Trump Says Middle-Class Tax Cut To Be Announced Within Three Months
President Trump told The Wall Street Journal on the sidelines of the World Economic Forum in Davos, Switzerland, that the White House plans to unveil a new tax-cut proposal for the middle class in approximately 90 days.
“We’re talking a fairly substantial … middle-class tax cut that’ll be subject to taking back the House and obviously keeping the Senate and keeping the White House,” Trump said. He declined to elaborate more on the specifics of the plan.
Trump has been touting the idea of a middle-class tax cut since the 2018 midterm election, and more recently since the 2020 election year has begun.
White House National Economic Council Director Larry Kudlow said last week that tax cut 2.0 could be unveiled in the summer months.
Kudlow said the White House is considering a payroll tax cut and an expansion of the earned income tax credit. He said the new tax cut could spur consumer growth and help the middle class prosper.
However, Trump told reporters back in 2017 that tax cuts were “going to be one of the great gifts to the middle-income people of this country that they’ve ever gotten for Christmas” – it turned out that tax cuts funded by taxpayer debt allowed mega-corporations to repatriate hundreds of billions of dollars, not for CapEx purposes like what was promised, but rather a massive stock buyback binge.
With the effectiveness of the first tax cut waning, Trump has likely been advised by his economic team that the manufacturing recession has triggered an employment slowdown that could start damaging consumer spending, which is at least 68% of GDP.
The next round of supply-side tax cuts should be viewed as “emergency tax cuts” because the “greatest economy ever” is continuing to decelerate and could be seen as a last-ditch effort by the administration to push off the recession for another couple quarters.
Former vice president Joe Biden’s extraordinary campaign memo this week imploring U.S. news media to reject the allegations surrounding his son Hunter’s work for a Ukrainian natural gas company makes several bold declarations.
The memo by Biden campaign aides Kate Bedingfield and Tony Blinken specifically warned reporters covering the impeachment trial they would be acting as “enablers of misinformation” if they repeated allegations that the former vice president forced the firing of Ukraine’s top prosecutor, who was investigating Burisma Holdings, where Hunter Biden worked as a highly compensated board member.
Biden’s memo argues there is no evidence that the former vice president’s or Hunter Biden’s conduct raised any concern, and that Prosecutor General Viktor Shokin’s investigation was “dormant” when the vice president forced the prosecutor to be fired in Ukraine.
The memo calls the allegation a “conspiracy theory” (and, in full disclosure, blames my reporting for the allegations surfacing last year.)
But the memo omits critical impeachment testimony and other evidence that paint a far different portrait than Biden’s there’s-nothing-to-talk-about-here rebuttal.
Here are the facts, with links to public evidence, so you can decide for yourself.
Fact: Joe Biden admitted to forcing Shokin’s firing in March 2016.
It is irrefutable, and not a conspiracy theory, that Joe Biden bragged in this 2018 speech to a foreign policy group that he threatened in March 2016 to withhold $1 billion in U.S. aid to Kiev if then-Ukraine’s president Petro Poroshenko didn’t immediately fire Shokin.
“I said, ‘You’re not getting the billion.’ I’m going to be leaving here in, I think it was about six hours. I looked at them and said: ‘I’m leaving in six hours. If the prosecutor is not fired, you’re not getting the money,’” Biden told the 2018 audience in recounting what he told Poroshenko
“Well, son of a bitch, he got fired. And they put in place someone who was solid at the time,” Biden told the Council on Foreign Relations event.
Fact: Shokin’s prosecutors were actively investigating Burisma when he was fired.
While some news organizations cited by the Biden memo have reported the investigation was “dormant” in March 2016, official files released by the Ukrainian prosecutor general’s office, in fact, show there was substantial investigative activity in the weeks just before Joe Biden forced Shokin’s firing.
The corruption investigations into Burisma and its founder began in 2014. Around the same time, Hunter Biden and his U.S. business partner Devon Archer were added to Burisma’s board, and their Rosemont Seneca Bohais firm began receiving regular $166,666 monthly payments, which totaled nearly $2 million a year. Both banks records seized by the FBI in America and Burisma’s own ledgers in Ukraine confirm these payments.
To put the payments in perspective, the annual amounts paid by Burisma to Hunter Biden’s and Devon Archer’s Rosemont Seneca Bohais firm were 30 times the average median annual household income for everyday Americans.
For a period of time in 2015, those investigations were stalled as Ukraine was creating a new FBI-like law enforcement agency known as the National Anti-Corruption Bureau ((NABU) to investigate endemic corruption in the former Soviet republic.
There was friction between NABU and the prosecutor general’s office for a while. And then in September 2015, then-U.S. Ambassador to Ukraine Geoffrey Pyatt demanded more action in the Burisma investigation. You can read his speech here. Activity ramped up extensively soon after.
In December 2015, the prosecutor’s files show, Shokin’s office transferred the evidence it had gathered against Burisma to NABU for investigation.
In early February 2016, Shokin’s office secured a court order allowing prosecutors to re-seize some of the Burisma founder’s property, including his home and luxury car, as part of the ongoing probe.
Two weeks later, in mid-February 2016, Latvian law enforcement sent this alert to Ukrainian prosecutors flagging several payments from Burisma to American accounts as “suspicious.” The payments included some monies to Hunter Biden’s and Devon Archer’s firm. Latvian authorities recently confirmed it sent the alert.
Shokin told both me and ABC News that just before he was fired under pressure from Joe Biden he also was making plans to interview Hunter Biden.
Fact: Burisma’s lawyers in 2016 were pressing U.S. and Ukrainian authorities to end the corruption investigations.
Burisma’s main U.S. lawyer John Buretta acknowledged in this February 2017 interview with a Ukraine newspaper that the company remained under investigation in 2016, until he negotiated for one case to be dismissed and the other to be settled by payment of a large tax penalty.
Documents released under an open records lawsuit show Burisma legal team was pressuring the State Department in February 2016 to end the corruption allegations against the gas firm and specifically invoked Hunter Biden’s name as part of the campaign. You can read those documents here.
In addition, immediately after Joe Biden succeeded in getting Shokin ousted, Burisma’s lawyers sought to meet with his successor as chief prosecutor to settle the case. Here is the Ukrainian prosecutors’ summary memo of one of their meetings with the firm’s lawyers.
Fact: There is substantial evidence Joe Biden and his office knew about the Burisma probe and his son’s role as a board member.
The New York Times reported in this December 2015 article that the Burisma investigation was ongoing and Hunter Biden’s role in the company was undercutting Joe Biden’s push to fight Ukrainian corruption. The article quoted the vice president’s office.
In addition, Hunter Biden acknowledged in this interview he had discussed his Burisma job with his father on one occasion and that his father responded by saying he hoped the younger Biden knew what he was doing.
Fact: Federal Ethics rules requires government officials to avoid taking policy actions affecting close relatives.
Office of Government Ethics rules require all government officials to recuse themselves from any policy actions that could impact a close relative or cause a reasonable person to see the appearance of a conflict of interest or question their impartiality.
“The impartiality rule requires an employee to consider appearance concerns before participating in a particular matter if someone close to the employee is involved as a party to the matter,” these rules state. “This requirement to refrain from participating (or recuse) is designed to avoid the appearance of favoritism in government decision-making.”
Fact: Multiple State Department officials testified the Bidens’ dealings in Ukraine created the appearance of a conflict of interest.
In House impeachment testimony, Obama-era State Department officials declared the juxtaposition of Joe Biden overseeing Ukraine policy, including the anti-corruption efforts, at the same his son Hunter worked for a Ukraine gas firm under corruption investigation created the appearance of a conflict of interest.
In fact, deputy assistant secretary George Kent said he was so concerned by Burisma’s corrupt reputation that he blocked a project the State Department had with Burisma and tried to warn Joe Biden’s office about the concerns about an apparent conflict of interest.
Likewise, the House Democrats’ star impeachment witness, former U.S. Ambassador Marie Yovanovich, agreed the Bidens’ role in Ukraine created an ethic issue. “I think that it could raise the appearance of a conflict of interest,” she testified. You can read her testimony here.
Fact: Hunter Biden acknowleged he may have gotten his Burisma job solely because of his last name.
In this interview last summer, Hunter Biden said it might have been a “mistake” to serve on the Burisma board and that it was possible he was hired simply because of his proximity to the vice president.
“If your last name wasn’t Biden, do you think you would’ve been asked to be on the board of Burisma?,” a reporter asked.
“I don’t know. I don’t know. Probably not, in retrospect,” Hunter Biden answered. “But that’s — you know — I don’t think that there’s a lot of things that would have happened in my life if my last name wasn’t Biden.”
Fact: Ukraine law enforcement reopened the Burisma investigation in early 2019, well before President Trump mentioned the matter to Ukraine’s new president Vlodymyr Zelensky.
This may be the single biggest under-reported fact in the impeachment scandal: four months before Trump and Zelensky had their infamous phone call, Ukraine law enforcement officials officially reopened their investigation into Burisma and its founder.
The effort began independent of Trump or his lawyer Rudy Giuliani’s legal work. In fact, it was NABU – the very agency Joe Biden and the Obama administration helped start – that recommended in February 2019 to reopen the probe.
NABU director Artem Sytnyk made this announcement that he was recommending a new notice of suspicion be opened to launch the case against Burisma and its founder because of new evidence uncovered by detectives.
Ukrainian officials said that new evidence included records suggesting a possible money laundering scheme dating to 2010 and continuing until 2015.
A month later in March 2019, Deputy Prosecutor General Konstantin Kulyk officially filed this notice of suspicion re-opening the case.
And Reuters recently quoted Ukrainian officials as saying the ongoing probe was expanded to allegations of theft of public funds.
The implications of this timetable are significant to the Trump impeachment trial because the president couldn’t have pressured Ukraine to re-open the investigation in July 2019 when Kiev had already done so on its own, months earlier.
For a complete timeline of all the key events in the Ukraine scandal, you can click here.
Fed’s “National Activity Index” Plunges Back Into Contraction
Despite soaring stock prices, exuberant talking heads, and ebullient politicians (on the right), The Chicago Fed’s National Activity Index crashed from +0.41 to -0.35 in November (drastically worse than the +0.13 expectation).
Twenty-seven indicators improved from November to December, while 56 indicators deteriorated and two were unchanged.
25 of the 85 monthly individual indicators made positive contributions, while 60 indicators affected the index negatively.
A reading below 0 indicates below-trend growth in national economy.
Source: Bloomberg
The smoother 3m average seen above has been “below-trend” for 10 straight months now, but that doesn’t matter for stocks.
Tesla Now Valued More Than World’s Largest Automaker After Volkswagen-Like Short Squeeze
In a delightful turn of irony, the relentless short squeeze that has gripped Tesla shares ever since the Fed launched QE4 in October, a squeeze many have compared to the infamous Volkswagen short squeeze of 2008, sent TSLA shares another 5% higher in the process pushing the electric vehicle maker’s market cap above $100 billion for the first time ever, $103BN to be precise, rising above the world’s largest automaker Volkswagen (at $100BN), bigger than Toyota. It is now also bigger than GM ($50BN) and BMW ($51BN) combined, and is almost 3 times bigger than Ford ($36.5BN).
The record milestone came less than a month after Tesla”s stock crossed the infamous “funding secured” bogey of $420, the fake LBO price tweeted by Musk in 2018 which put got in much trouble for securities fraud, and which cost Musk his position as Tesla Chairman
More importantly, by surpassing a $100BN market cap, a record-breaking $346MM pay package for Elon Musk is now triggered. However, according to the fine print, the $100 billion valuation must stay for both one-month and six-month average in order to help Musk get the first of 12 tranches of this massive payout.
Putting Tesla’s valuation in context, Volkswagen delivered just over 10.8 million vehicles in 2019. By contrast, Tesla deliveres 367,200 cars in 2019, although investors have now bet the farm on the Chinese auto market where Tesla is betting the next leg of its growth will come from.
Last week, Morgan Stanley looked at Tesla’s valuation relative to other OEMs and came up with this chart:
Fast forward to today, when the red bar is now about 10% higher.
The system that has so enriched the self-serving Davos Crowd is unraveling, and technocratic tweaks, carbon trading and philanthro-capitalism can’t fix what’s broken.
Thought experiment: If the Martians teleported the entire Davos Crowd to a distant moon, who would mourn and who would cheer? Friends and family of the disappeared elites would of course mourn their teleportation to a Martian facility on a distant moon, but who else would mourn, other than the flunkies and apparatchiks in the corporate media?
Who would cheer? Everybody who is tired of the dominance of an elite who skims billions from the rest of us “for our own good.” The Davos Crowd is focusing on climate change because they see it as the latest and greatest opportunity to add more billions to their net worth via the skimming operation known as Carbon Trading and controlling the vast capital flows into New Green Deal boondoggles.
Who would cheer? Everybody who is tired of the Davos Crowd viewing themselves as “the solution” rather than “the problem.” The unprecedented concentration of wealth and power in the hands of the few in Davos isn’t a problem, it’s an “opportunity” because the Davos Crowd is immensely confident in the goodness and rightness of their power and control.
The Davos Crowd knows what’s best for the planet, so please get out of the way and let us take care of climate change, etc. our way, which just so happens to be extraordinarily profitable for us. But that’s to be expected because we’re so smart and hard-working and we care.
The hubris, sanctimony, false sympathy and hypocrisy of the Davos Crowd is off the charts. Having stripmined the Earth and its workforce for their existing billions, now they want to add to their billions by “fixing” what they broke in the most profitable possible fashion.
The Davos Crowd is incapable of recognizing that the unprecedented concentration of wealth and power in the hands of the few in Davos is the core problem. The happy cover story for further exploitation and predation is philanthro-capitalism, “do-good” projects that enshrine the power of elites and engineer a status quo that continues to divert wealth to the Davos elites under the virtue-signaling cover of philanthro-capitalism.
The Davos Crowd and their vast armies of apparatchiks, toadies, apologists and technocrat flunkies don’t understand why we would cheer their teleportation to a distant moon. Their right to rule (droit de seigneur) is so obvious and well, just so right that those doubting it must be sadly delusional.
The delusion is in Davos. The system that has so enriched the self-serving Davos Crowd is unraveling, and technocratic tweaks, carbon trading and philanthro-capitalism can’t fix what’s broken.
As you may know, Massachusetts also normally uses a 3-judge appellate panel on each appeal. I thought you might be interested in learning about that rule’s exception.
Here’s how it works. Most Mass. appeals are heard by a 3-judge panel of the Appeals Court and decided in an unpublished opinion by only those 3-judges. Therefore, the opinion only reflects the views of a small fraction of the Appeals Court.
If there is a dissent, however, the opinion gets circulated to the full bench of the Appeals Court and has to then reflect the majority view of the entire Court. It’s possible, of course, that a majority of the full Court will agree with the dissenting judge of the 3-judge panel. Therefore, the dissent becomes the majority and the prevailing party differs based on recomposition of the court members on the case. (It also means that, as in Warren, there can be two dissenting Appeals Court opinions.)
That’s one thing I try to teach my students: Every state has its own twists on the legal rules; there’s a lot of similarity from state to state, but you should always be aware of the possible differences (both as a lawyer and a student looking for good paper topics). If Nebraska can have a unicameral legislature ….
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As you may know, Massachusetts also normally uses a 3-judge appellate panel on each appeal. I thought you might be interested in learning about that rule’s exception.
Here’s how it works. Most Mass. appeals are heard by a 3-judge panel of the Appeals Court and decided in an unpublished opinion by only those 3-judges. Therefore, the opinion only reflects the views of a small fraction of the Appeals Court.
If there is a dissent, however, the opinion gets circulated to the full bench of the Appeals Court and has to then reflect the majority view of the entire Court. It’s possible, of course, that a majority of the full Court will agree with the dissenting judge of the 3-judge panel. Therefore, the dissent becomes the majority and the prevailing party differs based on recomposition of the court members on the case. (It also means that, as in Warren, there can be two dissenting Appeals Court opinions.)
That’s one thing I try to teach my students: Every state has its own twists on the legal rules; there’s a lot of similarity from state to state, but you should always be aware of the possible differences (both as a lawyer and a student looking for good paper topics). If Nebraska can have a unicameral legislature ….
from Latest – Reason.com https://ift.tt/38vB4rP
via IFTTT
Confirmed Coronavirus Cases Climb To 481 As Outbreak Spreads To Macau, Hong Kong
China’s National Health Commission has revised the total of coronavirus cases higher for at least the second time on Wednesday: there are now 473 confirmed patients infected in China alone, though the death toll remained at 9, Reuters reports.
Internationally, the total number of cases has climbed to 481, according to a running count by the SCMP:
As the virus spreads throughout the mainland, health officials in Hong Kong have confirmed that the first case of coronavirus has been detected in the Special Autonomous Region. According to the SCMP, the male patient arrived in Hong Kong on a high-speed train on Tuesday from Wuhan, the Chinese city at the center of the outbreak. He was discovered to have a fever when he arrived at a rail station in West Kowloon, and has now tested positive or the virus three times, the first two at Queen Elizabeth hospital in Jordan.
Local television footage showed the still-unnamed patient being taken from Queen Elizabeth to Princess Margaret Hospital, where the Hospital Authority Infectious Disease Center is located. Several health care workers wearing full protective gear could be seen pushing the patient on a stretcher.
Hong Kong’s public rail company, MTR Corp, confirmed that it had been notified by the Department of Health that the patient took a high-speed rail train G5607 from the Shenzhen North station to West Kowloon Station. Officials are now taking steps to disinfect the train.
The virus has also reportedly made it to Macau, which also confirmed its first case on Wednesday, according to the SCMP. Alarmingly, considering that Macau is one of the most popular destinations for the hundreds of millions of vacationers from the mainland looking to travel for the Chinese New Year Holiday this week, Macau’s patient zero made it through health screenings for the virus, even though she had been showing symptoms including a cough and soar throat for about a week.
The virus has already spread to Chinese cities including Beijing and Shanghai, as well as to the US, Australia, South Korea, Thailand, Japan and beyond.
Earlier, we reported that China had launched a nation-wide screening effort to detect any remaining cases of the virus, suggesting that there could be many more cases yet to be uncovered. Screeners are looking for symptoms including fever, cough and difficulty breathing, all pneumonia-like symptoms. In addition to the autonomous regions, the virus has been confirmed in at least 13 Chinese provinces.
Beijing has also launched extensive operations to coat whole cities in disinfectant, as the video below shows:
President Trump said earlier during an interview with CNBC’s Joe Kernen that the situation in the US is “totally under control” after the first case was identified in Washington state, the CDC announced yesterday.
Asked about criticisms that China wasn’t completely transparent about the virus, and initially tried to conceal the fact that it could spread from human to human, Trump said he had a good relationship with President Xi and expected that he could trust the Chinese government.
Chinese officials have warned that the virus has been evolving and mutating as it has traveled. The map below is the NYT‘s most up-to-date accounting of confirmed cases, though at this point it’s already woefully out-of-date.
The WHO is meeting on Wednesday to decide whether the outbreak warrants the most serious categorization for global pandemics.
Meanwhile, some experts are warning that on Wednesday the virus has taken a “step closer to full-blown epidemic.”
Media reports have been warning people in China and around the world about steps they can take to avoid being infected. Basic steps include frequently washing hands, avoid touching ones eyes, mouth or nose with unwashed hands, clean and disinfect objects, and covering one’s mouth and nose during a sneeze, per CNN.
And sure enough, less than 24 hours later, in an attempt to explain the return of overnight market euphoria Reuters writes that “world stock markets looked to be getting back to full strength on Wednesday, as updates from China about the spread of a new flu-like coronavirus raised hopes the outbreak would be contained” and Bloomberg doubled-down that “U.S. equity-index futures gained on Wednesday as China took steps to contain the spread of a deadly virus”, which is ironic since just moments ago China’s CCTV reported that there are now 473 confirmed Coronavirus cases in China, with many cases now observed internationally, and most recently, a Coronavirus case were confirmed in Hong Kong as the epidemic spreads. And yet, after dropping by 9 points yesterday, S&P futures have more than made up those losses and are up 14 points as of Wednesday morning.
China’s National Health Commission said on Wednesday there were 440 cases of the new virus, with nine deaths so far, and added that measures are now in place to minimize public gatherings in the most-affected regions. How one can prevent people from gathering in China, the world’s most congested nation, remains unclear. Meanwhile, the outbreak has spread from its origin in Wuhan, China, to the United States, Thailand, South Korea, Japan and Taiwan. The World Health Organization meets later on Wednesday to consider whether the outbreak is an international emergency.
In other words, despite what a handful of algos would like to telegraph, the Coronavirus is anything but contained, with the outbreak reviving memories of the SARS epidemic in 2002-03, a coronavirus outbreak that killed nearly 800 people. And the punchline: according to Reuters, “this time China’s response and candour — in contrast to the SARS epidemic — have helped reassure investors concerned about the possible global fallout.” Actually, the “response and candour” confirm, if anything, that China is panicking, but as usual the market is never wrong, until it is.
“The call here is not that the virus is done or nipped in the bud by any means,” said Kay Van-Petersen, global macro strategist at Saxo Capital Markets. “But there have been no big further reported outbreaks, and the response from the Chinese authorities has been very, very positive”.
“I would expect a lot of people – candidly, like we are – that are looking for opportunities to buy rather than sell” amid the dip in stocks caused by virus-contagion worries, Lamar Ville re, partner and portfolio manager at Villere & Co., said on Bloomberg TV. “I don’t think this is going to be the beginning of the end.”
Because one obviously “buys rather then sells” when stocks are trading at never before seen highs.
In any case, optimism that “Corona is Contained” helped European stocks in London, Frankfurt and Paris score early gains of 0.1% to 0.2%. European equities first erased initial gains to mirror whiplash price action for stocks in Asia, where early losses reversed after Beijing outlined measures to contain the outbreak of the Wuhan coronavirus, however it has since rebounded again.
Earlier in the session, Asian stocks resumed their climb, rebounding from the last session led by consumer-staples and technology companies. The benchmark stock gauge recovered about half of Tuesday’s losses, with most markets in the region gaining. Shares in Hong Kong also rebounded, with technology stocks and insurers boosting the Hang Seng Index. Chinese shares erased losses after Beijing said it will start a nationwide screening effort to tackle the outbreak.
MSCI’s airline industry index .posted its biggest daily drop in more than three months on Tuesday. Airline shares were still falling on Wednesday.
“While details on the coronavirus are scant, we reckon that the SARS period could offer some clues as to how markets could pan out,” analysts at Singapore’s DBS Bank said. “The trends are clear: Yields and stock prices fell in the first few months of the SARS outbreak and rebounded thereafter.”
And yes, the return of Fed-backstopped euphoria means a new record high in the US too where S&P 500 futures just hit a new all time high, reaching Michael Hartnett’s target of 3,333 more than one month ahead of schedule (March 3).
In rates, US 10Y Treasurys were unchanged with the yield on U.S. 10-year government bonds stabilizing after Tuesday’s drop, sitting at 1.78% US10YT=RR in European trading. Core European and U.K. bond yields are also little changed across most of the curves. Italian government bond yields rose as much as 8 basis points on reports the leader of the country’s 5-Star party and foreign minister, Luigi Di Maio, will step down, however they recovered all losses after it was confirmed that he is indeed stepping down. It was the biggest, if brief, sell-off in a month and raised the risk of another snap election in Europe’s fourth-largest economy, since 5-Star is part of Italy’s coalition government.
“The initial reaction was to sell because of the heightened political uncertainty,” said Luca Cazzulani, a strategist at UniCredit in Milan. “But there is no outright link between de Maio’s resignation and a collapse of the government.”
In FX, with markets generally rising, safe plays such as gold and the Japanese yen were weaker. The dollar was rising toward the highs it reached in December against the other top world currencies. The yen dipped after gaining Tuesday on news of the contagion and potential disruption to spending during China’s week-long Lunar New Year. The yuan steadied, after tumbling the most in almost five months Tuesday in onshore trading.
In commodities, gold gave back some gains to trade at $1,555 per ounce; West Texas Intermediate crude fell 0.7% to $58 a barrel and natural gas gained 1% to $1.91 per mmbtu.
Expected data include mortgage applications and existing home sales. Abbott, J&J and Prologis are among companies reporting earnings
Market Snapshot
S&P 500 futures up 0.4% to 3,332.25
STOXX Europe 600 down 0.04% to 423.20
MXAP up 0.6% to 173.55
MXAPJ up 0.7% to 566.22
Nikkei up 0.7% to 24,031.35
Topix up 0.5% to 1,744.13
Hang Seng Index up 1.3% to 28,341.04
Shanghai Composite up 0.3% to 3,060.75
Sensex down 0.4% to 41,143.43
Australia S&P/ASX 200 up 0.9% to 7,132.73
Kospi up 1.2% to 2,267.25
German 10Y yield rose 0.3 bps to -0.245%
Euro up 0.08% to $1.1091
Italian 10Y yield rose 1.7 bps to 1.201%
Spanish 10Y yield rose 1.0 bps to 0.433%
Brent futures down 0.7% to $64.17/bbl
Gold spot little changed at $1,558.10
U.S. Dollar Index little changed at 97.56
Top Overnight News from Bloomberg
Chinese officials stepped up monitoring of transportation links in China and ordered a nearly complete shutdown of the city of Wuhan where the virus originated, as the death toll increased to nine
President Trump tells CNBC in interview from Davos that “I want this dollar to be strong. I want it to be so powerful. I want it to be great. But if you lower the interest rates, so many good things would happen,” he says, according to transcript provided by the network
U.S. Treasury Secretary Steven Mnuchin said there are no deadlines to start talks on a phase-two agreement, during a panel discussion at the World Economic Forum in Davos, Switzerland
The Federal Reserve averted a year-end liquidity crunch by pumping $256 billion into repurchase markets. The consequences are now rippling across the globe as Japanese bonds have become less attractive to U.S.-based investors, while yen-funded investors now find European bonds and U.S. credit more alluring
Xavier Rolet is stepping down as chief executive officer of billionaire Michael Hintze’s hedge fund firm, just a year after taking the role. Rolet is leaving for “reasons unconnected with CQS,” according to an emailed statement from the hedge fund.
Former UBS Group AG trader Kweku Adoboli fought to avoid deportation from the U.K. to the nation of his birth after his conviction for a $2.3 billion loss at the Swiss bank. Now, he is seeking a comeback in Ghana with a plan to kick-start its mortgage-backed bond market
Malaysia’s central bank unexpectedly cut its benchmark interest rate Wednesday, the latest emerging market to ease monetary policy amid an uncertain global economy.
Asian equity markets gradually improved and shrugged off the lacklustre lead from Wall St, where all major indices snapped their streak of record closes amid jitters related to the coronavirus with 440 cases reported in China and the death toll now at 9, while the CDC also confirmed the first case of the virus in the US. Nonetheless, ASX 200 (+0.9%) and Nikkei 225 (+0.7%) managed to rebound from opening weakness as outperformance in Consumer Staples, Tech and Healthcare underpinned the Australian benchmark to a fresh all-time high, while Tokyo sentiment was mainly driven by currency moves but with weakness seen in some automakers including Mitsubishi Motors after several of its locations were raided in Germany on suspicion of using emission cheating devices. KOSPI (+1.2%) gained with Hyundai Motor boosted amid earnings despite missing expectations on Q4 net as it still showed a turnaround from the loss Y/Y and both its operating profit and revenue topped forecasts. Elsewhere, Hang Seng (+1.3%) nursed some of the prior day’s near-3% losses and Shanghai Comp. (+0.3%) eventually joined in on the recovery after it initially slipped to its lowest levels so far this year due to the ongoing outbreak fears and after experts suggested the possibility of a mutation in the coronavirus. Finally, 10yr JGBs were indecisive amid a pullback in T-notes which retraced some of the prior day’s advances after hitting resistance around 129.20 and with prices also failing to benefit despite slightly firmer demand at the enhanced-liquidity auction for longer dated JGBs.
Top Asian News
India’s Painful Double Whammy Grips More Emerging Markets
Malaysia Follows Turkey, South Africa With Interest Rate Cut
Tencent Offers 27% Premium to Take Over Game Maker Funcom
A choppy session for European stocks thus far [EuroStoxx 50 -0.2%], with a mixed performance across regional bourses and following on from a mostly positive APAC handover. Italy’s FTSE MIB (-0.6%) lags its peers with the Italian Banking Index hitting 6-week lows – on the back of Di Maio’s resignation as the Italian 5SM leader. On the other end of the spectrum, SMI (+0.6%) outperforms with almost all of its stocks in positive territory. Sectors are mixed with no clear reflection of the overall market sentiment. In terms of individual movers, Airbus (+1.7%) shares are supported after a source noted that Boeing doesn’t expect regulators to sign off on the 737 Max until June or July, months later than the manufacturer previously expected. Traders also attribute the losses in Tui (-4.3%) to the Boeing news. Elsewhere, Daimler (-1.7%) reversed opening gains on the back of another profit warning in which it expects FY19 results to be below forecasts, with the return on sales of Mercedes-Benz vans also forecast below prior guidance. Meanwhile, ASML (-1.2%) shrugged off a mostly in-line earnings report and a EUR 6bln share buy-back programme, potentially on concerns that the Co. may not completed this programme given that the FY19 share buy-back was incomplete.
Top European News
Rolet to Step Down as CEO of Billionaire Hintze’s Hedge Fund CQS
U.K. Government Spending Soars as Austerity Continues to Thaw
ECB Hits Fifth Anniversary of QE Still Puzzled by Inflation Gap
Greece’s Lawmakers Elect Country’s First Woman Head of State
In FX, although safe-haven flows are unwinding amidst less acute concern about China’s coronavirus and knock-on effects, partly due to Chinese efforts to contain the spread and extent of contamination, the scale of Swiss Franc declines suggest that something else is afoot. Indeed, Usd/Chf has rebounded firmly above 0.9700 to around 0.9730 and Eur/Chf is hovering nearer a circa 1.0790 peak vs 1.0735 trough even though the single currency has retreated further from 1.1100+ highs vs the Dollar towards key technical support (100 DMA at 1.1070) and recent lows (1.1066 from December 20). Eur/Usd has been undermined to a degree by renewed Italian political instability awaiting an official 5-Star Movement announcement that is expected to confirm the resignation of leader Di Maio and leave one of the coalition Government parties without a head. No evidence to support the theory until next Monday’s weekly Swiss sight deposit statement, but perhaps the Franc has been sold in advance of anticipated FTQ positioning?
JPY/NZD/AUD/GBP/CAD – The Yen has also conceded some ground on renewed risk appetite premises, but holding close to 110.00 against the Greenback, while the Aussie and Kiwi remain depressed below 0.6600 and 0.6850 respectively as the clock ticks down to Thursday’s major Antipodean data points in the form of CPI and jobs. Elsewhere, Sterling is rangy in Cable and Eur/Gbp cross terms either side of 1.3050 and 0.8500 awaiting Friday’s preliminary UK PMIs that could well be the final jigsaw pieces for next week’s BoE policy meeting, and similarly the Loonie is biding time between 1.3050-1.3100 in the run up to Canadian CPI just before the BoC.
EM – The Rand continues its recovery from worst levels after in line SA CPI and last week’s surprise SARB ease prompted Usd/Zar upside to test the 200 DMA yesterday, but also as the Dollar stalls after another look at the same DXY chart resistance level around 97.720. However, the Rouble is fading after a fleeting relief rally on the formation of a new Russian Government alongside oil prices towards 62.0000 again.
In commodities, WTI and Brent front-month futures remain lacklustre in mid-week trade – with participants pointing dampened sentiment on the coronavirus outbreak alongside demand woes for the complex, amid lower demand from airlines in light of cancelled flights ahead of the Chinese Lunar Year. Bearish supply-side fundamentals also weigh on the futures as EIA expects US total shale oil production to rise by 22k BPD in February to 9.2mln, with a predominant increase by the Permian. WTI meanders around USD 58/bbl ahead of its 200 DMA at 57.57/bbl and the 100 DMA at 57.29, whilst the Brent contract fell below its 100 DMA (62.79/bbl) with eyes on its 200 DMA at 63.97/bbl as Mar’20 futures test yesterday’s low just above 64/bbl. As a reminder, the weekly API Private crude inventories will be released later today on account of Monday’s MLK US market holiday. Spot gold prices have clambered off overnight lows after a test of the 1550/oz to the downside and ahead of potential modest resistance at its 50 HMA (~1559/oz) which did cap gains in the yellow metal during yesterday’s session. Meanwhile, copper prices found an overnight base around 2.8/lb but ultimately remains flat intraday.
US Event Calendar
7am: MBA Mortgage Applications, prior 30.2%
8:30am: Chicago Fed Nat Activity Index, est. 0.1, prior 0.6
9am: FHFA House Price Index MoM, est. 0.3%, prior 0.2%
10am: Existing Home Sales, est. 5.43m, prior 5.35m
10am: Existing Home Sales MoM, est. 1.5%, prior -1.7%
DB’s Jim Reid concludes the overnight wrap
A look at my Davos stats from yesterday shows around 20,000 steps and 10 miles of trekking around town to various meetings and events. I think 3 miles of that was taking a forced detour as Mr Trump’s motorcade came through town. We hosted a fascinating panel on sustainability pitting NYT best selling author Andrew McAfee who’s written an optimistic tome (More From Less) against Tim Jackson – an ecological economist – who has written a more pessimistic book (Prosperity Without Growth). It made for a lively debate and in all my interactions its clear that the number of these conversations are rising exponentially. In talking about our Davos piece on this topic (link here) at a separate meeting, one client explained one of the dilemmas they face. They invest in African development and mentioned that surely everyone would want health improvements in the continent – especially the poorer parts. However his assertion was that the only way that can happen in the immediate future is if their energy consumption increases which in turn potentially damages the planet. Raising the awareness of such trade-offs is one of the main themes of our report and this is where more and more attention needs to be focused.
It’s fair to say that the two headline grabbers of Davos yesterday have different views on the issue. President Trump said that “we must reject the perennial prophets of doom and their predictions of the apocalypse”. It’s fair to say Greta Thunberg took the polar opposite view. Elsewhere in Mr Trump’s speech, he trumpeted the achievements of his administration, criticised the Federal Reserve once again for not cutting rates fast enough, and also said that talks with China on phase two would start “very shortly”. Later on, ahead of a meeting with European Commission President Ursula von der Leyen, Trump said that “we’re going to talk about a big trade deal” and that it was “something that we all want to be able to make.” However, Trump also said in an interview with the Wall Street Journal that he was “absolutely serious” when it comes to putting tariffs on European cars if a trade deal couldn’t be reached.
In terms of today at Davos, Von der Leyen will actually be one of the main speakers, with an address at 11:30 CET, while there’s a potentially interesting panel on the future of financial markets a bit earlier at 10:30 CET, which includes IMF Managing Director Kristalina Georgieva, along with the US and UK finance ministers, Steven Mnuchin and Sajid Javid.
Back to markets, and equities sold off yesterday as the US returned from a holiday, with investors becoming a bit more cautious around the world amidst the continued spread of a new coronavirus in China. Reports that a case had been discovered in the US helped reverse a gradual rally back in markets prior to the last couple of hours of US trading. More on the US session below but the latest on the virus is that with the death toll increasing to 9 from 6, China is likely to start nationwide screening as officials are stepping up the monitoring of transportation links in the country. The confirmed cases of the infection have reached 440 as of January 21 (from 218 on January 20) and 1,394 patients are under medical observation. Including the detection in the US, the virus has now stretched to 5 additional countries with Macau reporting its first case overnight. Elsewhere, the WHO is going to decide today as to whether to declare the virus an international public health emergency. China has said that as of now it has seen no evidence of “super spreaders” – infected people who pass on the disease rapidly to many other people – but could not rule out that some would emerge. Super spreaders played a key role in the SARS pandemic 17 years ago, which killed almost 800 people and hurt economies across the region.
Assessing the economic impact of the coronavirus, our Asian economists draw conclusions from the past outbreaks of SARS and MERS (link here) and conclude that the impact from any spread of the disease would be felt most in the form of a sharp decline in retail sales, tourism, hotel & catering and travel activities as people try to avoid infection by restricting travel and people to people contact. Also, if necessary, public health measures might get introduced to reduce infections by imposing quarantines and closing schools which could result in a higher impact. But most other services and trade and manufacturing activities are unlikely to be affected much, in their view; and consumption and travel can be expected to recover quickly, even before the authorities give the all clear as observed during the SARS and MERS outbreak. The big problem is that as the Lunar New Year holidays approach it might prove hard for China to contain. Some good news is that China have been forthcoming and transparent about the spread of this coronavirus as they involved the WHO very early on and have also shared the genetic sequencing of the virus to allow early detection of cases in other countries. This is unlike what happened with SARS which first came to light in China in November 2002 but only got widespread attention after the first cases were detected in Hong Kong in February 2003.
Overnight in Asia, markets are making advances as investors are moderating their concerns over the virus. The Nikkei (+0.59%), Hang Seng (+1.25%) and Kospi (+1.00%) are all up. Meanwhile, the CSI (+0.08%) and Shanghai Comp (-0.02%) are trading flattish. As for Fx, the Japanese yen is down -0.15% while most Asian currencies are making modest advances. Elsewhere, futures on the S&P 500 are up +0.47% and yields on 10y USTs are up +1.2bps while, gold is trading down -0.33% and oil prices are down -0.40%. As for overnight data releases, South Korea’s preliminary 4Q GDP printed at +2.2% yoy (vs. +1.9% yoy expected).
Before this the S&P 500 fell back from its record high from Friday, ending the session down -0.26%. It was a similar story elsewhere, with the NASDAQ (-0.19%) and the Dow Jones (-0.52%) also seeing declines. Boeing (-3.33%) saw another tough session. Before this in Europe, the STOXX 600 pulled back from its intraday low of -0.99% to close just -0.14% lower. Nevertheless the risk-off sentiment supported sovereign debt, with 10yr Treasuries down -5.7bps to 1.766%, while the 2s10s curve flattened by -2.5bps. Gilt yields fell -1.9bps to their lowest level since October, while bunds (-3.1bps) and OATs (-3.0bps) also saw yields move lower. Italy was the exception, where the spread of BTPs over bunds widened by +4.9bps ahead of lots of political news flow of late and a regional election on Sunday. That said, they’re still holding the 150-170bps range seen since mid-November so it’ll be interesting to see if political risk leads to a break out.
Looking at yesterday’s earnings, UBS shares fell -4.53% after the company reported that last year’s net profit attributable to shareholders was down -5% year-on-year, with the bank also lowering their targets moving forward. Bank stocks were subdued generally yesterday, with the STOXX Banks index closing down -0.47% at a one-month low, though UBS isn’t a member of that particular index.
Staying with earnings, Netflix reported overnight and said that it added 8.76mn subscribers in 4Q (+20% yoy). However, it forecasted slower subscriber growth in the current quarter at 7mn (vs. 7.82mn) expected. The stock was up +2.38% in afterhours trading. IBM also reported with a slight beat. The stock was up +3.83% after hours.
Over in FX, sterling was the strongest-performing G10 currency yesterday, as the UK employment numbers ended a run of pretty weak data from the country. The 3m/3m employment change rose to +208k (vs. +110k expected) in November, its highest rate since January, while the unemployment rate remained at 3.8%, in line with expectations. In response, investors lowered the odds of a rate cut from the BoE at next week’s meeting after the data release, with the chances falling to around 60%, having been at 70.5% at the close on Friday. Our economists point out (link here) though that most of yesterday’s announced employment gains have been government led so it shouldn’t change the view on a necessary rate cut too much. The last big data release before the BoE meeting will be the preliminary January PMIs on Friday, so the market will be paying close attention.
Meanwhile in Germany, the ZEW Survey beat expectations, with the current situation reading rising to -9.5 (vs. -13.5 expected), while the expectations reading rose to 26.7 (vs. 15.0 expected), the strongest reading for the expectations indicator since July 2015. So a note of optimism ahead of tomorrow’s ECB meeting.
In terms of the day ahead there are a number of key highlights. From central banks, the Bank of Canada will be deciding on rates, while Bank of England Governor Carney will be speaking at the Bloomberg Climate Forum in Davos. Earnings releases out today include Johnson & Johnson, Abbott Laboratories, ASML and Texas Instruments. Finally on the data, we’ll get French business confidence in January, Italian industrial sales and industrial orders from November, UK public sector net borrowing for December, Canada’s December CPI reading, and finally US existing home sales for December and the FHFA house price index for November.
