Category: zerohedge

Concluding a rather quick earnings season for financials which has seen mixed results from money-center banks, whose sharp revenue declines and tepid outlook on loss provisions – and outright misses in the case of Wells and BofA – sent their stocks lower, offset by strong performance by pure-play “hedge funds” such as Goldman, moments ago Morgan Stanley reported Q3 earnings which smashed expectations thanks to another quarter of stellar revenue from both equity and FICC sales and trading.

Morgan Stanley reported Q3 net revenues of $11.7 billion, up 16% from $10.0 billion a year ago, and solidly beating expectations of $10.6BN. Net income was $2.7 billion, or $1.66 per diluted share, up 25% from $2.2 billion, or $1.27 per share, a year ago, while adjusted EPS also jumped from $1.21 to $1.59, beating expectations of $1.28 (EPS was adjusted by tax benefits of $113 million which had an impact of $0.07 per diluted share). As Bloomberg observes, it is “fascinating that some of these firms, including Morgan Stanley, were able to pull off better results than a year ago despite being in the middle of a pandemic.”

“We delivered strong quarterly earnings as markets remained active through the summer months,” CEO James Gorman said in a statement Thursday, adding that completing the E*Trade acquisition, the “subsequent ratings upgrade from Moody’s, and the recently announced acquisition of Eaton Vance significantly strengthen our firm and position us well for future growth.”

The biggest highlight was the latest jump in sales and trading revenue which while down notably from the Q2 record bonanza, surged 20% in the third quarter to $4.2 billion from $3.5BN a year ago, lifting the firm’s profit to the second-highest ever. 

• FICC revenues surged by 35%, from $1.4BN to $1.924BN, above the $1.7BN consensus estimate, and the second-best among the big banks. MS said the strong performance was due to “strength in credit products benefitting from an active primary market.”

• In equities, S&T revenue also posted a sharp improvement, rising by 22% to $2.26BN, and beating the $2.17BN estimate. The firm cited “strong performance across products on continued client engagement, with notable strength in Asia” for the year-over-year increase.
• Other sales and trading net revenues decreased from a year ago due to losses on economic hedges associated with certain of the Firm’s borrowings and corporate lending activity, partially offset by gains on investments associated with certain employee deferred compensation plans (DCP).

Investment banking was also solid, with revenues up 11% from a year ago to $1.7BN from $1.5BN. According to MS, while advisory revenues decreased from a year ago due to lower completed M&A activity and fewer large transactions, equity underwriting revenues increased significantly from a year ago on higher revenues from IPOs, follow-on offerings and blocks as clients continued to access capital markets. Specifically, equity underwriting more than doubled to $874 million from $401 million, while advisory was down to $357 million from $550 million, and fixed income underwriting likewise fell to $476 million from $584 million due to “declines in loan issuances as large event-driven and M&A financings were muted.”

Wealth management net revenue in Q3 rose 6.9% from the prior year to $4.66 billion, also beating an estimate of $4.40 billion. In its statement, the bank said that excluding the impact of DCP – its employee compensation plan – wealth management’s reported net revenues of $4.4 billion “increased slightly” from a year ago.

Investment Management reported net revenues of $1.1 billion compared with $764 million a year ago, while pre-tax income doubled to $315 million compared with $165 million a year ago. The bank said the 20% increase was “driven by record AUM on strong investment performance and positive long-term net flows,” and that “investments revenues increased significantly from a year ago on higher accrued carried interest and investment gains primarily in Asia private equity.” Naturally, compensation expense increased from a year ago on higher asset management revenues and an increase in carried interest.

While of secondary importance for a non-balance sheet intensive bank, Morgan Stanley set aside just $111 million in provisions for credit losses, compared with $51 million a year ago and $239 million in the second quarter. The firm now has $1.3 billion set aside for soured loans.

On the expense side, Morgan Stanley reported $5.086 billion in compensation expense, higher than the $4.82 billion analyst expectation, with the firm cited higher revenues across the firm for the increase. Non-compensation expense came in at $3.08 billion, also slightly higher than the exp. $3.02 billion.

In response to these stellar results the stock… dropped in kneejerk reaction, suggesting it had been priced to perfection, and was down more than 2% at 49.70 at last check.

 

 

Authored bIll Blain via MorningPorridge.com,

“Their aim is not to destroy us, but simply to author us and profit from that authorship.”

The new head of the UK’s security services, M15 said y’day: “You might think in terms of the Russian intelligence services providing bursts of bad weather, while China is changing the climate.” 

The US election, Coronavirus economic instability and the growing threat of populism are likely to set the background for the next few years. But they won’t be the main story – that’s going to be defined by China’s continued rise and challenge to US and Western economic dominance.  The Chinese must be laughing their heads off at the way the West has been pole-axed economically by the Coronavirus, and is now increasing riven by political polarisation. The West’s growing instability is playing right into China’s game plan. Sun Tzu would be delighted… 

You know you are really getting old when the UK’s chief spook looks fresh out of school, but Ken McCallum, the new man in the hot seat has 25 years behind him. James Bond’s latest cinema outing might be delayed, but McCallum confirmed the services are active: “M15’s operational successes are mostly invisible..” He said Terrorism remains the biggest threat, but Russian, Chinese and Iranian espionageis growing in severity and complexity. 

I would have loved to have asked him some questions – especially about media manipulation, distrust and the destabilisation of democracy. 

Let me try and explain in terms of a quick look at markets, the Virus, then politics. And then I going to tell you to dial your scepticism dial right up to 11 and learn to ignore it all! 

Markets – Second Recovery Dip

The mood is darkening. All around Europe and the US we are seeing renewed, and apparently belated, efforts to contain the virus.  As lockdowns are imposed, businesses fear for the future, redundancies are rising, consumers are panicking.  The Pandemic economic hit is taking a double dip on economies; having chipped away at confidence in the spring and summer, it’s now taking huge chunks out of growth expectations.  The hopes of a vaccine reversing the decline are being knocked further back every day. 

As the doomsters say: Hope is just the first step on the road to disappointment. There is a growing sense the economic outlook gets worse before it gets better. 

Pandemic – what don’t we know?

I made the mistake of watching the news last night. Angry politicians demanded “we follow the science”, take “circuit break” steps, and immediately to lockdown the whole country. There was the obligatory interview with a “scientist” who confirmed the worst… “if we don’t lockdown it’s going to get much worse”.  That was followed with man-on-street interview with a Scouser who whined and moaned about how unfair it is to lockdown down Liverpool for the next 6 months… It’s always Liverpool. 

The models used by the scientists show predictive parabolic curves heading up in terms of infections, admissions, and inevitably deaths.. They show the rising cases among younger people are now spreading into older generations. The numbers of deaths are creeping attributed to Covid are creeping up – but aren’t (yet?) matching the predicative curves.

Dissent is growing. Trust that science and governments are getting it right is fracturing. Tweets, news feeds, friends and colleagues are sending me articles from medical journals and newspapers, and well-argued videos (like the soft-spoken and very convincing Irishman Ivor Cummins) that all say the same thing: we’re massively over-reacting. There is multi-billion liked post on Facebook: “Do you know anyone who has actually died of Covid.” (For the record… I do know two people my age who had Long Covid for months.)

The contradiction between what the politicians do and what scientists say is being used to further the “incompetence-at-the-top” narrative.  A senior member of SAGE (the government scientists advising on the pandemic) is on record saying we should have “circuit broke” in August, but earlier papers predicting 107,000 UK deaths are now embarrassing. Predictably the story has been seized as further evidence lockdowns are a waste of time. 

There is a growing polarisation between large numbers of people who have read all the “stuff” and are convinced the Pandemic is a minimal threat, and the actions of government which will destroy the economy. It raises doubts and suspicions. Why the panic? Have the scientists told government something we aren’t being told? Are governments acting in our best interest?

Yes. I believe they are. 

What we definitely know is the virus is very serious for the elderly and infirm. If 20% of the country do come down with the virus, and 10% of the +80 cohort (3.2 million) get it bad and are hospitalised, we are looking again at hospitals being swamped. If 2% of over 65 year olds get it, that’s another 220,000 folk in hospital. UK medical services won’t cope with 300,000 chronic cases. If that’s the worse case, then it would be brutal. 

Park your thinking on Coronavirus for a moment, and lets turn to something related..

US Elections and Polarisation 

On the advice of a very good friend, who just happens to suffer from a bad case of being a Republican, I watched a video.  The speaker was an elderly distinguished looking gentlemen who laid out a very convincing case. He made clear that Donald Trump is in many ways a bad man, but is exactly the right man to fight the Democrat threat. This clever, erudite speaker went on to carefully describe how Biden is a tool of the Antifa/BLM plot to destroy America, how transgenderism will dominate policy, and all Democrats are traitors leading America towards Civil War. It’s the duty of every Republican patriot to rally America to Trump’s flag. 

I was appalled. 

My Republican chums were in complete agreement with everything the guy said. 

The video capped the news flow many voters have come to fear and believe about this election; conclusively demonstrating how the Democrats have been captured by Antifa and BLM, and that Biden is just a pawn. Whoa. Stop. Reality Check. Do most Republican’s really believe 50% of their fellow citizens, Democratic voters, are treasonous? Do they really think the other side wants a Civil War? 

The latest “numbers” apparently show 33% of Republican Voters think Democrat voters want the US to crumble and Fall. The Democrats are much more forgiving; only 25% of them believe all Republicans want the union to collapse. American politics has become incredibly polarized in just a few years.. Why? What Changed? 

I urge everyone to quickly get up to date with the issues in Surveillance Capitalism – the way in which Social Media, Tweets, News Feeds, and the algorithims that determine what you see and what you don’t are shaping the dialog. If you want a quick primer you could do worse than watch the Netflix documentary, The Social Dilemma. 

The whole basis of Big Tech on the web is to earn money via Advertising. They want you to engaging with content so they can sell youto advertisers. When you don’t know what the product is – you are the product!

Google, Facebook and the rest use algorithms to watch, listen and send you content you are most likely to engage with. Because I’ve been watching and reading Far Right videos and articles to try and figure out why America is so polarized, I’ve been getting some extraordinary stuff in my feeds. The algorithms now perceive me to be a Militia Supporting Libertarian! They wish!

A few weeks ago I was reading how Kyle Rittenhouse, the 17-year old militia supporter who murdered two BLM protestors, is an “American Patriot” who was protecting property. I’m shocked anyone could possibly believes such misguided sh*t, but next thing I got an ad in my news feed offering to sell me “kill shots every hit” ammunition. Take a look at the proliferation of “pink slime” news providers in the US – they boil down to propaganda that appeals to many voters who read what they want to read. 

I’m sure it’s not just Republicans that are spinning and polarizing the agenda with fake news and distortion. The left is guilty as well. All these stories about Trump’s taxes, his renting rooms to foreign powers in Trump buildings, his family, etc. These stories confirm and affirm exactly what Trump haters already suspect and increasingly believe. 

Every Democrat is not a BLM Pod-person.  Not every Republican is a camouflage wearing racist.  They all care about their country. 

BUT why are they at each other’s throats? Because of deeply held beliefs, or because they have had their beliefs magnified by the growing dangers of fake news? Big Tech algorithms and new feeds are driving instability and reinforcing hatreds.  

Let’s step back and put this together.. 

Why has the west become so unstable and polarized? Why is there such distrust and contention over the Coronavirus response and Politics? Why are so many depressed about the economic outlook? 

This new age of Surveillance Capitalism and Directed Fake-news is dangerous. We just don’t yet understand how its distorting the political process. But neither can we ban freedom of speech – that way leads to Big Brother. We have to find middle ground. In the meantime be wary. Use your sense of pragmatism and a bit a critical skepticism. Start to question everything.

1) The Pandemic second wave will again challenge economies – but it is not the end of the world. It will accelerate change, and we will recover.

2) The Pandemic will be beaten. Treatments and Therapies are improved, and if it’s a matter of keeping health services functional in the face of a predicted wave – it will have to be done.. and we will face massive costs. But we will recover. 

3) Politics is about reasoned debate – it’s become polarized because people are fed the news the want to read, not the facts they need to understand. That’s why Google and Facebook are going to be regulated – which means sell. We will recover and do it better. 

And.. my comment: “The Chinese must be laughing their heads off at the way the West has been pole-axed economically by the Coronavirus, and in now increasing riven by political polarisation”, is just my opinion presented as irrefutable fact.

You don’t need to believe it, (although you probably should….)

Just as “stimulus (and covid vaccine) optimism” was the go to “explanation” for the market’s ramp in the past few weeks, so “stimulus (and covid vaccine) pessimism” is being trotted out to “explain” when stocks unexpectedly don’t melt-up overnight. And sure enough, one day after stocks sank when Steven Mnuchin told the Milken Institute Global Conference yesterday that “getting something done” on stimulus before the election “would be difficult”, the selling accelerated overnight in S&P futures which dropped over 1%, as Europe’s biggest cities clamped down to curb the virus and hopes wilted for new stimulus from Washington.

Hopes for a U.S. package to boost the coronavirus-hit economy before the presidential election next month have also fizzled out after U.S. Treasury Secretary Steven Mnuchin said such a deal would be difficult.

Nasdaq futures suffered an even bigger drop, sliding 1.8% after Goldman Sachs cut its recommendation on technology stocks to neutral, saying a barrage of policy and economic shifts will temporarily put an end to the outperformance of the sector.

In single name action, Fastly plunged in late trading on Wednesday and again in pre-market trading on Thursday after saying that Chinese internet giant ByteDance, its No. 1 customer, spent less than predicted in the third quarter on cloud computing services as a result of rising U.S.-China trade tension. Other big losers in the pre-market included Tesla, Moderna and DocuSign. With S&P 500 contracts also well down, U.S. stocks are facing a third declining session unless earnings from Morgan Stanley and Charles Schwab later on Thursday somehow manage to spark optimism.

As Bloomberg notes, investors are coming to terms with virus flare-ups that are triggering tighter restrictions, just as stalled talks on U.S. stimulus and Britain’s messy exit from Europe weigh on risk appetite. U.S. jobless figures in several hours may only add to the gloom, according to strategists at Mizuho International Plc including Peter Chatwell.

“Data today is expected to confirm U.S. economic sentiment is deteriorating, U.S. fiscal stimulus remains some way off, and a hard Brexit” is possible, Chatwell wrote in a note.

In Europe, markets fell for a 3rd consecutive session with the Stoxx 600 Index tumbling as much as 2.2% amid earnings disappointments and clampdowns by some of the region’s largest cities to curb the coronavirus. Markets in London and Paris were lower 1.4%-1.7% and Frankfurt and Milan 2%-2.5% weaker. Shares of auto and energy companies led the drop. The U.K. government imposed tougher curbs on London in a bid to contain a spike in new cases, while France set a curfew in Paris as European nations from Germany to Italy to the Czech Republic reported record increases in new infections. Analysts said the rise in coronavirus infections across Europe and no sign of a vaccine anytime soon after two high profile propects experienced problems was hitting sentiment.

“In Europe you just have a long list of quite notable actions being taken, with Paris and other French cities going into curfew, and today reports that London is going to the next, high level phase of restrictions,” said MUFG research head Derek Halpenny. “It’s all pointing to a greater hit to fourth quarter activity and warrants a degree of adjustment in market pricing.”

“We have been trading in a range for quite some time and up until the beginning of this week, at the top end of it, and it’s a trend that is likely to continue,” said Michael Hewson, senior market analyst a CMC Markets.

Earlier in the session, Asian stocks fell, led by communications and health care, after ending flat in the last session. MSCI’s index of Asia-Pacific shares ex-Japan lost 0.6% while Japan’s Nikkei .N225 dropped 0.5%. Most markets in the region were down, with Hong Kong’s Hang Seng Index dropping 2.1% and India’s S&P BSE Sensex Index falling 1.6%, while Australia’s S&P/ASX 200 gained 0.5%. The Topix declined 0.7%, with Transaction and JNS Holdings Inc falling the most. The Shanghai Composite Index retreated 0.3%, with Jiayou International Logistics and EGing Photovoltaic Technology posting the biggest slides.

In FX, all eyes were on a two-day summit of European Union leaders which starts on Thursday as the EU and Britain continue their efforts to overcome stumbling blocks, such as fishing rights and competition safeguards, to agreeing a trade deal before the UK’s Brexit transition arrangements end on Dec. 31. After this week’s summit in Brussels, U.K. Prime Minister Boris Johnson is expected to decide whether to pull out of talks and brace the country for a no-deal exit from the bloc.

“Today is unlikely to be ‘doomsday’ for the British pound, as talks are expected to go on between the UK and EU negotiators beyond the supposed 15 October deadline,” UniCredit bank said in a note to clients. The pound barely budged whereas the euro was a touch lower against the dollar at $1.1726. Money markets are betting that the BOE will lower interest rates to 0% in August 2021 ahead of the start of a two-day EU summit with the Brexit trade deal on the agenda.

Investors will also tune into European Central Bank President Christine Lagarde, who takes part in a debate on the global economy at 1600 GMT as part of the IMF and World Bank’s annual meeting which is being held virtually.

Elsewhere, The Bloomberg Dollar Spot Index rose to a one-week high; the dollar advanced versus all of its Group-of-10 peers and neared 1.17 per euro, the greenback’s strongest level in nearly two weeks.  Scandinavian and Antipodean currencies were the worst G-10 performers, led by a decline in Norway’s krone. Australia’s dollar touched the weakest level versus the greenback this month and sovereign yields slid after Governor Philip Lowe said the central bank is assessing whether buying longer-dated bonds would help spur hiring.

In rates, Treasuries were higher as the curve flattened led by the long end, following bigger advance for bunds on haven demand as Covid-19 cases rise in Europe. Yields lower by 0.5bp to 4bp across the curve with 2s10s curve flatter by nearly 2bp, 5s30s by ~2.5bp; 10-year lower by 2.7bp at ~0.70% vs 4bp-5bp declines for U.K. and German 10-year yields. Gilts bull-steepen ahead of Prime Minister Boris Johnson’s decision on whether to continue working with European Union leaders on Brexit trade talks. In Europe, London and Paris face fresh Covid-19 related clampdowns amid record new coronavirus cases. Italian bonds declined on profit-taking, while German bunds rallied to leave their yields at their lowest level since the March spread of COVID-19 caused the global meltdown in stock markets and other riskier assets.

Oil prices also fell as the renewed surge in the virus in large parts of the world underpinned concerns about economic activity. Brent crude futures dropped 0.8% to $42.96 a barrel, WTI crude futures dropped back to $40.68 a barrel while gold and industrial metals like copper were broadly flat.

Today the DOL will report that Initial claims likely resumed their slow grind lower, as economists expect filings for new unemployment benefits to drop to 825,000 last week from 840,000, consensus shows, while continuing claims likely fell to 10.6 million from 11 million.

Looking at the day ahead, today’s expected data include jobless claims and Empire State Manufacturing Survey. Morgan Stanley and Walgreens Boots are reporting earnings. From central banks, speakers include ECB President Lagarde, the Fed’s Quarles, Bostic, Kaplan and Kashkari, as well as the BoE’s Cunliffe.

Market Snapshot

• S&P 500 futures down 0.9% to 3,448.25
• STOXX Europe 600 down 2.1% to 362.68
• MXAP down 1.1% to 175.06
• MXAPJ down 1.2% to 579.85
• Nikkei down 0.5% to 23,507.23
• Topix down 0.7% to 1,631.79
• Hang Seng Index down 2.1% to 24,158.54
• Shanghai Composite down 0.3% to 3,332.18
• Sensex down 1.8% to 40,053.86
• Australia S&P/ASX 200 up 0.5% to 6,210.30
• Kospi down 0.8% to 2,361.21
• Brent futures down 1.1% to $42.83/bbl
• Gold spot down 0.3% to $1,895.46
• U.S. Dollar Index up 0.3% to 93.69
• German 10Y yield fell 4.4 bps to -0.625%
• Euro down 0.3% to $1.1710
• Italian 10Y yield unchanged at 0.455%
• Spanish 10Y yield fell 0.5 bps to 0.13%

Top Overnight News from Bloomberg

• Democratic presidential nominee Joe Biden raised $383 million in September, breaking the monthly record his campaign set in August when it pulled in $364.5 million
• Londoners will be banned from mixing with other households indoors and Paris is set for a curfew, as European leaders struggle to cope with record new coronavirus cases around the region
• A combination of falling worldwide bond yields and rock-bottom currency hedging costs are bullish signals for U.S. Treasuries. The recent steepening of the U.S. yield curve has driven the yield pick up on 30-year Treasuries to 80 basis points over German bunds, for euro-hedged investors. Their yen-hedged equivalents get a yield of 1%, about the same on 10-year Italian debt where Japanese investors have recently made record purchases
• Bond investors are pouring back into riskier debt in search of higher returns as they increasingly factor in years of low interest rates. China drew bumper demand for a bond sale this week even amid increasing tensions with the U.S. Turkey returned to international debt markets last week despite mounting geopolitical risks. And across emerging markets, dollar notes sold by the lowest-rated borrowers are returning more than top-rated peers

A quick look at the global markets courtesy of NewsSquawk

APAC equity markets traded mostly lower following a negative handover from Wall Street which saw major indices post a second straight day of declines amid the dwindling prospect of a pre-election relief bill, rising COVID-19 cases and as US earnings season gets underway. ASX 200 (+0.5%) bucked the trend following dovish remarks from RBA Governor Lowe who noted that it is reasonable to expect that further monetary easing would get more traction than was the case earlier, and it is possible to cut the Cash Rate to 10bps, but the Board has not yet made any decisions. Meanwhile, an overall better-than-expected Aussie jobs data further underpinned the index. Nikkei 225 (-0.5%) was subdued on yesterday’s JPY action, whilst Rakuten shares rested at the foot of the index as it lost out to Amazon on Prime Day deals. The KOSPI (-0.8%) also traded with losses despite Big Hit Entertainment shares rising over 150% at its IPO. Elsewhere, Hang Seng (-2.0%) and Shanghai Comp (-0.2%) were also lower, with the former pressured after US sanctioned Hong Kong’s Chief Executive Lam over her alleged undermining of Hong Kong’s autonomy, albeit the US Treasury stopped short of imposing sanctions on banks. Meanwhile, Alibaba shares fell over 2.5% as US state department reportedly submitted an application to the Trump Admin to put Alibaba’s unit Ant Group on a trade blacklist. Mainland China meanwhile opened with modest gains amid PBoC liquidity injections, but thereafter traded indecisively due to heightened geopolitical tensions after a US destroyer crossed the Taiwan Strait on Wednesday. Finally, JGBs saw modest gains as it tracks price broader price action across the fixed income futures complex.

Top Asian News

• Hong Kong-Singapore Travel Bubble to Reopen Financial Hub Links
• China Inflation Slows in September as Food Price Gains Moderate
• BTS Band Members Make Millions as Big Hit Shares Jump in IPO

European equities (Eurostoxx 50 -2.5%) have endured heavy losses throughout the session as markets contemplate a disappointing Q4 growth landscape with lockdown measures tightened across the region once again. Various restrictions have been in place since for several weeks/months; however, the policy responses from various governments throughout the week have clearly placed an even tighter grip on the European economy, particularly in some of the core nations. Earlier today, Germany warned that the nation is facing a very broad second wave, whilst France recently imposed a curfew in the Paris region and London looks set to be designated tier 2 status in the recently announced “traffic-light” system. All of this has served to highlight that some of the expectations for growth this quarter will likely need to be revised lower, however, questions may begin to arise over what policy response such an outturn will be met with, particularly from a fiscal standpoint as negotiations over the EU recovery fund remain at an impasse. Losses can be seen across major European indices with the DAX (-3.0%) the marginal laggard after German Chancellor Merkel cautioned that even tougher lockdown measures might be required. From a sectoral standpoint, all sectors are lower on the session with notable softness seen in some of the more cyclical names such as autos, oil & gas and travel & leisure which have tended to bear the brunt of selling when COVID fears heighten. On travel & leisure, albeit not the worst performing company in the sector, Ryanair (-3%) earlier announced that it will cut its winter capacity to 40% from 60% and cautioned that FY2021 traffic will likely decrease to around 38 million guests. IAG (-4.0%) have also succumbed to the selling pressure despite reports suggesting that hedge fund heavyweight Marshall Wace has built a 3% stake in the Co. Elsewhere, Thyssenkrupp (-5.4%) are lower on the day after comments from the North Rhine-Westphalia premier who believes it would make more sense for the Co. to restructure and produce green steel than the Gov’t take a stake. Earnings from swiss heavyweight Roche (-3.3%) have seen their shares lag amid softer than forecast revenues, whilst Schroders (-3.0%) shares are seen lower by an equal magnitude post-earnings. Looking ahead, the main highlight in the pre-market for US earnings comes via Morgan Stanley.

Top European News

• Paris and London Face Clampdowns as Europe Posts Record Cases
• Rolls-Royce Says Bond Success Removes Need for State-Backed Loan
• Spain Pushes Back on German Concerns Over Handling of Outbreak
• Dutch Home Prices Jump as the Market Overcomes Economic Weakness

In FX, a double hit for the Aussie as broad risk sentiment continues to deteriorate and RBA Governor Lowe upped the ante in terms of a potential 15 bp rate cut at the November policy meeting overnight, while the subsequent jobs report failed to provide much comfort even though headline payrolls and the unemployment rate were not quite as weak as forecast. Aud/Usd has extended its pull-back to sub-0.7100 and the Aud/Nzd cross is hovering just over 1.0700 to the relative benefit of the Kiwi that remains in-site of 0.6600, albeit losing traction from its recent 0.6650 axis ahead of NZ manufacturing PMI.

• GBP – Some calm after the midweek session mayhem for Sterling, as Cable pivots 1.3000 within comparatively narrow confines and Eur/Gbp meanders between 0.9037-17 parameters. However, the Pound’s predicament and position remains very fluid and prone to Brexit developments going into Day 1 of the European Council Summit, as any change in stance over the main outstanding issues could heighten the chances of a breakthrough and in turn lower the probability of no deal before deadline day (whenever that might be). As things stand, fishing rights is the key sticking point and area that neither side has given ground on, but the level playing field and state aid are also preventing the 2 sides from penning a draft trade deal.
• USD – After Wednesday’s whip-saw moves, in keeping with Sterling if not totally as a bi-product of the Gbp’s choppy price action, the Dollar is firmly back in safe haven demand as EU stocks cave under the weight of rising COVID-19 cases. Indeed, the DXY has rebounded from sub-93.500 lows to 97.763, thus far and eclipsing this week’s prior peak to expose 94.000 in advance of a busier US data schedule and more Fed speakers.
• JPY/CHF/EUR/CAD – The Yen is faring better than others given its own allure as a refuge from risk, with Usd/Jpy sitting tight in the low 105.00 zone and well flanked by decent option expiries extending from 105.25 (2.2 bn) through 105.10-00 (1.7 bn) to 104.85 (1 bn). Meanwhile, the Franc has retreated to circa 0.9150, Euro towards 1.1700 where expiry interest may provide some support (1 bn from the round number to 1.1695) and Loonie further from 1.3100 to a test of 1.3200 awaiting comments from BoC’s Lane.

In commodities, WTI and Brent front month futures are unsurprisingly pressured this morning, exhibiting losses of circa USD 1.0/bbl, as sentiment in general takes a hit with the FX, Fixed & Equity space all exhibiting risk-off price action. Specifically for crude, updates have been sparse following last nights private inventories which printed a larger than expected draw (-5.4mln vs. Exp. -2.8mln) and as such focus is on the EIA report today, at the slightly later time of 16:00BST/11:00ET given Monday’s US holiday, for confirmation of this; for reference, the headline is expected at -2.835mln. Aside from this the OPEC+ JTC meeting is taking place today but focus is very much on the JMMC meeting for October 19th to get any insight/guidance from the committee as OPEC’s plans for their supply schedule given the changing supply & demand picture since it was agreed. As such, price action this morning is very much being driven by the broader market drivers this morning and particularly the resurgence in COVID-19 cases and additional lockdown measures being implemented this morning in London & Paris already and the associated impacts for the demand side of the equation; evidenced by the poor performance in travel names and similarly sensitive areas of the economy in European equity trade this morning. Moving to metals, spot gold is subdued and back below the USD 1900/oz mark in-spite of the broad risk move as the metal is weighed on by a dominant dollar. Price action which sees the DXY in proximity to ever increasing session highs and therefore the precious metal remains at lows with losses in excess of USD 10/oz.

US Event Calendar

• 8:30am: Empire Manufacturing, est. 14, prior 17
• 8:30am: Initial Jobless Claims, est. 825,000, prior 840,000; Continuing Claims, est. 10.6m, prior 11m
• 8:30am: Import Price Index MoM, est. 0.25%, prior 0.9%; YoY, est. -1.2%, prior -1.4%
• 8:30am: Export Price Index MoM, est. 0.25%, prior 0.5%; YoY, prior -2.8%
• 8:30am: Philadelphia Fed Business Outlook, est. 14.8, prior 15

DB’s Jim Reid concludes the overnight wrap

We finally got a negative Covid test result for one of the twins yesterday afternoon so we are back to restricted freedom rather than solitary confinement. I can’t remember seeing my wife so happy. Never has wearing a mask and not being able to go near people felt so good. We actually had a Zoom parents evening last night and scheduled all 3 sessions back to back leaving Bronte the dog to look after the children in the other room. By the time we got back Bronte had eaten Maisie’s dinner and planted the remains on the floor and Jamie was downing neat tomato ketchup straight out of the squeezy bottle. Neither of us could remember how much was there before we left but the fact that it was nearly empty by the time we got back worried us a little.

The bottle was a bit half empty yesterday as global equity markets fell back somewhat as they weighed up the seemingly never-ending US stimulus negotiations along with a number of earnings releases. By the close the S&P 500 had fallen back -0.66%, in spite of the buoyancy of energy stocks as WTI rose a further +2.09%. Furthermore the VIX index of volatility rose for a 3rd day running, albeit with a small +0.33pts increase. Elsewhere, the Dow Jones (-0.58%) and the NASDAQ (-0.80%) also fell, and in Europe the STOXX 600 shed -0.09%.

A large number of US banks reported again yesterday. Goldman Sachs (+0.13%) saw overall trading revenue up 29% for the quarter, primarily driven by fixed income. The beat saw EPS rise to record levels and nearly twice analysts’ estimates. Bank of America’s (-5.29%) trading operation did not do as well as peers during the last quarter, missing analysts’ expectations of $3.5bn by $160mn. Bank of America CEO Moynihan noted that more fiscal stimulus is needed to see the recovery continue, joining the chorus of bank executives calling for action. United Airlines (+0.24% aftermarket) posted worse losses than expected but has lowered its daily cash burn to $25million from $40 million in the previous quarter. The company highlighted its $19.4 billion of liquidity though but with specific airline-only stimulus stalling in Washington, airlines will likely have to continue shoring up reserves.

On the topic of stimulus, yesterday we got more negative short-term headlines. The big one was from Treasury Secretary Mnuchin, who now does not expect a relief package to make it to President Trump’s desk prior to the election. This comes after he and Speaker Pelosi spoke at length over the last few weeks. Speaking at a Milken Institute conference, the Treasury Secretary said “At this point getting something done before the election and executing on that would be difficult, just given where we are in the level of details.” Mnuchin went on to note that the difference in overall price tag was not the breaking point, but the policies within each side’s bill are seemingly not easily reconcilable. This is even before we get to the fact that Senate Majority leader McConnell has said that there are Republican Senators that are hesitant to pass a bill of the size that the White House and House Democrats have proposed.

Overnight in Asia markets are mostly trading lower following Wall Street’s lead. The Nikkei (-0.71%), Hang Seng (-1.28%) and Kospi (-0.98%) are all down while the Shanghai Comp (+0.14%) is up. The Asx is also up +0.65% on comments from the RBA Governor that the central bank is considering whether buying longer-dated bonds would spur hiring. Meanwhile, futures on the S&P 500 (-0.37%) are currently pointing to a weaker open. Elsewhere, China’s September CPI and PPI both came in softer than expectations at +1.7% yoy (vs. +1.9% yoy) and -2.1% yoy (vs. -1.8% yoy).

In other overnight news, Bloomberg is reporting that as part of a European tour last week, US Under Secretary Keith Krach met executives including Deutsche Telekom AG CEO Timotheus Hoettges and Meinrad Spenger, the head of Spanish telecom carrier MasMovil, to urge them to ditch Chinese vendors of cloud infrastructure on data-security concerns.

On the coronavirus, there was sadly yet another day of bad news out of Europe, with Italy reporting a record number of cases at 7,332 (albeit with much higher levels of testing now than back in March). The rise in numbers there are bringing it more into line with the recent increase we’ve seen in the UK and France in recent weeks, though Italy’s numbers still remain at lower levels by comparison. French President Macron announced that nine of the country’s largest cities, including Paris, will be subject to a curfew from 9pm to 6am starting on Saturday lasting at least 4 weeks. More restrictions were also seen in Switzerland. Meanwhile, Catalonia, Spain’s largest region by population, ordered that bars and restaurants can only serve take away for the next 15 days. Overnight various media reports are suggesting that London is likely to see an tightening of restrictions as soon as tomorrow.

The concern over rising cases comes as hospitalisations increase. For example, here in England, the number of people in hospital with Covid has risen above the 4k mark for the first time since June 9. On a similar note, French President Macron said yesterday while announcing the new restrictions that the situation in French hospitals is “unsustainable” and the goal is to bring new cases down to 3,000 to 4,000 a day. France reported 22,591 new cases yesterday. So an ambitious target.

Onto Brexit, sterling was the strongest performing G10 currency yesterday after a Bloomberg report came through suggesting that the UK wouldn’t walk away from EU trade talks today. Although this was increasingly expected, Prime Minister Johnson had previously set October 15 as a deadline to reach an agreement, ahead of the transition period’s conclusion at the end of the year. Last night on a call between Prime Minister Johnson, European Commission President Von der Leyen and European Council President Charles Michel, the Prime Minister said he was disappointed with the progress but that he will decide on continuing talks only after the European Council meeting today and tomorrow. Bloomberg reported that those privy to the negotiations now consider the end of October or first few days of November as the real deadline for getting a deal, though that has remained a moving target.

Moving to fixed income, it was yet another day of falling yields in sovereign bond markets, as yields in parts of southern Europe fell to fresh all-time lows. Although BTPs were broadly flat, yields fell further in Greece, where 10yr yields fell -1.3bps to 0.772%, though in Spain 10yr yields are still 10bps above their recent lows in August 2019. Core country sovereign bonds also performed strongly, with 10yr bund yields down -2.5bps to a 5-month low, and French yields down -1.6bps to a 7-month low. Treasuries also advanced, moving -0.2bps to 0.726%.

In a parallel universe, we would be writing about tonight’s second presidential debate, but with that cancelled this election is now set to be the first since 1996 without 3 presidential debates. Instead, both candidates will be facing separate town halls tonight, with President Trump in Miami and Joe Biden in Philadelphia. With Trump still facing a noticeable polling deficit (currently showing him down -10.4pp on average), our chart of the day yesterday (link here) looked at previous polling errors in US elections, and shows that if the polls remain steady over the final 3 weeks, it’d take the largest polling error since data began post WWII for President Trump to win the popular vote.

Wrapping up with yesterday’s data, and the Euro Area industrial production numbers for August showed a +0.7% increase (vs. +0.8% expected). That’s its 4th consecutive monthly gain, though the year-on-year reading actually fell a tenth to -7.2%. Over in the US, producer prices were up +0.4% month-on-month, while the year-on-year reading climbed into positive territory for the first time since March, at +0.4% as well. Both ahead of expectations.

To the day ahead now, and as mentioned EU leaders will gather in Brussels later today for the European Council summit. Elsewhere, earnings releases out include Morgan Stanley and the Walgreens Boots Alliance. Data releases include the weekly initial jobless claims from the US, along with the September Empire State manufacturing survey and Philadelphia Fed business outlook survey. From central banks, speakers include ECB President Lagarde, the Fed’s Quarles, Bostic, Kaplan and Kashkari, as well as the BoE’s Cunliffe.

Rudy Giuliani hinted last night that there would be more emails from the trove discovered by a Delaware computer repair shop owner (who has shared his story on the record with Fox News). And at 0500ET, the NYPost published another lengthy exposé – at least the second front-page piece in what is shaping up to be a fascinating series – citing never-before-seen emails between Hunter Biden and various individuals connected to a major Chinese energy firm that failed earlier this year after its chairman – a party insider with deep ties to China’s military – was “disappeared” by China’s state security apparatus.

The first of three email chains explored in the story was sent to biden by a man named Jams Gillar, of the international consulting firm J2cR. The email chain discusses what appears to be a generous compensation package for Hunter Biden, along with other individuals whom the Post was apparently unable to identify (though it’s tempting to hazard a guess).

A subject line on the email, dated May 13, 2017 read “Expectations”, and it included details of “remuneration packages” for six individuals involved in the new business venture (the nature of the business wasn’t clear, though it appears to be related to Biden’s international consulting business). However, Biden’s partner in the business appears to be CEFC China Energy, the now-defunct energy firm mentioned above.

Source: NYP

The deal also listed “10 Jim” and “10 held by H for the big guy?” Though neither was positively identified.

In another email, sent by Biden as part of a chain dated Aug. 2, 2017, Biden discusses what appears to be a joint venture – a deal structure common in China, where foreign competitors must build partnerships with domestic firms – involving the former Chairman of CEFC, Ye Jianming. Half the ownership was to be held by Hunter and the Biden family.

Ye disappeared in early 2018 and is believed to have had deep connections to China’s intelligence and security services. Though at one point, Biden wrote that Ye had sweetened the terms of an earlier, three-year consulting contract with CEFC that was to pay him $10 million annually “for introductions alone.”

Here’s the excerpt from the NY Post story, accompanied by visual snippets culled directly from the emails, in which Biden asserts that the reason this joint venture is “so much more interesting to me and my family is that we would also be partners in the equity and profits.”

The nature of this ‘venture’ wasn’t made clear.

Biden wrote that Ye had sweetened the terms of an earlier, three-year consulting contract with CEFC that was to pay him $10 million annually “for introductions alone.”

“The chairman changed that deal after we me[t] in MIAMI TO A MUCH MORE LASTING AND LUCRATIVE ARRANGEMENT to create a holding company 50% percent [sic] owned by ME and 50% owned by him,” Biden wrote.

“Consulting fees is one piece of our income stream but the reason this proposal by the chairman was so much more interesting to me and my family is that we would also be partners inn [sic] the equity and profits of the JV’s [joint venture’s] investments.”

Source: NY Post

What’s more, a photo published by the Post and dated Aug. 1, 2017 shows what appears to be a handwritten flowchart illustrating the ownership structure of “Hudson West”, split 50/50 between two entities ultimately controlled by Hunter Biden and someone else identified only as “Chairman.”

Source: NYP

We know from the Senate report released last month that ‘Hudson West III’ was used as a name for one of Hunter Biden’s shell companies formed with Gongwen Dong. To be sure, some details about Biden’s Chinese consulting practice has already been made public, but details of the dealmaking and discussions that went on behind the scenes have not.

Finally, the last in the triptych of distressing email chains is aa copy of an “attorney engagement letter” between Hunter Biden and one of Ye’s top lieutenants, Hong Kong official Chi Ping Patrick Ho.

He agreed to pay Biden a $1 million retainer for “counsel to matters related to US law and advice pertaining ot the hiring and legal analysis of any US Law Firm or Lawyer.”

Later, in December 2018, a Manhattan federal jury convicted Ho for being involved in two schemes to pay $3 million in bribes to high-ranking government officials to help obtain oil rights in Chad and lucrative business deals in Uganda.

Source: NYP

Ho has served his sentence and was deported to Hong Kong in June.

Neither the Biden Campaign, lawyers for Hunter Biden, Gillar, Dong nor Ho returned requests for comment from the NY Post.

After yesterday’s catastrophe, we look forward to watching Facebook and Twitter scramble to suppress this story as well. We’re beginning to see why the Post has decided to publicize details from the trove piecemeal, instead of writing a 10,000-word NYT-style novel about Hunter Biden’s transgressions.

The NY Post also published a handful of new candidate selfies apparently taken by Hunter Biden along with the story.

It’s a suitable tactic for what some conservatives are calling a “digital civil war” over information that could influence the election in President Trump’s favor.

It may not be completely legal – there, the lawyers are happy now – but buying an iPhone 12 in the US, and selling it in India could be the greatest ‘arbitrage’ deal ever…

Apple unveiled its new generation iPhone yesterday. The new models, iPhone 12 and 12 Pro will be available on October 23 and pre-orders can be placed starting Friday. Notable new features include the integration of 5G technology, a faster chip and improvements to the camera’s night mode, according to the manufacturer. The iPhone 12 is also available in a new mini format, while the Pro can be ordered in the tested Max screen size as well. Both special sizes will ship November 13 and can be pre-ordered from November 6.

In the U.S, the iPhone 12 will be available starting at US$33/month for a two-year contract. For ease of comparison, the price of the standard model is displayed at US$943 without contract, trade-in or sim-lock and including California state sales tax in our chart. Still, as Statista’s Katharina Buchholz notes, the iPhone price in the U.S. is quite low compared to other countries.

The Japanese are also among the luckiest Apple customers. Here, the new iPhone model is available for under US$950 (including tax) for the 128 GB iPhone 12 and just over US$1100 for the 64 GB iPhone 12 Pro.

You will find more infographics at Statista

India’s customers, however, are paying a much higher price for the same phone. It will cost them upwards of US$1100 for the starter model and a whopping $1,636 for the Pro model. While the price of the iPhone 11 was one of the highest in the world in the UK and Russia, the price of the 12 model turned out lower – at least in comparison. Continental Europeans – for example in Germany and France – are paying more of a premium this time around.

Authored by Paul Joseph Watson via Summit News,

The World Health Organization’s Regional Director for Europe Hans Kluge says governments should stop enforcing lockdowns, unless as a “last resort,” because the impact on other areas of health and mental well-being is more damaging.

In an interview with Euro News, Kluge cautioned against the imposition of more lockdowns unless they are “absolutely necessary.”

“He says damage to other health areas, mental health, domestic violence, schools and cancer treatment is too great,” tweeted reporter Darren McCaffrey.

NEW: WHO Europe Director, Hans Kluge tells me, no government should enforce another national lockdown unless it is absolutely necessary, a last resort

He says damage to other health areas, mental health, domestic violence, schools and cancer treatment is too great pic.twitter.com/jzbh9YbH7z

— Darren McCaffrey (@DarrenEuronews) October 13, 2020

Kluge’s warning matches that of the WHO’s special envoy on COVID-19, Dr David Nabarro, who recently told the Spectator in an interview that world leaders should stop imposing lockdowns as a reflex reaction because they are making “poor people an awful lot poorer.”

WATCH: Dr David Nabarro, the WHO’s Special Envoy on Covid-19, tells Andrew Neil: ‘We really do appeal to all world leaders: stop using lockdown as your primary control method’. Watch the full interview here: https://t.co/XLdaedsKVS #SpectatorTV @afneil | @davidnabarro pic.twitter.com/1M4xf3VnXQ

— The Spectator (@spectator) October 9, 2020

It also resonates with numerous other experts who have desperately tried to warn governments that lockdowns will end up killing more people than the virus itself, but have been largely ignored.

Germany’s Minister of Economic Cooperation and Development, Gerd Muller, recently warned that COVID-19 lockdowns will result in “one of the biggest” hunger and poverty crises in history.

“We expect an additional 400,000 deaths from malaria and HIV this year on the African continent alone,” Muller said, adding that “half a million more will die from tuberculosis.”

Muller’s comments arrived months after a leaked study from inside the German Ministry of the Interior revealed that the impact of the country’s lockdown could end up killing more people than the coronavirus due to victims of other serious illnesses not receiving treatment.

Another study found that lockdowns will conservatively “destroy at least seven times more years of human life” than they save.

Professor Richard Sullivan also warned that there will be more excess cancer deaths in the UK than total coronavirus deaths due to people’s access to screenings and treatment being restricted as a result of the lockdown.

His comments were echoed by Peter Nilsson, a Swedish professor of internal medicine and epidemiology at Lund University, who said, “It’s so important to understand that the deaths of COVID-19 will be far less than the deaths caused by societal lockdown when the economy is ruined.”

According to Professor Karol Sikora, an NHS consultant oncologist, there could be 50,000 excess deaths from cancer as a result of routine screenings being suspended during the lockdown in the UK.

Experts have also warned that there will be 1.4 million deaths globally from untreated TB infections due to the lockdown.

As we further previously highlighted, a data analyst consortium in South Africa found that the economic consequences of the country’s lockdown will lead to 29 times more people dying than the coronavirus itself.

*  *  *

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New figures produced by the Turkish Exporters’ Assembly and subject of an investigation by Reuters show a massive surge in Turkish weapons exports to its ally Azerbaijan just ahead of the raging conflict sparked late last month in the disputed Nagorno-Karabakh region.

“Turkey’s military exports to its ally Azerbaijan have risen six-fold this year, with sales of drones and other military equipment rising to $77 million last month alone before fighting broke out over the Nagorno-Karabakh region, according to exports data,” reports Reuters.

It’s a massive figure for the tiny Caucasus country of just less than ten million people. The data shows that over the first nine months of 2020 Turkey sold Azerbaijan $123 million in defense and aviation equipment.

But this ramped up significantly by August once clashes between Armenian and Azeri forces, which have been sporadic and fierce since the early 1990’s collapse of the Soviet Union and self-declared autonomy of ethnic Armenian Nagorno-Karabakh, grew more intense at the end of the summer.

According to the report:

Most of the purchases of drones, rocket launchers, ammunition and other weapons arrived were after July, when border clashes between Armenian and Azeri forces prompted Turkey and Azerbaijan to conduct joint military exercises.

Sales jumped from $278,880 in the month of July to $36 million in the month of August, and $77.1 million in just September, the data showed. 

Other major suppliers of Azerbaijan’s military have included Russia and Israel. Russia also has a defense pact with Armenia, including a major base in the country’s north.

Israel’s ties are much more controversial, given Tel Aviv is a major supplier of high tech small drones, including so-called ‘suicide drones’ which have recently been seen on the battlefield targeting Armenian troops.

Drone warfare has been somewhat of a gamechanger in the historic conflict, given multiple battlefield videos have shown a massive uptick in drone activity from both sides.

The latest Azerbaijani suicide drone shot down over Artsakh. Israel has been rearming Azerbaijan with these drones in the middle of the war. pic.twitter.com/gAMw9srIw0

— Serge (@Zinvor) October 11, 2020

Turkey has also been documented as transferring foreign mercenaries to the front lines, especially Syrian Islamists, a charge which Ankara has this week vehemently denied.

This seems notable: Azerbaijani President Aliyev admits his country has Turkish F-16 jets but says they are “not being used in the Nagorno-Karabakh conflict”. https://t.co/Odamc4qwqU

— Alison Meuse (@AliTahmizian) October 14, 2020

It also recently appears Turkey is finally admitting it has F-16 fighter jets based in Baku, however, the defense ministry is making the highly dubious claim they are not being used against Armenian forces, or for any level of active military operations.

Authored by Bill Blain via MorningPorridge.com,

“By 1965 there will be total depravity. How squalid everything will be…”

There are mornings when you wake up, look up to the skies, and go… oh no… “not again”. 

But let’s be positive. There is so much good news out there..

Investors around the globe were no doubt be delighted at the opportunity presented yesterday to lend Italy 3-yr money for slightly less than zero yield.  The €3.75 bln Zero deal was 1.4 times oversubscribed. (If I were a cynic I might suggest the ECB will end up holding most of it under QE, after the Japanese investors who bought for a positive currency hedge dump it…)

But I am not a cynic this morning. I am keen and enthusiastic and looking for more reasons to be cheerful. So, if you are Sovereign Bond investor, you should have filled your proverbial boots – because next month Italy will probably be raising money even cheaper. The flattening curve means the prospect of a Zero-Coupon Italy Perp is just around the corner. Just 8 years ago, when we all confidently expected Italy to explode, default and exit the Euro, it was paying near 8% on debt, and trading by appointment only. 

How wrong we all were about Italy.  Europe’s least competitive economy with the highest debt load (155% of GDP) commands premium pricing… and all be because the ECB has enabled it. Why all the worry? All that Italy needs to do is grow its economy, and everything will be just fine. Simples. (Except… as any man will tell you.. “fine” is the most dangerous word in the world..) 

Italy is doing well re numbers in the second Covid wave, but the economy has contracted 9% because of the pandemic, and isn’t actually expected to fully recover till some time in 2022. It won’t get back on its debt reducing budget surplus track till 2024 – or “never” as any date longer than 36 months is considered in the currently popular shorten-duration game of bond investment. 

That should not concern us unduly.  Italy is an important and valued member of the EU, and now that the UK is about to be kicked into the long-grass by the French denying us a Brexit deal – Italy steps up a place.  (Rule 1 in the history of UK relations with Europe: it’s never the UK’s fault. If anyone suggests it is – blame France.. it’s probably them.)

The ECB’s Pandemic Emergency Purchase Programme (PEPP), and the soon to be released grants and loans from the Next Generation EU recovery fund will ensure Italy has zero funding costs for ever.. Therefore, what else can happen except an explosive outpouring of Italian entrepreneurship and growth.. because that is what 8 years of ultra-low European rates have achieved across Europe – haven’t they? 

Oh… they haven’t… that was probably because rates weren’t low enough. Well they are zero now.. so what can possibly go wrong?

The answer to that question is long-term stagnation, deflation and decline – but because I don’t want to sound grumpy and suspicious.. I won’t say it.. (Some say Italy has been in historical decline since Atilla’s visit to Rome in 410, but that’s a tad harsh..) 

What if the Pandemic and the response means Italian growth remains stifled by ongoing restrictions, Brexit tariffs (yep, we’re going skiing in Scotland!) and rather than a “swift” 2-year recovery, it takes longer? Much Longer.  What if tourism loses another season? What if businesses give up and throw themselves on welfare? The reality is Italy’s growth was already weak and insipid before the Pandemic.  

Just like Covid has cut a swathe through the elderly and infirm it might do the same to sickly economies. 

There are bank forecasts out there suggesting Italy’s Long Financial Covid could last for years, impacting growth and expectations through the 2020s, putting further pressure on the country’s fragile politics, raising populist threats and a potential North/South split. The economic effect would be similar to the way the great depression triggered by 1929 cause recession through the 1930s. Italy became a fascist state earlier in 1922 due to the weakness of the economy post WW1. 

Today Italy’s economy is still suffering the negative effects of the 2008 banking crisis – which remains essentially unresolved – and the following European sovereign debt crisis – which is also essentially unresolved. Essentially (3 uses of the same word – deliberate) Italy is relying on policy made on the hoof. 

Key Phrase I used earlier is that Italy is still solvent because the ECB has enabled it.

Italy is not a Sovereign Borrower. It is in exactly the same boat as any Latin American sovereign that borrowed in dollars. Since it joined the Euro, Italy has no fiscal agency and monetary authority. Italy can’t decide to create Euro’s through its own central bank to finance infrastructure, bank bailouts, or target fiscal stimulus packages.  The monetary rules of the ECB mean it needs the EU to nod at breached debt guidelines to put stimulus in place. It does not control the money printing presses. It might be easier if the EU was in a monetary union, but it’s not – and is unlikely to ever be. 

The Euro is just a pooled currency under which members gave up financial sovereignty and agreed to stick to monetary rules – which Italy has not met. It benefits some – Germany – and penalises the rest. 

When the ECB President Christine Lagarde misspoke and said it wasn’t her job to keep bond spreads tight, the market crashed! Italy yields soared. She soon corrected herself and has clearly learnt the lesson: that she is playing a very difficult and complex Game of Politics within the EU, trying to reconcile the unspoken promise to continue Mario Draghi’s Do-Whatever-it-Takes efforts to keep yields low, versus a rising tide of national self-interest across Europe – which is being accelerated by the pandemic effects on job security. 

Italy is surely too big for other EU members to deny? Surely Germany would never ever insist Italy meets its debt targets? That would mean austerity and further economic decline… 

Germany, Holland, Finland are all negative on unlimited support. The European election cycle means the costs of bailing out Italy will feature in Northern Europe. While Lagarde has distracted and deflected some of the criticism of the ECB by her pledges on Climate Change and support for diversity, especially women in finance, its still early days in her EU Presidency.  

Meanwhile… An Apple a Day.. 

Apple announces a new phone that you simply must buy! This one is a slightly different shape! And it’s available in Blue. It’s completely, utterly and irrevocably future proofed for at least the next 12 months. It comes complete with 5G connectivity meaning it absolutely can do what other phones that were already 5G enabled do already. And, wait for it… it will do everything, yes absolutely everything your current iPhone already does.

Wow.. isn’t that fantastic? £1100 winging its way their way now!  

I expect the stock will go through the roof. I can’t wait to buy one in November, or maybe I better pre-order now just in case there is a queue… and someone isn’t wearing a face mask… 

The U.S. presidential election is just around the corner and, as Statista’s Niall McCarthy notes, an overwhelming majority of people across Europe want Joe Biden to win according to a recent YouGov poll.

The research polled over 7,000 adults in seven key European countries – Denmark, France, Germany, Italy, Spain, Sweden and the UK.

Denmark has the highest share of the public hoping for a Biden victory at 80 percent with just six percent of people there rooting for another four years for President Trump.

You will find more infographics at Statista

Italy had the highest levels of support for Trump in the survey at just 20 percent while a significant 58 percent majority are hoping his Democratic challenger wins the election. In the UK, which has been bitterly divided by populist politics and Brexit, a 61 percent majority favors Biden.

Despite the surging support for the Democrat ticket across Europe, YouGov found that a considerable swathe of the public remains sceptical of a Biden victory.

Only in Denmark do half of respondents feel Biden will win on November 03. The research is damning when it comes to the integrity of the U.S. election with just 2 percent to 11 percent of respondents across the seven countries agreeing that it will be “completely free and fair”. Italy had the most respondents agreeing the election will be “completely free and fair” at just 11 percent and that share dips as low as two percent in Germany and four percent in Denmark. YouGov found that a large majority of the public across Europe considers Trump a “poor” or “terrible” president and that ranges from 61 percent in Italy to 82 percent in Denmark.

Authored by Steve Watson via Summit News,

The leader of the coronavirus vaccine team at Oxford University declared Tuesday that nothing is going to approach returning to normal until at least next Summer.

Professor Andrew Pollard said that face masks and social distancing rules are not going away any time soon, declaring that a vaccine is still months away and would only become available for key workers during the first phase of its rollout anyway.

“Life won’t be back to normal until summer at the earliest. We may need masks until July,” Pollard said during an online seminar with Oxford alumni.

“If we end up with a vaccine that’s effective in preventing the disease, that is by far the best way to control the virus. But in the medium term, we’ll still need better treatments,” the professor added.

“When does life get back to normal? Even if we had enough vaccine for everyone, in my view it’s unlikely that we’re going to very rapidly be in a position where the physical distancing rules can be just dropped,” he added.

Politicians and health advisors to governments have repeatedly said that strict measures will have to remain in place until a vaccine is available.

“Until we’ve got a high level of immunity in the population so that we can stop the virus so most vulnerable people are immune, there is going to be a risk. Initially, we’re going to be in a position where mask-wearing and social distancing don’t change,” Pollard reiterated.

“Only when there is a big drop in serious cases will governments feel able to relax these measures. This is a very easily transmissible virus,” he further commented.

Back in May, scientists expressed doubts over the effectiveness of Oxford’s coronavirus vaccine, after all of the monkeys used in initial testing later contracted coronavirus.

While funding is pouring into vaccine trials, other research on coronavirus treatments has all but been ignored, despite some scientists claiming to have discovered anti-bodies that can completely block COVID-19 or effectively neutralise the virus.