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Broadcom executives should’ve seen this coming.

For months now, Singapore-based Broadcom has pursued a merger with US-based Qualcomm, raising its bid for the largest US-based technology firm to $117 billion, which is developing chips that are expected to be integral to 5G network technology in the US. Then, national security issues reared their head.

Earlier this month, the Committee on Foreign Investment in the US inserted itself into the negotiations (following a request from lawmakers) by ordering Qualcomm to delay its March 6 shareholder meeting to give CFIUS more time to investigate the takeover bid.

CFIUS’s involvement presented yet another obstacle to the deal. Qualcomm had actively resisted the Broadcom’s overtures, but the Singapore-based firm’s willingness to repeatedly raise its bid, along with its plans to redomicile in the US, impressed upon investors that the company was committed to closing the merger.

Then last night, President Trump definitively quashed the deal by issuing an executive order blocking the deal on national security grounds.

“There is credible evidence that leads me to believe that Broadcom Limited, a limited company organized under the laws of Singapore (Broadcom) … through exercising control of Qualcomm Incorporated (Qualcomm), a Delaware corporation, might take action that threatens to impair the national security of the United States…”

The move, as many analysts noted, was unusual. But Kyle Bass of Hyman Capital anticipated the intervention, telling CNBC last week that QCOM’s importance to 5G tech meant that “we can’t possible let the Broadcom Qualcom merger to go through.

And on Monday, the Treasury Department sent a letter to lawyers involved in the deal expressing concerns about Chinese competitors in 5G network development, which raises national security concerns over the Broadcom-Qualcomm merger.

Broadcom said in a letter to Congress regarding its offer to acquire Qualcomm that the company would not sell any “critical national security assets” to any foreign companies.

But clearly those assurances weren’t enough. And today, as Bloomberg explains, Trump’s swift rejection of the hostile takeover sent a clear message to overseas investors and companies: Any deal that could give China an edge in critical technology will be blocked on national security grounds.

And right now, Qualcomm is locked in a race with China’s Huawei Technologies Co. over which company will dominate the development of next-generation wireless technology. By blocking the deal, Trump is sending a strong message to foreign firms: Vital American technology is not for sale.

“This decision hangs a huge ‘not-for-sale’ sign on just about every American semiconductor firm,” said Scott Kennedy, who studies China’s economic policy at the Center for Strategic & International Studies in Washington. “A Chinese entity doesn’t need to be anywhere near a transaction now in semiconductors for the deal to be nixed.”

The White House is mulling a broad range of imports to punish Beijing for its alleged theft of intellectual property – measures that could include imposing tariffs on an even broader range of imports, and blocking Chinese investments in the US.

And while Broadcom is a Singapore-based company (and is in the process of redomiciling in the US) it’s believed that China would’ve exerted undue influence over the combined firm.

As Bloomberg points out, only five takeovers of American firms have been blocked by US presidents on national security grounds since 1990. Barack Obama blocked two deals during his eight years in office. Trump has blocked two deals in six months. And already, CFIUS has played a role in opposing at least nine takeover bids. Most of these involved Chinese companies.

Lawmakers have internalized Trump’s national security rhetoric by considering legislation that would expand the universe of overseas investments that require national security approval from CFIUS. Trump has endorsed the bill, which was proposed by Sen. John Cornyn with China in mind.

The reasoning for blocking the deal is relatively straightforward: Any disruption in Qualcomm’s dominant position in the semiconductor market would cede an edge in the global tech arms race to China’s Huawei. This represents a shift away from blocking deals for fear that China could steal their technology, to blocking deals because they might impact the competitiveness of American companies…

“China would likely compete robustly to fill any void left by Qualcomm as a result of this hostile takeover,” CFIUS said in the letter. “Given well-known U.S. national security concerns about Huawei and other Chinese telecommunications companies, a shift to Chinese dominance in 5G would have substantial negative national security consequences for the United States.”

“Concern has expanded from existing technologies with national security implications potentially falling into rivals’ hands to ensuring American companies continue to invest in R&D to maintain their technological edge,” he said.

While blocking the deal will no doubt play well with Trump’s base, it will elicit howls of disapproval from Wall Street, which stands to lose hundreds of millions – if not billions – in revenue from all of these blocked mergers. In fact, as a result of just this one busted deal it may be time to revise Q1 financial EPS lower: according to preliminary estimates, Qualcomm-Broadcom was expected to earn banks $280 million in advisory fees.

Bankers are probably already reminiscing about the days of the now long gone “China M&A premium…”

via RSS http://ift.tt/2Gr0Gte Tyler Durden

Hillary Clinton does not have the best luck with obstacles – however it has nothing to do with her health, we’re being told again.

While navigating down a flight of approximately 15 stairs at Jahaz Mahal in New Delhi, India on Monday, Clinton began to fall about halfway down. As helpers scrambled to assist the former Secretary of State, she lost control again – her left foot shooting forward while her right leg crumpled beneath her. 

Hillary’s double stumble down the relatively benign flight of stairs comes one day after she said Trump supporters “didn’t like black people getting rights,” or “women getting jobs” during a discussion at the India Today Conclave on Sunday. 

Madame Citizen’s fall from grace was the latest in a long line of stair-related issues Hillary has suffered throughout her long and lucrative career. During an August 2016 campaign stop in South Carolina, a state she lost, Clinton struggled to ascend yet another unassuming flight of stairs.

And in 2011 – after successfully making it up a flight of stairs, Clinton was assaulted by a doorway threshold – mercilessly tripping her as she attempted to board her plane in Yemen. 

In June 2009, a little more than six months after losing her first bid for White House, Clinton fractured her elbow while on her way to see President Obama.

While no stairs were involved, Hillary Clinton infamously fainted during a memorial on September 11, 2016 before being chucked into a van and rushed to daughter Chelsea’s Manhattan apartment.

Clinton’s campaign said she was recovering from pneumonia – which she had no problem breathing into this little girl’s face for an “I’m fine!” photo-op. 

Blooper reel and commentary: (you knew this was coming)

BREAKING: Hillary Clinton’s shoespic.twitter.com/Lug8cPFEvu

— Mike (@Fuctupmind) March 13, 2018

Hillary Clinton Nearly Falls Down the Stairs TWICE in India!

Just because I added Mario sound effects DOESN’T mean I’m making fun of her! pic.twitter.com/lInH6BW5z0

— Austen Fletcher (@fleccas) March 13, 2018

Thank God CNN explained to me how Hillary being in bad health was just a “conspiracy theory,” otherwise I might question why she’s totally incapable of walking down stairs even while being supported by two men. 😐 pic.twitter.com/2ekGFE7alB

— Paul Joseph Watson (@PrisonPlanet) March 13, 2018

STAIRS 2

HILLARY 0 pic.twitter.com/A8LgT4t0RD

— Rex Tillersom (@RexTillersom) March 13, 2018

BREAKING: Another video of Hillary Clinton taking on the stairs has been released! pic.twitter.com/sKDCil39aF

— Jack Murphy (@RealJack) March 13, 2018

Maybe it’s time to deploy: 

Since poor Hillary can’t seem to get up and the down stairs…. pic.twitter.com/yEwiQBLGvs

— Ҝŗïšדּө╒ữЯ 🌬️❄️☃️ (@EuroRaver) March 13, 2018

 

via RSS http://ift.tt/2FxV438 Tyler Durden

Russia has refused to respond to the British “ultimatum” about a clandestine Soviet chemical weapon allegedly used in an ex-double agent’s poisoning until a sample of the agent is provided, the Russian foreign minister said. As reported on Monday, British PM Theresa May said a chemical weapon developed under a secret Soviet program dubbed Novichok was used in the poisoning of Sergei Skripal. May demanded that Russia provide details of the program, saying otherwise London would consider the poisoning an attack directed by the Russian government.

On Tuesday, Moscow balked at this demand, with the Russian Foreign Ministry saying that it had summoned British Ambassador to Moscow Laurie Bristow.

“We have certainly heard the ultimatum voiced in London,” Russia’s top diplomat Sergey Lavrov said. “The spokesperson for the Foreign Ministry has commented on our attitude to this,” he added referring to Maria Zakharova branding of May’s appearance in Parliament as a “circus.”

Lavrov said that a case of alleged use of chemical weapons should be handled through the proper channel, being the Organization for the Prohibition of Chemical Weapons of which both Russia and Britain are members.

“As soon as the rumors came up that the poisoning of Skripal involved a Russia-produced agent, which almost the entire English leadership has been fanning up, we sent an official request for access to this compound so that our experts could test it in accordance with the Chemical Weapons Convention [CWC],” Lavrov said. So far the request has been ignored by the British side, he added.

The minister assured that Russia has nothing to do with the poisoning of Skripal and would assist Britain in the investigation, provided that London meets its own obligations as to how such probes are to be handled.

The OPCW rules allow Britain in this case to send a request to Russia on the suspected Russian-made chemical weapon and expect a response within 10 days, Lavrov explained. If the response is not satisfactory, Britain would have to file a complaint with the organization’s executive council and the conference of CWC member-states, he said.

* * *

Russia’s diplomatic sparring aside, according to BlueBay Asset Management’s Timothy Ash, U.K. “countermeasures” mentioned in Prime Minister Theresa May’s statement likely mean new sanctions.

“Significant sanctions against Russia seem likely, and I would expect the U.K. to request support from its NATO and EU partners with this.” Naturally, this would also mean that Russian LNG is suddenly not obtainable during the next British deep freeze.

There’s unity “across the U.K. political spectrum” as well as “an understanding that the U.K. has to act and with very significant measures to ensure its own security,” Ash says in emailed note.

Meanwhile, Germany’s chancellor refused to get involved, and as Angela Merkel’s representative said on Tuesday, the poisoning of a former Russian double agent and his daughter in the U.K. “is a matter between Britain and Russia,” Michael Grosse-Broemer, parliamentary whip for German Chancellor Angela Merkel’s party bloc, told reporters in Berlin. He did add, however, that “It’s somewhat shocking that something like this happens on foreign soil.”

Finally, as reported earlier, US Secretary of State, and formerly a close friend of Vladimir Putin, said that it was “clearly” Russia that was behind the Skripal poisoning, without providing any actual evidence, and warned that the action will “trigger a response.”

We now wait to find out what this “response” will be.

via RSS http://ift.tt/2FBRYHc Tyler Durden

After yesterday’s aborted market liftoff, which saw the S&P spike at the open then fizzle lower amid easing trade tensions and a goldilocks US economy, today world stocks are going for it again, with European stocks climbing following a mostly green Asian session.

The MSCI All-Country World index of stocks was up less than 0.1%, and has recovered about half its losses from the February correction.

S&P futures were trading at session highs while the dollar strengthened with less than 90 minutes to go until the much anticipate U.S. inflation report which will provide more clues on the pace of Fed tightening. Treasury yields were fractionally higher as oil slipped.

It’s all about the CPI print today, and as Deutsche Bank notes, “will we see yields march up today or will the latest batch of US inflation data disappoint? We’ll know the answer to that with the release of the February CPI report in the US. As a reminder, market expectations for the data is for a +0.2% mom headline and core reading. Should we see that then the annual rate should nudge up one tenth at the headline to +2.2% yoy while the core should hold at +1.8% yoy. One interesting point our colleagues make is that the annual growth rate of core CPI will mechanically rise by around 20bps in the March data release just from annualizing the -10% decline in wireless telephone services. In our economists’ view this should help core CPI to exceed +2.0% yoy in March, before then rising further to +2.3% yoy by the end of this year.”

Others chimed in: “Today’s CPI inflation data is likely to add further color to the US inflation picture, however it probably won’t add any further clarity to the overall inflation outlook puzzle, given that the Fed doesn’t use CPI as its inflation benchmark,” Michael Hewson, chief markets analyst at CMC Markets in London, told Reuters. “Nonetheless it is still a useful gauge in establishing when and how the price pressures we’ve been seeing build up in US supply chains start to filter down into the wider economy.”

That said, while the CPI is closely watched by traders, it is not the primary gauge the Fed uses to determine whether it is meeting its mandate of price stability. Instead, the Fed uses the personal consumption expenditure (PCE) index, or as UBS’ Paul Donovan puts it:

US consumer price inflation is due. Markets focus on this price measure. It matters to inflation-linked US government bonds. The Federal Reserve does not focus on this price measure. A relatively large part of US consumer price inflation is prices people do not pay in the real world. These prices may start adding to inflation this year.

Back to markets where the Stoxx Europe 600 Index rose for a seventh day in Europe’s longest run since October, led by oil and mining shares. Italian and Spanish stocks rose 0.3 to 0.4 percent, while Britain’s FTSE was a laggard, down 0.1 percent, and in early trading triggered a “death cross.“

MSCI’s Asia-Pacific shares ex-Japan index rose 0.2% after spending much of the day swerving in and out of negative territory, and after surging 1.5% on Monday. Japanese stocks fluctuated before closing higher, while Hong Kong and Chinese shares slipped. The yen weakened as investors digested the political fallout from a scandal embroiling Japanese Finance Minister Taro Aso, and decided – for now – that it won’t rock the Abe administration materially.

However both Asian and European trading has been muted, with modest volumes as most are waiting for U.S. CPI report. According to Bloomberg, a figure that misses or meets estimates is likely to reaffirm the case for just three rate hikes this year and give the green light to fresh appetite for risk assets.

Politics also remain in focus after President Donald Trump issued an unexpected executive order blocking Broadcom Ltd. from acquiring Qualcomm Inc., scuttling the $117 billion hostile takeover which would have been the biggest tech deal in history, and had been the subject of scrutiny over the deal’s threat to U.S. national security.

In FX, the Bloomberg Dollar Spot Index pared Monday’s drop ahead of the CPI reports as investors covered dollar-yen shorts after Aso refused to resign as part of the Moritomo scandal. Volatility remains in defensive mode with buyers yet to surface, while most major currencies stay in tight ranges in an overall quiet session. Pound traders stay sidelined, looking for headlines on Brexit and Hammond’s Spring Statement.

Overnight FX recap from Bloomberg:

• The euro was steady against the dollar with the pair hovering below the 21-DMA resistance, while the Treasury curve bear- steepened modestly
• The pound edged lower, slipping for the first time in three days and after failing to break the 21-DMA resistance; U.K. Chancellor Philip Hammond’s Spring Statement is seen more likely to give impetus to gilts as issuance is forecast to decline to the lowest in more than a decade
• The yen was the worst Group-of-10 performer, with USD/JPY rising as much as 0.8% to 107.22 as gains in Japanese equities spurred traders to cover short positions and the looming U.S. inflation data drew traders’ attention from the land-sale scandal with links to Japanese Prime Minister Abe
• New Zealand’s dollar climbed against all of its G-10 peers after the nation’s syndicated sale of April 2029 government bonds drew demand that was more than twice the expected range; NZD/USD rises as much as 0.5% to 0.7333, highest since Feb. 26

“The broader story remains that of U.S. monetary policy normalization in the backdrop of an improving economy and a further decline in currency market volatility would only fuel more risk taking appetite,” said Commerzbank’s FX strategist Thu Lan Nguyen.

The yen tends to suffer in an environment when riskier and higher-yielding assets are bid but Morgan Stanley strategists said in a note that a further deterioration in the political situation that affected the position of Abe, could see the yen“forcefully return towards its previous upward trend.”

The U.S. 10-year yield inched up to 2.88 percent after Monday’s Treasury auction was broadly in line with expectations. Gold retreated for a second day.

In Europe, Slovakia’s 10-year bond yield rose as much as five basis points and the cost of insuring exposure to its debt hit the highest in almost three months as the country’s government inched towards collapse. Slovak Prime Minister Robert Fico’s government moved closer to collapse on Monday after his junior coalition partner called for early elections amid a political crisis sparked by the killing of a journalist.

In commodities, crude oil prices staged a recovery after sliding on concerns over rising U.S. output. U.S. crude futures were up 0.2 percent to $61.51 per barrel. Brent also rose 0.2 percent to $65.08 per barrel. Spot gold fell 0.2 percent to $1,318 per ounce

 

Bulletin Headline Summary from RanSquawk

• European bourses marginally in the green with newsflow relatively quiet.
• JPY weakens across the board, USD/JPY back above 107.00
• Looking ahead, highlights include US CPI, UK Spring Statement and a speech from BoC Governor Poloz

Market Snapshot

• S&P 500 futures up 0.2% to 2,795
• STOXX Europe 600 up 0.07% to 379.48
• MXAP up 0.2% to 178.92
• MXAPJ up 0.2% to 590.82
• Nikkei up 0.7% to 21,968.10
• Topix up 0.6% to 1,751.03
• Hang Seng Index up 0.02% to 31,601.45
• Shanghai Composite down 0.5% to 3,310.24
• Sensex down 0.3% to 33,808.49
• Australia S&P/ASX 200 down 0.4% to 5,974.71
• Kospi up 0.4% to 2,494.49
• German 10Y yield unchanged at 0.632%
• Euro down 0.04% to $1.2329
• Brent Futures down 0.3% to $64.78/bbl
• Italian 10Y yield fell 0.7 bps to 1.746%
• Spanish 10Y yield fell 1.5 bps to 1.39%
• Brent futures up 0.2% to $61.1/bbl
• Gold spot down 0.4% to $1,317.70
• U.S. Dollar Index up 0.2% to 90.07

Top Overnight News

• The EU could get an exemption from U.S. steel and aluminum tariffs if the union was to be considered a reliable partner in fighting over capacities, among other criteria, Politico reports, citing three unidentified people
• Italy’s League senior lawmaker Giancarlo Giorgetti tells state television network RAI that the chance that the nation will have to hold a second elction this year is “more than 50%”
• Japanese Finance Minister Taro Aso says it seems the documents were changed to fit the parliamentary testimony of a MOF official. On being asked why we won’t resign he replied that he feels it’s his responsibility to find out what happened and prevent a repeat incident
• CNBC personality Larry Kudlow has emerged as President Donald Trump’s favorite to replace Gary Cohn, the outgoing director of the White House National Economic Council, two people familiar with the matter said
• Treasury’s $28 billion three-year note sale, which was $4 billion larger than two months ago, offered the highest yield for that maturity at auction since 2007, while the strength of demand as measured by the bid-to-cover ratio dipped to the lowest since November. Purchasers of the $21 billion in 10-year debt demanded a rate unseen since 2014, and the appetite for that auction was around the average for the past two years
• With his swift rejection of Broadcom Ltd.’s hostile takeover ofQualcomm Inc., Trump sent a clear signal to overseas investors: Any deal that could give China an edge in critical technology will be swatted down in the name of national security
• China is giving its central bank the power to write the rules for the financial sector, as part of a sweeping overhaul aimed at closing regulatory loopholes and curbing risk in the $43 trillion banking and insurance industries. The China Banking Regulatory Commission and the China Insurance Regulatory Commission will be merged in the biggest industry overhaul since 2003
• Trade wars are bad but President Donald Trump’s steel and aluminum tariffs won’t have much direct impact on the U.S. economy unless the situation escalates, according to a new survey conducted by Bloomberg News. Roughly two-thirds of the 35 economists polled by Bloomberg expect the tariffs that Trump signed last week would cause a small decrease in jobs and a small drop in U.S. economic growth
• Prime Minister Theresa May publicly accused Russia of a chemical weapon attack on British soil and warned of retaliatory measures that will further strain relations between the West and the Kremlin

Asia stocks were mixed following a similar varied lead from Wall St where S&P 500 and DJIA finished negative as Trump tariff overhang weighed heavily on industrials, while the Nasdaq outperformed amid tech resilience to post a 7th consecutive gain and fresh record high. Furthermore, trade across the Asia-Pac region was quiet in which stocks lacked any significant drivers for price action. As such, ASX 200 (-0.4%) was subdued as mining and commodity-related stocks dragged on Australia, while the largest weighted financials sector was also lower as the royal commission began hearings on mortgage fraud. Nikkei 225 (+0.7%) spent most the session in negative territory, but later coat-tailed on a rebound in USD/JPY. Elsewhere, Hang Seng (-0.1%) and Shanghai Comp. (-0.2%) were choppy with trade indecisive after the PBoC kept its liquidity efforts tepid. Sector-wise, the Hang Seng Telecom Index underperformed following some downward broker moves, while banking names benefitted from proposals to consolidate regulatory agencies and after ‘Big 4’ AgBank reported preliminary earnings as well as a private placement to raise as much as USD 15.8bln. Finally, 10yr JGBs lack demand and retreated below the 151.00 level amid a late recovery in Japanese stocks and following mixed 5yr auction results which attracted reduced interest than prior. PBoC injected CNY 30bln via 7-day reverse repos and CNY 30bln via 28-day reverse repos.

Top Asian News

• China’s Central Bank Gains More Power in Xi’s Regulatory Shuffle
• $103 Billion Quant Firm Piles Into China as Foreigners Welcomed
• Billionaire Agarwal’s Vedanta Jumps After Record Dividend Payout
• Qatar Stocks Surge Amid Steps to Raise Foreign Ownership Limit

European equity open followed the mixed sentiment seen in Asia as investors focus on the pending US inflation data. Sectors are mixed with energy among the outperformers as oil prices recover from yesterday’s losses, despite the rise in US crude output whilst sector heavyweight Total (+1.4%) at the top of the CAC 40 following an upgrade at Barclays. Likewise, BP (+0.9%) and Royal Dutch Shell (+0.6%) are moving in sympathy. Telecom sector is underperforming after France’s Iliad (-5.7%) slumped after the company FY 2017 results miss forecast, whilst Mediaset (-3.1%) is at the foot of the FTSE MIB following a downgrade at JP Morgan. Elsewhere, German utilities company E.ON (+5.7%) is again performing strong amid reports of the company expecting as many as 5000 job cuts and EUR 600mln to EUR 800mln of synergies as part of its asset swaps with RWE (+1.3%).

Top European News

• Steinhoff Seeks About $322 Million From KAP Share Placement
• Greencore Will Miss Profit Expectations as U.S. Woes Grow
• Paschi Names Rovellini CFO After Mele Unexpectedly Resigns
• French Connection Says No Formal Offer After Approach Last Year
• German Utility Deal Turns Coal Veteran Into Green Giant; EON to Cut 5,000 Jobs in Deal to Overhaul German Utilities

In FX, the DXY is still straddling 90.000, with the Usd largely rangebound vs G10 majors aside from the Jpy and Nzd that have broken out of Monday’s narrow bands in opposite directions. Usd/Jpy saw importer demand in the low 106.20 area and then short covering from leveraged accounts on the way up towards offers at 106.90 before eclipsing yesterday’s peak and retesting highs just over 107.00 seen after Friday’s NFP release. Follow through buying pushed the pair up to and just over nearest resistance around 107.20. Conversely, the Kiwi is looking to consolidate and build on gains above 0.7300 with the aid of some upbeat minor NZ data overnight (land prices), and ahead of tonight’s top tier Q4 GDP and current account updates. Aud/Usd continues to encounter resistance/offers in advance of 0.7900, and will look for further direction from RBA Assistant Governor Kent later. Eur/Usd remains in a tight band above 1.2300, and with a key Fib still limiting dips below the handle (1.2266), while the 30 DMA (1.2350) provides a near term cap. Cable is sticking close to the 1.3900 handle awaiting the UK Budget and any further Brexit news after some positive reports about transition implementation on Monday, while Usd/Cad is slightly firmer above 1.2850 after comments from Canada’s PM claiming that exemptions of US import tariffs are not contingent on NAFTA negotiations. Note, BoC Governor Poloz is due to speak this afternoon, and staying with Central Banks the January BoJ minutes will be released shortly before midnight.

In commodities, oil prices are taking a breather, with WTI and Brent trading with marginal gains, the latter back above USD 65/bbl from the sell-off seen yesterday fuelled by a Genscape build in stockpiles and the relentless rise in US Crude output reported by EIA. US April shale output is expected to hit record highs at 6.95mln bpd. In the metals complex, Iron ore continued the longest stretch of losses since 2016 whereas gold prices are creeping lower awaiting the US CPI data to gauge the outlook for inflation.

 

US Event Calendar

• 6am: NFIB Small Business Optimism, est. 107.1, prior 106.9
• 8:30am: US CPI MoM, est. 0.2%, prior 0.5%; Ex Food and Energy MoM, est. 0.2%, prior 0.3%
  • 8:30am: US CPI YoY, est. 2.2%, prior 2.1%; Ex Food and Energy YoY, est. 1.8%, prior 1.8%
• 8:30am: Real Avg Weekly Earnings YoY, prior 0.44%; YoY, prior 0.8%

DB’s Jim Reid concludes the overnight wrap

Will we see yields march up today or will the latest batch of US inflation data disappoint? We’ll know the answer to that in about six hours with the release of the February CPI report in the US. As a reminder, market expectations for the data is for a +0.2% mom headline and core reading. Should we see that then the annual rate should nudge up one tenth at the headline to +2.2% yoy while the core should hold at +1.8% yoy. Our US economists are slightly below market on the headline reading at +0.1% mom however also expect a +0.2% core print. As we also noted in yesterday’s EMR, one interesting point our colleagues make is that the annual growth rate of core CPI will mechanically rise by around 20bps in the March data release just from annualizing the -10% decline in wireless  telephone services. In our economists’ view this should help core CPI to exceed +2.0% yoy in March, before then rising further to +2.3% yoy by the end of this year.

This will also be the last CPI report that the Fed will see before the March FOMC meeting next week. So potentially an opportunity for officials to sharpen their pencils with the big debate being whether or not the median dot moves from 3 to 4 rate hikes. We’ll also have the PPI report tomorrow to digest. If you’re one for excitement, then one thing we would note is that recent evidence suggest that the CPI print tends to surprise one way or another. Indeed, for the core mom reading, the actual reading has differed from the consensus in 9 out of the last 13 months (69%) since the start of 2017. So the consensus estimate has only been right on 4 occasions in that time. Most of those have been a downside miss too (7 times) but remember that last month was a rare beat and the strongest monthly reading since 2005 (+0.35% vs. 0.2% expected). In the 2 and 3 years prior to that period, economists got it wrong just 29% and 36% of the time respectively.

As we head into that big data release, markets have largely spent the last 24 hours twiddling their thumbs with newsflow pretty light on Monday. After opening up on the front foot risk assets quickly seemed to take some chips off the table. Indeed, the S&P 500 ended -0.13% last night and the Dow -0.62%. However the seemingly unbreakable Nasdaq notched up another +0.36% gain which means it’s now closed higher for 7 consecutive sessions – the longest streak since last October. In Europe markets also faded from highs but for the most part stayed just above water. The Stoxx 600 in particular finished +0.25% and up for the sixth straight day.

Meanwhile rates markets were well offered to kick start the day however by the end of play yields ended lower across the board. 10y Treasuries ended the day down 2.6bps at 2.869% after trading as high as 2.909% earlier in the session. The double auction of 3y and 10y Treasuries proved to be no hurdle in the end with solid enough demand at both. While we’re on bonds it’s worth adding that the Treasury curve has flattened substantially since the recent highs, with the 5s30s and 2s10s at 49.4bp and 60.6bp respectively and c.12bp and c.18bp flatter than the February wides.

This morning in Asia, markets are mixed with the Kospi (+0.1%) and Nikkei (+0.51%) both firmer, while the Hang Seng (-0.27%), Shanghai Comp (-0.23%) and ASX (-0.36%) are all in the red. The most interesting overnight news is the announcement by President Trump that he has issued an executive order blocking Broadcom from acquiring Qualcomm. The President stated that “there is credible evidence that leads me to believe that Broadcom’s (takeover) might take actions that threaten to impair the national security of the US”. This of course follows the President’s toughened stance of foreign takeovers of US technology companies.

Moving on. Failing to break from tradition, headlines that we did get yesterday were mostly of a political nature. One of those was a WSJ story suggesting that President Trump’s lawyers were trying to negotiate a deal with special counsel Robert Mueller “that uses an interview with the president as leverage to spur a conclusion to the Russia investigation”. The article mentioned that Trump would agree to an interview so long as Mueller commits to a date for finishing at least the Trump-related portion of the investigation”. A separate Bloomberg report suggested that Mueller was likely to refuse this while he concludes other parts of the probe.

Staying with the US, President Trump confirmed yesterday that Secretary of Commerce Wilbur Ross will speak with EU representatives about limiting tariffs and barriers used against the US. To be honest there weren’t any real developments on the trade front yesterday aside from some retaliatory comments out of the EU. Also worth noting from the White House yesterday was a Politico article suggesting that Trump had narrowed down Gary Cohn’s successor to either former GM and Microsoft CEO Chris Liddell or current NEC deputy Shahira Knight. The article suggested that Cohn favoured Knight (who is also said to be a tax expert) however unnamed sources mentioned that she wasn’t necessarily interested in the job.

Closer to home we heard from Junior Brexit Minister Robin Walker yesterday. Robin said that the UK and EU are “very close to a deal” on a Brexit implementation period. Sterling actually dipped slightly following the comments – before recovering – although the comments seemed to be largely ignored in the end with no official statements from either the UK or EU to back it up. While we’re on the UK, another reminder that today we have the Chancellor’s Spring Statement. Our UK strategists aren’t expecting any policy announcements however they expect the market reaction to be focused on the publication of the 2018-2019 Gilt remit. You can find a preview note to the Statement here.

Earlier yesterday, the ECB’s Coeure noted that Euro area economic growth “is strong and well distributed” but it is still too dependent on monetary policy with at least 50bp of Euro area growth due to monetary policy. Elsewhere, he  noted “inflation is not yet where we want it” and interest rates “will remain low long after the end” of QE.

Before we look at the day ahead, it was a very light day for economic data yesterday. In Europe we had the latest ECB CSPP data. The CSPP/PSPP ratio was 26.8% (27.9% over last 4 weeks). As a reminder, before Apr 2017 when QE was still €80bn/m the ratio was 11.5%. Between Apr-Dec 2017 (QE €60bn/m) the ratio edged up to 12.7% but since Jan 2018 (QE €30bn/m) the ratio is now 26%. Indeed, the strength of corporate vs. government purchases as proxied by the CSPP/PSPP ratio has so far surpassed our expectations of “roughly 20%”. In the US, the February monthly budget statement deficit was slightly better than expected at -$215bn (vs. -$216bn expected). Notably, the impact of recent changes in the tax code was evident in the revenue data, with net receipts down 9.4% yoy. Elsewhere, the NY Fed February survey of consumer expectations noted median one-year ahead inflation expectations rose to 2.83% from 2.71% in January, the highest reading in 12 months.

Looking at the day ahead, a reminder of the Special Congressional election in Pennsylvania which will likely be seen as a decent bellwether for the prospect of Republicans holding onto majorities in the House and Senate at the November midterms. Datawise, the big highlight is of course the February CPI report in the US, due out shortly after lunchtime. Away from that, we’ll also receive the February NFIB small business optimism reading. In Europe, the only data of note is wages data for France for Q4, while late in the evening in Japan the latest BoJ meeting minutes are due out. In the UK, Chancellor Hammond will deliver the Spring Statement at just after midday. Elsewhere, there is the European Council and European Commission statements on Brexit.

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While it has been accused in the past of pandering to various political organizations, the NFIB Small Business Economic Trends Survey nonetheless reflects the mood of America’s main street corporations. And according to the March release of the NFIB index, small business owners are showing “unprecedented confidence” in the economy as the optimism index continues at record high numbers, rising 0.7 points in February to 107.6 and above the 107.1 expected, the second highest level in its 45-year history, second only to the 108.0 reading in 1983.

The historically high numbers include a jump in small business owners increasing capital outlays and raising compensation. The small business outlook, or the percentage of respondents saying it is a “good time to expand” and who generally view expected business conditions favorably, rose to a record high.

“When small business owners have confidence and certainty in the economy, they’re able to hire more workers and invest in their businesses,” said NFIB President and CEO Juanita Duggan. “The historically high readings indicate that policy changes – lower taxes and fewer regulations – are transformative for small businesses. After years of standing on the sidelines and not benefiting from the so-called recovery, Main Street is on fire again.”

One would almost think that America’s small business federation absolutely loves the Trump administration.

And indeed, for the first time since 2006, the survey showed that taxes received the fewest votes as the number one business problem for small business. The February report shows several components of the Index reached noteworthy highs. In a sign that small businesses are confident and expect growth, a net 22 percent of owners are planning to raise worker compensation and 66 percent reported capital outlays, up five points from January and the highest reading since 2004.

Then again, as we have shown before it is one thing to think about raising compensation (or boosting CapEx); it is something entirely different to do it.

Additionally, small business owners are also expecting higher real sales rose three points to a net 28 percent, one of the best readings since 2007. Owners also reported higher nominal sales in the past three months at a net eight percent of all owners. The net percent of owners reporting inventory increases rose three percentage points to a net seven percent on top of a six-point rise in January.

“Small business owners are telling us loud and clear that they’re optimistic, ready to hire, and prepared to raise wages – it’s one of the strongest readings I’ve seen in the 45-year history of the Index,” said NFIB Chief Economist Bill Dunkelberg. “The fact that several components saw significant increases tells us that small businesses are flourishing in a way we haven’t seen in over a decade.”

Job creation remained strong in February, as reported in the NFIB February Jobs Report, released last week. Finding qualified workers remained as the number one problem for small business owners, surpassing taxes and regulations which have held the top two spots for years.

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U.S. Secretary of State Rex Tillerson told reporters Monday evening poisoning of former Russian double agent Sergei Skripal “clearly came from Russia” and “certainly will trigger a response.” 

Tillerson noted that he didn’t know whether the Kremlin knew about the “really egregious” March 4 attack on Skripal, 66, and his daughter Yulia,33, but that the poison – which is “only in the hands of a very, very limited number of parties,” could not have come from anywhere else. 

“There is never a justification for this type of attack – the attempted murder of a private citizen on the soil of a sovereign nation – and we are outraged that Russia appears to have again engaged in such behavior,” Tillerson said in a statement. “From Ukraine to Syria – and now the U.K. – Russia continues to be an irresponsible force of instability in the world, acting with open disregard for the sovereignty of other states and the life of their citizens.”

Lashing out at Russia for what the US and its allies are now framing as Moscow’s “destabilizing role” in world affairs, Tillerson said “and now in the UK,” Moscow “continues to be an irresponsible force of instability in the world, acting with open disregard for the sovereignty of other states and the life of their citizens.” 

The White House took a softer tone, declining to name Russia as the likely culprit. 

“The use of a highly lethal nerve agent against UK citizens on UK soil is an outrage,” said Press Secretary Sarah Sanders. “Right now, we are standing with our UK ally,” Sanders said, adding “I think they’re still working through even some of the details of that, and we’re going to continue to work with the UK.”

Tillerson’s comments came hours after British Prime Minister Theresa May told the House of Commons that the Kremlin was “highly likely” to be responsible for the attack in the southwestern city of Salisbury, and the UK government would consider it an “unlawful use of force.” 

May fleshed out the evidence that the UK has gathered to make its determination, while insisting that actions would be taken to hold the regime accountable – raising the possibility of more sanctions against Russia.

Hedging her bets

Instead of outright declaring that Russian President Vladimir Putin authorized the attack, May said UK intelligence have come up with two possibilities of the origin of nerve agent: The attack was either ordered by Putin, or Russia lost control of the nerve agent used against Skripal.

“Russia has previously produced this agent, and the government has concluded that it is highly likely that Russia was responsible,” May said.

May said that the attack happened “against a backdrop of Russian state agression,” citing the annexation of Crimea four years ago and unrest in the Donbas region. She also brought up election meddling. 

May has given Russia 36 hours to explain how the exotic nerve agent wound up poisoning Skripal, or face “extensive measures.” 

Break: Theresa May gives Russian ambassador 36 hour ultimatum to explain how state developed nerve agent used in Salisbury, or face “extensive measures”.

— Tom Newton Dunn (@tnewtondunn) March 12, 2018

“I share the impatience of this house and the country at large to bring those responsible to justice and take a full range of appropriate responses….but as a nation that believes in justice and the rule of law it’s right we proceed in the right way,” said May, adding “There can be no question of business as usual with Russia.”

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Via JonathanTurley.org,

Today is an important anniversary for former intelligence chief James Clapper. No it is not his marriage anniversary or conventional milestone.  Clapper can celebrate the running out of the statute of limitations on his alleged perjury before Congress — five years and Clapper is now beyond the reach of the law.

I recently wrote a column on the approaching anniversary and how it reaffirms the widely held view that powerful people in Washington are immune from laws used against the rest of society.

Clapper appeared before the Senate to discuss surveillance programs in the midst of a controversy over warrantless surveillance of the American public. He was asked directly, “Does the NSA collect any type of data at all on millions, or hundreds of millions of Americans?”

There was no ambiguity or confusion and Clapper responded, “No, sir. … Not wittingly.” That was a lie and Clapper knew it when he said it.

Later, Clapper said that his testimony was “the least untruthful” statement he could make. That would still make it a lie of course but Clapper is a made guy. While feigned shock and disgust, most Democratic leaders notably did not call for his prosecution. Soon Clapper was back testifying and former president Obama even put Clapper on a federal panel to review the very programs that he lied about in Congress. Clapper is now regularly appearing on cable shows which, for example, used Clapper’s word as proof that Trump was lying in saying that there was surveillance of Trump Tower carried out by President Barack Obama. CNN and other networks used Clapper’s assurance without ever mentioning that he previously lied about surveillance programs.

News organizations now regularly feature Clapper who has denounced Donald Trump and members of his government, as discussed in an earlier column.

It is the latest chapter in America’s Animal Farm as average citizens are criminally charged with small discrepancies in statements to investigators while people like Clapper and David Petraeus and Sandy Berger are protected from serious repercussions for alleged criminal acts.

Orwell wrote the fanciful account of a farm society of animals at the end of World War II during a period of authoritarian power and government propaganda. The farm government proclaimed equality of all animals but, as the pig Squealer explained, “all animals are equal, but some animals are more equal than others.”

Of course, none of our politicians is nearly as open and honest as Squealer. There will be no sign proclaiming the different treatment of the governing and governed classes. They prefer the barnyard to return to its previously sleepy existence once the offender has been put away.  That is why Clapper’s anniversary is a point of celebration in the Beltway as a reaffirmation that, in Washington, “all animals are equal, but some animals are more equal than others.”

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After a decade of soaring prices, spurred on by hot money flows from Russia and China, London’s 2017 property slowdown is accelerating in 2018 as Bloomberg reports house prices are falling at the fastest pace since the depths of the recession almost a decade ago, with the capital’s most expensive areas seeing the biggest declines.

Average prices fell 2.6% to 593,396 pounds ($820,000) in January, according to a report published by Acadata on Monday. That’s the most since August 2009.

London’s highest-priced boroughs were the biggest losers over the last year, while the largest single drop was recorded in Wandsworth, down almost 15 percent.

Wandsworth and Southwark are home to huge speculative property developments facing on to the River Thames – including the Battersea Power Station development – but the market for £1m-plus one-bed properties has shrivelled in recent years.

But, as Bloomberg reports, anecdotally it’s considerably worse according to realtors:

Business has been slow in “a lot” of offices since the start of the year, though there are more deals being done in some central outlets, Simon Aldous, a director at Savills, said in a survey published last week by the Royal Institution of Chartered Surveyors.

Offers for homes are often more than 10 percent below asking prices, James Gubbins, a partner at Dauntons in Pimlico, said in the poll.

“Uncertainty over Brexit is the issue,” Gubbins said.

Media coverage of the slowdown, including headlines about falling house prices, is making consumers nervous and holding back demand. New buyers registering with real-estate agents fell for an 11th month in February, RICS said last week.

The slump in London home prices has weighed on national prices too as home price inflation has dropped to its lowest since Feb 2012:

Increased taxes on landlords and loan limits in Singapore have also helped to damp demand from overseas, and as Lucian Cook, head of residential research at broker Savills Plc, warns, a decade of soaring prices means London’s more exposed to political and economic uncertainty, the prospect of interest rate increases and mortgage loan limits.

Interestingly, the north-west of England has now replaced the capital as the fastest-growing property market in the UK. Top of the league for price growth is Blackburn, which recorded average prices ahead by 16.4% over the last 12 months.

Ironically, especially compared to the US, with the most recent official data showing earnings growth averaging 2.5%, that means that unusually, wages are currently outpacing house prices.

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With the characteristic greeting gesture of Turkish ultranationalists and neo-fascists Grey Wolves, President Recep Tayyip Erdogan greeted the crowd at a meeting of his party AKP in Mersin, in South Turkey.

He recited also his favorite poem “One heart, one flag, one nation, one homeland.”

As KeepTalkingGreece.com reports, The Grey Wolves (Turkish: Bozkurtlar) is a Turkish ultranationalist organization with close links to to the Nationalist Movement Party (MHP) with which Erdogan has made an alliance ahead of the 2019 elections.

The characteristic hand sign used by Grey Wolves and MHP supporters represents a wolf head. In Turkish nationalist myth, the Turks originate from a wolf.

Next to Erdogan, a high-ranking official – maybe a minister? – had raised his hand in the Rabia sign, a gesture symbolizing the resistance of the Muslim Brotherhood to the Sisi regime in Egypt.

When the crowds began to shout at Erdogan to engage them in the military operaiton in Afrin, he told them

“When it is time to order the mobilization, I will join first and then all of you, because we believe in martyrdom,” he replied.

“They do not know the Turks, they do not know the Turkish nation, they do not know the Turkish armed forces,” he warned.

There is talk that the part of the MHP will challenge the alliance with Erdogan in the next elections. Cities in the south of Turkey were the first to vote for MHP when it gained power in the beginning of 2000’s.

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