As discussed yesterday, President Donald Trump’s decision to unleash a series of "truculent tweets" showing videos of Islamist mobs destroying Christian artifacts and, in one video, pushing a boy off a building has elicited howls of outrage from both American lawmakers and liberal leaders across the "open" west.

Amid the growing global outrage, no world leader responded more stridently than UK Prime Minister Theresa May, who successfully pressured US diplomats to drop plans for Donald Trump to conduct a visit to Britain in January amid a war of words between the two countries’ leaders. May emphatically criticized Trump for tweeting the videos, saying “I think we must all take seriously the threat that the far-right poses.”

Trump had been scheduled for a ‘working visit’ in the first month of 2018 to formally open America’s new London embassy, according to the Telegraph.

The trip, a scaled down version of a state visit with no meeting with the Queen, was organized to allow Trump to visit the UK without triggering the outpouring of protests that would accompany an official state visit.

According to the Telegraph, rather than being cancelled, Trump’s brief working visit has been “pushed into the long grass.” Meanwhile, no new data have been released.

A senior US diplomat appeared to confirm this: "The idea of a visit has obviously been floated, but not December and not January. I would not expect a Trump visit in January."

Amber Rudd, the Home Secretary, hinted the trip could be delayed, telling MPs on Thursday morning that “we have yet to make the arrangements” and “dates have not yet been agreed."

During her first public comments about the tweets, May rebuked Trump, saying he was “wrong” to share the videos and insisting her cabinet ministers would never do the same. Doing nothing  to disguise her frustration, May denounced Britain First as a "hateful organization" that "seeks to spread mistrust and division within our communities.” Of course, Trump quickly responded that May should focus on fighting "Radical Islamic Terror."

.@Theresa_May, don’t focus on me, focus on the destructive Radical Islamic Terrorism that is taking place within the United Kingdom. We are doing just fine!

— Donald J. Trump (@realDonaldTrump) November 30, 2017

Sir Kim Darroch, the British ambassador in Washington, formally complained to the White House about Trump’s behavior.

British people overwhelmingly reject the prejudiced rhetoric of the far right, which seek to divide communities & erode decency, tolerance & respect. British Muslims are peaceful and law abiding citizens. And I raised these concerns with the White House yesterday.

— Kim Darroch (@KimDarroch) November 30, 2017

One Labour MP, Chris Byrant, went so far as suggesting that the US President should face arrest if he came to the UK. "The Prime Minister should make it absolutely clear that if Donald Trump comes to this country, he'll be arrested for inciting religious hatred and therefore he'd be better off not coming at all."

When asked whether Trump was legitimizing far-right groups, May said: "I think that we must all take seriously the threat that far-Right groups pose, both in terms of the terrorist threat that is posed by those groups and the necessity of dealing with extremist material which is far-Right as well. “I have commented in the past on issues in the United States on this matter. In the United Kingdom we take the far-Right very seriously and that is why we ensure that we deal with these threats and this extremism wherever it comes and whatever its source.”

She added that she would not hesitate to rebuke America when she feels Trump has got something wrong, despite the special relationship between the two countries. "The fact that we work together does not mean that we are afraid to say when we think the United States have got it wrong and be very clear with them," she said.

Meanwhile London Mayor Sadiq Khan, the London Mayor, said Trump would not be welcome in the capital.

"As the mayor of this great diverse city, I have previously called on Theresa May to cancel her ill-judged offer of a state visit to President Trump… After this latest incident, it is increasingly clear that any official visit at all from President Trump to Britain would not be welcomed."

Britain First has boasted of gaining hundreds of new membership applications thanks to Trump's retweets.

President Trump has used Twitter to promote a vile, extremist group that exists solely to sow division and hatred in our country. It's increasingly clear that any official visit from President Trump to Britain would not be welcomed. https://t.co/rwJJ5saSAb http://pic.twitter.com/bus3kMWIfk

— Mayor of London (@MayorofLondon) November 30, 2017

The group's leader Paul Golding, who is facing charges of religiously aggravated harassment alongside Fransen, also said the group's Facebook posts were reaching hundreds of thousands more users.

"We have had hundreds of new membership applications and our organic Facebook reach (number of unique users) has increased by hundreds of thousands,” Golding said.
 

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In response to the recent crackdown against RT and Sputnik who saw their TV station credentials recently yanked by the US government, which is rapidly descending into a neo-McCarthyite abyss, Russia’s parliament said it would bar U.S. media from reporting within its walls in retaliation.

Olga Savastyanova of the State Duma told Russian news agencies on Friday that she expects the Duma to adopt the ban next week.

“By our decision we are offering this move for the consideration of the State Duma Council and plenary session. We are expressing our attitude to the inadmissibility of attacks on democratic values, freedom of speech and the right to receive objective information,” Savastyanova told RIA Novosti on Friday.

Savastyanova emphasized that the ban was a reciprocal action introduced after RT America was stripped of accreditation with the US Congress. According to current regulations any foreign reporter must receive an accreditation with the Foreign Ministry to work in Russia. Once received, this document grants free access to the Parliament.

Separately, the AP reported that Igor Morozov, member of the information policy committee at the Federation Council, told the RIA Novosti news agency that the upper chamber of the Russian parliament would support the ban and could vote to enforce it later this month.

As of this moment, foreign correspondents in Russia can access the Russian parliament and some government agencies with their press credentials issued by the Russian Foreign Ministry; that access will likely be lost in a few days.

The action is retaliation to a Wednesday decision by a committee that governs Capitol Hill access for broadcast journalists, which withdrew credentials for Russia’s RT after the company complied earlier this month with a U.S. demand that it register under the Foreign Agents Registration Act. Russia has denounced the move as a violation of media freedom. The U.S. move and the Russian threats of retaliation follow the endorsement of a new Russian bill that allowed the government to designate international media outlets as foreign agents in response to the U.S. demand made to the RT TV channel.

Asked about the possible ban for U.S. media to report from the Russian parliament, Kremlin spokesman Dmitry Peskov said on Friday he views the initiative “with understanding.”

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Markets were thrown for a loop in the past 24 hours, with the Dow first soaring nearly 400 points on Thursday on expectations that tax reform was a done deal, when drama emerged just after the close when the Senate tax bill came this close to falling apart when the proposed “Trigger” was ruled as invalid, pushing a Thursday tax vote to this morning, and as of this moment the bill appears in limbo with the GOP scrambling to find ways to appease the sudden loud opposition among budget hawks. UBS economist Paul Donovan summarized it best this morning:

Tax cut plans were thrown into confusion by the realisation that the US Treasury Secretary repeating “tax cuts pay for themselves” does not, in fact, make it true. A tax increase trigger mechanism was also ruled out. Votes will take place today to attempt to strike a new compromise. Faced with this crisis, US President Trump has responded with swift and decisive leadership by publically saying “Merry Christmas”. Like every other president has done.

On Friday morning, Trump continued the pep talk…

Republicans Senators are working hard to pass the biggest Tax Cuts in the history of our Country. The Bill is getting better and better. This is a once in a generation chance. Obstructionist Dems trying to block because they think it is too good and will not be given the credit!

— Donald J. Trump (@realDonaldTrump) December 1, 2017

… but this time the market wasn’t falling for it, and overnight both US futures and global equity markets are notably lower on concerns over what the latest fireworks in the Senate tax bill mean.

For those who missed it, here’s what happened: as reported last night, the Senate postponed a vote on the GOP tax bill on Thursday night with the debate to continue on Friday, in which US Senate Majority leader McConnell stated that the next floor votes will be 1100EST. in related news, US Senator Mike Rounds said the Senate is to adopt a USD 10K state-local tax deduction and Senator Cornyn said other trigger ideas are being vetted for tax reforms, while Senator Corker stated the bill is to include USD 350bln in tax increases. In other words, the tax cut somehow is now a tax hike.

As a result, first Asian, then European stocks dropped at the start of the last month of 2017 as the tech stock selloff resumed. The dollar was pressured by tax confusion, and Treasuries predictably gained.

The Stoxx Europe 600 Index fell to a two-week low, with all but one of the 19 industry sectors turning red. The price action in Europe began with DAX tripping through the 13k level and  yesterday’s low, while the November low resides at 12,847. In tandem with this, auto names had been leading the losses with Fiat Chrysler shares halted for trade, having fallen 5%. Tech stocks stumbled sharply for a third day, bringing their decline this week to almost 5%. The SX8P index was down 1.7% vs Stoxx 600’s 0.8% decline; the tech subindex extends this week’s decline to as much as 5.2%. Among the worst performers: Infineon -4.2%, Software AG -3.5%, STMicro -3.2%, Logitech -2.2%, SAP -1.9%, ASML -1.8%.

Sentiment in Asian markets was also subdued and Japanese stocks briefly gave up all their gains amid a pullback in USD/JPY, a miss on Chinese PMI data and after the Senate postponed a tax reform vote to Friday morning. Shanghai Comp. (Unch.) and Hang Seng (-0.4%) were indecisive in the wake the aforementioned data and after the PBoC skipped operations due to high liquidity, with Tencent also jittery following its fall out from the USD 500bln club. The Hang Seng Index fell 0.4% Friday, and down 2.7% on the week, to close out its worst week since December last year, with Tencent Holdings Ltd. and Ping An Insurance among the main drags on the benchmark. China large caps also have worst week of 2017, with CSI 300 Index declining 2.6%. Shenzhen Composite Index adds 0.8% Friday. Tencent tumbled 3.3% for weekly loss of 7.4%, though stock is still a top performer this year, with 103% gain.

The MSCI World Index slid 0.2%. Japan’s Nikkei had finished 0.4% higher, while MSCI’s broadest index of Asia-Pacific shares outside Japan was nearly flat on the day.

The dollar pared its weekly gains as U.S. tax overhaul stalled and Treasuries advanced; the euro met renewed demand from leveraged accounts and the loonie rose before the release of Canadian growth and labor data; the pound slipped below $1.35 as the Irish border question remained unanswered; core euro-area government bonds edged higher, while the S&P future index fell, suggesting U.S. stocks will track European equities’ weakness. Chinese bonds posted their first weekly gain since mid-September.

U.S. stock-index futures also declined. 10Y TSY yields dropped back below 2.4%, down 2bps – the largest dip in more than a week – after climbing eight basis points in the previous two days. The euro pared an advance even after manufacturing data underscored the region’s economic resilience. The latest Markit PMI showed Euro zone factories had their busiest month for over 17 years in November. Of course, ISM and PMIs are nothing but “fake news” as UBS also explained:

Assorted manufacturing sentiment opinion polls are due out. 1) This is not the real world, and calling a rising PMI or ISM “stronger output” is fake news. 2) People lie on surveys, answer questions inaccurately, or answer a different question to the one asked. 3) This is why the correlation of sentiment surveys with economic reality is so low.

“We have a two-faced market. Wall Street continues to run on hopes of fiscal reform while in Europe, the renewed strength of the euro is hurting the DAX which in turn is dragging all the other bourses to the downside,” said Carlo Alberto De Casa, Chief Market Analyst at ActivTrades.

The gap between German 10-year and 30-year borrowing costs was at its tightest level since late August as a worse-than-expected euro zone inflation number on Thursday pushed back prospects for monetary policy tightening well into the future. The dollar index against a basket of six major currencies was 0.1% lower at 92.95 but poised to eke out some gains for the week, supported by oil prices, after OPEC and other major producers agreed to extend production curbs.

In commodities, crude futures were up 28 cents, or 0.5%, at $57.67 a barrel. Brent added 37 cents or 0.6% to $63.01 a barrel. Brent rose for a third consecutive month in November. “This outcome was widely expected, but its confirmation has removed a clear near-term downside risk to prices,” said Gordon Gray, head of oil and gas equity research at HSBC. Gold edged higher as the dollar eased but was still trading near the 3-1/2-week low touched in the previous session, with investors flocking to riskier assets. Spot gold was up 0.2 percent at $1,277.82 an ounce. Copper advanced 0.5 percent to $3.08 a pound, the first advance in a week.

Expected economic data include manufacturing PMIs and construction spending. National Bank of Canada and Big Lots are among companies reporting earnings.

Market Snapshot

• S&P 500 futures down 0.3% to 2640.5
• Stoxx 600 down 0.6% to 384
• MSCI Asia Pacific down 0.1% to 170
• Nikkei 225 up 0.4% to 22819
• Hang Seng down 0.4% to 29074
• Shanghai Composite up less than 0.1% to 3318
• S&P/ASX 200 up 0.3% to 5990
• FTSE 100 down 0.2% to 7311
• DAX down 0.9% to 12910
• German 10Yr yield down 3bps to 0.34%
• Italian 10Yr yield down 1bp to 1.74%
• Spanish 10Yr yield down less than 1bp to 1.44%
• Brent Futures up 1% to $63.25
• Gold spot up 0.2% to $1,277.34
• Dollar Index little changed

Top Overnight News from BBG

• Time is quickly running out for U.S. Secretary of State Rex Tillerson. The White House is weighing a plan to replace him with CIA Director Mike Pompeo, three administration officials said.
• The U.S. dropped tentative plans to visit Britain soon after President Donald Trump re-tweeted anti-Muslim videos from a British right-wing activist then criticized Theresa May for rebuking him, the Telegraph reported. U.K. Prime Minister May said the close alliance between the two countries will endure.
• The Northern Irish party that props up May’s government threatened to bring her down if she makes anything like the concessions that Europe is demanding. The move risks May’s Brexit breakthrough deal with the European Union.
• A second daily surge in Europe’s overnight benchmark rate sparked widespread speculation among traders about the trigger, though there were no signs of wider funding stress
• Some traders attributed the jump in the Eonia rate to possible year-end funding squeeze at some lenders, while others pinned it down to demand related to Greece’s just-concluded bond swap
• The breakthrough in Brexit talks that Theresa May has been working to clinch next week was at risk Friday as the Northern Irish party that props up her government threatened to bring her down if she makes anything like the concessions that Europe is demanding
• Oil extended gains after a third monthly advance as OPEC agreed to prolong production cuts through to the end of 2018 in an effort to drain a global glut. Goldman Sachs Group Inc. says oil markets are overly jittery and there’s a reduced risk of both unexpected increases in supply as well as excess draws in stockpiles
• The Senate tax bill is headed for a marathon debate this week after Republican leaders brought the measure to the floor Wednesday with the goal of holding a final vote by the end of the week
• Federal Reserve Bank of Cleveland President Loretta Mester brushed aside concerns over a flattening yield curve while expressing some worry over elevated stock market valuations, saying both were reasons for continued interest rate hikes
• Short sellers may be aggravating China’s biggest bond selloff in four years. While the nation’s debt market has no official measure of short sales, analysts say a surge in bond lending has been partially fueled by rising bearish bets

Asia equity markets were choppy as the region counterbalanced the momentum from the record highs in the US with disappointing Chinese Caixin Manufacturing PMI data. ASX 200 (+0.3%) and Nikkei 225 (+0.4%) took impetus from the rally in  US where tax optimism fuelled advances in S&P 500 and Dow to fresh all-time highs, in which the latter also surmounted the 24,000 level for the first time. However, sentiment was brought down a notch and Japanese stocks briefly gave up all their gains amid a pullback in USD/JPY, miss on Chinese data and after the Senate postponed a tax reform vote to Friday morning. Shanghai Comp. (Unch.) and Hang Seng (-0.4%) were indecisive in the wake the aforementioned data and after the PBoC skipped operations due to high liquidity, with Tencent also jittery following its fall out from the USD 500bln club. Finally, 10yr JGBs eventually found mild support from an indecisive risk tone and the BoJ’s Rinban operation for nearly JPY 1tln of  JGBs in 1yr-10yr maturities, which underpinned prices to above 151.00. Chinese Caixin Manufacturing PMI Final (Nov) 50.8 vs. Exp. 50.9 (Prev. 51.0). PBoC skipped open market operations for a net weekly drain of CNY 40bln vs. last week’s CNY 150bln net injection. PBoC sets CNY mid-point at 6.6067 (Prev. 6.6034) Japanese CPI (Oct) Y/Y 0.2% vs. Exp. 0.2% (Prev. 0.7%). Japanese CPI Ex. Fresh Food (Oct) Y/Y 0.8% vs. Exp. 0.8% (Prev. 0.7%)

Top Asian News

• Short Sellers Seen Fueling Worst China Bond Rout Since 2013
• Japan’s Economy Is Still Outrunning Its Potential Growth Rate
• Central Banks Find Post-Crisis Bubble Tool Is Doing the Job
• Hang Seng Index Has Worst Week This Year as Tencent Weighs
• China’s Iron Ore Port Stockpiles Jump to Record on Winter Curbs

European stocks are beginning the final trading month of the year on the backfoot with the Euro Stoxx 50 trading with losses of over 1%. The price action in EU bourses began with DAX tripping through the 13k level and yesterday’s low, while the November low resides at 12,847. In tandem with this, auto names had been leading the losses with Fiat Chrysler shares halted for trade, having fallen 5%. Additionally, sentiment has not been helped after a delayed vote on the US tax reform bill, which has dented trading. Several potential catalysts and some bullish factors that are guaranteed to have propelled bonds to their highs. Bunds took a while to challenge 162.96 near term technical resistance, but once through there was little psychological opposition to gains through 163.00 before a pause at yesterday’s 163.10 Eurex session peak. However, with the Dax dumping for no obvious reason other than charts turning bearish once it breached Thursday’s low,  13k and the late November base, the core 10 year bond advanced further to almost hit highs made during the countdown to month end (163.26, so far). Interestingly and perhaps tellingly, Gilts have not been unduly ruffled by stronger than forecast UK manufacturing PMI, and remain above 124.00 within a 123.57-124.08 range (so almost ½ point ahead at best), so it seems that some kind of asset-reallocation has occurred, legged in and by default if not designed or as a specific trade. Back to the abrupt about turn down in the German index and other EU cash bourses, there is talk of algo/chart selling, maybe a basket of equities and even an erroneous sale in a big auto that dragged other car names down with it.

Top European News

• Brexit Risks Leaving Banks on the Hook for Impossible Contracts
• Morgan Stanley Is Right to Fear My Party, Labour’s Corbyn Says
• Eonia Mystery Deepens Despite No Sign of Wider Funding Stress
• Turkey’s Success Selling Junk Yen Bonds Shows Hunger for Yield
• Poland’s Goldilocks Economy Faces Inflation Wake-Up Call

In FX, the USD-index appears unable to sustain recovery gains above 93.000, with the delayed Senate vote on US tax reforms undermining Dollar sentiment, while Sterling and other major currency counterparts continue to thrive on bullish independent factors. GBP failed to benefit from firmer than expected manufacturing PMI from the UK (58.2 vs. Exp. 56.5) as markets pause for breath in the wake of recent gains and potential weekend risk ahead of PM May’s meeting with Barnier and Juncker on Monday with the Norther Ireland border issue also seemingly unresolved. EUR is maintaining 1.1900+ status vs the Greenback, but only just and capped by offers between 1.1940-50 before key chart resistance at 1.1961. JPY holding within a new broad 112.00- 113.00 range vs the Usd, eyeing JGB/UST yield differentials and of course the passage of US tax reform proposals/bills. Decent option expiries between 112.65-70 (1 bn).

In commodities, crude prices marginally firmer, following last night’s decision by OPEC and Non-OPEC to extend production cuts for 9-months which was widely expected. The more interesting development had come out from the EIA, who stated that US production rose around 300k bpd. Elsewhere, the metals complex has been relatively uneventful with both gold and copper sideways throughout Asia hours

Looking at the day ahead, the final November PMIs in Europe are due, while in the US, the November ISM manufacturing print and November vehicle sales data is due. Also worth noting is the various Fedspeak with Bullard, Kaplan and Harker all due.

US Event Calendar

• 9:05am: Fed’s Bullard Speaks in Little Rock, Arkansas
• 9:30am: Fed’s Kaplan Addresses Symposium in  McAllen, Texas
• 9:45am: Markit US Services PMI, est. 54, prior 53.8
• 10am: ISM Manufacturing, est. 58.3, prior 58.7
• 10am: Construction Spending m/m, est. 0.5%, prior 0.3%
• 10:15am: Fed’s Harker Speaks on Inclusive Economic Growth

DB’s Jim Reid concludes the overnight wrap

I arrived back to London yesterday to snow, albeit for a few minutes and consisting of a few dozen snow flakes. However my twitter and Facebook feed is full of pictures and videos recording this monumental occasion. London has had a lot to deal with this year – first Brexit and now a nanometer of snow sending the capital flocking to buy shovels and tinned food. Wherever you are around the world please think of us Londoners trying to navigate through this deluge as we commute to work today. The transport system typically doesn’t respond well to such disruption.

Anyway welcome to December. My wife officially marks this as the start of Xmas and I will most likely be greeted tonight at home as I come through the door with the Michael Buble’s Christmas Album which I always moan at but secretly quite like. In markets it’s beginning to look a lot like a new record for the S&P 500 as yesterday’s +0.82% climb cemented the 13th successive month of positive total returns in the index. We’ve never had such a run with data going back over 90 years. We’ve also never seen each month of a calendar year with a positive return so can December mark another landmark in this pretty incredible equity bull market?

The month ended with the FANG and wider technology stocks regaining some of their mojo after a difficult day on Wednesday. The NASDAQ (+2.2%) and FANGs (+1.5%) recovered but with the DOW powering on and crossing 24,000 for the first time ever (30 business days after first crossing 23,000) and the S&P 500 hitting a new record high.

Onto the US tax reform, momentum had been strong during the day, particularly after Senator McCain has decided to support the bill. However, later in the evening, there was a setback with three Senators (Mr Corker, Flake and Lankford) wanting to tie their votes to a triggering mechanism into the bill which would increase taxes down the track if revenue targets are not met. This seemed
to prevent any chance of a late night Thursday vote. Looking ahead, the timing of the full Chamber vote is evolving. The wires (eg Bloomberg) are potentially suggesting this morning (11am US time) at the earliest. As a reminder, there are currently five undecided GOP Senators, with three of them required to pass the bill in the Senate (GOP control 52 seats and need 50 yes votes).

One of the highlight yesterday was that not only did equities rise but US bond yields sold off quite sharply late in the Euro session. At one point we were up c5.5bp before closing +2.1bp to 2.41%, partly being bumped around by the tax developments and before that the solid core PCE data. European bond markets were firmer after weaker regional CPI data, with core yields down 1-3bp (Gilts -1bp; Bunds -1.7bp; OATs -2.8bp) while peripherals fell 4-6bp, with the outperformance led by Portugal where its yields are now the lowest since April 2015.

Staying in Europe, the economy is currently flying and latest surveys suggest it will likely continue. However, it’s precisely because of this strong growth impulse that DB’s Mark Wall feels the recent spell of unusually low macro volatility will inevitably change in 2018. He takes a closer look at the potential sources of change, including economic trends, Brexit, France’s Macron pivot, the Italy election and ECB tapering. Refer to his note for more details.

This morning in Asia, markets are mixed but little changed. The Nikkei (+0.62%) and Kospi (+0.13%) are up modestly, while the Hang Seng (-0.28%) and China’s CSI 300 (-0.24%) are slightly lower as we type. Elsewhere, China’s November Caixin manufacturing PMI was softer than expectations at 50.8 (vs. 50.9), while Japan’s Nikkei manufacturing PMI was slightly lower than last month (53.6 vs. 53.8 previous) but core October CPI was in line at 0.8% yoy.

Now briefly recapping other markets performance from yesterday. European markets were broadly lower, not responding to the positive boost from US tax reforms and the rebound in tech stocks. The Stoxx 600 and DAX were both down c0.3% while the FTSE fell 0.9%, impacted by the stronger Sterling.

Turning to currencies, the US dollar index fell 0.17% while the Euro and Sterling gained 0.50% and 0.88%, with the latter boosted by increased signs of a potential Brexit deal. In commodities, WTI oil edged up 0.17% after OPEC members agreed to extend production cuts to the end of 2018, note that Libya and Nigeria have accepted their output caps for the first time.

Away from markets, our US economists take a closer look at what new Fed nominee Marvin Goodfriend could mean for the Fed. They note that Mr Goodfriend is a respected monetary economist with considerable experience both inside and outside the Federal Reserve system. He has previous experience in Washington, having served on Ronald Reagan’s Council of Economic Advisers. In their view, his appointment will add much needed expertise on macroeconomics and monetary policymaking to a Board that has lost Stanley Fischer. Overall, they believe Goodfriend “leans hawkish, but is not a strident hawk”.

Staying with central bankers, firstly on bitcoin. The Fed’s regulation chief Mr Quarles noted “while these digital currencies may not pose major concerns at their current level of use, more serious financial stability issues may result” if they’re adopted widely. The ECB’s Mersch also noted “I can’t call the assets currencies and sooner or later….there will be a price paid for having excessive speculation”. Turning back to the traditional economy, the ECB’s Praet noted the breadth of economic expansion in the Euro area is “notable” and that monetary policy still plays an important role in sustaining recovery, but “it is not the only game in town”. Elsewhere, the Fed’s Kaplan noted one of the Fed’s big concern is labour participation, which could fall below 61%. On tax reforms, he believes reforming the corporate tax code “could be beneficial”, but some elements of the overall tax plans will create “a short term (economic) bump…but when it’s over, we’ll be more highly leveraged” than before.

Back in the UK, there seems to be little progress on the issue of Irish borders. Northern Island’s Democratic Unionists lawmaker Mr Wilson noted “it they (PM May) stop defending the union, we stop voting for them…it’s as simple as that”. Looking ahead, PM May is expected to meet with EC President Juncker on 4th December to discuss the next steps.

Over in Germany, Ms Merkel has held initial talks with the SPD to potentially form the next coalition government. Little specific details were released but the SPD Premier of the State of Lower Saxony Mr Weil noted “I expect that we would wrap up coalition talks before February as a best case scenario”. Before then, the SPD will hold their party conference on 7-9 December.

Finally, the NY times and then Bloomberg and Reuters have reported that the White House may be planning to replace Secretary of State Mr Tillerson with CIA Director Mike Pompeo, in part due to a slow pace of hiring and differences with President Trump. As per the administration officials, no official decision has been made, but if true, it could be a negative signal on the stability of Trump’s administration. Notably, the Guardian has reported that the White House has since denied such reports.

Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In the US, the October PCE core was in line at 0.2% mom and  1.4% yoy, but note the prior reading was revised up 0.1ppt and recent momentum looks stronger with the 3-month annualized rate now at 1.9%. The October personal income growth was above market at 0.4% mom (vs. 0.3% expected), but spending was in line at 0.3% mom. Elsewhere, the November Chicago PMI was above expectations at 63.9 (vs. 63 expected), while the weekly initial jobless claims (238k vs. 240k expected) was in line but continuing claims were slightly above (1,957k. vs. 1,890k expected).

In Europe, the November inflation data ranged from slightly below to in line. The Eurozone core CPI was below market at 0.9% yoy (vs. 1.0% expected). In Italy, CPI was also below at 1.1% yoy (vs. 1.2% expected). However, France’s CPI was in line at 0.1% mom but higher on an annual basis at 1.3% yoy (vs. 1.2% expected).

For October unemployment stats, the Eurozone was slightly lower at 8.8% (vs. 8.9% expected) but Germany and Italy were both in line at 5.6% and 11.1%, respectively. In terms of the October PPI, Italy was slightly above the prior reading at 2.2% yoy (vs. 2.0% previous), but France was below at 1.5% yoy (vs. 2.0% previous). Elsewhere, Germany’s October retail sales were below market at -1.4% yoy (vs. 2.8% expected). Finally, in the UK, the November GfK consumer confidence was weaker than expectations at -12 (vs. -11) – back to its post- Brexit vote low. The Nationwide house price index was also below market at 2.5% yoy (vs. 2.7% expected).

Looking at the day ahead, the final November PMIs in Europe are due, while in the US, the November ISM manufacturing print and November vehicle sales data is due. Also worth noting is the various Fedspeak with Bullard, Kaplan and Harker all due.

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Neil Woodford is the founder of Woodford Investment Management, with $20 billion under management, and was appointed a Commander of the Order of the British Empire (CBE) for services to the economy in the Queen’s 2013 Birthday Honours List. However, he’s not very happy in his latest outlook for equity markets, nor is he happy with the recent performance of his funds, although he’s been in this situation before – ahead of the tech crash in 2000 and the sub-prime crisis in 2008. According to the Financial Times.

Neil Woodford, the UK’s most high-profile fund manager, has said he believes stock markets around the world are in a “bubble” which when it bursts could prove “even bigger and more dangerous” than some of the worst market crashes in history. The founder of Woodford Investment Management, which manages £15bn of assets, warned investors to be wary of “extreme and unsustainable valuations” in an interview with the Financial Times, likening the level of risk to the dotcom bubble of the early 2000s.

“Ten years on from the global financial crisis, we are witnessing the product of the biggest monetary policy experiment in history,” he said. “Investors have forgotten about risk and this is playing out in inflated asset prices and inflated valuations. “Whether it’s bitcoin going through $10,000, European junk bonds yielding less than US Treasuries, historic low levels of volatility or triple-leveraged exchange traded funds attracting gigantic inflows — there are so many lights flashing red that I am losing count.”

Woodford likes to be contrarian: few people believed that Brexit was a buying opportunity, for example. Given his value investing style, it’s not surprising that’s he’s avoiding high-profile momentum driven names and boosting holdings in old economy “bricks and mortar” companies, literally. The FT continues.

He said this (flashing red lights) was why he was staying out of a host of expensive “zeitgeist” stocks, instead buying UK-focused housebuilders, retailers and banks whose share prices are discounting “economic Armageddon for the UK economy” following the Brexit vote. Mr Woodford shunned bank shares before the 2007 financial crisis and stayed out of the tech sector before the dotcom crash. Both hurt the performance of his funds in the short term, but ultimately cemented his reputation as one of the UK’s most revered money managers.“

In the dotcom bubble it was the old economy stocks which became profoundly unloved and undervalued and today in the UK stock market, it is domestically-focused stocks,” he said. “The funds I manage are positioned to exploit this opportunity and I am utterly convinced it will pay off when the bubble bursts — which I believe it inevitably will.”

He has been steadily raising his contrarian stake in the UK. Between September 2015 and October 2017, the proportion of the portfolio’s revenues derived from the UK increased from 41.9 per cent to 55.5 per cent.

In the interim, Woodford's contrarian style is literally killing his performance – his fund has the worst performance in its peer group – and previously faithful supporters have redeemed their funds. For example, from a peak of over £900m ($1.2 billion), Jupiter Asset Management pulled the remainder of its money out of Woodford’s funds in September 2017.

Aside from his contrarian approach, his performance has suffered from big hits to the share prices of a few Footsie 100 companies, including AA, Astra Zeneca, and infamously, Provident Financial. The latter was a top-5 holding and fell 66% in one day in August. The following month a casually dressed Woodford, sitting on a green sofa, released a video on Youtube, “Has Neil Woodford lost it?”. In the one minute broadcast, Woodford countered his critics.

“I don’t believe I have lost it. I believe I have the right portfolio, the right strategy to deliver the right returns to investors over the long-term. Things have been very difficult in the short-term, I’m sure people are disappointed, as I am, about short-term performance, but this is a long game…I’m not going to cut and run.”
Back to the FT interview in which he was pressed on his performance… 

In the interview, Mr Woodford admitted that his investment strategy has put him in “the most uncomfortable position I have been in during my career”. He added: “I don’t know when I’m going to be proved right, but I’m utterly convinced that I am right, as I have been right before.”

…and he stuck to his guns on value investing.

He spoke of the growing gulf between the prices investors are willing to pay for income stocks perceived as safe and dependable, and “unfashionable” stocks exposed to the UK economy, including early-stage businesses that are the target of his Patient Capital Trust. “There is always a subset of the market which falls out of favour as investors clamour for the fashionable stocks of the day, providing the fuel to power the bubble on through the final leg of its journey before it bursts,” he said.

“In a challenging global economic environment, the few stocks that are perceived to be capable of delivering dependable growth have, as in the early 1970s, become very popular but that popularity has manifested itself in extreme and unsustainable valuations. The market appears to be making the same mistakes again, but this time the bubble has grown even bigger and even more dangerous.”

We’re with you on that Neil, and thanks for sparing us the FANG and TATS acronyms. We particularly liked this quote.

“This is a period when stock markets have the ability to seduce investors (into believing) that making money is easy,” he says. But to abandon investment principles and “buy what’s going up, just because it’s going up . . . is the route to penury”.

While Woodford is scathing about what he calls a “prolonged period of market inefficiency and mispricing” he retains his humility, something which markets teach us all, painfully.

Does he ever doubt his judgment? “Daily,” he replies. “You must never, as a fund manager, stick your head in the sand saying ‘everybody go away, I’m right, I’m right, I’m right’. You’ve always got to expose yourself to criticism and the analysis that you may be wrong.”

Neil: capital markets are no longer serving the UK economy, or other economies. In fact, they are the problem, as we all know, and will be a bigger one. You could send your CBE back as a protest. John Lennon did (and they still named an airport after him).

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Authored by Zainab Calcuttawala via OilPrice.com,

A new law passed by the Danish government could authorize regulators to block the passage of the Russian Nord Stream 2 gas pipeline on security or foreign policy grounds, according to a new report by Reuters.

Under previous laws, the two reasons above would not have constituted valid grounds to reject the construction of a pipeline.

Nord Stream 2 will bypass land routes through Ukraine, Poland, and Belarus to supply gas to Germany and surrounding nations.

The line’s route cuts through Danish waters in its current form, but Gazprom researchers are investigating a new route that cuts through international waters instead, preventing a showdown in the Danish parliament regarding the project.

The Danish Energy Agency is assessing a submitted application for the Nord Stream 2 line, but the new law applies to all applications being processed, including this controversial one.

Supporters of the project argue that Germany and neighboring countries will get cheap, reliable gas from Russia that will complement – not replace – gas from existing supply routes.

Opponents of the project argue that Russia’s Gazprom will increase its share of the European gas market, which would boost its already dominant position in Central and Eastern Europe, and therefore undermine the efforts of some European countries to diversify their gas supplies away from Russia. Opponents also see Nord Stream 2 as Moscow gaining political leverage over the EU.

Nord Stream 2 – currently planned for completion by the end of 2019 – faces stiff opposition from Poland, the Baltic countries, and several other EU countries.

Germany, on the other hand, which will be the main beneficiary of the new gas supplies, says that the project is just business, and should not be made political.

“There is existing, well-functioning gas transportation infrastructure in place to ensure Europe’s energy supply. Building Nord Stream 2, would, at the same time, endanger existing transport routes, notably via Ukraine,” the European Commission has said in the past.

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Content originally published at iBankCoin.com

Former Clinton campaign manager John Podesta jumped down the throat of feminist and Political Science major Nicole Kiprilov in front of 300 people at Duke University Wednesday, after the undergrad asked Podesta questions about how he responds to various controversies including ‘Pizzagate,’ Uranium One, The Podesta Group, and Joule Unlimited – a now-defunct Boston green energy company Podesta sat on the board of along with to two Russian officials, which received $35 million from the Kremlin while Hillary Clinton was Secretary of State.

Via the Duke Chronicle:

“when junior Nicole Kiprilov asked him how he was dealing with accusations of being involved with the now-debunked “Pizzagate” scandal, that he owned 75,000 “undisclosed” shares of stock from a company with Russian Kremlin ties and Uranium One being a client of the Podesta Group—among other allegations—he didn’t hold back.

“This is how the alt-right does fake news,” Podesta said. “It’s personally painful because a lot of this is really total bullsh*t. My family and I have been put through this Pizzagate bullsh*t now for a year—which has totally been debunked, by the way.“

Kiprilov didn’t have a chance to ask a followup question such as what playing dominoes on cheese vs. pasta means, before the 68 year-old Podesta launched into a defense of his involvement with failed green energy company Joule Unlimited – which he owned 75,000 shares that were reportedly transferred to his daughter via a shell corporation before joining Hillary Clinton’s campaign.

“My relationship with the company that you talked about, that was based in Boston, an American innovative company—I totally disclosed, and Fox has had to correct that twice” –John Podesta

Yes – it’s an American company, which received $35 million from the Kremlin and had two high ranking Russians on its board of directors aside from Podesta; senior Russian official Anatoly Chubais and oligarch Reuben Vardanyan – a Putin appointee to the Russian economic modernization council.

The Podesta Group

In response to the next question from an audience member about how John feels about his brother Tony Podesta of the Podesta Group being under FBI investigation, John Podesta made sure to distance himself from Tony as he stammered through his response:

“Look I think my brother, uh, uh, A) I’m not my brother. Does it worry me? You know, I, I, It’s, it’s painful. I mean his firm, uh, uh, after many years in business, uh, uh, un-unraveled as a result of, I think of the fact that it was under investigation,” adding that he thinks Tony’s involvement with Manafort’s partner Rick Gates and Congressman Vin Weber (R-MN) was ill advised.

Alas, nobody asked him about explosive claims from a “long time former Podesta Group executive” who was “extensively” interviewed by Robert Mueller’s FBI Special Counsel and claims that in 2013, John Podesta recommended brother Tony hire David Adams – Hillary Clinton’s chief adviser at the State Department, giving the Podesta Group a “direct liaison” between the group’s Russian clients and Hillary Clinton’s State Department.

Nicole Kiprilov responds

Kiprilov – a Political Science junior and UN intern who has studied at Stanford, Oxford, and is the president of Duke University’s ‘premier feminist magazine,’ Phoenix – was disappointed in Podesta’s responses, telling the Duke Chronicle

“Pizzagate was a conspiracy theory, but the other allegations, I don’t know,” Kiprilov said. “If he had been a bit calmer and more mature in answering the questions, I would have been satisfied. I was disappointed that he got so angered and triggered by my question.”

A self-identified Republican who says she is not part of the alt-right, Kiprilov said she felt that Podesta misunderstood the nature of her question.

“I did not imply that I believed any of this,” she said. “I think he immediately assumed I did, so he lumped me with the alt-right crowd, which was very unfortunate that he jumped to that conclusion.”

Kiprilov caught up with Podesta after the event to let him know she’s not a member of the alt-right.

Before the night was over, Podesta also answered questions about Russia’s effect of the election, stating that while he didn’t think Russia’s efforts to interfere with voting on election day succeeded, bots and Facebook ads spreading fake news did.

“I do think that had an effect,” Podesta said, adding “It eats away at you underneath. You don’t fully sense it because it’s not bubbling up to the mainstream.”

Or, maybe Russian internet bots, Pokémon Go and Facebook ads promoting liberal activism are perhaps the lamest possible excuses for why Hillary Clinton lost the election.

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We always shudder slightly when we discuss ABN Amro, since nothing ever seems straightforward in the ongoing saga of the Dutch bank. However, this time at least nobody has died. In 2015, we noted that Chris Van Eeghen, head of the bank’s corporate finance and capital markets “startled” friends and colleagues after the “always cheerful” banker reportedly committed suicide. Van Eeghen was the fourth ABN banker suicide since the financial crisis.

When it comes to bonuses, ABN also has a chequered history. The Dutch government nationalised the bank at the height of the financial crisis at a cost to Dutch taxpayers of 22 billion Euros. There was a national outcry in 2015 over bonuses ABN paid to its top executives, as Business Insider reported.

Public outcry over bankers' bonuses is pretty common, but the anger sweeping the Netherlands, over nationalised ABN Amro's executive pay packets is on a completely different level. Over the last week, Dutch newspapers Financieele Dagblad and NOS (Holland's version of the BBC), and other media outlets were awash with debates over the justification of how ABN Amro’s high ranking executives were getting huge bonuses ahead of the bank being re-privatised.

 

In fact, the outcry was, and continues to be, so bad that Dutch finance minister Jeroen Dijsselbloem delayed the IPO of the nationalised bank at the end of March because the row over giving six executives a €100,000 (£73,000) bonus on top of their salaries escalated so greatly.

 

He even went to parliament on Thursday to answer questions over how the government is "allowing" the bank to pay hefty bonuses, compared what the average Dutch person receives in a year, even though it is still yet to be privatised, after being taken over by the state in 2008.

As we said, nothing is ever straightforward with ABN and Dutch financial newspaper, Het Financieele Dagblad, is reporting that Dutch bank ABN Amro is poised to scrap the bonus system for almost all of its roughly 20,000 staff. Unusually, the calls for ending the bonus scheme came from the staff, not ABN management. According to dutchnews.nl.

ABN Amro bank is planning to overhaul its current bonus structure for the 17,000 members of staff who are covered by a formal pay and conditions agreement, the Financieele Dagblad said on Thursday.

 

The paper bases its claim on people involved in the current talks between unions and the bank on a new pay deal (CAO) for 2018. A spokesman for the bank told the paper (that) company surveys showed a large part of the bank’s personnel want to get rid of the ‘performance-related bonus’.

 

‘We want a complete new structure: no performance assessments and no performance-related bonuses,’ he said.

How very “equitable”…as long as they’re happy. There will be a few exceptions, however, although that doesn’t include the board of directors, since the Dutch state still owns 56.26% of the equity through the NLFI investment vehicle. The directors are prohibited from receiving bonuses until the state disposes of its holding. Dutchnews.nl continues.

The plans will cover all members of staff who are paid according to the CAO (collective labour agreement). Around 100 specialists, including traders and corporate bankers, will still be eligible for a bonus. The bank’s board do not qualify for bonuses because the Dutch state still owns a majority stake.

 

The FD says the bank’s plan is in line with developments elsewhere in the financial services sector. Former finance minister Jeroen Dijsselbloem fought hard against the bonus culture, which he saw as a major cause of the financial crisis and introduced a 20% of salary ceiling.

Even Dutch bankers, it seems, aren’t totally magnanimous as negotiations between unions and the bank are continuing with staff demanding a 9% pay rise as compensation. We’re not sure precisely what’s behind the motivation of ABN’s staff, although it could have something to do with the bank’s interminable restructuring. As Bloomberg noted following the release of its 3Q 2017 results.

ABN Amro Group NV fell the most since May after the Dutch lender reported a third-quarter decline in earnings from banking and a capital ratio that fell short of estimates. The stock dropped as much as 3.3 percent in Amsterdam trading and was down 1.8 percent as of 9:15 a.m. Net interest income declined 1 percent to 1.57 billion euros ($1.82 billion), which is about 2 percent below consensus estimates, according to a Kepler Cheuvreux note.

 

Chief Executive Officer Kees van Dijkhuizen has focused on lowering costs while the bank seeks to grow its domestic retail, private-banking and investment units…While net income beat analyst estimates, much of the result was driven by cost cuts. Operating expenses dropped 12 percent in the third quarter from a year earlier, the Dutch state-controlled bank said in a statement on Wednesday.

 

The former global banking giant was cut back to a largely domestic Dutch lender in the wake of the financial crisis and the CEO has focused on lowering costs while the bank seeks to grow its domestic retail, private-banking and investment units. The shares have climbed 23 percent since the beginning of the year, when van Dijkhuizen took over.

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Via GEFIRA,

Once France was one of “the great powers”, dominating Europe and parts of the world in terms of culture and economy. The country’s demise started after the Second World War, though it still played a key role in the creation of the European Union and the euro, which was to prevent Germany from subjugating the rest of the continent.

However, this strategy has failed and Berlin has become Europe’s capital, with France’s importance ever dwindling.

France’s population is slowly being substituted for by people from Africa. Renaud Camus calls it the “grand replacement”. Paris, once a European, then a global is slowly turning into an African metropolis. If French elites, whose influence in Europe is fading, want to remain a world power, they can only opt for Africa. Qaddafi, the king of the kings, became a threat to France’s interests on the continent. It were not the Americans that pushed for Qaddafi’s replacement but the French elites.

Although the days of colonialism officially came to an end in the 1960s, Paris has not given up its position of a great power on the Dark Continent.

France controls most of the countries in West and sub-Saharan Africa politically, economically and through a strong military presence.

Gendarme without backbone

France’s current zone of influence in Africa is the result of the policies of President Charles de Gaulle, who was unable to come to terms with his defeats in Indochina (1954) and Algeria (1962) and therefore sought to achieve the dominance of France in his former colonies. After de Gaulle, however, other presidents did not refrain from using military force and violence in Africa to defend their interests, on the pretext of protecting human rights and democracy. The French often achieved the opposite, because they made the same mistakes in their military actions as Americans made elsewhere in the world: they supported people who later became their enemies or violated human rights.  For example, it was the regime of Juvenal Habyariman in Rwanda that was supported by Paris: the French supplied Hutu combat groups with weapons, thus contributing to the Tutsi massacre. Hollande, who in Paris and Europe was perceived as a weakling, showed the face of a warrior and sent heavy units and fighter planes to Mali in 2013. This would not have been necessary if French President Sarkozy and the USA had not overthrown Qaddafi. It was Sarkozy that initiated the NATO led airstrikes against Libya. The removal of Colonel Qaddafi gave rise to the creation of the Caliphate with the help of Tuaregs in the north of Niger and Mali. After a few years since the start of the mission in Mali one wonders: has it made Europe safer? Has the flow of migrants been stopped through Sahel countries? Are the Jihadists of African descent a lesser threat in Europe?

The cost of the military action in Mali in 2013 amounted to 650 million euros. Operation Barkhane (as it is called) continues to this day and costs the French budget €500 million per year. Of course, democracy in Mali is a top priority for most Europeans, right?

A total of 9,000 French soldiers are currently stationed in Chad, Niger, Mali, Burkina Faso, Senegal, Gabon, the Central African Republic and Djibouti. The growing military presence is intended to support the fight against terrorism and crime, in fact it is about the French elites extending their power to the south, reaching for cheap raw materials and outlet markets.

Common currency – Central African Republic sponsored by Mario Draghi

To preserve power, a sovereign needs not only to have an army but even more so issue a currency. Paris knows about this and uses a currency of its own to preserve its colonial power. It is beneficial for the government and large corporations that it represents: uranium from Niger and Gabon, cocoa from Ivory Coast, peanuts from Senegal, commercial orders for French companies in many different countries of West and Central Africa – some 1,000 French companies operating in francophone Africa generate annual profits of around €52 billion. Such profits would not be possible without the CFA franc. The CFA franc is the official currency in 14 African countries with a total population of 140 million.

Its history can be traced back to the Bretton Woods conference after the Second World War: as in all countries participating in the Bretton Woods system, there was considerable inflation in France. The introduction of a quasi-parallel currency should devalue the real franc and lower inflation in the African countries because the Africans cannot print money at will. Banque de France thus guaranteed the convertibility of the CFA franc into the real French franc for many decades and ensured its devaluation and a fixed exchange rate:

Since the introduction of the euro, the CFA franc has been linked to the common European zone. Still, it is the French treasury that is responsible for its stability and so it is the French tax payers who are held liable.

The monetary union thus transferred the cost of the CFA zone to the French taxpayer. Is it clear to an average French taxpayer that he is not only confronted with the cost of mass-migration and that, apart from the billions in development aid, which is usually wasted anyway, part of his tax goes to Africa? Part of it? Well, how much is that? Those responsible are happy to keep quiet about this. Try to get the information out, it’s like France’s state secret. The Maastricht Treaty provides proof of this: it says nothing about the CFA. Perhaps the French signed the treaty because the financial burden was too heavy for them?

Carrot for African elites, French conglomerates and… migrants

Let us take just one country as an example: Senegal, a popular destination for French presidents. Rolf Heimer wrote:”The devaluation (1994) of the CFA had two aspects: on the one hand, exports of its most important product, peanuts, actually rose in 1994/5, and thus the income of the plantation owners, who belonged to the elite; on the other hand, the majority of the population continued to impoverish, as the higher prices for the fertilizers and pesticides imported from abroad meant much lower income for most small farmers.^"

While devaluation against the franc or the euro makes imports from Europe more expensive, linking the CFA franc to the strong euro reduces the competitiveness of African CFA countries. It favours imports from countries with weaker currencies (e. g. China, Nigeria, India and Thailand). In addition, most of Africa’s exports are calculated in dollars, meaning that the loss is double, since any appreciation of the euro against the dollar worsens the total value of exports. It was particularly clear in the years 2000-2010: the appreciation of the euro put the CFA countries at a disadvantage. The African countries do not form an optimal currency area. It means that the group of countries can be hit by crises that are economically too much asymmetric: one of them can be worse off while others can be booming. There is no coordinated fiscal policy ensuring that capital is transferred from states that are doing well to those that are doing poorly. For example, rises in oil prices can cause immense damage to employment and production capacity in one country, as their central banks cannot cushion the negative effects of changes in nominal exchange rates, while another country may profit from the phenomenon. Even though the CFA guarantees its countries lower inflation and fiscal discipline imposed by the ECB, the question here is whether the cost of the single currency will not outweigh expected profits.

Who profits from it? It is certainly Africa’s upper classes and migrants. Thanks to CFA, the former can buy luxury goods at low prices in Europe and transfer French lifestyle to Africa, while the latter can rely on their homes in Ouagadougou or Dakar to retain their value.

Macron – a man who will change everything?

You must be joking. During his February visit to the former French colony of Algeria, he said:“Colonization is part of French history. It is a crime against humanity, a real barbarity. You have to face that part of the past and apologize for what has been done.” 

From a historical perspective it was a strange remark, because the French conquered Algeria while it was under the Ottoman rule to end Berber slave raids and piracy. Politically, his apologies make sense in that to rule the African continent, the Paris elites should win the hearts and minds of the black “French” peasants.

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Bitcoin Rockets Higher, Then Crashes Lower, Then Repeats

Written by Nathan McDonald, Sprott Money News

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