Month: August 2016

In one of the most closely followed bond issues in recent history, overnight the International Bank for Reconstruction and Development (IBRD), one of the five member-institutions of the World Bank Group, sold 500 million SDR-denominated three-year bonds carrying a coupon of 0.49% at an auction in China’s interbank market on Wednesday. This was the first SDR denominated offering in three decades, with the issuance symbolically taking place in Shanghai one month before the official inclusion of China’s currency in the SDR basket. 

While some have speculated that the offering is a test toward internationalizing the SDR as a global reserve currency and putting the IMF at the forefront of a post-globalized world, with notable implications for the fate of the US Dollar as the global reserve, for now the consequences are more mundane: the SDR bonds that settle in RMB give Chinese domestic investors the option of getting exposure to different currency assets without investing overseas, says Ju Wang, a senior FX strategist at HSBC. According to PBOC deputy governor Pan Gongsheng the issuance of the SDR-denominated bond will help boost the stability of the international currency system.  Pan said the SDR bonds will help investors avoid exchange-rate risks and are a good way of making the reserve currency a more a market-oriented pricing tool. The PBOC will work with IMF to further expand the use of the SDR, he said.

The first issuance in China of bonds denominated in Special Drawing Rights was well received, Gongsheng added, as he pledged to expand the use of the International Monetary Fund’s reserve currency. Speaking at a press conference, Pan, who is also head of China’s foreign exchange regulator, said the bid to cover ratio was 2.5 with around 50 institutional investors bidding for the bonds, including domestic banks, brokerages, insurance companies and overseas central banks as well as international organizations and overseas financial institutions. Chinese government bond auctions typically have a bid to cover ratio of around 3.

The bonds, which will be settled in yuan, were the first batch of a planned 2 billion SDR issue that the IBRD has won approval to sell in the interbank market.

China will also further open up the domestic financial market to foreign investors, which will increase their access to yuan denominated assets.

While the SDR issuance may lead to greater global adoption of the Chinese currency as an initial step, the Yuan will remain a risky currency from the perspective of investors despite its inclusion in IMF’s basket of reserve currencies, Market News International reports, citing Guan Tao, a former SAFE official.  “The yuan is a peripheral currency and a risky currency, not a safe-haven currency,” Guan is cited as saying in an interview.

Others were more optimistic, with HSBC saying the issuance will provide diversification in domestic investments for foreign investors who are accessing the Chinese market, but still buying government bonds or policy bank notes, Candy Ho, global head of RMB business development for global markets, says at a press conference today.  HSBC expects potential pickup in interbank bond market activity following the Special Drawings Rights issuance, while the SDR issuance and RMB inclusion into SDR will bring inflows from central banks and other foreign institutions.

As to the fate of the SDR – or the Yuan – as a global exchange currency, the jury is still out.

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The August market doldrums were on display on the last day of the month, where just two days ahead of the August payrolls report which the Fed is allegedly watching closely to decide whether to hike rates, S&P futures were fractionally lower on non-existent volume, while both Europe and Asia were modestly in the green; ten-year Treasury yields headed for the biggest monthly jump in more than a year while the dhe dollar gained for a sixth day against the yen in the longest winning streak since March. European stocks advanced for a second day, adding to a monthly gain as oil trimmed its advance in the best month since April.

In terms of notable movers, Deutsche Bank (+3%) and Commerzbank (+4%) stole the early session the headlines after Manager Magazin reported that that Deutsche Bank were mulling a merger (adding that s considerations were “only of a theoretical nature” and at a very early stage), and while the CEO stated that he does not believe this is an option, shares shrugged this off and continued to lead the way higher in Europe.

CEO John Cryan said Germany’s largest lender is looking to shrink in size, when asked about a media report that it considered merging with rival Commerzbank AG.“Part of the work we’re doing is to make our bank a bit smaller, to make it a bit simpler,” Cryan said at a conference in Frankfurt on Wednesday, when asked whether the German lender is looking for a merger partner.  Deutsche Bank, which runs Europe’s largest investment bank, has lost about 42 percent in market value this year as Cryan struggles to shore up capital and reverse losses. As part of his restructuring plan introduced last year, the CEO announced thousands of jobs cuts, sold risky assets and suspended dividend payments.  “A merger between the two is unlikely,” said Chris Wheeler, a London-based analyst at Atlantic Equities. “There would be major competitive concerns. It would be looked upon by many people as negative news.”

The Asian session was uneventful with the most significant moves once again reserved for Japan where the Nikkei closed up 1%. Those gains have come after industrial production in Japan (0.0% mom vs. +0.8% expected) printed well below expectations and so keeping the pressure on the BoJ. The Yen was trading just shy 103.3 at last check following recent speculation that the BOJ may monetize foreign debt. The rest of Asia was more mixed. The Hang closed down 0.2%, the Shanghai Comp +0.4% and the ASX (-0.8%) was in the red.

The Bloomberg Dollar Spot Index is poised for its first monthly gain since May as prospects for higher U.S. borrowing costs widened the policy divergence with Europe and Japan, where central banks stand ready to add to unprecedented stimulus. A private report on jobs growth on Wednesday, ahead of Friday’s monthly payrolls, may provide insight on whether the economy is strong enough to withstand a rate increase as early as next month after Fed Vice Chairman Stanley Fischer said on Tuesday that any rate hike in September will be data dependent. “The dollar has been “supported by the recent, more hawkish comments from the Fed which have signaled that the Fed is moving closer to resuming rate hikes,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The key will be the incoming economic data.”

Due to the hawkish Fed, in addition to the big move in the USD, US treasuries extended their steepest monthly loss since June 2015 as traders almost doubled bets of a September Fed rate increase to 34 percent.

The yield on 10-year Treasuries rose one basis point to 1.58 percent at 10:52 a.m. in London, up 15 basis points in August. The rate on two-year notes, the most sensitive to the monetary policy outlook, climbed 16 basis points this month to 0.81 percent, with the  spread versus 30-year rates at the narrowest since January 2008 on Tuesday. Treasuries on average have handed investors a 0.6 percent loss for August, Bloomberg data show. “A December hike remains very likely, although a bumper payrolls on Friday would make September more live,” said  Peter Jolly, the global head of markets research at National Australia Bank Ltd. in Sydney. “The yield curve almost always flattens when the Fed raises rates. Curve flattening has not finished.” The World Bank is in the process of selling a bond denominated in the International Monetary Fund’s Special Drawing Rights, the world’s first such offering in three decades. The issuance is taking place in Shanghai before China’s currency is included in SDRs from Oct. 1.

Market Wrap

• S&P 500 futures unchanged at 2175
• Stoxx 600 up 0.2% to 346
• FTSE 100 down less than 0.1% to 6816
• DAX down 0.2% to 10632
• German 10Yr yield down less than 1bp to -0.09%
• Italian 10Yr yield down less than 1bp to 1.1%
• Spanish 10Yr yield down less than 1bp to 0.95%
• S&P GSCI Index down 0.3% to 354.5
• MSCI Asia Pacific up 0.2% to 138
• Nikkei 225 up 1% to 16887
• Hang Seng down 0.2% to 22977
• Shanghai Composite up 0.4% to 3085
• S&P/ASX 200 down 0.8% to 5433
• US 10-yr yield up less than 1bp to 1.57%
• Dollar Index down 0.07% to 95.99
• WTI Crude futures down 0.3% to $46.20
• Brent Futures down 0.5% to $48.14
• Gold spot up 0.2% to $1,314
• Silver spot up 0.9% to $18.77

Top Global News

• Blackstone Said to Weigh Buying $3.6b German Landlord: IVG Immobilien, which owns OfficeFirst, may agree to sale, scrapping a planned IPO.
• Tribune Media Sells Chicago Tower to CIM Group for $240m: Co. to get $205m at closing, with another $35m contingent on meeting conditions it didn’t disclose.
• Google Said to Tie Up With MUFG on Android Pay Mobile Payments: Starting as early as Japan’s autumn, users of certain Android-based mobile phones will be able to use MUFG’s debit cards for Android Pay transactions.
• Aeropostale Auction to Go on Amid Bid to Save 229 Stores: WSJ: Landlords, liquidators teamed up in joint bid to save stores.
• Mondelez Shifts From Hunter to Hunted After Hershey Deal Dies: With Hershey discussions dead, Mondelez facing very different outcome: becoming a target itself.
• Departing Viacom CEO Reaps $59.4m in 8-Day Sale of Stock: Former CEO Philippe Dauman has sold almost all of his stock in media co. since resigning earlier this month.
• Schlumberger’s Dimmer View Clouded by Deepwater Woes: 3Q Drilling segment results expected to be “slightly lower” as West Africa, Brazil, Asia see further declines in deepwater drilling.
• New Clinton E-Mails to Be Reviewed for Link to Benghazi Attack: Judge issued order Tues. in 2015 FoIA lawsuit brought by conservative group Judicial Watch Inc.
• Trump Heads to Mexico Looking to Shake Up Presidential Race: “I have accepted the invitation of President Enrique Pena Nieto, of Mexico, and look very much forward to meeting him tomorrow,” Trump wrote.
• U.S. Raises Farm Income Estimate to $71b on Cost Drop: U.S. farm net income will be $71.5b in 2016, USDA said Tuesday in a report on its website.
• U.S. Auto Sales Seen Sliding for August on Dialed-Down Discounts: Aug. data may show seasonally adjusted annual sales pace of ~17.2m cars, light trucks, according to Bloomberg survey.

Looking at regional markets, Asian stocks traded mixed following a negative lead from Wall Street where commodity weakness and losses in Apple weighed on sentiment. ASX 200 (-0.8%) underperformed as the slump in commodities pressured miners and energy names, while reports the government is considering curbs on the banking sector dampened financials. Nikkei 225 (+1.0%) bucked the trend as a weaker JPY underpinned exporters and risk-appetite, while Chinese markets were mixed with Hang Seng (-0.1%) negative & Shanghai Comp (+0.3%) resilient amid better than expected earnings from big 4 banks ICBC and Bank of China. However, other earnings releases were less inspiring and the PBoC halved the amount of today’s liquidity injection. 10yr JGBs traded lower to track the weakness seen in T-notes, with the heightened risk-appetite in Japan dampening demand for government paper. The PBoC injected another CNY 40bIn via 7-day reverse repos and CNY 10bIn in 14-day reverse repos. PBoC set CNY mid-point at 6.6908 (Prey. 6.6812). BoJ’s Funo said the central bank will utilise all tools to reach 2% target and will review how to get inflation to goal ASAP. Funo also added he expects to hit the 2% inflation goal during 2017, but added uncertainty on the outlook is high.

Top Asian News

• China H Shares Set for World’s Best Monthly Gain as Profits Beat: Hang Seng China Enterprises has advanced 6.9% in August.
• China’s Hottest Property Market Imposes Curbs to Cool Prices: Halts selling residences to buyers depending on home ownership.
• Fosun Signals IPO of Health Assets to Be Announced This Year: Net income rose 21% in 1H led by gains in investment.
• Rajan Leaving on a Bond High With Best Rally Since Start of 2015: 10-year yield slides in August for a third straight month.
• Chinese Airlines Plan Stricter Cost Control on Yuan, Competition: Yields fall on international routes even as fuel prices drop.
• Korea’s Hanjin Shipping Becomes Symbol of Industry in Pain: Container line’s board votes to file for court receivership.
• Mystery of Oil Held on Chinese Islands Puzzles Crude Markets: Analyst opinion divided over level of China strategic reserves.
• China Stock Traders Bet $305m on Military Tensions: Three funds to launch ETFs tracking defense companies.

European equities have kicked off the session in the tentative fashion that has become a regular occurrence of late, with most indices in modest positive territory (Euro Stoxx 50: +0.3%). In terms of notable movers, Deutsche Bank (+3%) and Commerzbank (+4%) have stolen the headlines after Manager Magazin reported that that Deutsche Bank were mulling a merger, and while the CEO stated that he does not believe this is an option, shares shrugged this off and continued to lead the way higher in Europe. Elsewhere, Bouygues (+3.4%) are also among the best performers in the wake of their pre-market earnings. In terms of underperformers, materials remain the session laggard, as was the case for much of yesterday.

Top European News

• ECB Says Stimulus Justified as Financial Stability Under Control: Framework incorporates “important safeguards to prevent an overly narrow and zealous interpretation of price stability from becoming a source of financial instability,” Executive Board member Peter Praet said in speech.
• Europe Bankers See $2.5b Melt From Bonuses in Stock Rout: Drop in financial stocks this year has wiped >$2.5b from value of deferred shares that were paid as bonuses.
• Cryan Denies Merger Report as Deutsche Bank Seeks to Shrink: “Part of the work we’re doing is to make our bank a bit smaller, to make it a bit simpler,” CEO John Cryan said at Frankfurt conference.
• EU Show of Might With Apple Tax Demand May Be Brexit Boon: By ordering AAPL to pay Ireland EU13b in back taxes, EU gives U.K. chance to reinvent itself as fiscal paradise.
• U.K. Banks Eyeing EU Market May Find Equivalence Cold Comfort: Between passporting and equivalence, passporting might get City of London closer to its goal of maintaining full access to single market.
• End Near for Brexit Indecision as May Convenes Her Cabinet: PM, ministers such as chief Brexit negotiator David Davis haven’t publicly disclosed details on bargaining tactics.
• VW Hopes to Agree With U.S. on 3-Liter Diesel Engine by Oct.: Reuters: Co. in “really good discussions” with U.S. authorities on larger diesel engines.
• Norway Wealth Fund Buys Stake in S.F. Office Properties: To buy 44% common equity interest in 2 Kilroy Realty companies that own 2 office properties

In FX, the dollar gained 0.2 percent to 103.18 yen, extending this month’s advance to 1.1 percent. The Bloomberg Dollar Spot Index was little changed, leaving it 0.5 percent higher in August after closing at the highest since July 28 on Tuesday. Prices for Fed funds futures imply a 59 percent chance of an interest-rate increase this year, up from 36 percent at the start of the month. New Zealand’s dollar strengthened 0.5 percent on Wednesday, extending this month’s gain, as a report showed business confidence in the nation was at a 20-month high.  A gauge of emerging-market currencies was little changed in August. South Africa’s rand slid 3.9 percent after a police summons for Finance Minister Pravin Gordhan heightened political risk in the country, while Russia’s ruble gained 1.2 percent amid a rebound in oil.

In commodities, crude oil traded at $46.11 a barrel before government data due Wednesday that’s forecast to show U.S. stockpiles increased by 1.3 million barrels last week. The price surged 11 percent for this month amid speculation informal talks among OPEC members in Algeria next month will result in an output freeze, speculation which has largely dissipated following comments from both Iran and Iraq that they support a freeze as long as they are not part of it. Gold was headed for a monthly loss of almost 3 percent as the prospect of a Fed rate hike dulls the allure of assets that don’t bear interest. This is the metal’s first drop in August since 2009. Prices normally rise in this month onIndian buying. Holdings in gold exchange-trade funds rose about 25 metric tons this month, the smallest gain in 2016. Copper slid 6 percent in London since July on concern a glut is worsening. It rose 0.5 percent on Wednesday after Chilean miner Codelco halted one mine and faced the possibility of a strike at another, threatening disruptions from the world’s top supplier of the mined metal. Corn was headed for a third monthly drop with prices touching $3.155 a bushel on Tuesday in Chicago, the lowest since 2009. The U.S. crop was rated 75 percent good-to-excellent as of Aug. 28, the highest since 1994, official figures show.

Looking at the day ahead, the main focus will be the August ADP employment change reading where current market expectations are for a 175k print following a 179k reading in July. Also due out is the Chicago PMI for August which is expected to decline nearly 2pts to 54.0, while July pending home sales data is also scheduled for release.

* * *

Bulletin Headline Summary from RanSquawk and Bloomberg

• Another tentative session for European equities, however Deutsche Bank and Commerzbank take focus amid German press reports speculating of a merger.
• GBP sees notable strength coming largely through a EUFt/GBP rate which took out the lows from last week.
• Looking ahead, participants will see the release of US ADP Employment Change and the DoE Crude Oil Inventory report.
• Treasuries trade with downside bias overnight, though within ranges, while global equities rise, USD steady; there’s been “little in the way of market moving headlines to inspire market flows in either direction,” independent strategist Marty Mitchell said in note.
• “There’s no second referendum; no attempts to sort of stay in the EU by the back door; that we’re actually going to deliver on this,” Prime Minister Theresa May tells ministers after their summer break at a meeting near London
• Two Federal Reserve officials laid out sharply different takes on whether continued low interest rates might raise the risks of financial instability, highlighting divisions on the FOMC ahead of its September policy meeting
• One of Shinzo Abe’s advisers cast a shadow over the prime minister’s revival program for Japan, warning that he’s starting to see a chance that Abenomics may not do well
• German unemployment continued its decline in August, signaling that consumption driven by a strong labor market may cushion the blow to Europe’s largest economy from Britain’s decision to leave the EU
• Euro-area inflation failed to accelerate in August, adding to signs that the euro area’s economic outlook deteriorated ahead of a ECB meeting next week
• The ECB is monitoring the impact of its monetary stimulus on financial stability, though governments and regulators must also play their part in preventing imbalances, two of the institution’s policy makers said
• A rout in financial stocks this year has wiped more than $2.5 billion from the value of deferred shares that were paid as bonuses in the past few years at Barclays Plc, Credit Suisse Group AG, Deutsche Bank AG and UBS Group AG, data compiled by Bloomberg show

US Event Calendar

• 7am: MBA Mortgage Applications, Aug. 26 (prior -2.1%)
• 8am: Fed’s Kashkari to speak in St. Paul, Minn.
• 8:15am: ADP Employment Report, Aug., est. 175k (prior 179k)
• 9:45am: Chicago Purchasing Manager, Aug., est. 54 (prior 55.8)
• 10:00am: Pending Home Sales m/m, July, est. 0.7% (prior 0.2%); Pending Home Sales y/y, July, est. 2.2% (prior 0.3%)
• 10:30am: DOE Energy Inventories

DB’s Jim Reid concludes the overnight wrap

The most interesting story over the last 24 hours has been the one regarding the EC’s decision to order Apple to pay €13bn in back taxes in Ireland. While the decision may be appealed by both Ireland and Apple, and spend years in court, it is an interesting long-term macro development. Globalisation has allowed multinational companies to base a large part of their operations in lower tax regimes. Indeed many countries have openly courted big companies in the hope that investment and jobs would be higher as a result. However in the era of globalisation, while corporate tax rates around the world have generally fallen, budget deficits have generally increased. Although there are other reasons, lower corporate tax rates have not helped government finances. It does seem that in a world of low growth, high deficits, generally high corporate cash balances and low corporate tax rates, companies have been vulnerable to a change in the political wind. Although having said this, it’ll be interesting to see if the UK tries to encourage investment (to offset Brexit risks) by lowering its corporate tax rates over the coming months. So while countries may increasingly be trying to find ways of taxing multinationals in the years ahead, there will always be someone trying to entice the same companies into their lower tax world.

Unsurprisingly Apple shares (-0.78%) were down on the day but perhaps not as much as might have been expected due to the fact that they can offset tax against their US earnings and also due to the fact that appeals will drag this out Nevertheless the story did appear to weigh on other blue-chip tech stocks like Microsoft, Facebook and Alphabet which all ended up declining a similar amount. In fact apart from more gains for financials (S&P 500 financials index +0.80% to extend its 2016 high) losses were reasonably broad-based by sector resulting in the S&P 500 edging down -0.20%. A strong day for the Greenback (Dollar index +0.50%) following a bumper consumer confidence print – more on that shortly – played its part, as did a leg lower for Oil. WTI ended up falling -1.34% yesterday and has continued to retreat this morning (-0.20%) to the lowest level in two weeks. It feels like most days we seem to get conflicting stories on the fundamental demand and supply dynamics, and also expectations of a potential major producers’ production freeze. Case in point yesterday where Bloomberg reported an Iranian deputy minister saying that the country is planning to boost output to 4m barrels a day by the end of 2016. This was then countered with another report suggesting that Iraq would support a production freeze next month.

Meanwhile rates markets were little changed with the 10y Treasury yield continuing to hover in this 1.50% to 1.60% range. We did break the upside of that range temporarily on Friday following Fischer’s comments and there was some hope that yesterday we’d get a bit more clarity around his views however the Vice-Chair’s comments ended up being almost a complete non-event. Fischer confirmed once more that the labour market ‘is very close to full employment’ but refused to comment on timing expectations for the next Fed rate hike, instead saying that ‘we choose the pace on basis of data’.

Yesterday’s headline consumer confidence print in the US did turn a few heads however after printing at 101.1 (vs. 97.0 expected) and up a bumper 4.4pts from July. That is actually the highest reading since September last year while the other components of the report were also encouraging. The present situations component rose 4.2pts to 123.0 and the best print in nine years, while the expectations index (which rose 4.4pts to 86.4) is now at the highest since October. Encouragingly the labour differential also improved with the share of those who said jobs were plentiful rising to most in nine years too.

Glancing at the latest in Asia this morning the most significant moves have once again been reserved for Japan where the Nikkei and Topix are +0.99% and +1.24% respectively. Those gains have come after industrial production in Japan (0.0% mom vs. +0.8% expected) printed well below expectations and so keeping the pressure on the BoJ. The Yen was as much as -0.30% weaker at one stage but is back to flat now. Meanwhile the rest of Asia is a bit more mixed. The Hang Seng is +0.02%, Shanghai Comp +0.29% and the Kospi (-0.25%) and ASX (-1.07%) are in the red. There was also some data released in the UK overnight where the August consumer confidence reading improved 5pts albeit to a still lowly -7.

Moving on. Over in Europe yesterday it was a better session for equity markets relative to their US counterparts as another rally for European Banks helped send the Stoxx 600 up +0.45%. Banks were actually up +1.84% and have quietly gone about rallying over 12% from the intraday lows of this month back on the 2nd. Yesterday’s gains actually came about despite relatively disappointing data in Europe however. The European Commission’s economic sentiment index declined 1pt to 103.5 in August which is the lowest reading since March, while business climate, industrial and services confidence readings were also down. The latest CPI report for Germany in August revealed that headline CPI was 0.0% mom and lower than expected (+0.1% expected). That has seen the YoY rate stay unchanged at +0.4%. The other data came in the UK where mortgage approvals declined to 60.9k in July from 64.2k in the month prior.

Looking at the day ahead, kicking off this morning is Germany where the July retail sales data is due out. We’ll then get the latest house prices data in the UK before the Euro area, France and Italy all release August CPI reports. Germany will also release August unemployment data and France is also due to release consumer spending data for July. In the US this afternoon the main focus will be the August ADP employment change reading where current market expectations are for a 175k print following a 179k reading in July. Also due out is the Chicago PMI for August which is expected to decline nearly 2pts to 54.0, while July pending home sales data is also scheduled for release. Fedspeak should also be a big focus today. Speaking this morning at 8.15am BST at an event in Beijing will be Rosengren and Evans, while this afternoon (1.00pm BST) the Fed’s Kashkari is speaking on the role of the Fed with audience Q&A expected. It’ll also be important to keep an eye on events in Spain where PM Rajoy is attempting to win a confidence vote in Parliament.

via http://ift.tt/2bRJWOw Tyler Durden

In his latest striking and unorthodox move, Trump announced last night via Twitter that he had accepted an invitation from Mexican President Enrique Peña Nieto for a meeting in Mexico today.  The meeting, set to take place just hours before he sets out proposals to crack down on illegal immigration that have stirred up widespread anger among Mexicans, is expected to cover a broad variety of topics including NAFTA, immigration and the contentious issue of border enforcement. 

The meeting with President Enrique Pena Nieto looked to be the type of dramatic, Trump-style event to ensure he dominates the headlines as he tries to close a gap in national opinion polls that now favors his opponent, Democrat Hillary Clinton.

According to LifeZette, Trump will include former New York City Mayor Rudy Giuliani, RNC Chairman Reince Priebus and Alabama Sen. Jeff Sessions in the meetings.  Trump and Nieto are expected to make brief statements to the press after the meeting though a full press conference is not anticipated.

The trip is completely unprecedented as no previous non-incumbent presidential nominee of a major party has ever traveled to Mexico as part of his campaign.  According to the Wall Street Journal, the announcement comes after Nieto sent an invitation to both Trump and Hillary last Friday.  Nieto’s office has said the invitation was well received by both campaigns but so far Trump is the only one to accept. 

Both Trump and Nieto confirmed the meeting over Twitter last night: 

I have accepted the invitation of President Enrique Pena Nieto, of Mexico, and look very much forward to meeting him tomorrow.

— Donald J. Trump (@realDonaldTrump) August 31, 2016

The Mexican government, which has bristled at Trump’s threats to wall off Mexico and tear up the North American Free Trade Agreement, also confirmed the meeting in a tweet, saying Trump had agreed to meet Pena Nieto in private.

El Señor @realDonaldTrump ha aceptado esta invitación y se reunirá mañana en privado con el Presidente @EPN.

— Presidencia México (@PresidenciaMX) August 31, 2016

Pena Nieto later tweeted about the meeting, then added:  “I believe in dialogue to promote Mexico’s interests in the world, and chiefly, to protect Mexicans wherever they are.”  Trump has been pilloried by media in Mexico since he launched his presidential campaign last year with a barrage of broadsides against the country, saying it sent rapists and drug dealers north across the border.

The meeting appeared to be a gamble by Pena Nieto, whose popularity has slumped to all-time lows, and opposition politicians reacted with dismay. “Be part of the campaign of a candidate dedicated to insulting us? Why?” said former interior minister Alejandro Poire, retweeting #TrumpNotWelcome hashtags on Twitter.

Trump has said, if elected on Nov. 8, he would carry out his pledge to build a wall along the U.S. southern border with Mexico to prevent illegal crossings into the United States. He has steadfastly demanded that Mexico pay for the wall, a position Trump supporters cheer but which Mexican officials scoff at.

Talks between the Trump campaign and the Mexican government on the trip began after Trump decided last weekend to take up Pena Nieto on an offer to meet, a source familiar with the situation said. Trump is expected to meet the Mexican leader in Mexico in between fundraising events he has scheduled in California and his immigration speech in Phoenix, Arizona, on Wednesday night.

Pena Nieto has publicly voiced skepticism about Trump.

Both Mexican security services and Trump’s secret service have expressed concerns regarding the security of the event. 

Trump has made conflicting statements about the Mexican people over the past several months, although his recent pivot seemed to soften his stance toward Hispanics, and he even ate this taco bowl to prove it:   

Happy #CincoDeMayo! The best taco bowls are made in Trump Tower Grill. I love Hispanics! https://t.co/ufoTeQd8yA http://pic.twitter.com/k01Mc6CuDI

— Donald J. Trump (@realDonaldTrump) May 5, 2016

 

For his part, Nieto also hasn’t been the most complementary of the Republican nominee having previously compared Trump to Hitler and Mussolini.  Per CBS, Nieto made the following comment about Trump which basically implies he is a fascist dictator that could ultimately start World War III:

“There have been episodes in human history, unfortunately, where these expressions of this strident rhetoric have only led to very ominous situations in the history of humanity.  That’s how Mussolini got in, that’s how Hitler got in — they took advantage of a situation, a problem perhaps, which humanity was going through at the time, after an economic crisis. And I think what (they) put forward ended up at what we know today from history, in global conflagration. We don’t want that happening anywhere in the world.”

Trump aides said he would reaffirm his determination to build the border wall to cut new illegal crossings and quickly deport illegal immigrants who have committed crimes in the United States. However, the central question facing Trump was how he would treat the majority of the 11 million illegal immigrants who have set down roots in their communities and obeyed U.S. laws, an issue that bedevils the immigration debate.

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Submitted by Mikko Annala via DemosHelsinki.fi,

Finland is about to launch an experiment in which a randomly selected group of 2,000–3,000 citizens already on unemployment benefits will begin to receive a monthly basic income of 560 euros (approx. $600). That basic income will replace their existing benefits. The amount is the same as the current guaranteed minimum level of Finnish social security support. The pilot study, running for two years in 2017-2018, aims to assess whether basic income can help reduce poverty, social exclusion, and bureaucracy, while increasing the employment rate.

The Finnish government introduced its legislative bill for the experiment on 25 August. Originally, the scope of the basic income experiment was much more ambitious. Many experts have criticized the government’s experiment for its small sample size and for the setup of the trial, which will be performed within just one experimental condition. This implies that the experiment can provide insights on only one issue, namely whether the removal of the disincentives embedded in social security will encourage those now unemployed to return to the workforce or not.  

Still, the world’s largest national basic income experiment represents a big leap towards experimental governance, a transformation that has been given strong emphasis in the current government program of the Finnish state. Additionally, the Finnish trial sets the agenda for the future of universal basic income at large. Its results will be closely followed by governments worldwide. The basic income experiment may thus well lead to the greatest societal transformation of our time.

There are few important things one should understand when following the headlines on  the Finnish basic income experiment:

1.Basic income is the most comprehensive political reform of our century so far.

There is no other reform in sight that would a) potentially impact the majority of citizens in any given nation and b) be of such great importance in as many countries as basic income is today. Take the global interest in the Finnish experiment as evidence: why such attention for a trial in a country of just 5 million inhabitants? Probably because basic income seems to address challenges faced by all societies across borders. Currently, basic income is being discussed in earnest in Switzerland (where a basic income reform was rejected in a referendum in June 2016), in the US (where Y Combinator, an organization known for its highly successful start-up accelerator, has announced a pilot experiment for basic income to take place in Oakland, California) and in the Netherlands (where a basic income experiment will begin in the city of Utrecht in January 2017).

2. The Finnish basic income experiment is officially referred to as an incremental reform of the welfare model, not as an indicator of a complete paradigm shift.

At present, citizens in Finland are entitled to a minimum level of social security support that is the same as the amount of its suggested basic income (560€ a month). In official statements, the basic income experiment is said to aim to reduce bureaucracy, to unravel disincentives and to decrease poverty in society. Government documents do not mention changes in the structure of work and income, nor do they offer comments on looming technology-induced unemployment. Hence, basic income is seen as an additional element to the Finnish universal social security system. Elsewhere, basic income has been envisioned as a solution for rising inequality, exacerbated by the explosion of robotics and the automatisation of routine work. Top politicians in Finland, however, have not explicitly made these connections.

3. The basic income trial is a part of a larger shift in policy-making.

Over the last two years, Finland has explored possibilities on how to reform its policy-making functions. As Forbes put it, Finland, through the Prime Minister’s Office, has “been pioneering a form of deciding upon public policy where people actually think through the problems at issue, think about them, consider solutions, test a few of them, then implement the best.”

This new form of policy-making has come to be known as “co-design” or “co-creation” of policy. In short, the term refers to the engaging of relevant stakeholders and citizens in the policy-making process from its early phases onwards. As further described in this article, which looks at the policy-making model that was created by Nordic think tank Demos Helsinki, more human-centered and experimental governmental steering can encourage trust and make policy more user-oriented, targeted and efficient.

The basic income trial will pave the way for about 20 other large-scale experiments in Finland that have been launched or will be launched by the country’s ministries in the coming months. With the preparation work for the basic income trial, the Finns have spotted a handful of legislative problems that will need to be tackled in order to foster further experimentation. Experimental culture in general has encouraged civil servants to take a permissive attitude to legislation and thus enabled further innovative experimentation (well demonstrated by this case, where traffic law was reinterpreted so that it allowed Finland to become the first country in the world to test driverless vehicles in real urban environments). Lastly, preparing the large experiment has already forced the country to open up the discussion on and solve important issues in relation to the ethics and practices of experimenting. All this lays as a solid groundwork for building a forerunner governance system in the country.

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We are sure this will end well… Policy designed by the masses, for the masses? Free money to do nothing whatsoever will what? Guilt the unemployed into working? Perhaps… but don't work too hard… because welfare cliffs loom everywhere,

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Something is different this time. For the last few years, China has 'ensured stability' in the Yuan ahead of major geopolitical events – no matter what – only to let things slide back into turmoiling after. Ahead of this weekend's G-20, however, and amid notably deteriorating fundamentals (and an increasingly hawkish-sounding Fed), China has let the Yuan tumble in the last week… and traders are piling into bets on post-G-20 weakness to continue.

As Bloomberg notes, history shows that the Chinese currency usually strengthens ahead of major political or economic events, such as President Xi Jinping’s state visits to the U.S. and the Boao Forum.

 

But this time – ahead of the G-20 gathering – onshore Yuan is being allowed to weaken… back near post-Brexit lows…

 

Perhaps as another warning to The Fed? But as Bloomberg reports, derivative markets are pointing to renewed bets on yuan depreciation, with a measure of expected price swings poised for the biggest monthly increase since January.

 

Other indicators, such as the premium on options to sell the yuan over those to buy and the discount of forward contracts over the spot rate, have also climbed, indicating rising expectations for declines.

 

 

The increased pessimism comes after a period of calm that sent the measures to the lowest in at least nine months as the Federal Reserve held off on raising interest rates and investors bet that China would steady the yuan before it hosts a Group of 20 meeting in September.

 

Traders are probing the People’s Bank of China’s willingness to allow the yuan to fall between the G-20 gathering and the currency’s entry into the International Monetary Fund’s Special Drawing Rights on Oct. 1, especially with the chances of Fed action increasing.

"After G-20 ends next Monday, the market may want to test how much yuan depreciation the PBOC can tolerate," said Gao Qi, a strategist at Scotiabank in Singapore. "China doesn’t want the yuan to move too much during G-20 and become a topic of discussion. SDR’s impact will be smaller than G-20."

Offshore yuan bears have already started building short positions to speculate on declines after the G-20 gathering, according to Ken Cheung, a strategist at Mizuho Bank Ltd. in Hong Kong.

“The China data for July demonstrated China growth momentum has been weakening," he wrote in a note. "The PBOC might have a less strong intention to maintain yuan stability after the G-20 summit, and allow yuan depreciation again if expectations remain well-anchored."

And if the Yuan starts tumbling, then US equities will quickly follow.

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Submitted by Michael Snyder via The Economic Collapse blog,

What would happen if some sort of major national emergency caused a massive transportation disruption that stopped trucks from running?  The next time you talk to a trucker, please thank them for their service, because without their hard work none of our lives would be possible.  In America today, very few of us live a truly independent lifestyle, and that means that we rely on the system to provide what we need.  Most of us take for granted that there will always be plenty of goods at Wal-Mart and at the grocery store whenever we need more “stuff”, and most of us never give a second thought to how all of that “stuff” gets there.  Well, the truth is that most of it is brought in by trucks, and if the trucks stopped running for some reason the entire country would devolve into chaos very rapidly.

Earlier today, I came across a quote from Alice Friedemann that detailed what we would be facing during a major national transportation disruption very nicely…

Within a week, in roughly this order, grocery stores would be out of dairy and other items that are delivered many times a day. And by the week, the shelves would be empty.

 

Hospitals, pharmacies, factories, and many other businesses also get several deliveries a day, and they’d be running out of stuff the first day.

 

And the second day, there’s be panic and hoarding. And restaurants, pharmacies would close. ATM’s would be out of money. Construction would stop. There’d be increasing layoffs. Increasing enormous amounts of trash not getting picked up, 685,000 tons a day. Service stations would be closed. Very few people would be working. And the livestock would start to be hungry from lack of feed deliveries.

 

Then within two weeks, clean water supplies would run out. Within four weeks to eight weeks, there wouldn’t be coal delivered to power plants and electricity would start shutting down. And when that happened, about a quarter of our pipelines use electricity, and so natural gas plants wouldn’t be fed natural gas and they’d start shutting down.

There is so much infrastructure that we take for granted that would suddenly become very vulnerable in this type of scenario.  There are countless numbers of workers out there that never get any glory that do the hard work of maintaining our nuclear power plants, our natural gas pipelines, our electrical grid, etc.  If they suddenly were not able to do their jobs, the consequences would be absolutely catastrophic.  The following comes from Tess Pennington…

They rarely mention the dozens of nuclear power plants that litter the United States. If no one is there to operate them, how long before they melt down and bury millions of survivors under a radioactive cloud?

 

Then there are the 12,000 facilities around the country that store large quantities of toxic or flammable chemicals, and reside close to residential areas. 2,500 of these sites contain chemicals in quantities that, if a catastrophic accident were to occur, could affect 10,000 to 1 million people each. And let’s not forget the 2.5 million miles of oil and gas pipelines that can be found in every state. They suffer hundreds of leaks and ruptures every year, and are much more likely to explode when they aren’t maintained. That detail seems to be conveniently forgotten by post-apocalyptic films.

 

And finally, most post-apocalyptic movies will forget to mention what happens when there aren’t any functional fire departments. Aside from the obvious consequences, like whole neighborhoods routinely burning to the ground, who’s going to put out landfill fires that are occasionally radioactive?

For most Americans, a major national emergency of this magnitude may seem unimaginable right now.  But the truth is that it isn’t difficult to see how this kind of scenario could happen.  The Yellowstone supervolcano is becoming increasingly active, a single large asteroid could change all of our lives in a single moment, a crippling pandemic could bring normal life in America to a complete standstill, a terror attack involving weapons of mass destruction would spread panic and fear like wildfire, and a historic earthquake along the New Madrid fault, the Cascadia Subduction zone or any of the major faults in California could literally change the geography of our entire continent.

In addition, a massive EMP burst from a nuclear weapon or from the sun could fry our power grid and send us back into the stone age in a single moment.  This is something that I have written about extensively, and those that want to minimize this threat simply don’t know what they are talking about.

And an electromagnetic pulse is not even required to cause very serious problems with our electrical grid.  For instance, just consider what happened in Ukraine toward the end of last year…

On December 23rd, 2015, the Prykarpattyaoblenergo power distribution station in Ukraine was hit by a carefully coordinated cyber-attack that was months in the making. The technicians lost control of their cursors as they watched hackers open breakers and take circuit after circuit offline, plunging 230,000 residents into darkness.

 

The hackers took backup power of the stations offline, plunging the electrical workers into darkness too, and worse yet, they even rewrote the low-level firmware that controls the electrical transformers. The attack had come after months of careful infiltration and planning by a dedicated team of elite cyber-warfare specialists and the result was devastating.

 

Even months later, technicians struggled to regain full capacity in the electrical grid due to the overwriting of firmware. With Ukrainian moves to nationalize power companies, it is possible that the powerful and Putin-connected Russian oligarchs who own large parts of Ukraine’s infrastructure were sending a message: we can shut down the system anytime we want.

The truth is that we are far more vulnerable than most of us would like to admit.

So what would you do if “normal life” suddenly came to an end and you no longer had access to food, water or power?

How would you and your family respond?

Hopefully you would continue to act in a civilized manner, but history has shown that many people would not.

Desperate people do desperate things, and it would only take a matter of days for some people to become violent…

Before long, getting mugged or being a victim of some type of crime is as unpredictable and as common as a car accident. You’ll realize everyone in the neighborhood has now beefed up security on their homes. All your family, friends, and coworkers have experienced a mugging, carjacking, or worse.

 

You’ll have no choice but to accept this new way of life and count on basic safety measures (a form of passive denial) or further learn to defend yourself and remain in a constant state of alert (a very stressful state over time). It’s difficult emotionally, mentally, and physically to remain on high alert 24/7 for any length of time. Most people will revert to a form of passive denial until the next incident happens to them or a family member.

And even though things may seem relatively stable for the moment, concern about what is coming is one of the factors that has led an increasing number of Americans to arm themselves.  According to a brand new study from the Pew Research Center, 44 percent of all American homes now have a gun.  Just two years ago, a different study found that number was sitting at just 31 percent.

The way that we are living our lives right now will not last indefinitely.

At some point a major national emergency will strike, and when that day arrives we could suddenly be facing major power grid and transportation disruptions.

Are you prepared for that?

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