Month: July 2019

S&P futures reversed a two-day rally, dropping alongside European stocks, led by the tech sector after the DOJ announced it was launching a broad, anti-trust review of the mega-tech (FANG) names, while weaker-than-expected composite PMIs in the Eurozone weighed on equities and sent bond yields to new all time lows, with manufacturing readings in Germany and France standing out. The dollar slumped while cable spiked one day after BoJo was elected as the next prime minister.

Weaker-than-expected composite PMIs in Germany and France weighed on equities and lifted bond prices, with manufacturing readings in Germany and France standing out, as the recession in Germany’s manufacturing sector worsened in July with the performance of goods producers dropping to the lowest level in seven years while French business growth slowed unexpectedly, the latest PMIs showed.

Trade tensions, weaker demand abroad and the travails of the car industry have built up over the past year to take a toll on the engine of Europe’s economy. They’ve dragged manufacturing into its deepest slump in seven years, and some of the nation’s biggest corporate names from BASF SE to Daimler AG and Continental AG have had to come to terms with a new reality for business. As one of the world’s biggest exporters, Germany is paying a high price for the the slowdown in global trade. The economy is forecast to grow the least in six years in 2019, the Bundesbank sees no sign of an export recovery and some are even saying there’s a risk of recession.

Beyond manufacturing, Germany’s image has also been dented by the troubles at Deutsche Bank AG, which is cutting thousands of jobs, and warned Wednesday that its trading slump deepened sending its stock sharply lower.

Downbeat earnings as well as the weaker-than-expected Eurozone manufacturing surveys took European shares and the euro a leg lower, with the single currency hitting two-month lows. Following strentgh in Asia, MSCI’S All-Country World index extended its previous day’s gains by a whisker, rising 0.02%. Sentiment was boosted by a Bloomberg report that U.S. Trade Representative Robert Lighthizer would travel to Shanghai next week for meetings with Chinese officials.

“While the resumption of trade talks appears to mitigate any near-term deterioration in US-China tensions, prudent investors will not get carried away, seeing as a meaningful deal still seems a long way off,” said Han Tan, market analyst at FXTM.

Asian stocks climbed for a second day, led by communications firms, as U.S. officials prepare to travel to China next week for trade negotiations. Markets in the region were mixed, with China and Australia advancing and India retreating. The Shanghai Composite Index rose 0.8% for its biggest gain in three weeks, as large insurers and banks offered strong support. The Topix added 0.4%, driven by Toyota Motor and Sony. SoftBank gained 1% following a report that it’s close to announcing the launch of a new technology investment vehicle modeled on its giant $100 billion Vision Fund. The Bank of Japan may lower its inflation forecast for this fiscal year and downgrade some of its economic growth projections. India’s Sensex slipped 0.2%, with Reliance Industries and Larsen & Toubro among the biggest drags, as investors judged bad debt risks at some financial companies.

With the latest PMIs confirming Europe is on the edge of recession, the ECB is thought likely to at least offer a nod to easier policy at its meeting on Thursday. Meanwhile, in the US, futures remain 100% priced for a rate cut of 25 basis points from the Federal Reserve next week, and even imply an 18% chance of 50 basis points. The prospect of widespread central bank largesse helped take the sting out of a downgrade to the IMF’s global growth forecasts.

“There are two conflicting catalysts for stock traders right now: on one hand, central banks around the world are about to embark on an easing initiative…,” said Konstantinos Anthis, head of research at ADSS. “On the other though, the slowdown in growth on a global scale and various geopolitical factors keep weighing down on corporate profitability, asking questions on whether equities have peaked.”

In FX, the euro declined for a fourth day after manufacturing gauges in Europe came in weaker than forecast. The common currency hit a two-month lows at $1.1127, falling further after the weak PMIs. It also hit a near seven-month trough against the yen at 120.19 though it recovered from a two-year low versus the Swiss franc.  The Australian dollar tumbled after a domestic bank that has correctly called previous policy decisions flagged two more rate cuts. The pound reversed losses before Boris Johnson was set to be appointed U.K. prime minister, with a cabinet reshuffle expected later Wednesday, with investors unclear as to whether he will lead the country to a no-deal EU exit or find a compromise.

“We believe that in the short term the market is overstating the risk of a no deal,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “While a no-deal Brexit remains possible over the longer term, our view is that the most likely path in the short term is for a further extension to the UK’s 31 October exit day, either due to a change in stance from PM Johnson, or in the case of a general election.”

In rates, fears of a European recession sent investors toward the safety of German bunds, with Treasury and gilt yields also sliding lower in unison.  European bond yields lower across the curves, also dragging down UST yields, with BTPs and Bonos outperforming.

Expected data include PMI readings, mortgage applications and new home sales. AT&T, Boeing, Caterpillar, UPS, Facebook, Ford, and Tesla are among companies reporting earnings

Market Snapshot

• S&P 500 futures down 0.3% to 2,998.25
• STOXX Europe 600 down 0.1% to 391.14
• MXAP up 0.2% to 160.97
• MXAPJ down 0.03% to 528.60
• Nikkei up 0.4% to 21,709.57
• Topix up 0.4% to 1,575.09
• Hang Seng Index up 0.2% to 28,524.04
• Shanghai Composite up 0.8% to 2,923.28
• Sensex down 0.3% to 37,881.58
• Australia S&P/ASX 200 up 0.8% to 6,776.67
• Kospi down 0.9% to 2,082.30
• German 10Y yield fell 2.6 bps to -0.381%
• Euro down 0.1% to $1.1137
• Italian 10Y yield fell 5.0 bps to 1.25%
• Spanish 10Y yield fell 3.1 bps to 0.363%
• Brent futures up 0.4% to $64.11/bbl
• Gold spot up 0.4% to $1,423.97
• U.S. Dollar Index little changed at 97.71

Top Overnight News from Bloomberg

• European Central Bank policy makers have plenty of reasons to wait until September before committing to more stimulus; in the run-up to their meeting, Governing Council members have said that additional support measures are available, if needed, to boost the euro zone’s ailing economy
• U.S. Trade Representative Robert Lighthizer and senior U.S. officials are set to travel to China next Monday for the first high-level, face-to-face trade negotiations between the world’s two biggest economies since talks broke down in May
• Boris Johnson will formally take office as U.K. prime minister Wednesday and seek to build a government that will bring his Conservative Party together and deliver Brexit The new leader will give hardline Brexiteer Priti Patel a cabinet role and promote politicians of all stripes to try to reflect modern Britain, according to a person familiar with his plans
• U.K. businesses urges Johnson to soften “hugely worrying” Brexit stance
• China’s central bank governor said the country’s current interest rates are at an appropriate level, and policy will reflect domestic considerations
• Bank of Japan will probably lower its inflation forecast for this fiscal year and may also downgrade some of its economic growth projections at its meeting next week, according to people familiar
• Oil rallied as plans for a meeting between the U.S. and China offered a hint of progress in the trade war dividing the world’s two biggest economies
• Speaker Nancy Pelosi says the House will have the votes to pass the budget, debt limit deal

Asian equity markets traded mostly higher with sentiment lifted by US-China trade hopes after reports US Trade Representative Lighthizer will lead a small team of negotiators to China next Monday for trade discussions. This underpinned major indices on Wall St. with outperformance seen in the trade sensitive sectors such as materials and industrials, although futures pared some of the gains after-market on news the DoJ is to open a broad antitrust review on the large tech firms. Nonetheless, ASX 200 (+0.8%) and Nikkei 225 (+0.4%) were higher with broad strength seen in Australia aside from the mining sector, while gains in Tokyo were capped amid a downturn among JPY-crosses. Hang Seng (+0.3%) and Shanghai Comp. (+0.8%) showed a strong performance on the trade optimism which was also helped by US Commerce Secretary Ross who said he will deal with Huawei waiver applications within the next few weeks, while China was also said to be looking to make more agricultural purchases as a goodwill gesture. Finally, 10yr JGBs were uneventful with demand sapped following similar uninspiring trade in USTs amid the positive risk tone and with the BoJ also absent from the market today.

Top Asian News

• World’s Top Toymaker Joins Companies Leaving China’s Factories
• Japan May Soon Gain A Powerful Trade Weapon Against South Korea
• Hong Kong’s NWS Is Said to Mull Sale of Public Transport Assets
• Malaysia’s PE Fund Said to Weigh Options for Oil Tanker Operator

Major European bourses are marginally lower [Eurostoxx 50 -0.2%] following on from a relatively flat open as overall downbeat flash PMIs from Europe weighted on the region. UK’s FTSE 100 (-1.0%) lags its peers amid unfavourable currency action coupled with underperformance in heavyweight mining names following a barrage of broker downgrades. As such, Rio Tinto (-4.0%), BHP (-3.4%) and Anglo American (-3.1%) all rest at the foot of the index. Sectors are mixed with defensive sectors supported due to the current cautious risk tone. In terms of individual movers, ASM (+7.3%), ITV (+6.1%) and Akzo Nobel (+4.1%) shares are all fuelled by earnings and trade at the top of the Stoxx 600. On the flip side, Deutsche Bank (-3.7%) shares plumbed the depths post-earning after the German lender reported a larger than expected net loss and cut its FY 19 revenue guidance.

Top European News

• Euro Area’s Economic Struggles Persist as Industry Slump Deepens
• Dovish ECB Renders More Czech Rate Hikes Pointless for Michl
• Paris Scorches in Historic Drought as Heatwave Fries Europe
• Repsol Announces Buyback Plan as Oil Earnings Kick Off

In FX, dollar bulls have gleaned even more encouragement from unfolding US-China trade developments given that face-to-face talks look set to resume early next week, and Beijing offers to buy more agricultural goods as a good will gesture in response. Moreover, the Dollar continues to proffer from the demise of others and increasingly constructive technical impulses with the DXY eclipsing a Fib retracement level and inching closer towards the psychological 98.000 mark.

• AUD/NZD – The Aussie has given up 0.7000+ status and is now threatening to slide below 0.6975 in wake of slowdowns in all CBA PMI readings overnight and yet another dovish RBA policy call looking for 2 further cuts in the OCR (Westpac this time eyeing moves in October and February 2020). All this ahead of comments from RBA Lowe in the early hours on Thursday and in contrast to the Kiwi that is keeping in contact with 0.6700 after a wider than forecast NZ trade balance, albeit due to a bigger miss on the import side vs exports.
• EUR/CHF/CAD – The single currency has also been undermined by PMI surveys, and in particular the manufacturing prints showing France on the 50 threshold and Germany sinking deeper into contraction. With Eurozone M3 also softer than expected, rate cut odds have now tipped in favour of 10 bp for tomorrow’s ECB meeting and Eur/Usd is losing sight of decent option expiry interest at 1.1150 (1 bn) as a result, but holding above the ytd base and 1.1100 where big barriers lie. Meanwhile, the Franc has retreated further vs the Buck within a 0.9850-75 band, but remains above 1.1000 against the Euro pending Thursday’s ECB policy pronouncements and the SNB’s response, but the Loonie has clawed back some lost ground vs its US counterpart to meander between 1.3129-47 compared to 1.3164 or so at one stage on Tuesday.
• GBP/JPY – Relative outperformers and bucking the overall trend, as the Pound maintains its recovery momentum following confirmation that Boris Johnson will take over the reins from Theresa May as Tory Party head. Cable has extended its rebound from near 1.2400 to 1.2480+ awaiting the official unveiling of the new PM and his Cabinet line up, with Eur/Gbp down towards 0.8925 and early July mtd lows. Similarly, the Yen is still displaying resilience in the face of overall Usd strength and upbeat risk sentiment despite ongoing geopolitical tensions, with a reluctance to stray too far from 108.00 where massive expiries roll off (4.3 bn) and technical resistance capping the upside (108.31 Fib).
• EM – The Rand remains in the spotlight amidst comments from SARB Governor Kganyago underlining post-rate cut guidance for limited additional monetary stimulus and CPI data that was slightly firmer than anticipated in m/m terms. Usd/Zar is hovering just below 13.9500 as the Central Bank head highlights the fact that neutral rates have risen due to risk premia of late and this makes it tougher for further easing.

In commodities, WTI and Brent futures are taking a breather from last night’s geopolitical-induced gains in which the benchmarks reclaimed USD 57/bbl and USD 64/bbl to the upside on reports that UK approached EU nations to join a European-led mission for safe shipping via the Strait of Hormuz. Furthermore, reports of a US delegation heading to China on Monday exacerbated upside in the complex on sentiment. Meanwhile, the mammoth drawdown in API crude stocks (-10.96mln vs. Exp. -4.0mln) added further fuel to the upside for oil, although the immediate jolt was quickly faded due to bearish components of the release including a surprise build in gasoline inventories, it’s worth noting that this week’s inventory data also captures the late effects of Storm Barry. Elsewhere, spot gold in is crawling higher as the yellow metal consolidates following its recent decline from 6yr highs. Copper prices are marginally lower amid the cautious risk tone, albeit remain above USD 2.70/lb, while Dalian Iron ore extended losses amid slowing demand in the wake of output restrictions on steel producers in China’s top steel-making city Tangshan.

US Event Calendar

• 7am: MBA Mortgage Applications, prior -1.1%
• 9:45am: Markit US Manufacturing PMI, est. 51, prior 50.6; Services PMI, est. 51.8, prior 51.5
• 10am: New Home Sales, est. 658,000, prior 626,000; est. 5.11%, prior -7.8%

DB’s Jim Reid concludes the overnight wrap

I’ve been promised the hottest night of my life this week. For the avoidance of doubt, meteorologists have suggested that this week will likely see the hottest overnight temperatures on record here in the UK and the hottest July day on record and possibly a new overall record. I must admit the more I read about climate change the more worried I get. However all I will say is that since we moved house three months ago we must have eaten outside in the evening 90% of the time I’ve been around. It’s been absolutely fantastic. Not even a swarm of flying ants could stop us last night. The only thing missing was a glass of Rose. Interestingly flying ants have been so prevalent over the last week in the South of England that they’ve appeared on weather radars and some forecasters initially mistook them for a band of rain!

As well as potentially being the hottest day ever tomorrow, it’s possible we’ll also start the latest round of global monetary stimulus or at least get new dovish forward guidance from the ECB. Given we’re on the eve of such an event and given that we have seen a big rally in global assets as a prelude, I found it interesting to read DB’s Binky Chadha’s latest asset allocation piece yesterday (see link here). In it he showed that since the 1950s, the Fed has embarked on 19 easing cycles, including the unconventional easing measures adopted during the course of this economic recovery. However of these, 9 or almost half, saw the economy eventually slip into recession. The episodes that ended in recession saw the ISM continue to weaken, eventually bottoming – 8 months after the Fed began cutting – at low levels (median 36). In these recession episodes, the S&P 500 saw a full bear market, typically falling -27% from peak to trough, with a bulk of the decline occurring after the Fed had started easing. Indeed, on average, the S&P 500 did not bottom until 5 months after the Fed started cutting. The distinguishing characteristic of the episodes that did not end in recessions was that after a moderate further decline in growth (to a median ISM 48), on average within 2-3 months after the Fed began easing, growth rebounded quickly. The equity market typically fell -7% after the Fed began easing, but bottomed quickly with growth. The S&P 500 ended above the pre-easing level within 6 months each and every time, rising a robust 12% on average. So my take on this is that history suggests a much higher probability of an imminent recession than markets do and also that we’re at quite a binary moment for markets as the Fed (and other central banks) embark on a fresh easing cycle. See the piece for much more detail.

In terms of markets yesterday, the focus was a further rally for equities across the world, with the S&P 500 closing +0.69% higher and above the 3000 level for only the fourth time in history. Elsewhere, the DOW and NASDAQ advanced +0.65% and +0.58%. After US markets closed, the Justice Department said it is investigating tech firms for antitrust violations, which caused the Nasdaq to retrace a bit more than half of its gains from yesterday, with futures down -0.18% overnight. Shares of Amazon (-0.95%), Alphabet (-0.96%) and Facebook (-1.54%) declined c.1% in after-hours trading. Prior to that, indexes were supported by strong earnings reports, as well as positive news on the trade front after Europe went home. USTR Lighthizer and other senior officials will reportedly travel to China on Monday for face-to-face talks, likely staying through Wednesday. European equities rallied as well before this news, with the STOXX 600 up +0.98% and the DAX trading +1.64%.

The positive trade news has also supported the Asian session overnight with Chinese markets leading advances – the CSI (+1.03%), Shanghai Comp (+1.01%) and Shenzhen Comp (+1.39%) are all up over 1%. The Nikkei (+0.46%) and Hang Seng (+0.93%) are also up while the Kospi is down -0.25%. Elsewhere, futures on the S&P 500 are trading largely unchanged while crude oil prices (WTI +0.41%, Brent +0.27%) are up for the fourth day in a row on a report from the American Petroleum Institute which showed a 10.96 million barrel decline in US crude stockpiles last week. In terms of overnight data releases Japan’s preliminary July manufacturing PMI came in at 49.6 (vs. 49.3 last month) while the services PMI stood at +52.3 (vs. 51.9 last month) bringing the composite PMI print to 51.2 (vs. 50.8 last month).

Ahead of tomorrow’s ECB meeting the next test will be the rest of today’s flash global PMIs. The last few months have seen some stabilisation in the data with the manufacturing PMI for the Euro Area hitting 47.6 in June (vs. 47.7, 47.9 and 47.5 in the three months prior). The consensus expects a 47.7 reading for July. As for the services reading the consensus expects a 53.3 print which compares to 53.6 last month. We should note that we’ll also get country level PMI data for Germany, France, and also the US.

Turning back to the earnings reports from yesterday, Coca-Cola (+6.07%) and United Technologies (+1.50%) led gains. Coca-Cola shares climbed to a record high after their results showed a strong increase in demand, with full-year revenue growth estimated to grow 5%, up 1pp from the previous guidance. Demand from China has been a key driver of that growth, with sales volumes up 7% in Asia’s largest economy. United Technologies also raised their guidance, citing strong jet engine sales. After hours, Texas Instruments (+7.01%) and Snap (+9.10%) rallied strongly, as the former raised its guidance and the latter increased its daily user count to 203 million, compared to consensus estimates for 192 million.

The risk-on sentiment bled over into fixed income markets, where 10-year treasury yields rose +2.6bps. Two-year yields rose +2.5bps, leaving the 2y10y curve roughly flat. Earlier in the session, European yields rallied with bund yields down -0.9bps to -0.355%. BTPs outperformed, gaining -5.1bps. In the UK, gilt yields fell -1.6bps and the Treasury sold new 10-year notes at their second lowest ever yield at 0.789%, above only the September 2016 auction. In credit, HY spreads tightened -3.6bps and -4.7bps in Europe and the US. This morning we have published an update of our analysis looking at relative value between the EUR and USD HY markets. EUR HY has generally outperformed since February and within the note we assess whether USD HY is now starting to look relatively more attractive ( link here).

As widely expected, Boris Johnson was elected the leader of the Conservative Party yesterday, and as such will become the new UK PM this afternoon. While journals stretching to the moon and back have been written on the Brexit implications, less has been written on the wider economic policy mix of the incoming government. DB’s Oli Harvey wrote on this yesterday (see link here) and thinks that if the new administration survives or wins an election we could have a sizeable departure from the post 2010 regime. Indications are that Borisnomics may represent a significant relaxing of fiscal policy leading to materially higher borrowing and hence issuance. At the same time, we think there is at least some possibility the Bank of England’s mandate could be adapted to provide the bank more flexibility over inflation. This policy move is likely to be more extreme in a hard Brexit scenario but fiscal policy is likely going to take the strain in all reasonable scenarios. Oli thinks the best trades are forward steepeners such as 2s10s 2 year forward. As I’ve repeatedly suggested the UK could start the helicopter money experiment (on a hard Brexit) that I think is likely across the globe in the years ahead.

Elsewhere in the UK, there was some attention paid to two BoE speakers, Saunders and Haldane, who both leaned dovishly. Saunders is possibly the biggest hawk on the MPC, but he said that the economy looks weak and “is clearly not overheating,” suggesting potential support for policy easing. Similarly, Haldane said that uncertainty is high and “the case for holding rates until the road becomes clearer is strong.” Considering that he had previously argued for higher rates before the June policy meeting, this was a decidedly dovish shift as well. At the same time, the UK’s CBI manufacturing orders index fell to -34, its lowest level in over 9 years and far worse than the expected -15. The cocktail of dovish signals and weak data pushed the pound -0.31% weaker versus the dollar.

Away from markets, the IMF updated its World Economic Outlook and cut its forecast for global growth by -0.1pp for both 2019 and 2020, to 3.2% and 3.5%, respectively. The update described growth as “sluggish” and “subdued” and also noted that risks are tilted to the downside, emphasizing trade tension uncertainties. Nevertheless, the forecast for the US rose +0.3pp to 2.6% for this year, while Europe’s stayed steady at 1.3%. The forecast for China was revised down -0.1pp, to 6.2%, while India’s was trimmed -0.3pp to 7.0%. The IMF also revised down its forecast for 2019’s growth in world trade volumes by c.1pp, to 2.5%.

To wrap up yesterday’s economic data, in the US it was mostly disappointing, with the Richmond Fed manufacturing index down to -12 versus expectations for a positive print of 5. That contrasts with the recent rebound in surveys from the Philadelphia and New York Feds, giving a cloudier picture ahead of today’s flash PMI. Existing home sales slowed further in June to 5.27mn, weaker than expected, while the FHFA house price index rose only 0.1%, the weakest pace since early 2017 and fourth weakest since 2012. In Europe, consumer confidence improved slightly to -6.6 from -7.2.

Turning to the day ahead, the July flash PMIs in Europe and the US will be the main data focus. Away from that, July confidence indicators are due in France, June M3 money supply data due for the Euro Area and June new home sales data due in the US. Earnings highlights include Boeing, Caterpillar, Ford, Facebook and AT&T. Former Special Counsel Mueller will testify before the House Judiciary and Intelligence committees on Russian election interference.

via ZeroHedge News https://ift.tt/2OdfNxR Tyler Durden

If one ever needed evidence that such a thing as bank karma exists, look no further than Deutsche Bank, which after manipulating and rigging every market it traded in, violating virtually every regulation and anti-money laundering rule in existence, and quietly witnessing the bizarre, unexplained suicide by more than one senior official, has been caught in a downward spiral of spectacular collapse which culminated recently with the biggest corporate restructuring and mass layoff announced by a major bank. And then there are the earnings.

On Wednesday, the bank that is set to layoff over 20% of its workforce, reported a dramatic decline in trading revenue resulting in a far bigger than expected €3.16 billion net loss, a far cry from the €361MM profit a year ago. While the revenue of €6.2 billion was in line with the preliminary release from July 7, the bank warned that 2019 group revenue would be lower than 2018, blaming lower interest rates on increasing pressure on revenue after trading slump deepened in the second quarter, adding urgency to Chief Executive Officer Christian Sewing’s overhaul plans.

As many expected – largely since it is now firing front-line traders – the bank again underperformed Wall Street peers in trading, with income from buying and selling securities slumping 12%, led by a decline of about a third in the now defunct equities business. While Q2 FICC sales & trading revenue of €1.32 billion was a fraction better than the company-compiled estimate EU1.31 billion, equities sales & trading revenue €369 million badly missed the estimate of €480 million.  Fixed income trading declined 11% when adjusting for the TradeWeb IPO. While Sewing is keeping that business, he is reducing the amount of capital it uses.

The resulting total Q2 trading revenue of €1.69 billion not only missed the average estimate of €1.79 billion, but the 17% decline in trading revenue was the worst of all major Wall Street peers.

Deutsche Bank’s dismal trading Q2 results compared with a decline of around 8% at the five biggest Wall Street banks. UBS Group on Tuesday reported a 9% slump in equities trading and 7% lower revenue from fixed income, which however was better than expected and lifted DBK shares sharply higher. Oops.

Deutsche Bank said it started losing business during the quarter as it became clear it would exit equities trading. Sergio Ermotti, the UBS CEO, said Tuesday that some of the balances from the German lender’s business are coming to his bank’s prime brokerage unit; as a reminder, last week we reported that Deutsche was seeing a whopping €1 billion in daily outflows, as part of its exit from equities, in which the German lender had agreed to transfer some 150 billion euros of balances linked to hedge funds to French rival BNP Paribas SA. Additionally, Deutsche Bank is planning to auction its equity derivatives portfolio and kick off the process in the coming weeks, Bloomberg reports.

At the global transaction bank, which CEO Sewing is separating from the investment bank to make it the centerpiece of a new corporate bank division headed by Stefan Hoops, revenue was essentially flat when adjusting for a one-time gain a year earlier.

Elsewhere, Q2 Private & Commercial Bank revenue of €2.49 billion was in line with the company-compiled estimate EU2.49 billion; meanwhile Asset Management revenue €593 million was slightly ahead of estimates.

But wait, there’s more: after warning of about a €2.8 billion charge just a few weeks back, Deutsche decided to make Q2 into yet another kitchen sink quarter, as the bottom line result also included a bigger than expected €3.4 billion restructuring charge. How DB found an additional several hundred million in “one-time expenses” to lump into the charges in under a month is somewhat perplexing, yet traders would have likely let it slide… if only such “kitchen sinking” wasn’t now a regular, quarterly event at Deutsche Bank.

The pain was not over yet, as CFO James von Moltke had even more surprises in store, when he suggested the outlook for lower rates add further downside pressure on revenues: “Frankly it does represent a revenue pressure for us and all of the banks if rates from here go down further,” von Moltke said in an interview with Bloomberg Television. “It’s something that, as you say, is a significant risk to us.”

Von Moltke said earlier this month that the goal of lifting return on tangible equity to 8% in 2022 “is realistic given the interest rate environment we’re facing.” The bank wants to boost its annual revenue by 2 billion euros through 2022, helped by a “modest improvement” in rates.

“We provided a set of numbers,” von Moltke said on Wednesday. “As one always does, one has to make some planning assumptions, those happened to be at the end of May and we are very aware that the outlook deteriorated during June.”

The CFO also said he expected another €2 billion in second half charges, as he hopes to stabilize and grow revenue in the core bank. He also said that the bank would like to have job numbers in the high 80,000s by the end of the year, down from above 90,000 at present, and has given job notifications to about 900 equities staff.

Moltke said that if the European Central Bank does lower rates, he expects it to shield commercial banks from further harm through deposit tiering, in which some overnight deposits that banks park at the ECB are excluded or charged a less punitive rate. We explained last night why absent tiering, the ECB risked crushing Europe’s already suffering banks.

Attempts to put a favorable spin on the latest disastrous numbers fell far short alas, and as Thomas Hallett, bank analyst at Keefe, Bruyette & Woods in London, wrote, “client retention risks, an unfavorable interest rate environment and negative secular trends across divisions present material headwinds to management plans. These results do little to allay market concerns on the ability to deliver on those targets.”

Citi’s Andrew Coombs said he is “most cautious” on the ~€25b revenue assumption the bank has for its 2022 targets. The analyst estimates a greater risk of revenue attrition in the investment bank and believes the bank might need to factor in lower rates at its corporate and retail division

How DB will turnaround the ship with what is increasingly looking like a sub-skeleton crew of workers remains unknown: the German lender’s overhaul resulted in the departure of investment banking head Garth Ritchie. Sewing has taken over oversight over the division at the management board level while operational oversight has been split between Hoops; Mark Fedorcik, head of the investment bank; and Ram Nayak, in charge of fixed-income trading. Christiana Riley, who’s running the bank’s U.S. operations, will join the management board pending regulatory approval.

Deutsche Bank shares fall as much as 5.3% in early Frankfurt trading after the lender reported the disappointing results, and guided to even lower revenue. The move followed an odd gain of 3% on Tuesday after results from UBS and a lift in macro sentiment gave banking stocks a boost.

via ZeroHedge News https://ift.tt/2Yqqdhr Tyler Durden

For the first time since President Xi began his second term in 2017, China has released a defense white paper that doesn’t elaborate on the country’s military priorities so much as it criticizes Beijing’s chief political adversary – the US – while defending the Communist Party’s right to impose its rule over China’s wayward provinces, including Hong Kong, which is still being rattled by protests, and Taiwan.

It’s the latest sign that tensions between Beijing and Washington over the latter’s support for Taiwan – Washington recently approved the sale of $2 billion in tanks and anti-aircraft missiles – might not only scupper trade talks, they could be the spark that ignites World War III. And what’s more, it comes hours after the White House confirmed that the next round of in-person trade talks had been set for next week. Remember, Beijing has repeatedly threatened to use military force against any foreign power who interferes in its relationship with Taiwan, while Taiwan’s leaders have insisted that they would never submit to Communist Party rule, Bloomberg reports.

The paper, titled “China’s National Defense in the New Era” – in a reference to a popular Xi slogan – accused the US of provoking competition among major countries, and noted that the “international security system and order are undermined by growing hegemonism, power politics, unilateralism and constant regional conflicts and wars.”

“(The US) has provoked and intensified competition among major countries, significantly increased its defense expenditure, pushed for additional capacity in nuclear, outer space, cyber and missile defense,” the paper said.

The white paper noted recent patrols by Chinese warships and warplanes around Taiwan, insisting that the operation was intended to send a “stern warning” to Taipei. Oddly, given Beijing’s heated response to the Navy’s “freedom of navigation” operations, the white paper also described the situation in the South China Sea as “generally stable and improving” (despite the international legal battle over which country actually has sovereignty). Though the paper did describe American patrols in the area as “destabilizing.”

As Beijing has often done, the paper criticized foreign forces – a euphemism for the US and UK – for the recent bouts of instability witnessed in Hong Kong, where demonstrations over the hated extradition bill are still going on. On Sunday, 100,000 people rallied in down town Hong Kong for a demonstration that quickly devolved into violence, with police firing tear gas at unruly protesters.

During the press conference introducing the paper, Wu Qian, a spokesman for China’s defense ministry, echoed recent state media reports by insisting that the vandalism of a central government liaison office in Hong Kong was a direct challenge to the Chinese system, and that the PLA garrison in Hong Kong could intervene to end the demonstrations if it is asked by the city’s Beijing-controlled government, the SCMP reports.

“We are closely following the developments in Hong Kong, especially the violent attack against the central government liaison office by radicals on July 21,” Wu said at the briefing.

“Some behaviour of the radical protesters is challenging the authority of the central government and the bottom line of one country, two systems. This is intolerable.”

Foreign Minister Wang Yi blamed the “black hand” of the West for creating trouble in Hong Kong, though he didn’t specifically single out the US.

As CNN pointed out, one change in the 2019 report, compared with the last defense report, published in 2015, is the tight grip that President Xi has over China’s military: It included copious references appearing in the white paper to the “new era” of Xi’s signature ideology.

“Guided by Xi Jinping’s thinking on strengthening the military, China’s national defense in the new era will stride forward along its own path to build a stronger military.”

We imagine analysts at the Pentagon are picking through the report now, trying to suss out exactly what it means for US-China bilateral relations.

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Authored by Tom Luongo,

Gold is calling out the insanity of the European Union. It is also calling out the insanity of the global economy. But really it’s all about the euro at this point.

Since breaking through the post-Brexit high of $1375 per ounce, gold has pushed higher. Yes, it’s been volatile. Yes, the forces of control keep trying to stuff gold back inside the box, as it were.

And they keep failing.

Last week’s price action was impressive, even if the close was less than stellar. In the world of financial commentary everyone is looking for proximate causes for spikes and dips.

But most of that is simply noise. I don’t care why gold touched $1450 last week, only that it did.

Because a bull market that shakes off a number of big intra-week corrections to then blast to a new near-term high is a healthy one; one climbing the proverbial wall of worry.

And what’s important here is that this is not an anti-dollar trade. It is an anti-euro one. The U.S. Dollar Index has fully shaken off all attempts by the Fed to talk it down, trading at 97.6, and threatening a back-to-back monthly reversal at 97.8.

The euro is collapsing back towards its recent lows at $1.11 while the British pound is in free fall on renewed hopes of a No-Deal Brexit under new Prime Minister Boris Johnson.

Yes, Brexit is a proximate cause of these moves but they are also continuations of much larger and longer trends that cannot be ignored. It is the drive towards further political integration in Europe which is the cause of these declines.

The political landscape in Europe is, at best, fractious. And that is always reflected in a currency. This is especially true in what Martin Armstrong calls a “non-core” currency like the euro.

If the above charts don’t convince you, then this one should.

The dollar is the world’s reserve currency, for now. It certainly is versus the pound, euro and yen which are its biggest trading pairs. So when there is political unrest capital flows from that place to the reserve currency’s home, in this case the U.S.

And, despite the best efforts of the Democrats and The Davos Crowd, Donald Trump’s presidency is in far better shape than Ursula von der Leyen’s. Mish points out in response to my article from last week, that the EU is headed for even more gridlock and divisiveness than I’ve handicapped to this point.

I thought I was a euro-bear, but Mike makes me look like a Tesla punter.

Who does von der Leyen owe for her ‘election,’ Mike asks? It’s a good question but the answer boils down to George Soros and The Davos Crowd, who are desperate to keep Project Europe on the runway.

As long as Boris Johnson is not another stalking horse for the EU like Theresa “The Gypsum Lady” May was, he will have all the leverage between now and Halloween in Brexit talks.

And von der Leyen has been instructed to give Johnson whatever is necessary to achieve BRINO — Brexit in Name Only.

Only that will stop the bleeding of the euro, which needs to happen lest interest rates begin to rise. As long as there is no further technical breakdown of the euro, the current insane buying spree of toxic euro-bond debt will continue, per ECB President Mario Draghi’s plan.

The euro sliding below $1.11 reveals how unprofitable these current interest rate positions are and will unwind.

This further exposes Deutsche Bank. It should cause a spiral up in the U.S. dollar. Gold will get bid as well, on balance, as investors look to safe-haven assets.

Don’t underestimate China and Russia to come in and push the gold price up at vulnerable moments either. They have the money and incentive to do this. The more Russia de-dollarizes the more exposure to the euro they have in the form of corporate debt.

A falling euro and rising gold is exactly what companies like Gazprom and Rosneft want to see. On the flip side Europe is banning gas for new home construction, even as the continent moves towards more gas consumption.

This is the very picture of regulatory dysfunction. Just wait until the more powerful Greens get their political hooks into the European Commission.

The stampede out of the euro, given Germany’s increasingly precarious economy (and the slow motion implosion of Deutsche Bank), is just beginning. 

• Brexit of some form not to the EU’s liking is on the table lest Nigel Farage becomes Prime Minister. 

• Angela Merkel is on her last legs, physically and politically. 

• France wants to punish the English for Brexit.

• Italy wants out of the euro.

And the U.S. is leaning on everyone not to get off the train of any of the post-World War II institutions it rules: the IMF, NATO, the EU, etc.  That project is failing as well, but not today.

Weaponizing the dollar today will result in its destruction tomorrow. But for now, the dollar is still king and it is looking ready to push up, alongside a resurgent gold, to crush the unsustainable euro.

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Britain’s new call to establish a “European-led maritime protection mission” is gaining the support of key EU nations France and Germany. UK Foreign Secretary Jeremy Hunt announced on Monday that the new allied security force in the gulf would provide safe passage for international vessels in the vital oil transit waterway, protecting them from Iranian “state piracy”. But UK officials at the same time emphasized their continued commitment to the Iran nuclear deal (JCPOA), despite soaring tensions. 

France’s Foreign Minister Jean-Yves Le Drian told lawmakers on Tuesday, “we are setting up a European initiative, with Britain and Germany, to ensure that there is a mission to monitor and observe maritime security in the Gulf,” but stopped short of backing the UK’s call for a deployment of joint naval forces, only calling it an “observation” mission for the purpose of “de-escalation”.  

Like with Hunt’s initial introduction of the plan, France is seeking to distance itself from the United States’ build-up of military forces to counter Iran. “This is the opposite of the American initiative which is about maximum pressure to make Iran go back on a certain number of objectives,” Le Drian said.

“In that respect, we should even go further and think about a joint securitisation approach in the Gulf, diplomatically speaking. This way, we’ll really be in a logic of de-escalation,” he added, but without specifying details.

Previously US allies had rebuffed and resisted White house calls for an anti-Iran naval forces, fearing it would worsen already soaring tensions, but it appears last Friday’s dramatic Iranian military seizure of two British tankers (with one, the UK-flagged Stena Impero still in Iran’s custody) has changed Europe’s tune. 

Addressing Britain’s Parliament in London on Monday, Foreign Secretary Hunt condemned Iran’s seizure and continued detention of the UK-flagged Stena Impero. “Let us be clear, under international law Iran had no right to obstruct the ship’s passage, let alone board her,” Hunt told the House of Commons. “It was therefore an act of state piracy.” 

“We will seek to put together a European-led maritime protection mission to support safe passage of crew and cargo in this vital region,” he said. “We have had constructive discussion with a number of countries in the last 48 hours and we will discuss later this week the best way to complement this with recent U.S. proposals in this area,” Hunt added. 

Iran, for its part, says it’s rightly responding to the UK’s early July seizure of the Grace 1, which been transporting 2 million barrels of Iranian oil to Syria.

An unnamed Western diplomat told Reuters last week, “The Americans want to create an ‘alliance of the willing’ who confront future attacks,” but at the time asserted, “Nobody wants to be on that confrontational course and part of a U.S. push against Iran.”

But it appears the UK’s hand has been forced, now establishing just such a force in the gulf. Though France and Germany will likely remain reluctant to approve deployment of naval forces, instead signalling a pure observational and ‘monitoring’ role, any further tanker seizures by Iran could easily change that. 

The Royal Navy currently has a couple of warships escorting tankers out of the region, with further new unconfirmed reports that it’s deployed a nuclear-powered attack submarine to the region to bolster its force.

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Authored by Soeren Kern via The Gatestone Institute,

Former German Defense Minister Ursula von der Leyen has been narrowly confirmed as the next President of the European Commission, the powerful administrative arm of the European Union.

In a secret ballot in the European Parliament on July 16, von der Leyen, a close ally of German Chancellor Angela Merkel, received 383 votes, only nine more than the 374 required — the lowest margin since the position of President was established in 1958. She will take over from Jean-Claude Junker in November 2019 for a five-year term.

Before the vote, von der Leyen promised an ambitious left-leaning policy program on climate change, taxes, migration and the rule of law. Many of her pledges — which would require transferring yet more national sovereignty to unelected bureaucrats in Brussels — appeared aimed at enticing support for her candidacy from Greens and Socialists in the European Parliament.

In the final vote, however, the Socialists were divided in their support for von der Leyen and the Greens formally opposed her. Interestingly, von der Leyen won with the support of eurosceptics in Central and Eastern Europe after she publicly criticized the way the EU has treated them due to their opposition to mass migration.

In the past, von der Leyen has called for the creation of a European superstate:

“My aim is the United States of Europe, on the model of federal states such as Switzerland, Germany or the United States,” she said in an August 2011 interview with the German newsmagazine Der Spiegel. More recently, however, she appeared to scale back her ambitions: she said that her dream of a federalized EU had become “more mature and more realistic.”

In comments apparently aimed at appeasing Central and Eastern Europe, she added: “In the European Union, there is unity in diversity. That is different from federalism. I think that is the right way.”

An examination of von der Leyen’s policy proposals, however, reveals that she is calling for a massive expansion of top-down powers of the European Commission. Her proposals would substantially increase the role of Brussels in virtually all aspects of economic and social life in Europe — all at the expense of national sovereignty.

Following is a brief summary of von der Leyen’s main proposals for the next five years, as outlined in a 24-page document titled, “My Agenda for Europe”:

Climate Change

Von der Leyen called for the European Union to be “carbon neutral” by 2050. She pledged to propose a “European Green Deal” during her first 100 days in office. The deal would include the first “European Climate Law” to enshrine the 2050 climate neutrality target into law: “Carbon emissions must have a price. Every person and every sector will have to contribute.”

She also pledged to introduce a “Carbon Border Tax” that would apply to non-European companies, to ensure that European companies “can compete on a level playing field.” In addition, a “European Climate Pact” would “commit to a set of pledges to bring about a change in behavior, from the individual to the largest multinational.”

Von der Leyen’s social reengineering scheme would be paid for by European taxpayers: A “Sustainable Europe Investment Plan” would “support €1 trillion of climate investment over the next decade in every corner of the EU.” She also vowed that the EU “will lead international negotiations to increase the level of ambition of other major emitters by 2021.”

Economy, Society and Taxation

Von der Leyen vowed to prioritize the further deepening of the Economic and Monetary Union. She pledged to introduce a “Budgetary Instrument for Convergence and Competitiveness,” a “European Deposit Insurance Scheme” and complete a “Banking Union.” She also vowed to strengthen the international role of the euro.

She pledged to integrate European economic governance with the United Nations Sustainable Development Goals. Von der Leyen proposed a legal instrument to ensure a minimum wage for workers in all 28 EU member states. She also proposed a “European Unemployment Benefit Reinsurance Scheme,” a “European Child Guarantee,” and a “Work-Life Balance Directive,” to “encourage better sharing of responsibilities between women and men.”

Von der Leyen also proposed a “European Gender Strategy” to ensure “equal pay for equal work,” and pledged to introduce “binding pay-transparency measures.” She vowed to set quotas for gender balance on company boards. She also promised a fully gender-equal European Commission: “By the end of my mandate, I will ensure we have full equality at all levels of Commission management. I will accept nothing less.”

Von der Leyen vowed to overhaul the European taxation system: “One of the key foundations of our social market economy is that everybody pays their fair share. There can be no exceptions.” She promised to prioritize taxation of big tech companies: “If by the end of 2020 there is still no global solution for a fair digital tax, the EU should act alone.” She pledged to impose a common consolidated corporate tax base: “Differences in tax rules can be an obstacle to the deeper integration of the single market. It can hamper growth, particularly in the euro area where the economic ties are stronger. We need to be able to act.” She warned that Brussels would overrule EU member states opposed to her tax overhaul: “I will make use of the clauses in the Treaties that allow proposals on taxation to be adopted by co-decision and decided by qualified majority voting in the Council. This will make us more efficient and better able to act fast when needed.”

Technology

Von der Leyen pledged to develop joint EU standards for 5G networks, and to achieve “technological sovereignty” in critical technology areas: “We will jointly define standards for this new generation of technologies that will become the global norm.” She added: “In my first 100 days in office, I will put forward legislation for a coordinated European approach on the human and ethical implications of Artificial Intelligence.”

Meanwhile, a new EU “Digital Services Act” would “upgrade our liability and safety rules for digital platforms, services and products, and complete our ‘Digital Single Market.'” A joint “Cyber Unit” would “speed up information sharing and better protect ourselves.”

Von der Leyen also called for a “European Education Area” to “change the culture of education” and a “Digital Education Action Plan” to “rethink education.”

Rule of Law, Migration and Internal Security

Von der Leyen called for a comprehensive “European Rule of Law Mechanism” to ensure the primacy of EU law over the national laws of EU member states. She warned that there would be financial consequences for member states that refuse to comply: “I intend to focus on tighter enforcement, using recent judgements of the Court of Justice showing the impact of rule-of-law breaches on EU law as a basis. I stand by the proposal to make the rule of law an integral part of the next Multiannual Financial Framework.” She added: “The Commission will always be an independent guardian of the Treaties. Lady Justice is blind – she will defend the rule of law wherever and by whomever it is attacked.”

Von der Leyen also called for a “New Pact on Migration and Asylum” in which a reinforced European Border and Coast Guard Agency would take over border control responsibilities from EU member states: “I want to see these [EU] border guards with the ability to act at the EU’s external borders in place by 2024.”

Meanwhile, a new “Common European Asylum System” would require all EU member states to offer asylum to migrants who request it: “We all need to help each other and contribute.” In addition, the European Public Prosecutor’s Office “should have more muscle and authority” and “be able to investigate and prosecute cross-border terrorism.”

European Defense and Trade

Von der Leyen, who previously called for the creation of a European Army, pledged to take “further bold steps in the next five years towards a genuine European Defense Union.” She added: “We need an integrated and comprehensive approach to our security.”

She also said: “I believe Europe should have a stronger and more united voice in the world.” She called for a change in rules so that the EU could act even without the unanimous consent of EU member states: “To be a global leader, the EU needs to be able to act fast: I will push for qualified majority voting to become the rule in this area. I will work closely with the High Representative/Vice-President to ensure a coordinated approach to all of our external action, from development aid to our Common Foreign and Security Policy.”

In the area of trade, von der Leyen said that she would appoint a “Chief Trade Enforcement Officer” to improve compliance and enforcement of EU trade agreements. She also said that she would lead efforts to update and reform the World Trade Organization: “We must ensure that we can enforce our rights, including through the use of sanctions, if others block the resolution of a trade conflict.”

Reactions

Von der Leyen’s paper-thin endorsement by the European Parliament showed that she has as many detractors as supporters. Brexit Party leader Nigel Farage may be her biggest critic.

What you’ve seen today from @vonderleyen is an attempt by the EU to take control of every single aspect of our lives. pic.twitter.com/NUnWRUywoy

— Nigel Farage (@Nigel_Farage) July 16, 2019

Addressing the European Parliament, he said:

“What you’ve seen from Ursula von der Leyen today is an attempt by the EU to take control of every single aspect of our lives. She wants to build a centralized, undemocratic, updated form of Communism that will render [obsolete] nation state parliaments, where the state controls everything, where nation state parliaments will cease to have any relevance at all.

“I have to say from our perspective, in some ways, I’m really rather pleased, because you’ve just made Brexit a lot more popular in the United Kingdom. Thank God we’re leaving!

“But it is in the aspect of defense that I think people’s minds should be focused. She’s a fanatic for building a European Army, but she’s not alone. When it’s completed, NATO will cease to exist or will not have any relevance in Europe at all.”

Brexit Party MEP Matthew Patten, in an opinion article — “Fanatical Von der Leyen is the Final Nail in the Coffin for Shambolic EU ‘Democracy'” — published by The Telegraph, wrote:

“Ursula von der Leyen, the controversial Defense Minister of the Bundeswehr, got the approval of the EU Parliament to become President of the EU Commission by just nine votes…. Here in the EU Parliament, where most deals are stitched up way before any vote, that’s as close as it gets….

“It comes after days of intense wheeler-dealing, with Mrs. von der Leyen walking the corridors of Strasbourg and Brussels to lobby for the Presidency….

“Starting with ‘we have to do it the European way’ and ‘the world needs more Europe’ her proposals included an EU minimum wage, a capital markets union, a European unemployment insurance scheme, and most controversially, the abandonment of the national veto on foreign policy, another step towards a European Army and handing over the decision to go to war to the EU.

“She also promised the deepening of Europe’s economic and monetary union, a common consolidated corporate tax base, to be sympathetic towards an approach from Britain for further delay of Brexit.

“Von der Leyen concluded saying, ‘We need to move towards full co-decision power for the European Parliament and away from unanimity for climate, energy, social and taxation policies. She finished with a rallying cry ‘Long Live Europe!’ — underlining her support for a United States of Europe.”

In Italy, von der Leyen’s confirmation led to a crisis in the coalition government. Prime Minister Giuseppe Conte backed von der Leyen, as did Deputy Prime Minister Luigi Di Maio of the anti-establishment Five Star Movement. Deputy Prime Minister and Interior Minister Matteo Salvini from the League party opposed her. He tweeted that support for von der Leyen “betrayed” the vote of Italians who wanted change in the European Union.

US Ambassador to the EU Gordon Sondland called on von der Leyen to revive transatlantic trade talks — but warned that the United States was ready to impose tariffs with “immediate financial consequences for the EU” if there is no progress in negotiations. “I’m very optimistic about her leadership and about her willingness to engage constructively with the United States,” Sondland said in an interview with Politico.

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With the Russian stock market fading from all-time highs, the Russian economic minister has warned about a severe economic downturn that could start by 2021 amid current declines in personal lending, reported The Moscow Times.

Consumer debt loads have exploded due to plunging real disposable incomes, an issue that President Vladimir Putin said could produce economic bubbles.

The Russian economy is expected to cycle down through 2H19, partly due to a plunge in retail spending.

Economic Development Minister Maxim Oreshkin told the Ekho Moskvy radio station Sunday that GDP is expected to drop by 3% in the next year and a half. Demand for consumer loans is also expected to decline, ushering in a default cycle that will de-lever heavily indebted consumers that can’t get new financing.

According to Oreshkin, many Russians are trapped in insurmountable debts. In the next crisis, he said, massive defaults on these loans will shock the economy.

Oreshkin noted that it would be difficult to get out of the next recession painlessly.

The economic minister said the government is developing mechanisms to cushion citizens if the economy crashes.

Natalia Orlova, a chief economist at Moscow-based Alfa Bank, told the Vedomosti business daily, that Oreshkin’s comments were a sign by consumers to take out new loans.

Moscow-based United Credit Bureau (OKB) reported that personal loans jumped by 46% compared to 2017, totaling $130 billion.

The Russia economy stalled in the last 4.5 years. From 2014 to 2018, GDP grew by an annual rate of 1.50%. During the same period, real disposable incomes fell by 10.7%, leaving 13% of all citizens living in poverty. In 2018, 600,000 Russian companies closed their doors.

Western countries could’ve sparked Russia’s demise through economic sanctions after Putin annexed Crimea in 2014. The sanctions contributed to capital flight, in excess of $317 billion from 2014 to 2018. Foreign direct investments also plunged. In the first three quarters of 2018, the volume of foreign direct investment was 11 times lower than during the same period in 2017.

The Russian ruble has fallen 45.5% against the US dollar since 2014, a trend that should have strengthened Russia’s export market, but it didn’t.

Residential construction, wholesale and retail trade, banking and insurance, personal services, lodging and restaurants, mobile telecoms, and web-based services are likely to come under pressure as an economic crisis in Russia is expected by 2021.

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Via FreeWestMedia.com,

A French study on the electoral behavior of soldiers and gendarmes which examined the votes in several municipalities where their presence is significant, found that the National Rally is growing on Republicans party voters.

Done by Ifop for the Jean Jaurès Foundation, the researchers focused on the electoral results in the garrison towns and polling stations where the mobile gendarmes barracks are situated, in an attempt to identify electoral behavior that is difficult to perceive through polls.

With this technique, Ifop revealed the growing interest of soldiers and gendarmes in the National Rally (RN), observing communes “where the weight of the military and their family counts significantly, that is to say, places where the numbers are relatively large but where the communal population is relatively limited”.

Therefore, among the municipalities where the army is established, the RN has collected 50,4 percent of the votes in the last European elections in Mailly-le-Camp, 17 points more than on the whole of the department of the Aube. In Suippes too, the RN convinced 45,5 percent of voters, about 15 points above the average recorded in the Marne.

In the few communes selected, the vote for the RN has also largely progressed between the first round of the presidential election of 2002 and the last European elections. At the same time, the votes favorable to the Republicans (LR) decreased between the first round of the 2017 presidential elections and the European elections:  less 15,5 points in Mailly-le-Camp,  less 10,9 points in Sissonne, less 10,1 points in Mourmelon-le-Grand.

The study shows that these trends are also noticeable in some municipalities where air bases are situated, according to a report from Le Figaro.

In Ventiseri, for example, the RN obtained 43,6 percent of the votes in the European elections against 26,5 percent on average in the rest of Upper Corsica.

Even abroad, the military bases had an influence on the electoral results: in Abu Dhabi, where one of these establishments is implanted, Marine Le Pen has collected 12,6 percent of the votes in the first round of the presidential election in 2017, compared to an average of 4,9 percent at Dubai’s polling stations.

Another part of the study carried out by Ifop focused on “polling stations housing in their perimeter a barracks of the mobile gendarmerie”, in urban areas. Here again, the areas selected at the time, “showed a vote for Marine Le Pen in the presidential election well above the average of their city (or district for Paris and Lyon)”.

In Hyères in southern France, the difference between the gendarme vote for the National Rally and the city average was above 20 percent. In Toulouse and Dijon, the difference was 17,4 and 12,5 percent in Rennes.

This assumption was also confirmed by looking at the lowest scores achieved by the president of the former National Front in polling stations adjacent to those that include a gendarmerie barracks.

Versailles – which includes only gendarmes and their families – recorded 46,1 percent of the vote in favor of Marine Le Pen, in the first round, and the polling station of Nanterre where only the Republican guards and their families are represented, the RN won 37,5 percent of the vote in the 2012 presidential election, compared with an average of 10,7 percent for the rest of the city.

In the department of Aube, for example, the list of Jordan Bardella obtained 50,7 percent of the vote in Ville-sous-la-Ferte, where the Clairvaux prison is located, against a departmental average of 33,4 percent, which is similar in urban areas.

France’s law enforcement has strongly supported Le Pen for a while already. A 2017 Ifop study carried out ahead of the first round of presidential elections, estimated that about 51 percent of gendarmes were likely to vote for Le Pen.

In 2017 the police union Alliance urged police officers not to back Le Pen for president, but many officers ignored the directive, saying they would vote for Le Pen and the RN anyway.

Jerome Fourquet , director of the public opinion department at Ifop, said:

“This is why we have not been able to study the vote of sailors, who live in cities that are too big, or that of police officers, who are never grouped in the same place in sufficient number to be decisive in the local electorate.”

Fourquet said the numbers were very high. If the inclination of the RN voters “varies depending on the news, the average is still very high,” he told the French daily.

These differences of vote between the military and the rest of the population can be explained in particular by their “daily life being far removed from that of a ‘average’ voter”. Moreover, President Macron’s LREM party has not managed to impose itself as being the “party of the order”.

“In the process of political recomposition at work, where we observe the rallying of the right around Macron, the barracks are still impervious,” the head of Ifop explained.

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