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SNBDL Daily Briefing
Report prepared using big data solution Quid
Our take away from the last 24 hours news
Yesterday Fed minutes confirmed our analysis since September FOMC meeting: the Fed is worry about the global economy and there is no reason why they would have to rush normalising rates. This was an out-of consensus call. We had a very high confidence in our call because thanks to our approach we have the ability to look at the big picture instead of focusing on one or two ideas (such as the Philipps Curve indicates that the “equilibrium fed fund” should be higher or throughout history no bank succeeded in enlarging its balance sheet without creating hyperinflation). To these two question I like to answer: had we Smartphones in XIX Century? How these “little electronic stuff” is changing our Total Factor Productivity? As expected, USD rebounded, Treasury and stocks rallied. What next, actually, we see more verbal intervention to reduce the hawkish view (e.g. “low for longer”) but we believe that Fed will refrain itself to embark any new big-thing (monetary easing) unless the markets show much more pessimism. Our believe is built on two arguments: 1) Fed has to keep recovering credibility – BIS, IMF are all over the place worrying about asset frothiness – 2) Fed wants to continue to push banks – before this turns to Hedge Funds and Asset Managers – to undertake more regulation (macro prudential). We understand that banks are better off risking the economic recovery to avoid too much regulation, but they are better off changing their attitude because General Attorney Eric Holder said “there is no such thing as too big to jail”.
Furthermore, ISDA is working on derivatives leaving wills which would help bail-ins banks in more an ordinarily manner – and avoid systemic risks -. The recent hearings regarding AIG bail-out has shown that Fed has not sided with banks (because these are rotten to the core as some gold bugs are crying all over the place) but had no choice in the good of the public. By differentiating itself from Wall Street, the institutions are regaining trust (“credit” in Latin). We believe that we’ve entered in the 3rd phase of the crisis and this will lead us to a better economic future. This without going through the doom and gloom scenario, unless we have mis-read any genuine news which increases the probability of ISIL succeeding.
All about the data, that the Fed answer to Transparency Bill bugs, who have been polluting email boxes of many investors by the idea that “there is NO Rule but the Taylor Rule” (as I was told many times in Austrian gathering). While I believe in the Taylor Rule, I do believe as well that its parameters change and adapt overtime. When the total factor productivity is changing, the Taylor Rule’s parameters canNOT be fixe. This is why we believe the Fed has the right answer.
The more the time passes by, the more our energy and commodity call looks the best trade of 2014 (short of commodities on any spike). Not only this scenario has been called wrong by the consensus (which considers that from Russia to ISIL the oil premium would sky rocket), but also it has failed to understand the interaction with the rest of the economic picture. Less commodity inflation means less inflation, assuming that wages are low and would remain for some time (as we rebalance from labor-economy to start-up-of-yourself economy). Consensus can denial it but it has it wrong since the beginning of 2014. Without a genuine rethinking of how we do economic research, it’ll likely to continue to be wrong. Please test our work and judge us on facts (thanks for following and welcome to new follower).
BoJ: 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. Kuroda left many options opened as expected (please see our Jackson Hole 2014 paper which provide an in-depth analysis of Central Banks).
Ebola could cost between $9bn to $32bn depending how credible is the global institutions response according to the World Bank. From a pure economic prospect, (no nice feeling here), by investing $1bn the world could save $23bn. Because$1bn is actually what WHO, UN believe to be sufficient to deal definitely with the outbreak. Any CEO would love to have this difficult question which could bring 23x return. We have been following the ramp-up of this investment, US Pentagon devoted 750mn along with Bill Gates 50mn and other wealthy and NGO institutions. #IceBucketChallenge has showed as that we can be nice, without taking anything from ourselves. We are getting to understand that a Win-Win scenario is not only stable but it’s also generating the most profit. If only we restart believing in ourselves.
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.
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?
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 it.
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 winning its way to Labor market reform. This is likely to clear the way from more institutional reforms to defeat bad governance (or corruption). Furthermore, EU leaders are considering speeding up funds for job recovery support. The most important single data today comes from Switzerland, which after a long negotiation, is agreeing to share banking secrecy data – it’s the first step in dealing with privacy-security issues -.
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: Continuing data out of China confirm that the country is soft landing while rebalancing. Labor statistics have been showing that the manufacturers have started to rebalance their activities away from labor intensive (an objective already stressed by the Chinese leadership). These are in line with the objective to rebalance the economy away from credit driven investment. “BHP Billiton has raised the stakes in the ongoing war of attrition in global iron ore with a plan to slash costs and lift production” confirms our view that commodity companies are starting to adapt to the new normal, while China is cutting the road to nowhere and excessive bureaucracy (China removes 160,000 phantom staff on payroll, China Today). Acknowledging that there is “phantom staff” out loud is an event for those who have been following China for years (this could have cost some China Today’s managers their jobs a couple of years ago).
Furthermore, the west is helping China to change it’s “narrative” from being anti-democracy (China has not gone back on its agreements with Britain over the future of Hong Kong, whose autonomy is far greater than what Britain expected three decades ago, a former aide to late British Prime Minister Margaret Thatcher has said.).
Furthermore, Premier Li is undertaking a state visit to EU. This is likely to bring more collaboration with the West, while China will be offering a back-door to Russia energy at a moment when : President Putin is challenged by plummeting oil prices and sanctions are making harder for the energy sector (finance projects and investments).
The government continues to fear that the economic rebalancing has not taken momentum yet although 1) labor intensive manufacturers are relocating in cheaper labor countries, 2) businesses are upgrading their business models [while becoming environmental friendly], 3) President Xi has conducted many trade – investment agreement with Neighbours (after Premier Li did the same in Africa) to secure investment projects which use Chinese manpower – engineers know-how in this domaine, 4) China is gaining more military presence and has fluxed it mussels – e.g. China “Top Gun” intercept by a US fighter jet -, 5) China has signed many RMB agreement which reinforce the currency usage and prepare its full liberalisation – after Free Trade Zones (FTZ) have proven to be a success -, 6) China has undertaken a genuine fight against bad governance and better regulation – many examples in our recent daily briefings of fight against corruption and bad governance-. We see in FinMin Lou Jiwei recent comment an indication that not only China wants to create a reserve currency it does want it to be strong when Chinese leaders perceive the heavy pressure place on USD by a category of investors to avoid debasing the currency through deficit financing – although we consider that this worry is misplaced -.
Australia: Australia continues to be seen, by markets, as a derivative to the old Chinese model (i.e. commodity provider). This view explains the high beta between Australian assets and commodity prices (or China demand for commodities). Banks shares are suffering from the combination of the increase perception of increase in risks and additional macro prudential constants to curb housing prices frothiness. Small business defined the “goldilock range” for AUDUSD to be [.90-.94]. This level is much higher than RBA own assessment (based on PPP models). We have been criticising PPP models because they do not factor any structural changes.
These assume that neither China nor Australia are conducting their rebalancing agenda. We do believe that the current weaknesses offers genuine opportunity to benefit from the other drivers to the Australian economy which are not related to commodities. We see the current Australian Dollar weakness to continue at least until the USD start to weaken again when markets will realise that it has beaten too much on a quick rate normalisation. Meanwhile, from our previous daily briefing, we have gathered sufficient support to the view that the drivers of the Australian GDP are moving toward: 1) education, health and finance services provider to Asian neighbours, 2) innovation and digital sector, 3) energy resources export to Japan (the later contributes to our constructive view that the current negative Japan Energy Trade deficit will rebalance in the medium term – reducing Japanese Government bonds solvency risk – ).
Japan: inflation softening along with economic downgrade was widely expected as a result of the 1st VAT hike (cf our strategic note Dec 26th 2013). We see BoJ to keep the bazooka of QQE-2 un-tested until the JPY excessive depreciation and JGB solvency risk came down * investors are still short JGB expecting a Japan crisis *. The 2nd VAT hike will require some stabilisation at the current levels, though we expect that PM Abe will undertake the 2nd hike in steps, because BoJ is unlikely to be sufficiently confident to move ahead with more QQE while JPY is accelerating its depreciation. PM Abe voiced concerned over the JPY rapid depreciation, as he pointed (rightly in our opinion) to the increase in energy cost, which deteriorate further the energy trade deficit – and increase the risk of JGB solvency -. The Prime Minister confirmed in his Diet address to pursue Abenomics 3rd arrow. Japan is said to resume discussion with US on TPP, while energy sector is heading toward energy transition away from Nuxe. Physics Nobel price attribution to energy efficient and environmental friendly technology is a game changer because it does support the view that the Win-Win scenario is feasible, if only the consensus stop being pessimistic for no reason.
Furthermore, GPIF delayed its asset allocation review. This is positive because it will calm down markets nervousness that GPIF will shift over-night its JGB holding and would create a market fixed income crash. We see the current development in line with our constructive scenario.
However, BoJ might do some adjustment to its monetary program but nothing excessive. The news flow out of this weekend G20 meeting shows that the global community is gently pressing the government and the BoJ to pursue structural reforms, economic rebalancing, solvency improvement (through VAT 2nd hike commitment) and adequate monetary policy (not too hot – to avoid a crisis – not too cool – to avoid derailing the on-going portfolio rebalancing approach -). Japan continues to face heavy public pressure to rebalance its energy reliance to nuclear. While we believe that Japan will continue to press for reopening nuclear plants (when Nuclear Watchdog gives his green light), the medium to long term trend is that Japan will use Trade negotiation with neighbours to secure new energy sources while using this pressure to deregulate and move forward with Abenomics 3rd arrow (please see our Japan update for more on our views). We are not surprise by the fact that Russian news media are reporting the pushback to reopening nuclear plans, ahead of Japan-Russian talks (about sanctions, energy agreement, and disputed territories).
As China, Japan, and South Korea heads toward a constructive talks (as we were reporting in our previous daily briefings) and Japan and North Korea are heading toward a solution on Japanese civilians abduction, North Korea leaders close to Kim Jong Un held last weekend high level talks with South Korea minister of reunification. This indicates that the scenario of an unified Korea is advancing. We have been considering that the reunification will ultimately take place but it requires normalised relation amongst the 3 important players: China, Japan, South Korea.
Central banks News
Yesterday Fed minutes confirmed our analysis since September FOMC meeting: the Fed is worry about the global economy and there is no reason why they would have to rush normalising rates. This was an out-of consensus call. We had a very high confidence in our call because thanks to our approach we have the ability to look at the big picture instead of focusing on one or two ideas (such as the Philipps Curve indicates that the “equilibrium fed fund” should be higher or throughout history no bank succeeded in enlarging its balance sheet without creating hyperinflation). To these two question I like to answer: had we Smartphones in XIX Century? How these “little electronic stuff” is changing our Total Factor Productivity? As expected, USD rebounded, Treasury and stocks rallied. What next, actually, we see more verbal intervention to reduce the hawkish view (e.g. “low for longer”) but we believe that Fed will refrain itself to embark any new big-thing (monetary easing) unless the markets show much more pessimism. Our believe is built on two arguments: 1) Fed has to keep recovering credibility – BIS, IMF are all over the place worrying about asset frothiness – 2) Fed wants to continue to push banks – before this turns to Hedge Funds and Asset Managers – to undertake more regulation (macro prudential). We understand that banks are better off risking the economic recovery to avoid too much regulation, but they are better off changing their attitude because General Attorney Eric Holder said “there is no such thing as too big to jail”.
Furthermore, ISDA is working on derivatives leaving wills which would help bail-ins banks in more an ordinarily manner – and avoid systemic risks -. The recent hearings regarding AIG bail-out has shown that Fed has not sided with banks (because these are rotten to the core as some gold bugs are crying all over the place) but had no choice in the good of the public. By differentiating itself from Wall Street, the institutions are regaining trust (“credit” in Latin). We believe that we’ve entered in the 3rd phase of the crisis and this will lead us to a better economic future. This without going through the doom and gloom scenario, unless we have mis-read any genuine news which increases the probability of ISIL succeeding.
Dovish Fed minutes reveal global slowdown worries
WASHINGTON – Federal Reserve officials stressed “patience” in waiting to raise interest rates, worrying about weaker foreign economic growth and the stronger dollar, minutes of their September policy meeting showed Wednesday.
Participants at the Federal Open Market Committee meeting discussed their concerns about the stronger dollar amid stuttering growth in the eurozone, slowdowns in China and Japan and elevated geopolitical risks.
The greenback in particular had firmed against the euro, the yen and the British pound.
“Some participants expressed concern that the persistent shortfall of economic growth and inflation in the euro area could lead to a further appreciation of the dollar and have adverse effects on the U.S. external sector,” the minutes said.
“Several” of them added “that slower economic growth in China or Japan or unanticipated events in the Middle East or Ukraine might pose a similar risk.”
US STOCKS-S&P 500 has best day in a year following Fed minutes
NEW YORK, Oct 8 (Reuters) – U.S. stocks soared on Wednesday, with major indexes posting their biggest one-day jumps of 2014 after the Federal Reserve reassured investors that its first interest rate hike would not come until it deemed the economy could withstand it.
The day’s gains were broad and gains accelerated near the end of the volatile session. While Wall Street fell in morning trading, with the S&P briefly dipping under its 150-day moving average, all ten primary sectors of the S&P ended higher and only one closed with a gain of less than 1 percent.
The Fed has said that it would not raise rates for a « considerable time, » and in the minutes from its Sept. 16-17 meeting the U.S. central bank expressed concern that this could be interpreted « as a commitment » rather than being based on data that pointed to an economy that could grow without Fed stimulus.
Dollar Declines as Fed Expresses Strong Currency Concern
The dollar fell from almost a four-year high after minutes from the Federal Reserve’s last meeting showed officials are concerned that the global slowdown and a stronger currency pose risks to the U.S. economic outlook.
The greenback weakened for a third day as futures traders lowered bets the Fed will lift interest rates after the release of the minutes from the Sept. 16-17 meeting. South Africa’s rand rose as a gauge of emerging-market currencies erased a drop. Russia’s ruble declined amid data that showed the central bank sold $420 million of foreign currency in its third day of interventions this month. The yen fell.
“It kind of looks like the Fed will take any excuse not to normalize rates in the near term,” Lennon Sweeting, a San Francisco-based dealer at the broker and payment provider USForex Inc., said in a phone interview. “What we’re seeing is consolidation and probably a brief period of stability. Overall, the bull rally on the dollar is still intact.”
Low inflation expectations support euro zone bonds as QE wait goes on
Five-year, five-year breakeven forward in falling trend
* Inflation prospects boost QE bets even as ECB holds fire
* Bond rally intact for now, at risk if inflation stays low
By Marius Zaharia
LONDON, Oct 8 (Reuters) – Record low inflation expectations are reinforcing a two-year-old rally in euro zone bonds as they keep alive bets on further monetary easing despite signals from the European Central Bank that it’s in no hurry to do more.
Bonds sold off last week after ECB President Mario Draghi gave no hint that a big programme of sovereign bond buying, known as quantitative easing or QE, was imminent but inflation expectations have helped keep yield rises to a few basis points.
That buys time for the ECB to assess whether the steps it has already taken – and possibly a weaker euro – can lift inflation off near-zero levels without risking a surge in borrowing costs for governments and companies.
The five-year, five-year breakeven forward, which currently measures where the market expects 2024 inflation forecasts to be in 2019, fell below 1.90 percent in the wake of Thursday’s ECB meeting. link.reuters.com/dat72w
Constancio Says $1.3 Trillion of Assets Qualify for ECB Plan
Alessandro Speciale and Alastair MarshOct 08, 2014 10:42 am ET
(Updates with comment from analyst in fourth paragraph.)
Oct. 8 (Bloomberg) — European Central Bank Vice President Vitor Constancio said 1 trillion euros ($1.26 trillion) of asset-backed securities and covered bonds are eligible for the institution’s purchase program.
“The overall purchasable amount of ABS and covered bonds is sufficient to ensure that asset purchases can be carried out on a large scale,” Constancio said in Frankfurt today. “We are, of course, aware that the amounts that we will be able to buy will be lower than the theoretical amount.”
Asset purchases are the latest addition to the central bank’s medley of unconventional tools that also includes targeted long-term loans and a negative deposit rate. ECB President Mario Draghi has said he wants to steer the size of the bank’s balance sheet back toward early-2012 levels, indicating an expansion of as much as 1 trillion euros.
“It’s helpful to have a ballpark figure for the potential size of ECB purchases, but the success of the program will likely depend on reviving the primary market,” said Manuel Trojovsky, structured credit analyst at UniCredit Bank AG in Munich. “Some bonds that have already been issued are hard to come by because many of them are held to maturity so the ECB will also need to buy in the primary market.”
Falling Yields
The premium investors seek to buy European asset-backed bonds over benchmark rates was 0.72 percentage point yesterday, the lowest in seven years, according to Barclays Plc index data.
Spanish government bonds led gains in euro-area sovereign debt today as the ECB’s plans for asset purchases boosted investor confidence. Ten-year yields slid five basis points to 2.09 percent at 4:21 p.m. Frankfurt time. The yield on Belgian 10-year debt fell to a record low.
Polish Central Bank to Cut Interest Rate to 2.25%, Survey Shows
Poland’s central bank to reduce bmark rate by 25bps today, according to 33 of 40 economists in Bloomberg survey. * 7 economists predict 50bps cut * If in line with est., 1st rate reduction in 15 mos. * Decision due in Warsaw before 4pm news conference by Governor Marek Belka * Following today’s potential cut, “the Council will publish a dovish statement and will leave the door open for easing in November and December,” Piotr Kalisz, Warsaw-based Citigroup economist, says by phone yday. * Bank left its bmark rate unchanged on Sept. 3 * Rate cuts “are very probable” and Council “won’t have to wait” for next CPI and GDP projection in Nov., Belka said on Sept. 3 * “Yet, the projection will provide important data and may determine the size and length of the whole cycle,” says Kalisz, who expects total 75bps in cuts * NOTE: Consumer prices dropped 0.3% y/y in Aug. after a 0.2% decline in July, 1st deflation in >30yrs * NOTE: GDP growth slowed in 2Q less than originally estimated and was 3.3% vs 3.4% in 1Q * NOTE: Sept. PMI rose to 49.5 from 49 in Aug., stayed below 50 throughout 3Q
Brazil’s Real Rises on Speculation Fed Won’t Rush to Raise Rates
Brazil’s real gained for a fourth straight day after the publication of Federal Reserve minutes added to speculation that U.S. policy makers won’t be in a hurry to raise interest rates.
The currency climbed 0.8 percent to 2.3774 per dollar at the close of trade in Sao Paulo after falling 1.4 percent earlier today. Swap rates, a gauge of expectations for changes in Brazil’s borrowing costs, rose five basis points, or 0.05 percentage point, to 11.83 percent on the contract due in January 2016.
The real erased its decline as minutes published today show Fed policy makers said at their Sept. 16-17 meeting that a global slowdown and a stronger dollar posed potential risks to the U.S. economic outlook. Projected swings between the Brazilian currency’s gains and losses mounted before the Oct. 26 election runoff, with one-month implied volatility on options for the real increasing today to 22 percent, the highest among developing nations.
Economic News
All about the data, that the Fed answer to Transparency Bill bugs, who have been polluting email boxes of many investors by the idea that “there is NO Rule but the Taylor Rule” (as I was told many times in Austrian gathering). While I believe in the Taylor Rule, I do believe as well that its parameters change and adapt overtime. When the total factor productivity is changing, the Taylor Rule’s parameters canNOT be fixe. This is why we believe the Fed has the right answer.
The more the time passes by, the more our energy and commodity call looks the best trade of 2014 (short of commodities on any spike). Not only this scenario has been called wrong by the consensus (which considers that from Russia to ISIL the oil premium would sky rocket), but also it has failed to understand the interaction with the rest of the economic picture. Less commodity inflation means less inflation, assuming that wages are low and would remain for some time (as we rebalance from labor-economy to start-up-of-yourself economy). Consensus can denial it but it has it wrong since the beginning of 2014. Without a genuine rethinking of how we do economic research, it’ll likely to continue to be wrong. Please test our work and judge us on facts (thanks for following and welcome to new follower).
BoJ: 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. Kuroda left many options opened as expected (please see our Jackson Hole 2014 paper which provide an in-depth analysis of Central Banks).
FED OFFICIALS LINK RATE INCREASE TO ECONOMIC DATA
WASHINGTON (AP) — Federal Reserve officials, worried about weak growth overseas, agreed last month that they would begin raising interest rates only when measures of the economy’s health and inflation signaled the time was right.
Minutes of the Fed’s discussions at the Sept. 16-17 meeting released Wednesday showed that officials expressed rising worries about lackluster growth in Europe, as well as slowing growth in Japan and China.
The U.S. stock market surged after the release of the minutes, logging its biggest gain of the year. Investors appeared to take the revealed discussion as a sign that the Fed was in no hurry to raise interest rates. The Dow Jones industrial average jumped 274 points, or 1.6 percent, to 16,994.
« The markets like the news that there is no urgency on the part of Fed officials to stop doing what they are doing, » said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.
Fed officials also discussed the potential adverse impacts of a stronger dollar, which has gained strength recently against the euro, yen and British pound. A stronger dollar makes U.S. goods more expensive overseas and foreign goods cheaper in the United States, a development that can dampen inflation.
« Some participants expressed concern that the persistent shortfall of economic growth and inflation in the euro area could lead to a further appreciation of the U.S. dollar and have adverse effects on the U.S. external sector, » the minutes said.
At the September meeting, the Fed voted 8-2 to keep its key short-term interest rate at a record low near zero and retained language that it expected the rate to remain at that level for a « considerable time » after it ends monthly bond purchases. The minutes showed that some officials didn’t think that was clear enough.
CORRECTED-METALS-Copper slips as economic growth worries weigh
* China’s main share index hits 20-month high
* LME wins appeal against ruling that had halted reforms
* U.S. Fed to release mid-Sept meeting minutes
By Maytaal Angel and Harpreet Bhal
LONDON, Oct 8 (Reuters) – Copper fell on Wednesday, pressured by concerns about economic growth in China and Europe, although falls were capped by some short-covering after dipping to five-month lows last week.
Three-month copper on the London Metal Exchange (LME), untraded at the close, was bid at $6,635, down 0.5 percent. Prices fell to a five-month low of $6,600 a tonne on Oct. 2.
The International Monetary Fund on Tuesday cut its global growth forecasts for a third time this year while German industrial output in August posted its biggest fall since the financial crisis.
Underpinning copper, however, China’s main share index hit a 20-month high in intraday trade on Wednesday, helped by strength in property developers after the central bank rolled out policies to boost the struggling sector.
IMF: Credit not flowing despite monetary stimulus policies
The International Monetary Fund said Wednesday that banks must boost their lending to ensure accommodative monetary policies are felt in the real economy, but noted that many lack the strength to support the global recovery.
In presenting the multilateral lender’s latest « Global Financial Stability » report during the annual meetings of the IMF and World Bank, Jose Viñals, head of the IMF’s Monetary and Capital Markets Department, said banks are safer after the injection of needed capital.
But despite their healthier balance sheets and increased liquidity, many do not have the « financial muscle » to provide enough credit to drive a halting recovery, particularly in the euro zone, he said.
Emerging Stocks Drop as Clashes Roil Turkey While Ruble Weakens
Emerging-market stocks fell for the first time in four days after clashes erupted in southeast Turkey and capital outflows deepened in Russia. The ruble weakened to a record low.
The MSCI Emerging Markets Index decreased 1.2 percent to 998.76 in New York. Turkish shares slid to a five-month low and the Ibovespa snapped a four-day winning streak. Russian equities slumped as Brent crude slid into a bear market. A gauge of Hong Kong-traded Chinese shares ended a three-day gain and Samsung Electronics Co. (005930), the world’s largest smartphone maker, dropped to a two-year low in Seoul.
The International Monetary Fund cut its outlook for global growth and warned about the risks of rising geopolitical tensions and “frothy” stock markets. Oil, the source of half of Russia’s revenue with natural gas, sank to a 27-month low while clashes broke out in southeast Turkey as Islamic State attempts to widen its grip along Syria’s border. Hong Kong student protesters are threatening to bring back the crowds as talks with the government hit a stumbling block.
Kuroda Says Many Options Available for Any Increased Easing
The Bank of Japan has “many options” for additional easing, Governor Haruhiko Kuroda said, emphasizing that the bank would adjust its policy if needed to reach its 2 percent inflation target.
“We have substantially increased our JGB holdings but still it’s about 20 percent of total JGBs outstanding,” Kuroda said in response to questions after a speech in New York, noting that the Bank of England holds roughly 40 percent of government debt. “Our purchases of CP, corporate bonds, ETFs and J-REITs have been quite small compared to the market size.”
Kuroda’s comments come amid increasing signs of doubt at the BOJ that it will achieve its two-year timeframe for the target. A majority of board members think the bank should drop it, according to people familiar with discussions at the BOJ.
Brent Falls Into Bear Market as Supply Outpaces Demand
Brent crude slid into a bear market on concern rising global supplies will be more than enough to meet slowing demand. West Texas Intermediate dropped to a 17-month low after inventories jumped the most since April.
Brent closed 21 percent below its June peak, meeting the common definition of a bear market. U.S. production is set to increase to the most in more than three decades amid higher output from shale formations. Supplies from OPEC rose last month and Russian output neared a post-Soviet record. The International Energy Agency reduced demand projections for this year and next.
“There’s a lot of news out there and it all points to lower prices,” Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees about $120 billion of assets, said by phone. “It doesn’t look like demand is going to pick up anytime soon. On the supply side it doesn’t look like OPEC is ready to make the cuts needed to boost prices. The path of least resistance is lower.”
Brent for November settlement slid 73 cents, or 0.8 percent, to $91.38 a barrel on the London-based ICE Futures Europe exchange, the lowest close since June 28, 2012. The volume of all futures was 33 percent above the 100-day average.
WTI for November delivery retreated $1.54, or 1.7 percent, to $87.31 a barrel on the New York Mercantile Exchange, the lowest settlement since April 17, 2013. The volume of all futures was 53 percent above the 100-day average. Brent ended at a $4.07 premium to WTI, compared with $3.26 yesterday.
Ebola
Ebola could cost between $9bn to $32bn depending how credible is the global institutions response according to the World Bank. From a pure economic prospect, (no nice feeling here), by investing $1bn the world could save $23bn. Because$1bn is actually what WHO, UN believe to be sufficient to deal definitely with the outbreak. Any CEO would love to have this difficult question which could bring 23x return. We have been following the ramp-up of this investment, US Pentagon devoted 750mn along with Bill Gates 50mn and other wealthy and NGO institutions. #IceBucketChallenge has showed as that we can be nice, without taking anything from ourselves. We are getting to understand that a Win-Win scenario is not only stable but it’s also generating the most profit. If only we restart believing in ourselves.
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.
Ebola could cost global economy $32.6B, World Bank says
Disease will cost billions even if it doesn’t spread more than it already has
Ebola could cost the global economy over $32 billion by the end of 2015 if the viral infection spreads into countries that neighbour those already affected by the outbreak
That’s according to the most recent estimates from the World Bank, the UN’s global financial arm, which is tasked with handling loans to poorer nations.
To get the $32.6-billion estimate, the organization charted two scenarios.
In the first, which they call the « low Ebola » scenario, the group assumed officials manage to contain the outbreak in the three most heavily impacted countries: Guinea, Liberia and Sierra Leone.
In the second, known as « high Ebola, » they assume the outbreak takes longer to get a lid on in those countries, and has meanwhile spread to new ones in the region.
In the first scenario, the financial impact might be limited to about $9 billion. In the latter, it would be more than $32 billion.
For context, the U.S. government estimates that the SARS outbreak in 2003 which killed almost 800 people and infected more than 8,000 cost the world economy about $40 billion.
Spanish case focuses attention on the risk of Ebola infecting, spreading through dogs
Monkeys, bats and a menagerie of animals can spread Ebola. Now there’s worry that dogs – or one dog in particular – might spread it, too. Officials in Madrid got a court order to euthanize the pet of a Spanish nursing assistant who has the deadly virus.
The mixed-breed dog named Excalibur was killed on Wednesday.
No case of Ebola spreading to people from dogs has ever been documented, but « clearly we want to look at all possibilities, » said Dr. Thomas Frieden, director of the U.S. Centers for Disease Control and Prevention.
DALLAS – A Liberian man who was the first person diagnosed with Ebola in the United States died in a hospital isolation ward on Wednesday and the government ordered extra screenings at five major airports as part of efforts to stop the virus spreading outside of West Africa.
Thomas Eric Duncan, who arrived in the United States in late September from Liberia, had been in critical condition and on a ventilator, the Texas Health Presbyterian Hospital in Dallas giving him an experimental medication to try to keep him alive.
“It is with profound sadness and heartfelt disappointment that we must inform you of the death of Thomas Eric Duncan this morning at 7:51 a.m.,” hospital spokesman Wendell Watson said in an emailed statement.
About 48 people who had direct or indirect contact with Duncan since he arrived on Sept. 20 are being monitored, but none has yet shown any symptoms, according to health officials.
U.S. steps up Ebola response as Dallas patient dies
WASHINGTON, Oct. 8 (Xinhua) — Travelers from Ebola-affected countries will face enhanced screening at five major U.S. airports, the U.S. government announced Wednesday, hours after a Liberian man, the first person diagnosed with the deadly virus on American soil, died at a Dallas hospital.
Passengers from Guinea, Liberia and Sierra Leone will have their temperatures taken with a non-contact thermometer and have to answer questions about their health and exposure history, the Centers for Disease Control and Prevention (CDC) and the Department of Homeland Security’s Customs & Border Protection (CBP) said in a joint statement.
New York’s JFK International Airport will begin the new screening Saturday, while Washington-Dulles, Newark, Chicago-O’ Hare and Atlanta international airports will implement the new measures next week, said the statement.
By introducing the enhanced entry screening at the five airports, the United States can evaluate more than 94 percent of travelers from Guinea, Liberia, and Sierra Leone, the three West African countries hardest hit by the epidemic, it said.
A White House spokesman estimated that about 150 people would be subject to these additional measures every day.
Describing these measures as « belt-and-suspenders », U.S. President Barack Obama said they will add « a layer of protection on top of the procedures already in place at several airports. »
Spain Nurse’s Assistant With Ebola Is Lesson for Hospitals
Rodrigo Orihuela, Macarena Munoz and Angeline Benoit Oct 08, 2014 3:25 am ET
(Updates with comments from disease expert in 8th paragraph.)
Oct. 8 (Bloomberg) — Spanish officials pledged to review infection control procedures after a nurse’s assistant became ill with Ebola, highlighting the dangers to health workers of dealing with the virus in developed countries.
The 44-year-old worker from near Madrid was in stable condition, authorities said yesterday. Her husband is in isolation and is being tested for Ebola, and about 52 people are being tracked because they interacted with her or cared for Ebola patients, they said. A nurse who worked with the assistant at Carlos III hospital tested negative for the virus.
Two Spanish missionaries who became infected while working with Ebola patients in West Africa were brought to the hospital in August and September. Both died. The nursing assistant cared for the second man, Manuel Garcia. The episode shows that health workers can’t be too cautious, said Peter Piot, a co-discoverer of the Ebola virus in 1976 who is now the director of the London School of Hygiene and Tropical Medicine.
“It’s better to be accused of overreacting,” he said at a briefing yesterday in Geneva. “Dealing with patients with Ebola illness is a very risky business, and the slightest mistake can be fatal.”
The Ebola outbreak in Sierra Leone, Guinea and Liberia has killed more than 3,400 people, among them doctors and nurses caring for the sick. About 382 health-care workers have been infected in West Africa and 216 of them have died, the World Health Organization said Oct. 3.
Ebola: Spanish Nurse Teresa Romero Ramos ‘Got Infected by Touching Face with Gloves’
Teresa Romero Ramos, the Spanish nurse who tested positive to Ebola in Madrid, became infected when she touched her face with gloves she used to assist patient Manuel García Viejo, a Spanish missionary who had contracted the virus in West Africa.
Doctor Germán Ramírez of Madrid’s Carlos III Hospital, where Romero worked, told the Spanish press that « this morning we have been revising what happened in the room were Romero Ramos attended the patient.
« She told me that at one point she thinks she touched her face with the gloves she was wearing. »
He explained Romero entered the room of Viejo, who died of Ebola on 25 September, twice – once to change his diaper and again after he died to retrieve unspecified items.
Ramirez said Romero believes she touched her face with the glove after her first entry.
In an interview with El Mundo, Romero confirmed that she followed safety protocols. She also said by telephone from quarantine that she has felt « better, a little bit better » since being hospitalised on Monday [6 October].
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.
‘Islamic State in Gaza’ Threatens to Murder the Children of Zion
A fire and explosions at the French Cultural Centre in Gaza were claimed as the first act of terrorism in the Palestinian territory by the self-styled Islamic State in Gaza.
The new faction said its mission was to « implement Sharia law in Islamic lands and murder the children of Zion » and warned Gazans to stay away from possible targets.
Two explosions, which caused no casualties, were heard at the site while it was closed for the Eid al-Adha celebrations. A Palestinian interior ministry spokesman said the fire was caused by « faulty petrol jerry cans » and an investigation was underway.
Later, a flyer signed « Islamic State in Gaza » was released on social media saying that it had set off the explosion with 200 kg of explosives near the site’s gas tanks. The statement announced the beginning of operation for the « Islamic State group in the Gaza Strip ».
Israeli Budget Includes Extra Defense Spending After Gaza War
Israel’s cabinet approved the 2015 budget today, allotting a one-time payment of 4.3 billion shekels ($1.2 billion) to the Defense Ministry to develop “tools” deemed necessary after the last conflict with Hamas.
A statement from the Finance Ministry on the 328 billion shekel budget that also gave additional funds for education, health and welfare didn’t elaborate on how the extra defense money would be used.
Israel and Hamas fought a 50-day conflict that destroyed thousands of homes in the Gaza Strip and killed more than 2,100 Palestinians and 70 Israelis before an Aug. 26 cease-fire. Hamas and other Gaza militants have fired some 11,000 rockets and mortars at Israel since 2005, according to Israeli army data. A tunnel network Palestinian militants burrowed under the border to attack Israel was crippled in the fighting.
Israeli police clash with Palestinian demonstrators at Jerusalem holy site
JERUSALEM (AP) — Palestinian demonstrators clashed with Israeli police at a sensitive holy site in Jerusalem on Wednesday, leaving three officers lightly injured, a police spokeswoman said.
The clashes erupted after several dozen masked Palestinians began throwing rocks, firecrackers and other pyrotechnical devices at police when the site – known to Jews as the Temple Mount and to Muslims as the Noble Sanctuary – opened for prayers on Wednesday morning, said spokeswoman Luba Samri.
There was no immediate information on whether any Palestinian protesters were hurt.
Hezbollah has changed the rules of the game
Analysis: While IDF was busy with budget wars and failed to properly equip itself for next war on northern front, Shiite organization did exact opposite.
The incident which took place Sunday on the Lebanese border can be seen as a discrete incident in which a Golani force stationed on Mount Dov spots a cell, while at that stage it was still unclear whether it belonged to the Lebanese army or to Hezbollah, which has recently strengthened its relations with the local army.
Fighters of the Egoz Reconnaissance Unit spotted a cell crossing the international Blue Line, which is not marked by a fence, and opened fire on it. Lebanon reported that one person had been wounded, and mainly that Israel had violated its sovereignty.
Israeli-Palestinian conflict: How ‘lawfare’ has become a weapon
Wherever there is war in the modern world, there are allegations of war crimes.
Human rights lawyers will be scanning the battlefields of the Middle East as American-led coalition air forces expand their engagement with the militants of Islamic State.
And in the conflict between Israel and the Palestinians, the trading of accusations and the struggle to win the battle for international public opinion feel like an inevitable second act to the summer’s bitter fighting.
Each side sees the advantage of establishing the justice and virtue of its cause over the other – seeking a clear political and diplomatic victory after an inconclusive military outcome.
The Israeli case against Hamas is relatively simple: here is an organisation sworn to the destruction of Israel that fires rockets from the midst of its own civilians and aims them indiscriminately at Israel’s – both clear breaches of the laws of war.
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)
US prods Turkey over inaction against ISIS
A Pentagon official signaled Wednesday that the U.S. is pressing the Turkish government to intervene in support of Kurdish forces desperately battling to keep the Syrian border town of Kobani from falling into Islamic State hands.
Pentagon spokesman Rear Adm. John Kirby told Fox News that U.S. officials are talking with the Turks about « what they can or will or may do here. »
He added: « This is a decision the Turkish government has to make. We can’t make it for them. »
At a press briefing later in the day, Kirby clarified that the United States is not « making demands of the Turks, » but hopes they will « contribute what they can. »
The situation in the town of Kobani has intensified, and with it concerns over whether partners on the ground are doing enough.
The New York Times reported earlier that the White House is growing frustrated with Turkish inaction as the situation next door in Kobani gets worse.
Kirby also stressed the « limits of airpower » and said the U.S. needs more help on the ground.
Who’s doing what in the coalition battle against ISIS
(CNN) — Canada is expected to soon vote on sending troops, fighter jets and other resources to join the fight against ISIS. The militant group has seized large swaths of land in its quest to create a caliphate — an Islamic state — that stretches from western Syria to eastern Iraq.
Turkey joined the United States-led coalition late last week as the militants continued to fight Kurdish and Iraqi forces on the ground. In September, the United States promised broad cooperation in the effort against the terror group. So far, countries including Great Britain, France, the United Arab Emirates, Qatar, Australia, Germany, the Netherlands and others are participating.
Here’s a closer look at their roles.
Tarik Hassane allegedly tweeted he ‘smelled war’ before being arrested as part of London terror raid
A MAN arrested in London allegedly plotting a terrorist attack tweeted “I smell war” moments before armed officers stormed his home.
A 21-year-old medical student called Tarik Hassane from west London has been identified as one of four men arrested yesterday by counter terrorism police in what they claimed had foiled a “significant” terrorist act.
All four, including another 21-year-old and two 20-year-olds, remained in custody this morning and at least one of them was being questioned on suspicions he had travelled to Syria as a jihadist and had possible links to Islamic State.
Police claimed the arrests were the first directly linked to the IS terror group waging war across the Middle East and calling on extremists everywhere to attack kafirs or nonbelievers of the faith.
Jihadists advance in Syria border town despite air strikes
Jihadists fighting to take the strategic Syrian border town of Kobane advanced Wednesday despite intensified US-led air strikes, as deadly protests over the fate of its Kurdish residents shook neighbouring Turkey.
As pressure grows for international action to halt the advance of the Islamic State (IS) group’s fighters, France threw its weight behind calls for a buffer zone on the Syrian-Turkish frontier.
The top US and British diplomats said they were willing to « examine » the idea of a safe haven, but the White House later denied it was considering such a move.
And the Pentagon said air strikes alone were not enough to prevent Kobane from falling.
UK air strikes against IS in Syria ‘not ruled out’
The UK has « not ruled out » participating in air strikes against Islamic State (IS) in Syria, and would consider it if the US requested assistance, the foreign secretary says.
But Philip Hammond said the UK would need further parliamentary approval in order to target IS in Syria.
Last month MPs voted to authorise RAF air strikes against IS in Iraq, at the invitation of the Iraqi government.
IS has seized large parts of both Iraq and Syria, up to the Turkish border.
Iraq conflict: Australian Super Hornet drops two bombs on Islamic State targets in Iraq
Australia’s military campaign against Islamic State militants has stepped up with the bombing of targets in Iraq overnight.
Two bombs were dropped from an F/A-18F Super Hornet onto what Defence described as an « ISIL facility ».
A Defence statement said all aircraft left the target area safely and returned to base.
Pilots of the Super Hornet jet fighters had aborted one of their previous air strikes because of concerns about causing civilian casualties.
The ADF is working with other Western and Middle Eastern nations to push back the terrorist group that has taken ground in Iraq and Syria.
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.
Gold flat, global growth worries spark safe-haven bids
Spot gold pared losses on Wednesday after the Federal Reserve released minutes from its September policy meeting.
« The concern was raised that the reference to ‘considerable time’ in the current forward guidance could be misunderstood as a commitment rather than as data dependent, » said the minutes of the Fed’s Sept. 16-17 meeting, which were released on Wednesday.
Spot gold rose 0.5 percent to $1,215 an ounce. The metal dropped to $1,183.46 earlier in the week—its lowest since June 2013. U.S. gold futures settled $6.40 lower at $1,206.00 an ounce, but rose modestly after the announcement.
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).
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.
Russia Offers to Send More Experts to Tackle Ebola in West Africa
Russia’s health and safety watchdog has said it ready to send additional experts to West Africa to help contain the Ebola outbreak that has killed more than 3,400 people, if its medical personnels’ safety can be guaranteed.
Watchdog head Anna Popova said Tuesday that her agency, Rospotrebnadzor, « would be willing to consider sending specialists and laboratories to West Africa in line with the UN’s coordinating role [in combating the virus] and on the condition that the safety of personnel could be guaranteed, » according to a statement on the agency website.
The statement, which detailed a meeting between Popova and the UN’s system coordinator for Ebola, David Nabarro, did not specify which guarantees Russia may be seeking after a number of health workers have contracted the virus despite extensive safety precautions.
In the first known case of infection with the virus outside of Africa, a nurse’s assistant in Spain was this week diagnosed with Ebola after caring for two Spanish missionaries in Madrid, where they were flown for treatment after contacting the virus in West Africa.
SWAT kills Georgia man using info from drug addict who stole his car
A Georgia SWAT team, acting on a tip from a drug addict, killed a 59-year-old grandfather and businessman in his home while executing a warrant. The informant had stolen a car from the property a few days before.
It was just before 11 p.m. on September 24 in East Dublin, Ga., and David Hooks was asleep. His wife, Teresa, was in her craft room. Their home had been burglarized two days before, and an SUV stolen. Teresa heard a car drive fast up the driveway, and she looked out the window, according to the family’s attorney.
“She saw several men all in black and camo with hoods on,” lawyer Mitch Shook told the Macon Telegraph. “She ran downstairs, woke David and said, ‘The burglars are back’.”
Hook retrieved his shotgun and went downstairs. What happened next is disputed.
Deputies knocked on the door and repeatedly announced, “Sheriff’s department, search warrant,” according to a news release from the Georgia Bureau of Investigation (GBI). Laurens County Sheriff Bill Harrell said Hook brandished a gun and “demonstrated aggression toward the deputies,” WMAZ reported.
HRW to Push for Accountability for Everyone Violating Humanitarian Law in Ukraine
MOSCOW, October 8 (RIA Novosti), Daria Chernyshova – Human Rights Watch (HRW) will continue pressing for accountability for those responsible for humanitarian law violations in Ukraine, Rachel Denber, Deputy Director for the Europe and central Asia division of the organization told RIA Novosti on Wednesday.
“Both sides in this conflict are responsible for humanitarian law violations and we will continue to press for accountability on both sides,” Denber said.
Denber said that HRW will keep documenting the abuses committed in Ukraine, and will try to attract the attention of all sides in the conflict, as well as Moscow to violations of international humanitarian law.
FBI Urges Americans to Help Identify Fellow Citizens Travelling to Join Terrorists
WASHINGTON, October 8 (RIA Novosti) – Assistant director of the FBI’s counter-terrorism division has appealed to the US public to help identify fellow citizens, who might be engaged in terrorist activity in a press release.
“We need the public’s assistance in identifying US persons, going to fight overseas with terrorist groups or who are returning home from fighting overseas,” Michael Steinbach said in a statement published by the Bureau on Tuesday.
Since the September 11, 2001 attacks, several dozen US nationals were engaged in terrorist activities outside of the United States. One of the recent cases include a Chicago man, who traveled to Somalia in 2010 to join al-Shabaab terrorist group. He was sent to prison two years later for his activity.
Kiev Not Letting German Trucks in Donbas, Trying to Hide Truth: Donetsk Republic
DONETSK, October 8 (RIA Novosti) – Kiev would not let the German convoy with humanitarian aid into southeastern Ukraine because of fears that foreign staff will see the real situation in the region, Deputy Prime Minister of the self-proclaimed Donetsk People’s Republic Andrei Purgin said Wednesday.
« Kiev authorities will not let them in. As previously they did not let in the Malaysian experts [at the crash site of flight MH17] – they then had to literally run away from Kiev, and arrive at our checkpoint by taxi. The next time 30 Malaysian experts had been sitting in Kiev for a week, but still did not reach us, they flew back, » Purgin told RIA Novosti.
Trojan horse: ISIS militants come to Europe disguised as refugees, US intel sources claim
Islamic State militants are planning to insert operatives into Western Europe disguised as refugees, claim US intelligence sources, who unencrypted locked communications of the caliphate’s leadership.
The militant organization is afraid of using aircraft due to strict security rules, so they use land as an alternative, the US sources told Bild Am Sonntag, a German national Sunday newspaper.
Disguised as refugees from Syria, Islamic State (IS, formerly ISIS) operatives will cross the border to Turkey. Then, using fake passports, they will travel further to European countries to conduct attacks.
“In view of the chaotic conditions on the Syria-Turkey border, it is nearly impossible to catch ISIS-terrorists in the wave of refugees,” wrote Bild Am Sonntag.
Because hundreds of refugees cross the Syrian-Turkish border every day, the jihadists have a good chance of remaining unnoticed in the crowds.
Turkey is also used by jihadists who want to join the IS in Syria, as they don’t need a visa to get there. They go on ‘vacations’ as tourists and upon arrival have almost no trouble finding a way to cross the border.
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?
Hong Kong protests dwindle, but talks with government likely to go nowhere
Hong Kong pro-democracy protests that brought tens of thousands on to the streets last week dwindled to a few hundred on Wednesday after activist leaders agreed to talks with the government which are all but certain to go nowhere.
The student-led protests have calmed since clashes with police more than a week ago, and the number of protesters calling for universal suffrage has fallen dramatically since violent scuffles broke out at the weekend between demonstrators and pro-Beijing opponents.
Friday’s talks will focus on « the basis for political development », the government said, referring to plans for a 2017 election of the chief executive, Hong Kong’s leader, but it was unclear how discussions could reconcile two such polarized positions.
China again voices opposition to foreign interference in Hong Kong
BEIJING, Oct. 8 (Xinhua) — China reiterated its opposition to foreign interference in Hong Kong affairs Wednesday.
Vice Foreign Minister Li Baodong made the comment when asked if the upcoming Asia-Europe Meeting (ASEM) summit will touch upon Hong Kong and the Korean Peninsula situation.
The policy of « One Country, Two Systems, » implemented earnestly since Hong Kong’s return to China in 1997, has contributed to Hong Kong’s prosperity, stability and won international acclaim, Li told a news briefing ahead of Premier Li Keqiang’s Europe visit.
China has always opposed foreign interference in Hong Kong’s internal affairs and China’s domestic affairs as well. « Our stance remains unchanged, » Li said, adding that Hong Kong’s continuous prosperity and stability is in the interests of all sides.
« We are confident that Hong Kong’s future will be even brighter, » the vice foreign minister said.
Issues dealing with regional and international hotspots will be touched upon on the sidelines of the summit.
Majority pay the price for minority’s acts
The ongoing political farce that is « Occupy Central » has cost the Hong Kong Special Administrative Region tens of billions of dollars in economic losses over the past nine days. It began with class boycotts by university students and secondary school pupils, whose organizers, the Hong Kong Federation of Students and Scholarism, maintained back then they would boycott classes but not studies. They invited some scholars to give public lectures about constitutional reform and « real universal suffrage ».
However, the boycott soon turned into an illegal campaign by other political organizations with a penchant for violence. They proceeded to occupy the open space known as « Civic Square » in front of the government headquarters in Admiralty and block all access to government offices. They also used barricades to stop police officers from performing their duties and went so far as to attack them with umbrellas and other blunt objects in an attempt to breach the police cordon around the government complex. The organizers also encouraged their followers to put the chief executive’s office under siege.
When the Hong Kong Police Force sought to contain the mob-like crowd, some radical groups and individuals with ulterior motives made the authorities’ proper response an excuse to fan resentment toward the officers at the scene and elsewhere in the city. As a result more illegal gatherings took place in the busy commercial areas of Central, Causeway Bay and Mong Kok, blocking traffic on major streets and forcing hundreds of shops, schools, kindergartens and government services to close down.
Hong Kong Protest Leaders May Walk Away From Talks
Hong Kong protest leaders said they will consider pulling out of discussions should the government continue to ignore their key political demands.
The government’s decision to base formal talks on the legal and constitution framework ignored the demands of protesters for democracy, Lester Shum, vice secretary of the Hong Kong Federation of Students, told reporters yesterday.
Student protesters are threatening to bring back the crowds that had paralyzed parts of central Hong Kong last week, after days of talks eased tensions in the streets. As the discussions hit a stumbling block, pressure increased on Chief Executive Leung Chun-ying who yesterday had to refute a report that said he received money secretly from an Australian company.
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 it.
Casualties of independence: Barcelona, Espanyol could be out of La Liga if Catalonia secedes
On Nov. 9 of this year, the government of Catalonia plans to hold a non-binding referendum on becoming independent from Spain.
If the province says adiós to Spain, the president of the top soccer league, Javier Tebas, told reporters that Barcelona, Espanyol and other teams in the region could kiss La Liga goodbye as well. It would cause a cataclysmic rift in a league traditionally dominated by its richest clubs, Real Madrid and Barcelona.
Tebas noted that only one non-Spanish territory is allowed under law to participate in the Spanish league or in other official competitions: the tiny, Pyrenees Mountains nation of Andorra.
The region’s push for autonomy from Spain, a movement that has gained momentum over the last few years, became visible on the global stage during Scotland’s recent independence vote that affirmed its spot in the United Kingdom.
Catalonia’s plan to hold a referendum is overwhelmingly opposed by Spain’s parliament, where the government of Prime Minister Mariano Rajoy has a large majority.
Why Catalonia Isn’t Scotland as Nationalists Demand Vote
Call it solidarity among separatists: Sales of badges uniting the flags of Scotland and Catalonia are flying off the shelf.
Orders of the enamel lapel pins are up 300 percent since Scotland’s Sept. 18 referendum on leaving the U.K., according to Emblems-Gifts Ltd., which sells them online from its base in Cheshire, northwest England. Scottish voters ultimately rejected going it alone, with 45 percent of a record electorate backing a breakup. A month from today the baton passes to Catalonia, where the government is sticking with its plan to hold a vote that Spain says is illegal.
“It’s just a bit of moral support for each other as countries that want to get independence,” said Andrew Seaton, 52, who founded and is managing director of the retailer.
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, US Department of Justice to release NSA request information
NEW YORK: Twitter is suing the FBI and the Department of Justice to be able to release more information about government surveillance of its users.
Twitter Inc filed a lawsuit Tuesday in a California federal court to publish its full « transparency report, » which documents government requests for user information. The published report does not include the exact number of national security requests because Twitter, along with other Internet companies, has been prohibited from disclosing that information, even if no requests were received.
Islamic State jihadists advance on Syrian border town Kobane despite US-led air strikes
AUSTRALIAN fighter pilots in the Middle East have attacked their first target in Iraq.
Defence confirmed this morning that the Australian Air Task Group operating from a secret base in the United Arab Emirates dropped two bombs on to an IS facility overnight.
All aircraft involved in the attack, including the Super Hornet that dropped the payload, returned safely to base.
The Defence Force said no other details would be made available at this time.
Tony Abbott confirmed that Australia was involved in a “strike mission on an ISIL position in Iraq”, but he refused to offer any more operational details.
GOP candidates claim “Like it or not, Obama is on the ballot”
In what has been called a “Super Tuesday” of U.S. Senate campaign debates, Democratic hopefuls in Colorado, Georgia, North Carolina and West Virginia faced a relentless assault from their Republican opponents tying them to President Obama and accusing them of being his “rubber stamp.”
All four debates sounded like re-runs of each other, as GOP candidates marched in lockstep, discrediting Democrats with voters who are unhappy with the Obama Administration.
“Barack Obama even said this week that his polices are on the ballot,” said Georgia Republican David Perdue, a line repeated by his Republican counterparts in Colorado, North Carolina and West Virginia.
“I am absolutely running against Barack Obama and Harry Reid,” Perdue told his opponent Democrat Michelle Nunn. “No amount of false advertising will remove the fact that Barack Obama hand-picked you, he hand-funded you, and he’s mentoring you.”
Nunn told Perdue that it’s her name on the ballot and not the President’s, while also reminding voters that the President’s tenure is limited.
“We have two more years of President Obama and then we will have another President,” she said.
West Virginia Secretary of State Natalie Tennant used her opening statement to warn voters about Republican Shelley Moore Capito’s incoming attack lines.
JAPAN, US REVISING DEFENSE PLANS WITH EYE ON CHINA
TOKYO (AP) — Japan and the United States are revising their mutual defense guidelines for the first time in nearly two decades to respond to China’s military expansion and increase Japan’s role in regional defense.
An interim report released Wednesday says the U.S. and Japan are pursuing a wider partnership that requires « enhanced capabilities and greater shared responsibilities. »
The revision, the first since 1997, comes at a time of heightened Japan-China tensions over islands claimed by both countries in the East China Sea, as well as continuing concern about North Korea’s missile and nuclear weapons development.
« What we need to address today is quite different from what we were aiming for in 1997, » Koji Kano, a Defense Ministry official in the Japan-U.S. cooperation division, told reporters earlier this week. « The point is how Japan and the U.S. can respond better in the current environment. »
The revised guidelines will factor in policy changes under Prime Minister Shinzo Abe that enable Japan to shoulder more responsibility for its own and regional defense, and relieve some of America’s military burden in the Asia-Pacific region.
Even Jimmy Carter Is Slamming Obama For Mishandling Of ISIS
First this week it was Leon Panetta, former secretary of Defense. Now it’s former President Jimmy Carter who’s bashing President Obama’s approach to the Islamic State takeover of territory in Syria and Iraq.
In an interview with the Fort Worth Star Telegram at a local Habitat for Humanity building site, Mr. Carter said it’s hard to figure out exactly what Mr. Obama’s doing in the Middle East.
“It changes from time to time,” Carter told the Star Telegram. “I noticed that two of his secretaries of Defense, after they got out of office, were very critical of the lack of positive action on the part of the president.”
Carter’s referring there to Mr. Panetta and his predecessor, Robert Gates. Both men have published books critical of some aspects of Obama’s decision-making, particularly the president’s reluctance to support moderate rebel factions in the Syrian civil war.
Carter echoed their main point.
“We waited too long,” Carter told Star Telegram writer Jim Jones. “We let the Islamic State built up its money, capability, and strength and weapons while it was still in Syria. Then when [it] moved into Iraq, the Sunni Muslims didn’t object to their being there and about a third of the territory in Iraq was abandoned.”
Low-energy LED wins Nobel prize for physics
The arrival of such lamps changes the way places are lit, offering longer-lasting and more efficient alternatives to 19th-century incandescent bulbs.
An American and two Japanese scientists won the 2014 Nobel prize for physics on Tuesday for inventing a new energy-efficient and environment-friendly light source, leading to the creation of modern LED light bulbs.
Isamu Akasaki and Hiroshi Amano of Japan and Japanese-born United States citizen Shuji Nakamura won the prize for developing the blue light-emitting diode (LED) – the missing piece that now allows manufacturers to produce white-light lamps.
The arrival of such lamps is changing the way homes and workplaces are lit, offering a longer-lasting and more efficient alternative to the incandescent bulbs pioneered by Joseph Swan and Thomas Edison at the end of the 19th century.
“Red and green LEDs have been around for a long time but blue was really missing. Thanks to the blue LED we now can get white light sources which have very high energy efficiency and very long lifetime,” Per Delsing, a member of the Royal Swedish Academy of Sciences, told a news conference.
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 winning its way to Labor market reform. This is likely to clear the way from more institutional reforms to defeat bad governance (or corruption). Furthermore, EU leaders are considering speeding up funds for job recovery support. The most important single data today comes from Switzerland, which after a long negotiation, is agreeing to share banking secrecy data – it’s the first step in dealing with privacy-security issues -.
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
Italy’s prime minister wins labor reform confidence vote
ROME (Reuters) – Italian Prime Minister Matteo Renzi won the most important parliamentary confidence vote of his eight-month-old government early on Thursday on a labor reform proposal he hopes will boost his EU credentials.
Renzi won the vote in the upper house Senate 165-111. He would have had to step down if he had lost. The vote, expected in the afternoon, was delayed late into the night after a day of raucous stonewalling by opposition parties. The legislation now goes to the lower house Chamber of Deputies.
The prime minister called the vote in order to cut short debate over his broad proposal to change labor laws that many economists say have stifled job creation and scared off foreign investors in a country whose economy has stagnated for two decades.
« We want to eliminate the poison that kills investment, » Labor Minister Giuliano Poletti said in a speech to the Senate before the vote.
Switzerland Bans Islamic State Group: Reports
MOSCOW, October 8 (RIA Novosti) – The Swiss Federal Council issued an order on Wednesday, banning the Islamic State (IS) extremist group and all the activities in support of this organization on Swiss territory, Associated Press reported.
According to the document, the Swiss Federal Council’s ban covers all activities, aimed at supporting IS militants, including spreading propaganda and raising funds for the terrorist group. Those defying the ban could face up to three years in prison.
Switzerland says will begin talks with EU on sharing bank data soon
(Reuters) – Switzerland will begin negotiations soon with the European Union and some other countries on automatically sharing data on Swiss bank accounts held by foreigners, the government said on Wednesday.
It could start exchanging data in 2018 at the earliest, once an international standard is in place and pending parliamentary and even voter approval.
Switzerland, the world’s biggest offshore financial center with more than $2 trillion in assets under management, has come under huge pressure from the European Union and the United States to end bank secrecy as cash-strapped countries clamp down on tax evasion.
France uncorks new generation of wine experts
(Reuters) – Not everything related to wine gets better with age, as a young generation of French wine experts can attest.
Take Benoit Perrot and brothers Matthieu and Antoine Mondesert, all in their early thirties, who last November founded Demain les Vins (Tomorrow’s Wines).
Their business model combines selling with crowdfunding, an approach which this year will benefit Antoine Sunier, a 34-year-old who took up winemaking in the Beaujolais region after turning his back on telecoms.
A few hundred kilometers (miles) further south, Baptiste Ross-Bonneau, 25, is Chef Sommelier at the Hotel de la Cite in Carcassonne, responsible for the wine list of the Michelin-starred restaurant.
« The cliche of the old, tubby sommelier is gone, there is a new generation of motivated, enthusiastic young people who have changed the image of our profession, » said Ross-Bonneau, who was born in the southern Cotes du Rhone region, raised in a family of wine growers, and has developed a sharp knowledge of Roussillon wines.
Ukraine may ask Stockholm court for interim ruling on Russian gas
KIEV, Oct 8 (Reuters) – Kiev may appeal to the Stockholm court of arbitration to fix a temporary price for Russian gas and conditions for deliveries to Ukraine if an interim gas deal is not reached soon with Russia, Ukrainian Prime Minister Arseny Yatseniuk said on Wednesday.
The European Union is trying to broker a deal to resolve a standoff between the two countries after Russia shut off gas deliveries to Ukraine in June over what it said were more than $5 billion in unpaid bills.
Ukraine faces the possibility of energy shortages this winter if no deal is reached, risking a replay of the disruptions to Europe’s gas supplies seen in 2006 and 2009.
Kiev is waiting for a final decision from the Stockholm court on an appeal it lodged last June for a review of a 2009 deal between Ukraine and Russia’s Gazprom which set a price of $485 per thousand cubic meters – way above the market level.
Meanwhile, the European Commission is seeking to get Russia and Ukraine to sign an interim agreement as a step towards resolving the long-standing price row.
EU Seeks Quick Release of Job Boosting Funds
The leaders of Germany, France and Italy put their differences over fiscal discipline and austerity politics aside at an EU jobs summit Wednesday, pledging instead to focus energies on quickly allocating 6.4 billion euros ($7.6 billion) already earmarked to Europe’s 5 million unemployed youths.
The jobs summit — the third high-level meeting to tackle the continent’s employment crisis in less than 18 month — offered no new proposals or investments. It came amid growing popular disillusionment with official recipes to returning Europe to growth and putting back to work 25 million unemployed Europeans, a fifth of those under 25.
« This is the major challenge for Europe, » French President Hollande told a closing news conference with German Chancellor Angela Merkel and host Italian Premier Matteo Renzi. « If we are not capable or offering hope to the next generation, people will turn their backs on Europe. We see the risk, we see the threat. »
Hollande, who entered the meeting saying he and Renzi would push for an additional 14 billion euros in EU investments, emerged saying that could wait and that first the available funds must be exhausted.
Joblessness in Italy, no country for young men
It is just after dawn on a sunny Monday and the winding, cobbled streets of Posillipo on Naples’ northern peninsula are already humming with life. Rackety orange buses trundle down the hill toward the port of Mergellina and a fishmonger sings out with the catch of the day.
Inside Caffé Donn’Anna, piles of warm cornetti await early bird customers and the smell of just ground coffee wafts out to the pavement. Giuliana Stavolo has already been at work for an hour, preparing the espresso machine for the pre-work onslaught. By 9am, she will have served hundreds of caffeine shots.
Giuliana, dimpled and quick to laugh, looks much younger than her 28 years. She knows her customers by name, how they take their morning coffee and can read their moods.
Married young and already the mother of a boy, 13, Giuliana works an eight hour day, from 6am to 2pm, five days a week. She gets no holiday pay or sickness leave, has no job security and is paid €480 (Aust$691) a month. At €3 an hour, she earns less than a quarter of Australia’s minimum wage. Giuliana however regards herself as one of the lucky ones: she has a job.
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Her husband, made redundant from a big Neapolitan boatyard two years ago, remains out of work and, cheeks flaming, could not bring himself to speak publicly about his plight. Her two cousins – both university graduates – are unemployed and considering emigration and her sister, 31, and brother-in-law, 32, parents of a seven-month-old baby, are unemployed and live at home with her parents.
China News
China: Continuing data out of China confirm that the country is soft landing while rebalancing. Labor statistics have been showing that the manufacturers have started to rebalance their activities away from labor intensive (an objective already stressed by the Chinese leadership). These are in line with the objective to rebalance the economy away from credit driven investment. “BHP Billiton has raised the stakes in the ongoing war of attrition in global iron ore with a plan to slash costs and lift production” confirms our view that commodity companies are starting to adapt to the new normal, while China is cutting the road to nowhere and excessive bureaucracy (China removes 160,000 phantom staff on payroll, China Today). Acknowledging that there is “phantom staff” out loud is an event for those who have been following China for years (this could have cost some China Today’s managers their jobs a couple of years ago).
Furthermore, the west is helping China to change it’s “narrative” from being anti-democracy (China has not gone back on its agreements with Britain over the future of Hong Kong, whose autonomy is far greater than what Britain expected three decades ago, a former aide to late British Prime Minister Margaret Thatcher has said.).
Furthermore, Premier Li is undertaking a state visit to EU. This is likely to bring more collaboration with the West, while China will be offering a back-door to Russia energy at a moment when : President Putin is challenged by plummeting oil prices and sanctions are making harder for the energy sector (finance projects and investments).
The government continues to fear that the economic rebalancing has not taken momentum yet although 1) labor intensive manufacturers are relocating in cheaper labor countries, 2) businesses are upgrading their business models [while becoming environmental friendly], 3) President Xi has conducted many trade – investment agreement with Neighbours (after Premier Li did the same in Africa) to secure investment projects which use Chinese manpower – engineers know-how in this domaine, 4) China is gaining more military presence and has fluxed it mussels – e.g. China “Top Gun” intercept by a US fighter jet -, 5) China has signed many RMB agreement which reinforce the currency usage and prepare its full liberalisation – after Free Trade Zones (FTZ) have proven to be a success -, 6) China has undertaken a genuine fight against bad governance and better regulation – many examples in our recent daily briefings of fight against corruption and bad governance-. We see in FinMin Lou Jiwei recent comment an indication that not only China wants to create a reserve currency it does want it to be strong when Chinese leaders perceive the heavy pressure place on USD by a category of investors to avoid debasing the currency through deficit financing – although we consider that this worry is misplaced -.
Chinese premier’s Germany, Russia, Italy tour to promote deals
BEIJING, Oct. 8 (Xinhua) — A series of agreements will be signed during Chinese Premier Li Keqiang’s upcoming visit to Germany, Russia and Italy, Foreign Ministry officials told a press briefing Wednesday.
Li will visit the three countries and the UN Food and Agricultural Organization(FAO) headquarters in Rome from Oct. 9 to 15. He will attend the 10th Asia-Europe Meeting (ASEM) summit in Milan on Oct. 16 and 17.
Li and German Chancellor Angela Merkel will co-chair the third China-Germany governmental consultation. A document on innovation will be issued after the meeting. Over 20 intergovernmental agreements and commercial contracts will be signed during Li’s visit. The two countries will discuss visa procedures, Vice Foreign Minister Wang Chao said.
In Russia, Li will hold talks with his counterpart Dmitry Medvedev, meet Russian President Vladimir Putin and address a forum on innovation, Vice Foreign Minister Cheng Guoping said. The two sides will prepare for joint celebrations of the 70th anniversary of victory of the anti-fascist war, issue a joint communique and sign about 50 agreements.
Dirty politics lies beneath the veil of ‘democracy’
You’ve got to believe in the « genius » of the Chinese!
« It is not common for a 15-year-old student to lead the movement of civil disobedience, » Joshua Wong, 17-year-old leader of Scholarism, boasts of his « impressive feat » in 2012 – playing the leading role in a campaign against the Hong Kong government’s plans to implement national education in local schools, in an interview with the Financial Times.
Ever since his 2012 antics, Wong has been chosen and groomed as a « political superstar » by the city’s opposition camp, specifically the Civic Party.
He was not chosen because of any political skills or his credentials. It is hardly convincing that a high school boy possesses any meaningful political savvy. He was chosen because of the qualities of recklessness and radical mindset he had demonstrated in violent actions which saw him storming the government headquarters and the Legislative Council, harassing top government officials and charging at law enforcers.
« Teenager Joshua Wong picks up democracy baton in Hong Kong, » the Financial Times exclaims in its headline.
« 17-year-old Hong Kong student prepares for democracy battle, » CNN says.
« Joshua Wong: The 17-year-old public face of Hong Kong’s protests, » the Wall Street Journal writes after Wong was arrested for storming the government headquarters on Sept 28.
HK retail sales sink amid protests
Sales at major Hong Kong retail chains declined as much as 50 percent during the bulk of the Chinese National Day holidays. which began on Oct 1, after protests disrupted the shopping season, according to a survey.
Sales dropped at least 15 percent during the first five days of the long holiday known as Golden Week, the Hong Kong Retail Management Association said in a statement on Monday, citing a survey of its members.
Retailers selling watches and jewelry were among the most affected, according to the group.
Sales at small and medium-sized companies plunged as much as 80 percent, according to the association. Those operating in the Mong Kok, Causeway Bay or Tsim Sha Tsui shopping areas occupied by protesters were hurt the most, it said.
S.Korea can talk with DPRK about sanctions, tour resumption–minister
SEOUL, Oct. 8 (Xinhua) — South Korean Unification Minister Ryoo Kihl-jae said Wednesday that the country can talk with the Democratic People’s Republic of Korea (DPRK) about economic sanctions and resumption of tour to Mount Kumgang during the upcoming senior-level inter-Korean dialogue. « The May 24 measures and Mount Kumgang tour can be discussed if the high-level contact is held. All can be on the dialogue table, » Ryoo said during a parliamentary audit of the unification ministry. He added that it would be important for the two Koreas to overcome the issues through dialogue.
The DPRK has demanded the lifting of the so-called May 24 sanctions imposed by South Korea in 2010 when the South Korean Navy corvette Cheonan sank in waters near the disputed western sea border. It has since banned all inter-Korean exchanges except for the Kaesong industrial zone in the DPRK’s border town and some humanitarian aid programs.
Opposition lawmakers called for the lifting of the sanctions or an expansion in inter-Korean exchanges that could mean a « back- door » lifting, saying such actions would be a key to peace on the Korean Peninsula.
Rep. Kim Sung Gon of the main opposition New Politics Alliance for Democracy even said that it might be hard to « predicate 100 percent » that the warship sinking was caused by the DPRK though he said it had a high probability. He noted other scenarios should » not be ruled out completely » given mixed views of the international community on it.
Li delivers boost for the economy
It is running within a proper range, but nation must not underestimate the challenges it faces, premier says
China’s economy is « running within a proper range » and merits full confidence for its fundamentals, Premier Li Keqiang said on Wednesday, adding that the nation should not underestimate the challenges confronting it.
Li’s remarks, made at a State Council departmental meeting, follow forecasts by the World Bank and the International Monetary Fund of slightly slower growth in China for the rest of this year and in 2015.
The premier said, « Our country’s economy is generally running within a proper range, with the effects of reform continuously being fulfilled and new momentum for growth being formed.
« Still, there is great pressure on the domestic and international economic situations. »
On Monday, the World Bank forecast that economic growth in China will ease slightly to 7.4 percent this year and to 7.2 percent in 2015 as the central government seeks to put the economy on a more sustainable path with policies addressing financial vulnerabilities and structural constraints.
France backs creation of buffer zone between Syria, Turkey: Hollande
PARIS, Oct. 8 (Xinhua) — French President Francois Hollande said Wednesday he would back the creation of a buffer zone between Syria and Turkey to protect displaced civilians fleeing the bloody Daech offensive.
During phone talks with Turkish head of state Recep Tayyip Erdogan, Hollande discussed the « alarming situation in northern Syria mainly in Kobani city, » which risks falling into the hands of Islamist militants.
« (Hollande) stressed the necessity of avoiding massacres in the north of Syria. He gave his support to the idea proposed by President Erdogan to create a buffer zone between Syria and Turkey to host and protect displaced people, » a spokesperson from the French president’s office said.
Ireland’s think-tank predicts strong GNP growth in 2014, 2015
DUBLIN, Oct. 8 (Xinhua) — Ireland’s economic growth is expected to be strong in 2014 and 2015, with its gross national product (GNP) forecast to grow by about 5 percent in each year, according to the latest analysis on Wednesday.
The analysis from the Economic and Social Research Institute (ESRI), the country’s leading economic policy think-tank, indicated Ireland’s GNP will grown by 4.9 percent this year and 5.2 percent next year.
Declines in unemployment are also forecast, with the headline rate envisaged to fall to 9.6 percent in 2015, according to the ESRI analysis.
« The recovery in Ireland is broad-based and is stronger than previously thought. We have revised our forecasts upwards based on strong growth figures in the first half of 2014, better than expected performance in the net trade sector, a pick-up in investment levels and strong budgetary receipts, » said ESRI economist David Duffy.
In August, ESRI predicted Ireland’s GNP will grown by 3.4 percent this year and 3.7 percent next year.
GNP and GDP (gross domestic product) for most countries are at similar levels. However, Ireland is exceptional for its dependence on foreign direct investment.
Strong quake strikes SW China’s Yunnan
Follow China Daily’s live report on the 6.6-magnitude quake that hit Jinggu county, Pu’er city of Yunnan province at 9:49 pm (Beijing Time) on Oct 7, 2014.
Australia News
Australia: Australia continues to be seen, by markets, as a derivative to the old Chinese model (i.e. commodity provider). This view explains the high beta between Australian assets and commodity prices (or China demand for commodities). Banks shares are suffering from the combination of the increase perception of increase in risks and additional macro prudential constants to curb housing prices frothiness. Small business defined the “goldilock range” for AUDUSD to be [.90-.94]. This level is much higher than RBA own assessment (based on PPP models). We have been criticising PPP models because they do not factor any structural changes.
These assume that neither China nor Australia are conducting their rebalancing agenda. We do believe that the current weaknesses offers genuine opportunity to benefit from the other drivers to the Australian economy which are not related to commodities. We see the current Australian Dollar weakness to continue at least until the USD start to weaken again when markets will realise that it has beaten too much on a quick rate normalisation. Meanwhile, from our previous daily briefing, we have gathered sufficient support to the view that the drivers of the Australian GDP are moving toward: 1) education, health and finance services provider to Asian neighbours, 2) innovation and digital sector, 3) energy resources export to Japan (the later contributes to our constructive view that the current negative Japan Energy Trade deficit will rebalance in the medium term – reducing Japanese Government bonds solvency risk – ).
UPDATE 2-National Australia Bank says UK charges to hit FY earnings
* Sees FY cash earnings at A$5.1-A$5.2 bln vs A$5.9 bln yr ago
* Provisions include conduct charges, tax, capitalised software
* Expects final dividend of A$0.99/shr (Adds details about capital boosting plans, shares, analyst comments)
By Swati Pandey and Lincoln Feast
SYDNEY, Oct 9 (Reuters) – National Australia Bank Ltd warned on Thursday its full-year cash earnings will fall as much as 14 percent due to almost A$1 billion ($881.4 million) in higher charges from its troubled UK business.
NAB, Australia’s fourth-largest bank by market value, said it would post annual cash earnings of A$5.1 billion to A$5.2 billion, compared with an average estimate of A$6.2 billion from 16 analysts polled by Thomson Reuters and a record cash profit of A$5.9 billion a year earlier.
ABS backtracks on jobs data after August surge
Australia’s official statistician is making changes to employment figures for the past three months that, on the face of it, would show far fewer jobs created in August than first reported.
The Australian Bureau of Statistics (ABS) on Wednesday said it would restate employment figures to account for an absence of seasonal patterns usually seen in July, August and September.
The jobs numbers are closely tracked in financial markets and billions of dollars change hands depending on whether the results beat or miss forecasts.
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The September data are due on Thursday and analysts had been expecting a sizable fall of 30,000 in seasonally adjusted employment as statistical payback for a record 121,000 increase in August. The August figure had been so far above expectations that analysts had doubted its credibility.
Lunar eclipse reveals rare blood moon
TOKYO — Evening viewers in much of Asia and early risers in parts of the Americas were treated to a stunning lunar eclipse on Wednesday, though clouds obscured it for some.
Lucky ones saw the moon turn orange or red in what is known as a « blood moon. » The hue results from sunlight scattering off Earth’s atmosphere.
Whoops of joy erupted at the Sydney Observatory in Australia as the moon made a brief appearance.
« Very spectacular, » observatory astronomer Geoff Wyatt said. « The cloud certainly got in the way, but we’ve seen it during totality and of course that’s always the highlight – to see that lovely, reddish-brown color. »
In Australia’s capital, Canberra, Rachel Buckley watched from her driveway.
« It looked small, but very, very clear and really orange, I thought – blood orange, » she said. « It was quite exciting, pretty amazing to see because it’s not very often you get to see that. »
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.
Factbox: Dollar surge forces central banks to tap reserves
(Reuters) – The U.S. dollar’s recent surge to four-year highs has forced central banks across the world to intervene on open markets to prevent their currencies falling too sharply.
As the Fed ends its asset purchase program this month and investors brace for higher U.S. interest rates next year, yields on U.S. Treasury bonds have climbed relative to those of other governments. Dollar-funded ‘carry trades’ – where traders borrow in low interest currencies to buy higher yielding but riskier assets – are also being rapidly unwound.
As pressure on dollar exchange rates mounts, dollar-priced commodities have fallen and U.S.-based investments in many emerging markets are being rethought.
To stem that flight and prevent steep local currency losses feeding inflation and hampering foreign currency debt servicing, central banks from Russia to South Korea and Indonesia to Turkey have stepped up the sale of dollar cash reserves.
Japan News
Japan: inflation softening along with economic downgrade was widely expected as a result of the 1st VAT hike (cf our strategic note Dec 26th 2013). We see BoJ to keep the bazooka of QQE-2 un-tested until the JPY excessive depreciation and JGB solvency risk came down * investors are still short JGB expecting a Japan crisis *. The 2nd VAT hike will require some stabilisation at the current levels, though we expect that PM Abe will undertake the 2nd hike in steps, because BoJ is unlikely to be sufficiently confident to move ahead with more QQE while JPY is accelerating its depreciation. PM Abe voiced concerned over the JPY rapid depreciation, as he pointed (rightly in our opinion) to the increase in energy cost, which deteriorate further the energy trade deficit – and increase the risk of JGB solvency -. The Prime Minister confirmed in his Diet address to pursue Abenomics 3rd arrow. Japan is said to resume discussion with US on TPP, while energy sector is heading toward energy transition away from Nuxe. Physics Nobel price attribution to energy efficient and environmental friendly technology is a game changer because it does support the view that the Win-Win scenario is feasible, if only the consensus stop being pessimistic for no reason.
Furthermore, GPIF delayed its asset allocation review. This is positive because it will calm down markets nervousness that GPIF will shift over-night its JGB holding and would create a market fixed income crash. We see the current development in line with our constructive scenario.
However, BoJ might do some adjustment to its monetary program but nothing excessive. The news flow out of this weekend G20 meeting shows that the global community is gently pressing the government and the BoJ to pursue structural reforms, economic rebalancing, solvency improvement (through VAT 2nd hike commitment) and adequate monetary policy (not too hot – to avoid a crisis – not too cool – to avoid derailing the on-going portfolio rebalancing approach -). Japan continues to face heavy public pressure to rebalance its energy reliance to nuclear. While we believe that Japan will continue to press for reopening nuclear plants (when Nuclear Watchdog gives his green light), the medium to long term trend is that Japan will use Trade negotiation with neighbours to secure new energy sources while using this pressure to deregulate and move forward with Abenomics 3rd arrow (please see our Japan update for more on our views). We are not surprise by the fact that Russian news media are reporting the pushback to reopening nuclear plans, ahead of Japan-Russian talks (about sanctions, energy agreement, and disputed territories).
As China, Japan, and South Korea heads toward a constructive talks (as we were reporting in our previous daily briefings) and Japan and North Korea are heading toward a solution on Japanese civilians abduction, North Korea leaders close to Kim Jong Un held last weekend high level talks with South Korea minister of reunification. This indicates that the scenario of an unified Korea is advancing. We have been considering that the reunification will ultimately take place but it requires normalised relation amongst the 3 important players: China, Japan, South Korea.
Year’s strongest storm, super typhoon Vongfong, forecast to hit Japan
South Korean Town to Put Nuclear Plan to Vote
Fighting plans to build a nuclear power plant, a South Korean fishing village is holding a referendum Thursday, even though the government has warned the vote is illegal.
A site in Samcheok, 195 kilometers (120 miles) east of Seoul, was picked by the energy ministry after a previous city government applied in 2010 for a nuclear power facility. But attitudes have shifted since Japan’s 2011 nuclear disaster at the Fukushima.
Now, the city council has set up a volunteer committee to conduct a vote on whether Samcheok still wants the plant after election authorities refused to administer the referendum. Supporters of the nuclear plant say they will boycott.
South Koreans’ pride in the country’s nuclear power industry has eroded since scandals erupted last year over revelations hundreds of faulty components may have been used in reactors. That forced nearly half the country’s 23 reactors to shut down.
Critics of nuclear reactors also became more vocal about safety after an April ferry sinking killed hundreds of people and fueled complaints the country emphasized profit over safety.
In Samcheok, about 39,000 out of 61,000 registered local voters signed up to take part, and about 70 percent were expected to vote, according to Chung Yeon-man, a committee member.
GPIF Asset Review May Be Delayed Until December, Ito Says
Japan’s $1.2 trillion retirement fund may delay announcing its portfolio review until December, according to Takatoshi Ito, who was the top adviser to the government on overhauling public pensions.
A debate is under way on whether the Government Pension Investment Fund should buy and sell assets before publishing new allocation targets, Ito said yesterday. Should GPIF decide to do so, a postponement until December would be necessary, he said. Ito led a government-picked panel that last year urged the fund to reduce its reliance on domestic bonds.
Investors are waiting to see when and by how much GPIF will increase its stock holdings as Prime Minister Shinzo Abe seeks better returns at the fund. GPIF should hold 35 percent to 40 percent of its assets in Japanese debt, and 20 percent to 25 percent each in local and foreign stocks, Ito said.
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