to be used up, so we expect to see in the not-too-far distant future increases in employment and investment as well, » said ACCI’s chief executive Kate Carnell.
UPDATE 5-Bruised Rio Tinto rebuffs Glencore takeover approach
* Glencore approached Rio Tinto about a merger in July
* A tie-up would have created the world’s biggest miner
* Rio says no talks with Glencore after rejecting bid
* Glencore says no deal is actively being considered
* Graphic: link.reuters.com/teb23w (Updates with Glencore statement)
MELBOURNE/LONDON, Oct 7 (Reuters) – Rio Tinto has rejected a takeover approach from smaller rival Glencore Plc, snubbing a blockbuster deal that would have created a $160 billion mining and commodities trading giant.
Rio said on Tuesday that it was contacted about a potential deal in July, as the price of its most profitable product, iron ore, was heading towards five-year lows. Glencore confirmed later that it had made a telephone call to gauge interest in « some form of merger ».
« Rio Tinto responded that it was not interested in pursuing these discussions, » Glencore said in a statement.
Prime Minister Tony Abbott has left open the possibility of Australia joining a ground campaign against Islamic State militants « down the track », saying « let’s see how it goes ».
Previously, Mr Abbott has said that Australia has « no intention » of committing combat troops on the ground in Iraq.
Australia has contributed six F/A-18F Super Hornet fighter jets, a surveillance aircraft, a refueler, 200 special forces soldiers, and 400 military support staff to the US-led mission.
Australian Super Hornets have begun flying combat missions but are yet to use their weapons, while the special forces contingent is on standby waiting for authorities to agree on a final legal framework for it to be deployed in Iraq.
New Zealand News
New Zealand: Fontera payout cuts fuel concerns over NZ economic prospects. This increases the pressure on new PM Key Cabinet to accelerate rebalancing the economy and reforms. We have been indicating that NZ has already started a genuine shift toward new Tech agriculture, health (please see below recent promising advance in Asthma treatment) and education services directed to Asian neighbours. The fact that PM Key secured another term supports our constructive scenario on NZ.. This constructive scenario narrative is currently overshadowed by the “search for yield” (or interest rates differential) and RBNZ fight against excessive carry trade effects.
Drilling of New Zealand fault to help global understanding of earthquakes
WELLINGTON, Oct. 6 (Xinhua) — An international team of scientists has begun drilling a 1.3-km-deep hole into the Alpine Fault in New Zealand’s South Island in a pioneering project to understand the fault and the earthquakes it produces.
The ambitious project, north of Franz Josef Glacier, is expected to take about two months to complete, according to the New Zealand government’s Institute of Geological and Nuclear Sciences (GNS Science).
It will enable scientists to install monitoring equipment deep inside the fault to record small earthquakes and measure temperature, pressure and chemical conditions close to where earthquakes are generated.
The goal was to improve understanding of earthquake processes by sampling and analyzing rock and fluid materials retrieved from what scientists referred to as « the earthquake machine, » said a statement from GNS Science Monday.
Other major faults around the world had been drilled in this way after a big earthquake, but this was the first time a major fault had been drilled before it ruptured.
Vaccine breakthrough key to controlling asthma: New Zealand researchers
WELLINGTON, Oct. 6 (Xinhua) — New Zealand researchers said Monday they have discovered new vaccine technology for the treatment of asthma and other allergic diseases.
The discovery in the field of immunotherapy, which harnesses the body’s own ability to fight diseases, was an extension of work to develop cancer vaccines at Wellington’s Victoria University.
« Cancer and asthma both involve the immune system, but in cancer we are trying to get the body to take notice of tumor proteins, while in asthma, we want to stop it over-reacting to an allergen, » researcher Dr Ian Hermans said in a statement.
« Allergy is the wrong sort of immune response. Using the vaccine, we have initiated a more appropriate immune response and prevented the allergy from taking hold. »
Vaccines worked by presenting the body with an antigen, which provoked the immune system to activate T cells to protect from the disease in the future.
To strengthen the immune response, a chemical called an adjuvant was administered along with the antigen, to make the vaccine more effective.
In the asthma vaccine, the antigen and the adjuvant were chemically linked, rather than simply delivered together, ensuring the essential components reached the target cells together and created the most powerful but highly specific immune response to target the disease.
Japan News
Japan: inflation softening along with economic downgrade was widely expected as a result of the 1st VAT hike (cf our strategic note Dec 26th 2013). We see BoJ to keep the bazooka of QQE-2 un-tested until the JPY excessive depreciation and JGB solvency risk came down * investors are still short JGB expecting a Japan crisis *. The 2nd VAT hike will require some stabilisation at the current levels, though we expect that PM Abe will undertake the 2nd hike in steps, because BoJ is unlikely to be sufficiently confident to move ahead with more QQE while JPY is accelerating its depreciation. PM Abe voiced concerned over the JPY rapid depreciation, as he pointed (rightly in our opinion) to the increase in energy cost, which deteriorate further the energy trade deficit – and increase the risk of JGB solvency -. The Prime Minister confirmed in his Diet address to pursue Abenomics 3rd arrow. Japan is said to resume discussion with US on TPP, while energy sector is heading toward energy transition away from Nuxe. Physics Nobel price attribution to energy efficient and environmental friendly technology is a game changer because it does support the view that the Win-Win scenario is feasible, if only the consensus stop being pessimistic for no reason.
However, BoJ might do some adjustment to its monetary program but nothing excessive. The news flow out of this weekend G20 meeting shows that the global community is gently pressing the government and the BoJ to pursue structural reforms, economic rebalancing, solvency improvement (through VAT 2nd hike commitment) and adequate monetary policy (not too hot – to avoid a crisis – not too cool – to avoid derailing the on-going portfolio rebalancing approach -). Japan continues to face heavy public pressure to rebalance its energy reliance to nuclear. While we believe that Japan will continue to press for reopening nuclear plants (when Nuclear Watchdog gives his green light), the medium to long term trend is that Japan will use Trade negotiation with neighbours to secure new energy sources while using this pressure to deregulate and move forward with Abenomics 3rd arrow (please see our Japan update for more on our views). We are not surprise by the fact that Russian news media are reporting the pushback to reopening nuclear plans, ahead of Japan-Russian talks (about sanctions, energy agreement, and disputed territories).
As China, Japan, and South Korea heads toward a constructive talks (as we were reporting in our previous daily briefings) and Japan and North Korea are heading toward a solution on Japanese civilians abduction, North Korea leaders close to Kim Jong Un held last weekend high level talks with South Korea minister of reunification. This indicates that the scenario of an unified Korea is advancing. We have been considering that the reunification will ultimately take place but it requires normalised relation amongst the 3 important players: China, Japan, South Korea.
Japan Shares Fall After Yen Gains as IMF Cuts GDP Outlook
Japanese shares fell for a second day after the yen gained amid demand for haven assets as the International Monetary Fund cut its outlook for global growth.
Inpex Corp. declined 2.6 percent, leading a gauge of commodity producers to the steepest retreat among 33 industry groups on the Topix (TPX) index. Toyota Motor Corp., a carmaker that gets three-quarters of its sales outside Japan, sank 2 percent. Toho Co. surged 4.7 percent after the movie distributor raised its profit forecast.
The Topix index lost 1.4 percent to 1,273.50 as of 1:05 p.m. in Tokyo, with four stocks falling for each that rose. The gauge has dropped about 5.5 percent from a six-year high reached last month. The Nikkei 225 Stock Average declined 1.4 percent to 15,569.20 today. The yen traded at 108.33 per dollar after rising 0.7 percent yesterday.
“Outside of the hit to global sentiment from the IMF comments, the yen spiking through 108 per dollar is a major yoke for Japanese shares this morning,” said Gavin Parry, managing director of Parry International in Hong Kong. “The IMF comments are impacting given Japan’s export orientation.”
The IMF said the world economy will grow 3.8 percent next year, compared with a July forecast for 4 percent, after a 3.3 percent expansion this year. The lender also warned about the risks of rising geopolitical tensions and a financial-market correction as stocks reach “frothy” levels.
Japan’s Tepco to tie up with Chubu Electric in thermal power JV
TOKYO, Sept 18 (Reuters) – Tokyo Electric Power Co (Tepco) and Chubu Electric Power Co have entered final talks on a comprehensive joint venture in fossil fuel procurement and electricity generation, the companies said on Tuesday.
Tepco and Chubu Electric, the dominant electricity suppliers in Japan’s biggest and third-largest economic regions respectively, said they will aim to agree on terms of the tie-up by the end of the current business year ending March.
The utilities will discuss joint procurement of liquefied natural gas and the construction of new fossil fuel-fired power plants in a partnership that is likely to be held on an 50-50 basis.
Tepco was saved from bankruptcy by the government in 2012 following the reactor meltdowns at its Fukushima plant north of Tokyo after Japan’s March 2011 earthquake and tsunami, the world’s worst nuclear disaster since Chernobyl in 1986.
The disaster exposed the company to tens of billions of dollars of compensation claims and clean-up costs and led to the shutdown of all the country’s nuclear reactors for stringent safety checks.
Dollar rebounds above 109 yen line as Kuroda signals weak yen OK
TOKYO (Kyodo) — The dollar rose into the lower 109 yen zone on Tuesday morning in Tokyo as Bank of Japan Governor Haruhiko Kuroda said a weaker yen is generally positive for Japan’s economy, stoking expectations the central bank will not intervene to prevent the yen’s further weakening.
At noon, the dollar fetched 109.15-23 yen compared with 108.73-83 yen in New York and 109.42-44 yen in Tokyo at 5 p.m. Monday.
The euro was quoted at $1.2614-2615 and 137.69-70 yen against $1.2650-2660 and 137.61-71 yen in New York and $1.2537-2538 and 137.18-22 yen in Tokyo late Monday afternoon.
The dollar rose against the yen as Kuroda appeared at the Diet ahead of the release of the outcome of the BOJ’s two-day policy meeting expected later in the day, saying the central bank will continue its ultraloose monetary policy in pursuit of a 2 percent inflation target and that the weak yen is generally positive for Japan’s economy.
Kuroda made it clear that pulling Japan out of deflation is the BOJ’s priority despite concerns about the effect of a weakened yen, said Toshiyuki Suzuki, senior market economist at the Bank of Tokyo-Mitsubishi UFJ.
Nobel prize for physics 2014 goes to inventors of energy-efficient LED light
LONDON: The invention of an energy source that lights up our computer and/or mobile phone screens and holds promise to brighten up the quality of life of over 1.5 billion people around the world, has been awarded the Nobel prize for physics 2014.
Announcing that « this year’s Nobel prize for physics is about light », the Royal Swedish Academy of Sciences decided to award the most coveted prize to three Japanese scientists — Isamu Akasaki from Meijo University, Hiroshi Amano from the Nagoya University, Japan and Shuji Nakamura from the University of California « for the invention of efficient blue light-emitting diodes which has enabled bright and energy-saving white light sources. »
Japan planning to resume TPP talks with US
Japanese trade officials are planning to resume working-level talks with their US counterparts on a free-trade pact. They’ll try again to narrow their differences on key issues ahead of a ministerial meeting on the Trans-Pacific Partnership later this month.
Japan’s minister in charge of TPP talks, Akira Amari, met US Trade Representative Michael Froman in late September. But they failed to agree on a tariff structure for 5 agricultural categories and auto parts.
Japanese negotiators are apparently feeling pressure to compromise, as participating countries try to close the deal by year-end.
Froman says Japan’s response is key to doing so. Officials of New Zealand and Canada are also urging Japanese officials to further open their markets.
Ministers from 12 Pacific-rim countries are scheduled to meet for 3 days in Sydney from October 25th. They are to discuss tariffs, intellectual property, and preferential treatment for state-backed businesses.
In the meantime, Japanese officials hope to achieve a breakthrough in bilateral talks with the US to speed up the overall negotiations.
About this report
The report and analysis have been prepared using Quid a big data solution. This report focuses on the most important issues out of 10,000 articles produced by top contributors amongst 35,000 sources during the last 24hours (or from Friday 3am LDN to Monday 3am for Monday’s reports).
***
Disclaimer
Copyright 2014 SNBDL Ltd (“SNBDL”). All rights reserved.
This report may provide information, commentary and discussion of issues relating to the state of the economy and the capital markets. All opinions, projections and estimates constitute the judgment of the author as of the date of the report and are subject to change without notice. SNBDL is under no obligation to update this report and readers should therefore assume that SNBDL will not update any fact, circumstance or opinion contained in this report.
The content of this report is provided for discussion purposes only. Any forward looking statements or forecasts included in the content are based on assumptions derived from historical results and trends. Actual results may vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision, and no investment decisions should be made based on the content of this report.
This report is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation and particular needs of any specific person. Under no circumstances does any information represent a recommendation to buy or sell securities or any other asset, or otherwise constitute investment advice. Investors should seek financial advice regarding the appropriateness of investing in specific securities or financial instruments and implementing investment strategies discussed or recommended in this report.
This report should not be regarded by recipients as a substitute for the exercise of their own judgment and readers are encouraged to seek independent, third-party research on any companies discussed or impacted by this report.
Securities and other financial instruments discussed in this report are not insured and are not deposits or other obligations of any insured depository institution. Investments in general and, derivatives, in particular, involve numerous risks, including, among others, market risk, counter-party default risk and liquidity risk. No security, financial instrument or derivative is suitable for all investors. In some cases, securities and other financial instruments may be difficult to value or sell and reliable information about the value or risks related to the security or financial instrument may be difficult to obtain. Investors should note that income from such securities and other financial instruments, if any, may fluctuate and that the price or value of such securities and instruments may rise or fall and, in some cases, investors may lose their entire principal investment. Past performance is not necessarily a guide to future performance.
Foreign currency rates of exchange may adversely affect the value, price or income of any security or financial instrument mentioned in this report. Investors in such securities and instruments effectively assume currency risk.
Any information relating to the tax status of financial instruments discussed herein is not intended to provide tax advice or to be used by anyone to provide tax advice. Investors are urged to seek tax advice based on their particular circumstances from an independent tax professional.
Individuals identified as economists in this report do not function as research analysts. Under U.S. law, reports prepared by them are not research reports under applicable U.S. rules and regulations.
In accordance with rules established by the U.K. Financial Services Authority, macroeconomic analysis is considered investment research.
Materials prepared by SNBDL research personnel are based on public information. Facts and views presented in this material have not been reviewed by, and may not reflect information known to, professionals in other business areas of SNBDL.
To the extent this report discusses any legal proceeding or issues, it has not been prepared as nor is it intended to express any legal conclusion, opinion or advice. Investors should consult their own legal advisers as to issues of law relating to the subject matter of this report. SNBDL research personnel’s knowledge of legal proceedings in which any SNBDL entity and/or its directors, officers and employees may be plaintiffs, defendants, co—defendants or co—plaintiffs with or involving companies mentioned in this report is based on public information. Facts and views presented in this material that relate to any such proceedings have not been reviewed by, discussed with, and may not reflect information known to, professionals in other business areas of SNBDL in connection with the legal proceedings or matters relevant to such proceedings.
The information herein (other than disclosure information relating to SNBDL and its affiliates) was obtained from various sources and SNBDL does not guarantee its accuracy. This report may contain links to third—party websites. SNBDL is not responsible for the content of any third—party website or any linked content contained in a third—party website. Content contained on such third—party websites is not part of this report and is not incorporated by reference into this report. The inclusion of a link in this report does not imply any endorsement by or any affiliation with SNBDL.
Any unauthorised use or disclosure is prohibited.
TERMS AND CONDITIONS OF USE
YOU AGREE YOU ARE USING THIS REPORT AND THE SNBDL SUBSCRIPTION SERVICES AT YOUR OWN RISK AND LIABILITY. NEITHER SNBDL NOR ANY DIRECTOR, OFFICER, EMPLOYEE OR AGENT OF SNBDL ACCEPTS ANY LIABILITY WHATSOEVER FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, MORAL, INCIDENTAL, COLLATERAL OR SPECIAL DAMAGES OR LOSSES OF ANY KIND, INCLUDING, WITHOUT LIMITATION, THOSE DAMAGES ARISING FROM ANY DECISION MADE OR ACTION TAKEN BY YOU IN RELIANCE ON THE CONTENT OF THIS REPORT, OR THOSE DAMAGES RESULTING FROM LOSS OF USE, DATA OR PROFITS, WHETHER FROM THE USE OF OR INABILITY TO USE ANY CONTENT OR SOFTWARE OBTAINED FROM THIRD PARTIES REQUIRED TO OBTAIN ACCESS TO THE CONTENT, OR ANY OTHER CAUSE, EVEN IF SNBDL IS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR LOSSES AND EVEN IF CAUSED BY ANY ACT, OMISSION OR NEGLIGENCE OF SNBDL OR ITS DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS AND EVEN IF ANY OF THEM HAS BEEN APPRISED OF THE LIKELIHOOD OF SUCH DAMAGES OCCURRING.
If you have received this report in error, or no longer wish to receive this report, you may ask to have your contact information removed from our distribution list by emailing driss.lamrani@snbdl.com