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On any other day, today’s surge in the Turkish Lira would have been sufficient to prompt a sharp rebound in global risk and euphoria across emerging markets as “the Turkey contagion was contained.” But not today, for a few main reasons: first, the spike in the Lira was due not to improving fundamentals but as a result of another soft capital control: the local banking regulator announced that the total amount of foreign currency and lira swap and swap-like transactions can’t exceed 25% of banks’ legal shareholder equity (which followed a similar determination at 50% just two days earlier). The logic behind the move, taken straight out of the PBOC’s playbook: to “kill offshore lira liquidity to stop foreigners shorting the lira” as Blue Bay’s Timothy Ash noted.

And while the crackdown on shorts worked initially, sending the USDTRY sliding as much as 7% below 6.00, traders are aware that these moves have at beast a very short term impact, and a resumption in the Lira’s slide is virtually assured, especially after a Turkish judge rejected a release request from US pastor Brunson while Erdogan announced new tariffs on US imports, guaranteeing that the diplomatic feud with Erdogan will get worse in the next few days.

As a result, despite the lira’s temporary strength, U.S. equity futures slumped to session lows following declines in both Europe and Asia on Wednesday as risk appetite continued to be tested. Futures on the Dow, Nasdaq and S&P 500 all pointed to a lower open.

Treasuries climbed, with the 10Y yields sliding below 2.90%, while the dollar surged to the highest level in 14 months, sucking liquidity out of emerging markets and sending industrial metals sliding: the Bloomberg Dollar Spot Index rose a fifth day, up 0.2% to highest level since June 2017.

In light of the surging dollar, what spooked traders today was not so much Turkey but China, where the Yuan tumbled to new one year lows, with the USDCNH rising above 6.92 while the onshore yuan also fell below 6.900 per dollar, its lowest level since May 2017.

Elsewhere, Hong Kong intervened for the second time in three months overnight to defend its peg to the after the local currency fell to the weak end of its trading band. However, with the PBOC refusing to intervene and halt the Yuan’s drop, and with traders expecting more trade war retaliation from Trump, the Shanghai Composite was a straight diagonal lower, closing 2.1% lower – down for a 3rd day – and just above the lowest level set for 2018.

There was another key factor in today’s EM rout: China’s Tencent tumbled after reporting disappointing earnings, missing on both the top and bottom line:  Tencent (0700 HK) quarterly net profit of CNY 17.867bln vs. Exp. CNY 19.3bln (Prev. CNY 18.231bln), revenue CNY 73.675bln vs. Exp. CNY 77.7bln (Prev. CNY 56.606bln). And with a weight eight times (4.9%) that of Turkish stocks, this one Chinese company pulled down the EM index.

After a positive start to the European session, where volumes were muted and liquidity was drained due to the Assumption Day public holiday, raw material producers pulled the Stoxx Europe 600 Index down as industrial metals such as copper and zinc falling to the lowest in more than a year, with copper on the verge of a bear market.

As Bloomberg adds, with the US bull market just one week away from becoming the longest in historym investor caution remains amid thin summer trading, and as trade tensions between China and the U.S. linger.

“I think we have not seen the worst of it yet,” Peter Tchir, Academy Securities head of macro strategy, said on Bloomberg Television. “You’ve only started to see a knock-on effect. I think this is truly the eye of the storm and we are going to get another round of emerging-market weakness.”

Elsewhere in FX, the pound held losses against the dollar even as U.K. inflation accelerated for the first time in eight months in July, in line with estimates. Price increases were boosted by the cost of auto fuel, transport tickets and computer games. The Aussie and Kiwi were sold against the dollar as liquid proxies to the Turkish lira and South African rand. The yen dropped a second day against the dollar while Japan’s 10- year bond yields edged lower after the central bank refrained from cutting purchases.

There was more “evasive action” by various Central Banks and authorities to stem the capital flight, with an ‘unexpected’ Indonesian rate hike – the fourth time since May – accompanied by further measures or verbal pledges to inject liquidity and contain excessive price action/speculative attacks. However, many regional currencies have lost recovery momentum and handed back a chunk of Tuesday’s recovery gains if not more in some cases.

Oil fell on inventory increases and as Libya’s output climbed. The crude complex has continued the pullback seen in yesterday’s trade that was exacerbated by a surprise build in API crude inventories, with Brent and WTI breaking though the USD 72/BBL and USD 67/BBL levels to the downside. Taking a look at metals, all of zinc (-2.2%), lead (-1.9%) and gold (-0.5%) are down with the yellow metal below the USD 1190/OZ level, as the rising USD is hitting the metals sector as a whole. Copper is also down about 2% on the day and has hit a 13 month low, with the construction material hammered by the Escondida copper mine union stopping a strike amid a new contract offer.

Economic data include retail sales, industrial output and Empire State manufacturing survey. Cisco, NetApp and Macy’s are due to report earnings.

Market Snapshot

• S&P 500 futures down 0.1% to 2,838.25
• STOXX Europe 600 up 0.07% to 385.19
• MXAP down 1% to 161.48
• MXAPJ down 0.9% to 521.57
• Nikkei down 0.7% to 22,204.22
• Topix down 0.8% to 1,698.03
• Hang Seng Index down 1.6% to 27,323.59
• Shanghai Composite down 2.1% to 2,723.26
• Sensex up 0.6% to 37,852.00
• Australia S&P/ASX 200 up 0.5% to 6,329.02
• Kospi up 0.5% to 2,258.91
• German 10Y yield unchanged at 0.328%
• Euro down 0.1% to $1.1333
• Brent Futures down 0.7% to $71.95/bbl
• Italian 10Y yield fell 7.1 bps to 2.758%
• Spanish 10Y yield fell 0.5 bps to 1.409%
• Gold spot down 0.5% to $1,188.14
• U.S. Dollar Index up 0.05% to 96.78

Top Overnight News from Bloomberg

• A Turkish court refused to release U.S. pastor Brunson: Hurriyet
• Major Turkish companies, financial institutions and the government have at least $16 billion in bonds denominated in foreign currency that are due by the end of next year, data compiled by Bloomberg shows
• President Donald Trump “has a great deal of frustration,” his spokeswoman said, calling again on Turkish President Recep Tayyip Erdogan to release an American pastor and other U.S. citizens as a diplomatic standoff continued to weigh on global financial markets
• The franc’s recent appreciation against the euro highlights how frail financial markets still are, Swiss National Bank Vice President Fritz Zurbruegg said
• Trade conflict impact on China’s industrial production, employment and consumer prices will be “controllable”, National Development and Reform Commission spokesman Cong Liang says at a briefing
• Russia’s central bank, one of a handful in Europe to cut interest rates this year, could increasingly consider a hike after the ruble slumped following the latest U.S. sanctions and the risk of more to come
• Hong Kong intervened to defend its peg to the dollar for the first time in three months after the local currency fell to the weak end of its trading band. The Hong Kong Monetary Authority bought HK$2.159 billion ($275 million) of local dollars during New York trading hours on Tuesday, according to the de facto central bank’s page on Bloomberg
• China is able to weather the escalating trade war with the U.S. and achieve its economic targets for this year, an official at the nation’s top economic planning body said
• New Zealand’s government will ban foreigners from buying residential property, making good on its promise to crack down on offshore speculators who it says are partly to blame for spiraling house prices
• Indonesia’s central bank surprised most economists by raising its benchmark interest rate a fourth time since May, moving swiftly to contain the volatility sweeping across emerging markets and curb a slide in its currency

Asian equity markets were mostly negative. Nikkei 225 (-0.7%) weakened amid profit taking following the prior day’s gains of over 2%, while ASX 200 (+0.4%) remained afloat on technical buying as the index reclaimed the 6300 level but with upside capped by losses in financials as Australia’s largest lender CBA suffered on criminal misconduct allegations. Elsewhere, Shanghai Comp. (-2.0%) saw hefty losses and the Hang Seng (-1.5%) declined to its lowest in around a year in a continuation of the recent underperformance as Tencent and tech names remained pressured, while the PBoC skipped reverse repo operations for a 19th consecutive occasion and although it later announced CNY 383bln in 1yr MLF loans, this was still lower than its previous MLF operation of CNY 502bln in late July. Finally, 10yr JGBs were marginally higher with only minimal support seen amid the profit taking seen in Japanese stocks and BoJ’s presence in the market in which the central bank kept its purchase amounts unchanged. PBoC refrained from reverse repos but announced to lend CNY 383bln through 1yr Medium-term Lending Facility.

Top Asian News

• Dollar-Yen Carry Trade Just Got More Alluring, Thanks to BOJ
• Chinese Hot Pot Chain Said to Seek Approval for $1 Billion IPO
• China Is Said to Suggest New Bidding Limits for Special Bonds
• China Gas Stocks Slump as Margin Risks Take Sheen Off 2018 Rally

European equities have started the day marginally positive in a news-thin day as certain European bourses, including the FTSE MIB, are shut due to a public holiday. The metals sector is slightly underperforming on softer base metals prices, with the Stoxx 600 basic resources index breaking its July-low support level to the downside. The day has been dominated by earnings news flow, where Admiral Group (+4.2%) and Vestas Wind Systems (+7.5%)  eat on expectations and are leading the gains in the Stoxx 600. William Demant (-7.2%) missed on expectations, however, and are at the foot of the Stoxx 600

Top European News

• Highway Managers Must Resign After Bridge Collapse, Italy Says
• Credit Agricole Recommends Buying EUR/CHF on Possible SNB Action
• Nordic Funds Prove Haven in $56 Billion Europe Stock Drain
• South African Police Have Asked Interpol to Help With Steinhoff

In FX, Turkish Lira moves and Turkish news remain firmly in the spotlight, as other EM currencies continue to trade in lock-step and contagion spreads via the Usd through the G10 community. Indeed, the DXY climbed to fresh 2018 highs just shy of 96.900 (96.878 to be precise) when the Try retreated towards 6.6000 vs the Dollar and duly eased back when the pair breached 6.0000 to the downside before another bounce on headlines reporting that a Turkish Court has rejected a US appeal against the house arrest of Pastor Brunson – Usd/Try circa 6.2000 at writing. EM – Lots more evasive action by various Central Banks and authorities to stem the capital flight, with an ‘unexpected’ Indonesian rate hike accompanied by further measures or verbal pledges to inject liquidity and contain excessive price  action/ speculative attacks. However, many regional currencies have lost recovery momentum and handed back a chunk of Tuesday’s recovery gains if not more in some cases. NZD/CHF – Bottom of the heap of majors, with the Kiwi only just hovering above 0.6550 vs its US counterpart and back below 1.1000 vs its antipodean peer despite extended AUD weakness alongside the YUAN by official and free-float market forces (Cny and Cnh both under 6.9000 vs the Usd and revisiting line in the sand intervention territory). On that note, the SNB appears to have reached its tolerance limit with the Franc and as suspected reiterated the need for ZIRP and FX intervention to curb Chf demand and stabilise fragile FX developments. Usd/Chf rebounding as a result towards parity and Eur/Chf close to 1.1300 vs 1.1275 at one stage

In commodities, the crude complex has continued the pullback seen in yesterday’s trade that was exacerbated by a surprise build in API crude inventories, with Brent and WTI breaking though the USD 72/BBL and USD 67/BBL levels to the downside. Taking a look at metals, all of zinc (-2.2%), lead (-1.9%) and gold (-0.5%) are down with the yellow metal below the USD 1190/OZ level, as the rising USD is hitting the metals sector as a whole. Copper is also down about 2% on the day and has hit a 13 month low, with the construction material hammered by the Escondida copper mine union stopping a strike amid a new contract offer Iranian Oil Minister to attend JMMC meeting in Algeria in September

Looking ahead to today, we will get a series of US data releases: July retail sales, industrial production, manufacturing production and capacity utilization data along with August empire manufacturing, and preliminary Q2 nonfarm productivity and unit labor costs, June business inventories and August NAHB housing market index. Macy’s will be reporting earnings.

US Event Calendar

• 7am: MBA Mortgage Applications, prior -3.0%
• 8:30am: Empire Manufacturing, est. 20, prior 22.6
• 8:30am: Nonfarm Productivity, est. 2.4%, prior 0.4%; Unit Labor Costs, est. 0.0%, prior 2.9%
• 8:30am: Retail Sales Advance MoM, est. 0.1%, prior 0.5%;
  • Retail Sales Ex Auto and Gas, est. 0.4%, prior 0.3%
  • Retail Sales Control Group, est. 0.4%, prior 0.0%
• 9:15am: Industrial Production MoM, est. 0.3%, prior 0.6%; Capacity Utilization, est. 78.2%, prior 78.0%
• 10am: Business Inventories, est. 0.1%, prior 0.4%
• 10am: NAHB Housing Market Index, est. 67, prior 68
• 4pm: Total Net TIC Flows, prior $69.9b; Net Long-term TIC Flows, prior $45.6b

DB’s Jim Reid concludes the overnight wrap

President Erdogan and Finance Minister Albayrak gave speeches that doubled down on the confrontational message and  gave no indications of a positive resolution to the current political standoff with the US over American pastor Brunson’s house arrest. President Erdogan vowed to boycott American electronics, specifically expressing a desire to ban iPhones in favour of Samsung phones without giving details of when and how. Elsewhere, Turkey’s five-year CDS spreads tightened as well, falling 67.5 basis points, and 10- year sovereign bonds rallied 94 basis points. The strong moves were somewhat surprising, given the lack of concrete policy action by Turkish officials, although an easing of contagion fears, the central bank’s pledge of liquidity if required as well as Reuters reports of a potential conference call on Thursday where Finance Minister Albayrak will seek to reassure investors may have helped too.

Broader emerging market currencies performed well in line with the lira yesterday, especially those that had declined in unison over the last few sessions. The South African rand and Argentine peso gained 1.19% and 0.73% against the dollar, respectively. The Mexican peso also gained 1.24%, causing the trade-weighted dollar to close around flat. The DXY index, however, gained 0.35% to the strongest level since June 2017, as developed market currencies depreciated. The yen shed -0.41% but remains in its recent range, but the euro declined -0.58% to its weakest level in over a year and fell below its 200-week moving average.

This morning in Asia, the Turkish Lira is resuming its decline (-2.2%) and equities are broadly lower with the Hang Seng (-1.52%), Shanghai Comp. (-1.31%) and Nikkei (-0.85%) all down. Meanwhile, futures on the S&P are marginally lower while yields on UST10y are c2bp lower. As for data, China’s July new home prices grew to the highest in c2 years, up +1.2% mom and +6.6% yoy (vs. 5.8% in June). Elsewhere, Reuters cited an unnamed White House official who warned more economic pressure may be placed on Turkey if it refuses to release the American pastor.

Back to yesterday, the dollar’s recent strength is weighing on commodity prices. Brent crude oil failed to rally again yesterday, paring intraday gains of as much as 1.82% after news broke that India may cut oil imports from Iran by 50% to satisfy a US waiver. Countries like India are potentially the swing purchasers for Iranian oil; if they decide to follow US sanctions it will likely remove Iranian oil from the global market. The broader commodity complex was lower as well, with the bellwether CRB raw industrials index dipping to its lowest level of the year.

Front month copper futures fell 1.78% to their lowest level since last July. In the US, risk sentiment improved and the S&P 500 posted its first gain in the last five trading session, rising +0.64%. Banks led gains, rallying +1.04%, but they nevertheless remain -0.38% lower since their level before Turkey-related volatility intensified on Friday. Similarly, the VIX index fell 1.5 points but remains 2.4 points higher over the last week. Sectorally, cyclical sectors outperformed, with consumer discretionaries rallying 0.95% and utilities lagging behind. Treasuries sold off slightly but the 10-year yield ended the session broadly flat.

European equities failed to join the global rally yesterday, with the Euro Stoxx 600 closing flat. The weaker euro did not provide a tailwind, with the correlation between the single currency and the Stoxx 600 recently turning positive for the first time since last summer. Usually, a weaker euro boosts European exporters and increases the value of overseas earnings. Fixed income price action was firmer, with the IG and XO iTraxx indexes rallying 0.9bp and 2.4bp, respectively. German bund yields sold off slightly, in line with Treasuries, but peripheral spreads rallied notably. Italian two- and ten-year spreads to Germany closed 9 and 8.7 basis points tighter, respectively. This partially reflects the improved price action out of Turkey, but could be in response to more positive developments surrounding the upcoming Italian budget. Ansa reported that Prime Minister Conte and top ministers agreed that they will need to cut the debt stock moving forward.

Staying with Italy, ANSA also has reported that a 50-year old suspension bridge in Northern Italy has collapsed and led to at least 26 casualties. Following on, the Deputy Premier Salvini has signalled that EU rules should not hold back investments as he noted “there can be no trade-off between fiscal rules and the safety of Italians” while adding that “if external constraints prevent us from spending to have safe roads…then it really calls into question whether it makes sense to follow those rules”.

Moving onto Brexit where the German Chancellor Merkel may be suggesting a more flexible approach to Brexit talks. She noted that “hopefully it’ll not come to an unregulated Brexit, but rather to a reasonable negotiated agreement”, although she added that the UK has to “commit to re-accepting EU rules”. Earlier on, the UK Foreign Secretary Hunt noted that “we need a change in approach by the EC if we’re going to have a pragmatic deal that works for everyone”.

Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In the US, the July NFIB small business optimism index nudged up 0.7pts mom to a fresh 35 year high (107.9 vs. 106.8 expected). Respondents were more optimistic about the general economy, hiring and prospects for employee compensation.

In Europe, Germany’s 2Q GDP was above market at 0.5% qoq (vs. 0.4% expected), while prior data revisions have led to an annual growth of 2.0% yoy (vs. 2.1% expected). The German statistical office indicated that consumption and investment had contributed positively. Elsewhere, the second reading of the Euro area’s 2Q GDP was revised 0.1ppt higher to 0.4% qoq and 2.2% yoy, while the final reading of Germany and France’s July CPI was confirmed at 2.1% and 2.6%, respectively. Meanwhile, the August ZEW survey indicated respondents were less pessimistic this month, with the expectations index for Germany (-13.7 vs. -21.3 expected) and the Euro area (-11.1 vs. -18.7 previous) both improving and now at the highest levels since May. Back in the UK, the June unemployment rate fell to a 43-year low, down 0.2ppt mom to 4.0% (vs. 4.2% expected) while the employment change was below market at 42k in 2Q (vs. 93k  expected). Lastly, the average weekly earnings growth (ex-bonus) nudged down one tenth to an inline print of 2.7% yoy.

Looking ahead to today, we will get a series of US data releases: July retail sales, industrial production, manufacturing production and capacity utilization data along with August empire manufacturing, and preliminary Q2 nonfarm productivity and unit labor costs, June business inventories and August NAHB housing market index. Macy’s will be reporting earnings.

via RSS https://ift.tt/2MtSPAk Tyler Durden

The suspect arrested on suspicion of carrying out a terrorist attack at the UK Parliament on Tuesday has been named as Salih Khater, Sky News reported. It is believed the 29-year-old is a British citizen of Sudanese origin, and remains in police custody after his arrest on suspicion of preparing an act of terror.

A Facebook page for a man of the same name says he lives in Birmingham, works as a shop manager, and has studied at Sudan University of Science and Technology.

Khater has been arrested on suspicion of ramming a car into pedestrians and cyclists before crashing into security barriers outside the Houses of Parliament. The suspect is being held in custody in south London, and is said to be not cooperating with police. Scotland Yard’s head of counter-terrorism Neil Basu said no other suspects have been identified.

Police have been searching addresses in the Midlands after a car smashed into barriers near Parliament on Tuesday morning. Officers revealed the driver travelled from Birmingham to London on Monday night and arrived in the capital just after midnight.

He remained in the Tottenham Court Road area, close to Oxford Street, from around 1.25am until 5.55am.

The silver Ford Fiesta was then driven to Westminster and Whitehall for about 6am and stayed in the area until the time of the attack. It hit cyclists and pedestrians at 7.37am before crashing into security barriers.

According to the MI5, the suspect was unknown and “not currently cooperating”, the Metropolitan Police said afterwards. His vehicle was removed late on Tuesday night.

Two addresses in the West Midlands city were being searched by counter-terror officers later that evening, as well as a flat in Nottingham’s Radford/ Arboretum area.

* * *

It was the second terrorist attack on the Houses of Parliament in just under 18 months. The first one in March last year claimed the lives of five people, including a police officer. In a third incident, an attempted attack was foiled when counter-terrorist officers arrested the potential assailant, who was found outside parliament in possession of three knives.

A man and a women were taken to hospital with non life-threatening injuries after the vehicle hit cyclists in rush hour, but they have now been discharged. Witnesses described how the car came “whipping round the corner” and drove through about a dozen cyclists.

Robert Nicholson told Sky News he saw the incident unfold as he was waiting in a “safe cycling box” near Parliament. He chased the car after the impact left one woman flying up “onto the bonnet” and snapped the frame of one of the bikes.

Assistant Commissioner Neil Basu said: “There is no intelligence at this time of further danger to Londoners or to the rest of the UK connected to this incident.”

via RSS https://ift.tt/2nECP0o Tyler Durden

In a day in which the dollar set new highs against virtually all pairs and global risk is on the defensive, the Turkish Lira extended its rapid rebound from record lows, after Turkish regulators imposed new soft capital controls to prop up the battered currency, making it even harder for banks to short the currency through the swap market.

One day after Turkey suspended mark-to-market for banks in a bid to offset fears about debt rollover and capital shortfalls, the Ankara-based Banking Regulation and Supervision Agency (BDDK) announced that the total amount of foreign currency and lira swap and swap-like transactions can’t exceed 25% of banks’ legal shareholder equity; the announcement came just 48 hours after a 50% was imposed on Monday, which however failed to make much of a dent in the selloff.

The latest move limits funds’ access to lira liquidity in the offshore swap market and makes it harder for them to borrow the currency from local lenders and short it. The rate on overnight dollar-lira swaps surged more than 12% points to 34.5%, the highest level since 2003.

“They are killing offshore lira liquidity to stop foreigners shorting the lira,” said Timothy Ash, a strategist at BlueBay Asset Management in London.

Then again, this strategy – which just recently was attempted by China – tends to have a very short-term effect, as it does nothing to alleviate the underlying reasons behind a currency selloff.

For now however it is working, and the lira jumped for a second consecutive day, surging as much as 7% against the dollar with the USDTRY briefly sliding below 6.00, reversing much of the decline triggered by tensions with the U.S. Those tensions have been centered on a dispute over the detention of an American pastor, which resulted in tariffs and sanctions. The dispute exacerbated existing concerns about President Recep Tayyip Erdogan’s unorthodox approach to economic policy.

While on Monday the central bank promised “all necessary measures” to maintain financial stability, it didn’t mention higher interest rates and hasn’t raised them yet, even though Turkish corporate and banking executives have asked it to. Then on Tuesday,in another attempt to stabilize sentiment, we reported that the banking watchdog took an unconventional step to support the nation’s beleaguered banks, temporarily excluding the effect of day-to-day securities losses on how their financial strength is calculated.

The suspension of mark-to-market calculations on capital adequacy ratios will continue until prices of securities “normalize,” the banking regulator said in a document sent to banks on Tuesday. The “recent speculative volatility in markets” caused an “unfair erosion” in banks’ capital strength, it said. Under mark-to-market accounting, portfolios must reflect assets’ current market values rather than their book values.

The emergency moves followed the publication of a report from Goldman last week which spooked traders, and suggested that a USDTRY above 7.1 would wipe out the banks’ excess capital.

The average capital adequacy ratio of the banking system stands at 16 percent as of the end of June, according to official data. Every 10 percent decline in the lira reduces capital adequacy ratios by around 50 basis points on average, according to the Goldman Sachs report.

The BDDK also published a new set of regulations on loan restructurings by banks, financial leasing and factoring firms in the Official Gazette on Wednesday, Bloomberg reports. The new rules allow banks to extend the maturities of outstanding loans to clients, refinance them, make new loans to help troubled companies, and seek new collateral. Banks can also demand debtors sell assets to repay debts and improve their finances. Overdue loans can now be restructured within two years from the day a framework agreement is signed.

* * *

Meanwhile going back to the ongoing escalation in political tensions between the US and Turkey, one day after Erdogan vowed to boycott US electronics products, including the iPhone, Ankara slapped an additional tax on imports of a broad range of American goods. Turkey announced it would impose an additional 50% tax on U.S. rice, 140% on spirits and 120% on cars. There are also additional charges on U.S. cosmetics, tobacco and some food products. The was Erdogan’s latest retaliation for the Trump administration’s punitive actions over the past few weeks to pressure Turkey into releasing an American pastor.

Bloomberg calculated that the items listed in the decree accounted for $1 billion of imports last year, similar to the amount of Turkish steel and aluminum exports that were subjected to higher tariffs by President Donald Trump last week. The decision shows Turkey giving a proportionate response to American “attacks” on the Turkish economy, Vice President Fuat Oktay said in tweets this morning.

Zor günlerde liderinin etrafında kenetlenen Milletimiz, kural tanımaz tavırlara karşı uluslararası kamuoyu ile de kenetlenmiş, haksızlıklara karşı Dünya’yı cesaretlendirmiştir. Durmak yok, yola devam.

— Fuat Oktay (@fuatoktay06) August 15, 2018

In addition to imposing the new tariffs, Erdogan assured the spat with Trump would get worse before it gets better after a local court denied US pastor Brunson’s appeal to be released from house arrest. A local court in Izmir rejected the appeal by the US Pastor to be released from house arrest pending his trial on espionage and terrorism-related charges.

A higher Turkish court was still considering the appeal and Brunson’s lawyer, Ismail Cem Halavurt, told CBS News on Wednesday that he would not consider the appeal formally rejected until the higher court issues it’s ruling. He said that was likely to happen by the end of business on Wednesday. A previous appeal by Brunson was rejected at the end of July.

In response to this barrage of new developments out of Turkey, we expect Trump will shortly escalate his own crackdown on Turkey most likely in a tweet which in turn will send the lira plunging once more.

via RSS https://ift.tt/2MmJpXx Tyler Durden

Authored by Viktor Katona via Oilprice.com,

It took more than 20 years for littoral states of the Caspian Sea to reach an agreement that would lay the legal foundations for the full utilization of the region’s resources. The Fifth Caspian Summit in Aktau, Kazakhstan, brought the long-sought breakthrough after leaders of Russia, Kazakhstan, Azerbaijan and Iran signed the Convention on the Legal Status of the Caspian Sea – a remarkable feat considering that heretofore, barring bilateral deals, the Caspian has been governed by an obsolete 1940 convention between the Soviet Union (of which four current littoral states were a part) and Iran.

As the current Convention incorporates a plethora of tradeoffs between countries, let’s look at them in greater detail so as to grasp the implications of the deal.

The Convention stipulates that relations between littoral states shall be based on principles of national sovereignty, territorial integrity, equality among members, non-use of threat of force (it was only 17 years ago that Azerbaijan and Iran almost started a full-blown naval war over contested fields) and non-intervention.

The military-related clauses of the document can be considered a net diplomatic success for the Russian Federation as it prohibits the physical presence of any third-party armed forces, along with banning the provision of a member state’s territory to acts of aggression against any other littoral state. Since Russia is by far the most power nation in terms of both general military clout and military presence around the Caspian, this will placate Russian fears about any potential US (or other) encroachment in the area.

Then there’s energy… Although the Convention establishes a general legal framework for territorial disputes to be solved, it refrains from any particularities. Therefore prolonged negotiations are to be expected with regard to many disputed oilfields, stemming predominantly from Irani and Azerbaijani claims. Iran advocated throughout the entire negotiation process an egalitarian approach to delimiting the seabed (each nation would get 20% of the coast), running counter the other countries’ aspirations. The things is that when Russia concluded its seabed delimitation agreements with Kazakhstan and Azerbaijan in 2001 and 2003, respectively, the parties split their parts using the median line. Point 8.1. effectively keeps the delimitation task in the hands of relevant governments, thereby providing a very modest boost to the demarcation of the Southern Caspian (the Northern part is fully delimited).

There are two main territorial conflicts to be settled – the Irani-Azerbaijani and the Azerbaijani-Turkmen disputes. The row between Baku and Teheran revolves around the Araz-Alov-Sharg field (discovered in 1985-1987 by Soviet geologists), the reserves of which are estimated at 300 million tons of oil and 395 BCm of natural gas. Even though the field is only 90 kilometers away from Baku and should seemingly be under Azerbaijan’s grip, if one is to draw a straight line from the Azerbaijani-Irani border most of the field ought to be allotted to Iran (the median would keep most of it in Azerbaijan). As those old enough to remember the 2001 naval ship hostilities would attest, it does matter at what angle the final line is drawn.

The Serdar/Kapaz field (estimated to contain 50 million tons of oil) is the bone of contention between Azerbaijan and Turkmenistan. Considered to be an extension of Azerbaijan’s main oil-producing unit, the Azeri-Chirag-Guneshli field, Baku sees it as an indispensable element in its quest to mitigate decreasing oil output numbers. Geographically, Serdar/Kapaz is closer to Turkmenistan, yet here too Azerbaijan might come out the ultimate winner. The Apsheron peninsula stretches out some 60km into the Caspian Sea, in effect extending Azerbaijan’s geographical reach. Absent previous demarcation agreements between Baku and Ashgabat, the settlement will once again boil down to getting the angles right, as in the case of Araz-Alov-Sharg. However, it must be said that a resolution might come about as a by-product of new gas endeavors.

Clause 14, dealing with laying subsea pipelines and cables, is the one most coveted by energy analysts, since it has the potential to significantly alter Europe’s gas supply options.

According to point 14.2., all parties have the right to construct subsea pipelines given that they comply with environmental standards (which are particularly strict in the Caspian Sea). With no further caveat included, some analysts might be tempted to think that Russia will inevitably use the “environmental protection” card when trying to stop the construction of the Trans-Caspian pipeline (TCP) from Turkmenistan, a pipeline it spent many years to halt. Under current circumstances, when US-Russian relations falling ever deeper into an insurmountable ditch, Moscow’s decision to allow for the construction of the mightily Washington-backed TCP to take place might be perceived as a massive omission.

Since the Turkmen gas is unlikely to find demand in Azerbaijan or Turkey, it would need to take the whole route via the South Caucasus Pipeline, TANAP and TAP. Merely the transportation tariffs from these pipelines would render any transportation economically unviable unless European gas prices rise substantially to levels above $300/MCm. Moreover, the estimated cost of building the subsea TCP of $2 billion is a disabling burden for either Türkmengaz or SOCAR. Thus, allowing the construction of Trans Caspian gas pipelines might be a brilliant ruse from the Russians – cognizant of all the deficiencies above, they can wield it as a sign of good will in their never-ending negotiations with the European the economics for supplying gas to Europe via the Southern Gas Corridor are far from being Union.

This being said, there are natural impediments to see the TCP implemented anytime soon. Azerbaijan might be interested in getting transit fees for Turkmen natural gas, yet it lacks the required infrastructure to include the above volumes in its traditional conduit via Turkey.

All in all, the Caspian convention is a good basis for further negotiations, even though it falls short of being an all-encompassing legal framework. Territorial disputes will most likely remain frozen for quite some time and no new gas pipeline projects will see the light of day unless market conditions change.

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The United Kingdom is to leave the European Union on March 29, 2019, but a final deal has yet to be agreed between Westminster and Brussels.

In the event of a “no-deal Brexit“, the UK leaving the EU single market and customs union without a free trade deal, Britain would have to adopt rules set by the World Trade Organization (WTO). This scenario, as Statista’s Raynor de Best notes, could mean that airline licenses, medicine certifications and certain citizen rights end overnight along with an increase in bureaucratic checks on goods and people passing in and out of the country.

According to estimates from the International Monetary Fund (IMF), a hard Brexit would also lead to significant long-term economic damage across the European continent.

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The Washington-based fund said the economic output of the EU-27 could be reduced by 1.5 percent of GDP by 2030.

Ireland, the Netherlands, Denmark and Belgium, all countries with close trading links to the UK, would be hit hardest. Germany would lose 0.5 percent of its GDP due to industrial supply chains.

Nations with financial ties to the City of London, such as Malta, Cyprus and Luxembourg, would also be negatively affected by a “no deal”.

The IMF estimated, for example, that two-way bank claims between Luxembourg’s financial sector and the UK were about 220 percent of Luxembourg’s GDP.

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Authored by Judith Bergman via The Gatestone Institute,

In July, the Union for the Mediterranean (UfM) celebrated its 10-year anniversary. Most Europeans, however, are unlikely to have heard about the Union, let alone the anniversary. The media rarely reports on the UfM and its activities.

The participating countries in the UfM are the 28 European Union (EU) member states and the Southern Mediterranean countries, which include Albania, Algeria, Bosnia and Herzegovina, Egypt, Israel, Jordan, Lebanon, Mauritania, Monaco, Montenegro, Morocco, “Palestine”, Syria (temporarily suspended), Tunisia and Turkey. Libya has observer status in the UfM. The UfM is chaired by a “co-presidency” shared between the European Union and Jordan. The UfM Secretariatmaintains the daily operations of the UfM and is run by a Secretary General, presently Nasser Kamel (Egypt).

The UfM was launched by a decision of the UfM Heads of State and Government in Paris in July 2008, and constitutes an institutionalization of the Barcelona Process, which began in November 1995 with the signing of the Barcelona Declaration.

According to the European Institute of the Mediterranean (IEMed), the Euro-Mediterranean alliance launched by the Barcelona Declaration Process “was structured around three main work areas (political and security dialogue; economic and financial partnership; and social, cultural and human partnership)” between the EU and the mainly Muslim majority countries in North Africa and the Middle East (usually referred to in UfM context as the Southern Mediterranean).

In January 2017, the 43 foreign ministers of the UfM agreed on a “Roadmap for Action” in Barcelona, which aims at “enhanced regional cooperation and integration in the Mediterranean,” setting out “three key interrelated priorities, regional stability, human development and integration.” It was the first political document adopted by the UfM foreign ministers since 2008.

The UfM lists a number of ways in which it seeks to achieve regional stability and human development. One of them is “Intercultural and Interfaith dialogue” the aim of which is, among other things:

“[T]o exert all efforts to bridge any potential cultural divide to fight against extremism and all forms of racism and to build upon a common heritage and aspirations. Intercultural and Interfaith dialogue in the Mediterranean is an important underlying dimension of all regional cooperation activities in the framework of the UfM.”

The EU countries involved in the UfM appear unbothered by promoting “integration” — or even claiming “a common heritage” — with countries such as Mauritania, where, according to recent reports, up to 20% of the population (Haratines and other Afro-Mauritanian groups) is enslaved, and anti-slavery activists are regularly tortured and detained.

The UfM has held 15 ministerial conferences on “key strategic areas” in the past 5 years on topics such as, Strengthening the role of Women in Society (Egypt, November 2017), Sustainable Urban Development (Egypt, May 2017), Water (Malta, April 2017), Energy (Italy, December 2016) Employment and Labour (Jordan, September 2016), Regional Cooperation and Planning (Jordan, June 2016), Blue Economy (Belgium, November 2015) Digital Economy (Belgium, September 2014), Environment and Climate Change (Greece, May 2014), Industrial Cooperation, (Belgium, February 2014) Energy (Belgium, December 2013), and Transport (Belgium, November 2013), as well as two Foreign Minister Conferences (Spain January 2017 and Spain November 2015).

The UfM aims to reach its priorities through projects such as “Empowering women and youth in the Mediterranean”, “Promoting job creation and inclusive growth” and “Enhancing the Role of Women and Youth in Preventing Violent Extremism.”

There is not the slightest allusion in the yearly report, nor in the 2017 Roadmap for Action, to the fact that in most Muslim countries, sharia law influences the legal code — especially regarding personal status law, which concerns marriage, divorce, inheritance and child custody — and that gender inequality may therefore be institutionalized and not something likely to change, regardless of the number of UfM projects. Nor is there any allusion to the role of Islamism in fostering “violent extremism”. Instead, the roadmap for action speaks of joining “regional and international efforts to address socio-economic root causes of terrorism and extremism” and “developing further projects and initiatives of high impact, with a special focus on youth employability and women empowerment.”

According to the European Institute of the Mediterranean (IEMed):

“From 1995 to 2006, the EU allocated 16,000 million euros through MEDA programmes for bilateral and regional cooperation, aimed at fostering both socioeconomic projects (modernisation of the industry, promotion of the private sector, reform of the health sector, development funds…) and political and good governance reforms…

“The cooperation funds are channelled through the European Neighbourhood and Partnership Instrument (ENPI), aimed at both the eastern European and southern Mediterranean neighbourhood. The joint budget for both regions for the period 2007-2013 amounts to 11,000 million euros…

The funds allocated to cooperation with the EU neighbouring countries(in eastern Europe and the southern Mediterranean) for the period 2014-2020 amount to 15,000 million euros.”

These figures do not include bilateral agreements between the UfM and EU countries, such as the €6.5 million multi-annual financing agreement between the UfM Secretariat and Sweden “to deepen and amplify UfM specific cooperation initiatives and core activities promoting regional dialogue.”

Given these large sums, it is remarkable that the UfM and its activities enjoy little to no scrutiny in the European press. Especially as, in the words of IEMed in its 2015 assessment of the 20th anniversary of the Barcelona Process, “The scenario of concord set out for the Mediterranean in the 1995 Barcelona Declaration has never become a reality”.

Subsequent Islamic radicalization and terrorism and the years-long migrant crisis constitute recent examples of the failure. IEMed’s assessment continues:

“The roadmap designed in the Catalan capital could not predict the destabilising effects on the region of al-Qaeda on 11S and the subsequent invasions of Afghanistan and Iraq; the political immobility and lack of reforms and improvements in governance in many MPCs; the non-creation of the free trade area in the Mediterranean scheduled for 2010; the lack of south-south regional integration; the instability caused by the Arab Spring since 2011, currently with two failed states, Syria and Libya; the migration and refugee crises; or the emergence of Islamic State terrorism that is ravaging Syria and Iran and has already shown its capacity to attack Europe.”

The UfM has itself conceded:

“UfM countries have among the highest unemployment rates in the world, affecting mostly youth and women, which adds to many other pressing issues such as social cohesion, migration or efforts to counter radicalization.”

Despite this apparent evidence of the failure of the Barcelona Process and the UfM, the latter nevertheless sees itself as having “entered a new phase, building on the progress achieved so far… increasing and expanding activities demonstrate that windows of opportunity exist to further develop regional cooperation.”

The UfM, undeterred, barrels on with its goal to achieve:

“greater levels of integration and cooperation in the region through a specific methodology that has yielded positive results in terms of political dialogue and the implementation of region-wide initiatives in which young people play a key role.

With more than 50 labelled projects and over 300 ministerial and expert fora gathering 25,000 stakeholders since 2012, UfM activities illustrate the strong belief that regional challenges call for regional solutions and that there is no security without development.”

It seems counterintuitive that nearly a quarter century of costly investment by Europe in the southern UfM countries appears to have yielded few to no positive results.

A map of the Union for the Mediterranean members. Blue are EU member states, brown are other members, Libya (red) is an official observer, and Syria (green) is a suspended member. (Image source: Treehill/Wikimedia Commons)

Despite the UfM’s own aforementioned assessment of challenges having reached “unprecedented levels,” the EU nevertheless continues the Barcelona Process in the form of the UfM. It is also bizarre that any substantive evaluation of the costs and benefits of the Barcelona Process, and the UfM and its many projects is absent from most public discourse, as the media apparently fail to report on the UfM and its activities.

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If you want to move to the world’s most liveable city, pack your bags and book a flight to Vienna.

The Economist assessed 140 major cities worldwide on stability, healthcare, culture and environment, education, and infrastructure, declaring the Austrian capital the most liveable city for the first time. Australia’s second most populous city, Melbourne, scored 98.4 out of 100. Osaka, Japan, came third with Calgary and Sydney rounding off the top five.

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In total, three Canadian and three Australian cities made the top-10 list.

Interestingly, U.S. cities are notably absent from the top of The Economist’s ranking with Copenhagen the only other European city this year besides Vienna.

However, as Statista’s Niall McCarthy notes, even though people living in Damascus are daring to hope that their country’s long and bloody civil war might be drawing to a close, the Syrian capital is at the opposite end of the ranking. It scored just 30.7 out of 100 where 100 is ideal.

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Dhaka, Bangladesh and Lagos, Nigeria, rounded off the bottom three with scores of 38.0 and 38.5 respectively.

While most of the bottom-10 are scattered across Africa and the Middle East, Karachi in Pakistan and Port Moresby in Papua New Guinea were among the bottom-ranked cities.

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