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Authored by Bryce Buchanan via The Burning Platform blog,

Many government officials with long entrenched power are unwilling to give up any of that power.  In their minds, they have a right to control our lives as they see fit, with complete indifference to our wishes.  To avoid rebellion, they need to hide this fact as much as possible.  They want the citizens to believe the lie that we are a nation of laws with equal justice under the law.  To advance this lie, they have staged many theatrical productions that they call “investigations”.  They try to give us the impression that they want to expose the facts and punish wrongdoing.

Most of the big ‘investigations’ in the news in recent years have not been at all what they pretended to be.  The sham investigations of Hillary’s email, or the Clinton Foundation, or Weiner’s laptop, or Uranium One, or Mueller’s witch hunt, or Huber’s big nothing, or the IG’s whitewash, or the Schiff-Pelosi charades, have all been premeditated deceptions.

There are three types of investigations that call for different deceptions by the Deep State. 

The first type is the rare honest investigation.   Examples would be the attempt to find the truth about Fast and Furious (Obama’s gunrunning operation), or the IRS scandal (Obama’s weaponizing of government).   In response to real investigations, the criminals do two things… lie and hide evidence.  Key evidence, even if it is under subpoena, just disappears.  In the IRS case, Lois Lerner’s relevant email and the email of 6 others involved in the scheme was just “lost”.  The IRS “worked tirelessly” to find the email, but hard drives had been destroyed and back-up drives were missing, so the subpoenaed evidence could not be provided.

For the Deep State, hiding and destroying evidence of guilt is standard operating procedure.  They simply report a “glitch” that destroyed the key evidence and that’s the end of it.  Or, they simply redact the portions of the record that would expose the truth.  To my memory, no one ever suffers any consequences for this.  Even now, Director Wray and others are tenaciously withholding evidence.

The second type of ‘investigation’ is when the Deep State pretends to investigate the Deep State.  In these ‘investigations’ the outcome is known in advance, but the script calls for pretending, sometimes for years, that it an honest investigation is underway.

There was nothing about the Hillary investigations that had anything to do with finding facts.  The purpose from the beginning was exoneration.  Key witnesses were given immunity and many were allowed to attend each other’s interviews.  There were no early morning swat team raids to gather evidence.  Evidence was destroyed with no consequences.

When Anthony Weiner’s laptop was found to contain over 340,000 Hillary emails in a file named “insurance”, the FBI did not rejoice about finally getting the ‘lost’ email.  No, they hid the discovery for weeks until a New York agent threatened to go public.  Then, quite miraculously, Peter Strzok found a way to very quickly examine 340,000 messages and found that there was nothing at all that was incriminating.  No rational person would believe that.

The dirty cops are so comfortable about getting away with lies like this that Huber can announce that he found no corruption, when it is readily apparent that he did not interview key witnesses.  He even turned away whistleblowers who wanted to submit evidence.   A real investigator, Charles Ortel, could have given Huber a long list of Clinton Foundation crimes.  Like the Weiner laptop fake investigation, you don’t find crimes if you don’t really look for them.

The dirty cops are so confident in their ability to deceive the public that they just announced that the FISA court reforms will be managed by David Kris.  Kris has been a defender of FBI misconduct and he attacked Devin Nunes for telling the truth about the FISA court.  They don’t even care about the appearance of fairness.  They do what they want.

IG investigations have proven to be flimsy exonerations of Deep State criminality.  Any honest observer can see that there was a carefully organized plan by top officials to control the outcome of the Presidential election.  This corrupt plan involved lying to the FISA court, illegal surveillance and unmasking of citizens and conspiring with media partners to make sure lies were widely circulated to voters.  The government conspirators and the majority of the media were functioning as nothing more than a branch of Hillary’s campaign.  That’s a lot of power aimed at destroying Trump.

To an IG investigator, this monumental scandal was presented to us as nothing to be very concerned about.  Yes, a few minor rules were inadvertently broken and there did appear to be some bias, but there was no reason at all to think that bias effected any actions.  If the agencies involved make a training video and set aside a day for a training meeting, then that should satisfy us completely.

The third type of investigation involves investigating an imaginary crime for political reasons.  The Mueller investigation and the impeachment investigation are two examples of this.  Probably as a justification for illegal surveillance they were already doing, the conspirators pretended that there was powerful evidence that Trump was colluding with Putin to win the election.  Lies about this issue propelled the country into 3 years of stories about nothing… stories and investigations about something that never happened.  Never in the history of nothing has nothing been so thoroughly covered.

Because there was nothing, and because it was known from the start that, “there is no big there, there”, the Mueller Team used several irrelevant legal actions to prolong the belief that they were closing in on Trump.  Mueller arranged for their media partner, CNN, to film the early morning swat team raid on 67 year old Roger Stone’s home.  It was very dramatic and very un-necessary.   Also, some small-time Russian troll farms were indicted so that the word “Russia” could fill the news, prolonging the desired myth.  One of the indicted firms did not even exist.  The others did not appear to favor any one candidate and much of their activity was after the election.

Mueller led a 40 million dollar investigation looking for a crime.  That effort failed at finding any collusion, but it did play a role in the Democrats winning a majority in the House of Representatives.  That then enabled another investigation of an imaginary crime for political purposes.  A scripted hearsay ‘whistleblower’ submitted lies that allowed Adam Schiff to continue his own campaign of lies.  You know the rest of the story.  Trump is being falsely charged for doing what Biden bragged about doing.

The Deep State and the media appear to believe that we are fooled by these fraudulent investigations.  We are not fooled.  We are tired of the lies and the arrogance. 

We are increasingly angry that there is a double standard of justice in this country.  There is a protected class of people who are not prosecuted for their crimes.  This needs to end.

DoubleLine Capital’s Jeffrey Gundlach has already express his views on the Federal Reserve’s retreat into manipulation of both the financial markets, and the media narrative, via the central bank’s continuing “ad hoc” operations in the repo market. He also hasn’t been shy with his warnings – at the risk of being labeled a chicken little – that stocks will get crushed during the next downturn, even as the rest of the market sees every pullback as a dip to buy, and every disappointing economic print as another reason to root for another rate cut.

And during the first-ever Doubleline “Round Table Prime” featuring a handful of guests. In keeping with the theme, the panel stared with a discussion of the current state of monetary policy, and the cognitive dissonance surrounding the Fed’s repo operations, and Powell’s unwillingness to label it what it truly is: QE4.

As several of the panelists pointed out, here we are, already well into January, and the market is still grasping for the Fed’s liquidity teat.

Which is why central banks will have no choice but to remain accomodative over the coming year, according to David Rosenberg of Rosenberg Research. Even referring to the Fed’s rate cuts as a ‘return’ to loose monetary policy by the world’s biggest central banks is misleading. The Bank of England is the only one of the world’s main central banks aside from the Fed that managed to raise interest rates. And it’s not like the Fed managed to get us that far off the zero bound before the potentially Trump-inspired about-face.

Rosie added that even though the economy is humming right now, the Fed’s “rosy” economic outlook could be dashed by the weakness that’s already beginning to show in the US consumer.

“When we look at what’s going to happen in the coming year, I think all the central banks are going to remain extremely accommodative. My sense is that although the Fed would probably like to not have to ease policy and they’re premising it on their rosy economic outlook, I think that rosy economic outlook is going to be challenged, and I think the biggest stress test is whether or not the US consumer – which was resilient last year – in the face of weakness in other parts of the economy, is going to remain resilient.”

The economist, who for years was one of the most wide-read names (if not the most wide read) at Gluskin Sheff, added that rather than simply following in the path of Bernanke and Yellen, Powell has been, in his own way, quietly revolutionary.

For example, Powell understands the feedback mechanism between the corporate debt sector and the stock market (if companies can raise debt, how can they afford to buy back their own shares?)

“Jay Powell has completely broken with precedent. When credit markets seized up in late 2018, he’s somebody who understands duration, he’s somebody who understands the full credit spectrum. He grasps the magnitude of underlying assets not trading in exchange-traded bond funds – and that’s kind of in the weeds. Jay Powell understood what was going on, and the feedback mechanism – how it could transmit back into the stock market via arrested share buybacks.”

Instead of following through with the well-laid tightening path, long foretold in the central bank’s dot plots, Powell has chosen to keep volatility contained “at any cost.”

“He has chosen to break with his predecessor and try to get out in front of credit volatility, keep it contained at all costs, and obviously that’s backed him into a corner because the only debate on Wall Street is how big the Fed’s balance sheet is going to get.”

But while Rosie expects rates to remain on hold in 2020, his fellow panelist, Danielle DiMartino Booth, an economic consultant who once worked at the Fed and is now one of its harshest critics, said rising geopolitical tensions could put rate cuts back on the table. 

Booth also pointed out that the Fed’s repo operations are causing its balance sheet to rapidly expand. There’s an expectation in the market that the central bank will surpass $4.5 trillion – its QE3 peak – “very quickly.” The fact that the central bank is refusing to call this QE 4 isn’t just ridiculous, it’s suspect.

“And we’re at a record $100 billion a month run rate. Levels of quantitative easing that were unheard of and unseen when we had QE3 running in the background at $85 billion a month. This is the quietest rejection/denial that I’ve ever seen at this institution that I used to call home.”

Right about here is where Gundlach finally jumps into the conversation, building on DiMartino Booth’s point. Though the central bank likes to project the image that they’re operating with a plan, in reality, they’re just bouncing from one crisis of confidence to the next. Which is why Powell is trying to say “as little as possible,” Gundlach said.

“I think Jay Powell has gotten into a mode where he wants to say as little as possible. When he started he seemed to have a framework in his head…particularly in the 4th quarter of 2018…but the market was by degrees and fairly consistently rejecting his framework.”

And that’s because it’s not just about the stock market. Remember all those warnings Powell and other central bankers have given about corporate credit markets?

“If you remember in the fourth quarter of 2018, the high yield bond market was closed, it couldn’t float an issue for 2 months. And Jay Powell, As the stock market was down into full bear market territory, he got in front of the podium in December of 2018 and reiterated his multiple rate hikes quantitative tightening framework that the market had already rejected as a sound policy.

“And subsequent to that press conference, he struggled for six months to put back to back press conference messaging together that was at all consistent with the one prior. And it kind of shamed him into following the bond market.”

“It seems to me that he’s just following the market at this point. And the market had been kind of leading the Fed…so I think what [Powell’s] looking to do is hope things hang together and to get through 2020 and rates pretty much on hold the entire year.”

Powell has also made some major blunders, Gundlach said, sounding almost as if President Trump really does have a justification for his disdain of the Fed chairman.

“Jay Powell did not understand in my opinion to what was happening in the credit market dynamic in 2018, and he also failed to foresee the dustup in the repo market in September 2019. I find that a little disconcerting.”

“In retrospect, you can see there was pressure on the repo funding because there was a mismatch between the issued bills and maturing bills and the tax payments in early September…but both of those variables are completely known.”

Mistakes were also made, in the panelists’ estimation, when it came to choosing Fed personnel.

“The fact that Powell was a huge advocate for John Williams taking over at the New York Fed was mistake number one. Then there was the dismissal of the head of the New York Markets Desk. So you had the architect of quantitative easing leave in the middle of negotiations over the debt ceiling.”

So far, the Fed has succeeded in keeping a lid on markets. But as Gundlach and his fellow panelists explained, Powell is walking a very tight rope. Something as simple as a slight unraveling of the American consumers’ voracious appetite for goods and services might be enough to throw a wrench in the central banks’ works, and expose the fact that they’re – as many have pointed out before – already tapped out.

Watch the full interview below:

After the IMF cut its global economic outlook for 2019 to 2.9% in October, the lowest since the financial crisis, and warned that global trade growth would be “close to a standstill”, moments ago the IMF once again downgraded its forecast for global GDP for 2020 and 2021, its sixth straight reduction, although in a sliver of optimism, global GDP in 2020 is now expected to post a modest rebound from 2.9% to 3.3%, (down from 3.4% in October) and to 3.4% in 2021 (down from 3.6%) as the IMF says “there are now tentative signs that global growth may be stabilizing, though at subdued levels.”

According to the IMF, the downward revision primarily reflects negative surprises to economic activity in a few emerging market economies, most notably India, where 2020 GDP is now expected to rise just 5.8% down from 7.0%, which means that in 2020 China will regain the title of the world’s fastest growing economy. In a few cases, this reassessment also reflects the impact of increased social unrest.

Emerging market debacle aside, the IMF said that on the positive side, market sentiment “has been boosted by tentative signs that manufacturing activity and global trade are bottoming out, a broad-based shift toward accommodative monetary policy, intermittent favorable news on US-China trade negotiations, and diminished fears of a no-deal Brexit, leading to some retreat from the risk-off environment that had set in at the time of the October WEO.”

However, and this will be of particular interest to traders, even the IMF admitted that “few signs of turning points are yet visible in global macroeconomic data.”

And so, in addition to the collapse in India, the IMF also sees continued slowdown in the US and Europe in 2020, both of which were cut by 0.1% to 2.0% and 1.3%, while China saw a modest increase by 0.2% to 6.0%, which however drops to 5.8% in 2021.

Commenting on its latest forecasts, the IMF said that “the balance of risks to the global outlook remains on the downside, but less skewed toward adverse outcomes than in the October WEO. The early signs of stabilization discussed above could persist, leading to favorable dynamics between still-resilient consumer spending and improved business spending. Additional support could come from fading idiosyncratic drags in key emerging markets coupled with the effects of monetary easing and improved sentiment following the “Phase One” US-China trade deal, with the associated partial rollback of previously implemented tariffs and a truce on new tariffs. A confluence of these factors could lead to a stronger recovery than currently projected.”

Nonetheless, the IMF admitted that downside risks remain prominent, and arise from:

• Rising geopolitical tensions, notably between the United States and Iran, could disrupt global oil supply, hurt sentiment,and weaken already tentative business investment.
• Higher tariff barriers between the United States and its trading partners, notably China, which have hurt business sentiment and compounded cyclical and structural slowdowns underway in many economies over the past year
• A materialization of any of these risks could trigger rapid shifts in financial sentiment, portfolio reallocations toward safe assets, and rising rollover risks for vulnerable corporate and sovereign borrowers. A widespread tightening of financial conditions would expose the financial vulnerabilities that have built up over years of low interest rates and further curtail spending on machinery, equipment, and household durables.

And the most amusing risk, one not seen before, climate change:

• Weather-related disasters such as tropical storms, floods, heatwaves, droughts, and wildfires have imposed severe humanitarian costs and livelihood loss across multiple regions in recent years. Climate change, the driver of the increased frequency and intensity of weather-related disasters, already endangers health and economic outcomes, and not only in the directly affected regions. It could pose challenges to other areas that may not yet feel the direct effects, including by contributing to cross-border migration or financial stress (for instance, in the insurance sector). A continuation of the trends could inflict even bigger losses across more countries.

But… but… whatever happened to the idiotic Keynesian “broken window” mantra: after all, what better reason to rebuild something over, and over, and over again than arson “global warming” causing all those Australian fires. Oh wait, it was arson. Nevermind, point still stands.

Perhaps the most ominous sign is that despite the “end” of the trade war, global trade volume forecasts were cut again, by 0.3% and 0.1% in 2020 and 2021 to 2.9% and 3.7%, respectively. The good news: both are an improvement to the dismal 1.0% recorded in 2019. Expect these numbers to be substantially cut in the coming quarters as the much anticipated global trade renaissance fails to emerge.

With the US on holiday celebrating MLK Jr. day, volumes around the globe are abysmal and sentiment has seen a modest drift even if the the general market tone has remained upbeat after the signing last week of the US/China Phase 1 trade deal, which helped push Asian shares to 20 months high this morning after US equities last week hit another all-time high on Friday.

MSCI’s s all-country index is up almost 2.5% for the first three weeks of the year and was holding near record highs on Monday along with Wall Street and European benchmark equity indices. Just three weeks into the new year, the S&P 500 has gained just over 3% and the NASDAQ almost 5%.

“The feel-good factor appears to be driven by a number of factors including better than expected economic data, as well as the dialing back of trade tensions between the U.S. and China as the low-hanging fruit of a phase one trade deal was being signed off,” Michael Hewson, chief market analyst at CMC Markets told Reuters. “If you also toss into the mix some better than expected earnings reports from U.S. banks and other multinationals, it makes a heady cocktail of optimism on which to push stock markets higher.”

US cash markets are closed, but US equity futures remained open and drifted lower as investors awaited the first full week of corporate earnings and some key central bank meetings this week. Crude oil first rose following supply disruptions in Libya and Iraq, but then faded most of its overnight gains.

European stocks were modestly in the red after striking a record closing high in the previous session, as investors paused before launching into a week packed with economic data and the European Central Bank’s first policy meeting of the year. The pan-European STOXX 600 index traded down as much as 0.3% before recovering much of its losses, after gaining nearly 1% on Friday on optimism around U.S.-EU trade talks to address long-standing issues such as a French digital tax and aircraft subsidies.

Among individual movers, Germany’s diagnostic company Qiagen rose 4% to the top of the STOXX 600 index after a report the firm was talking to an interested party about a possible acquisition, while British shopping center operator Intu Properties tumbled 7.5% after saying it was targeting an equity raise by the end of February to tackle debt. Also in the UK, tonic water maker Fevertree Drinks Plc hit its lowest level in over two years as it said annual revenue growth of 10% would be below its expectations, hurt by subdued Christmas trading in Britain. The company’s shares were on track for their worst session ever.

The benchmark European index has risen about 2% in January, as investors bet on faster global growth amid improving economic indicators and cooling U.S.-China trade tensions. For the week, all eyes will be on PMI readings from the euro zone, after a recent Reuters poll showed economists expected a slowdown in the bloc to have bottomed out in 2019.

“Markets increasingly think that we have seen the bottom regarding the industry so if the PMIs would surprise on the downside, that would be a risk to market sentiment,” said Teeuwe Mevissen, senior market economist at Rabobank.

Traders will also look to comments from ECB Chief Christine Lagarde on inflation and economic growth in 2020 at the central bank’s first policy meeting for the year on Thursday, where the bank is expected to keep the deposit rate unchanged after cutting it in September for the first time since 2016. “The ECB rendezvous will likely be the most interesting one as the new president launches the central bank’s second strategic review in the euro’s two decade history,” said Hussein Sayed, chief market strategist at FXTM.

Earlier in the session, MSCI’s index of Asia-Pacific shares ex-Japan was flat having risen to its highest since June 2018. Asia shares pared initial gains as Philippines, Hong Kong and Indian stocks fell with the MSCI Asia Pac Index starting Monday in the green before erasing most of the gains in the afternoon. The Philippines was the region’s worst-performing, with its benchmark index closing at the lowest level since Oct. 3. Hong Kong shares extended declines, as casinos including Sands China Ltd and Galaxy Entertainment Group Ltd slumped amid growing concern over the risk of China’s corona-virus outbreak on travel ahead of the lunar new year holidays. India’s Sensex snapped two days of gains. South Korea’s Kospi index rallied, helped by battery makers after Hyundai Motor said it’s considering cooperating with various companies to secure a stable supply of batteries. Japan’s Topix climbed to a one-month high while the Nikkei added 0.2% to be near its highest in 15 months.

“We are entering 2020 on a more stable footing with economies globally stabilizing and looking like they’re turning up, and the phase one trade deal,” UBS fixed income strategist Anne Anderson told Bloomberg TV in Sydney. “So it’s a bit more positive with regard to the economic fundamentals.”

In rates, US cash Treasuries are closed for the MLK holiday; Germany’s 10-year yield gained less than one basis point to -0.21%, while Britain’s 10-year yield advanced less than one basis point to 0.636% and Japan’s 10-year yield climbed one basis point to 0.01%.

“In 2020 we don’t expect the pace of growth to slow as much as it did last year,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “Accommodative policy and the reduction of downside risk following the signing of the Phase 1 U.S.-China trade deal will help support the economy and risk assets.”

In FX, a string of mostly solid U.S. data helped underpin the dollar.  Figures on Friday showed U.S. homebuilding surged to a 13-year high in December and a gauge of manufacturing activity rebounded to its highest in eight months. The dollar last traded at around 110.17 yen, not far off an eight-month peak of 110.305 last week. while the Bloomberg Dollar Spot Index up 0.1%; the euro was little changed at $1.1087 ahead of this week’s ECB meeting. The British pound sank 0.2% to $1.2986 as a string of poor British economic news has fanned speculation about a cut in interest rates soon, weighing on sterling. In Asia, the onshore yuan decreased 0.2% to 6.8715 per dollar, while the Japanese yen was little changed at 110.18 per dollar.

While equities movers were few and far between, the big overnight action was in commodities, as Brent jumped back above $65 a barrel as unrest hit key production regions: Iraq temporarily stopped output at an oil field on Sunday, while Libyan production almost ground to a halt after armed forces shut down a pipeline. However, much of the initial gains were faded.

Another major mover was nat gas futures, which were briefly halted at the start of trading, when $2.00 stops were hit for the first time since May 2016 amid growing fears of a massive inventory glut.

Elsewhere in commodities, iron ore decreased 0.4% to $94.11 per metric ton. Gold gained 0.2% to $1,559.62 an ounce.

With geopolitics on the backburner for now, investors now turn their attention to the Trump impeachment drama set to begin this week, and to corporate earnings after average results from the biggest banks on Wall Street.  Companies including Netflix, IBM, UBS, Procter & Gamble and Hyundai will post results. Key central bank meetings in Europe and Japan are also on the agenda. The world’s biggest billionaire boondoggle also begins: the World Economic Forum, the annual gathering of “global leaders in politics, business and culture”, opens in Davos, Switzerland.

DB’s Jim Reid summarizes all the weekend/overnight events:

I hope you had a good weekend. I spent the weekend watching Toy Story 4 twice (wife cried first time, daughter the second time as she was scared), having a blazing row with my wife in a public park as I forgot to put the break on the occupied pram and it started the very early stages of a journey down a hill that could have terminated in a lake had my wife not ran and intervened, getting hay fever in-spite of it being frosty and then attending a 5 year old’s party where they unfortunately had two cats which I was allergic to. At the party they showered us all with glitter and I’m not sure I’ve got it all off yet which as I head off to Davos this morning probably isn’t a great look.

Around the sparkles from my suit we will be having conversations about growth in Davos and ahead of that we published a note last week (link here) looking at how wonderful growth has been for humankind relative to the stagnant bleak existence before the first industrial revolution. However, we acknowledge the side effects to growth in recent decades, which are higher debt, domestic inequality and the most worrying of all environmental damage. Concerns over the environment are only going to escalate further and it is fast becoming the topic of our age. Action needs to be taken but we wanted to stress that for many reasons (which we discuss) we can’t ignore the need for growth in looking for solutions.

Moving on, the highlights for this week are policy meetings from the ECB (Thursday) and the Bank of Japan (tomorrow), along with the release of the flash PMIs from around the world (Friday). Earnings season also continues with a number of key releases, while events at the World Economic Forum in Davos will dominate the news cycle throughout the week. Note that there’s a US holiday today so equity and bond markets will be closed there.

Joining me at Davos (main events Tuesday to Friday) will be a number of world leaders and senior central bankers.Ahead of this, the IMF will be releasing their World Economic Outlook update today, which includes their latest economic forecasts. Tomorrow there’ll be an opening speech from US President Trump, and on Thursday, there’ll be another from German Chancellor Merkel. Lastly, on Friday, there’s a panel on the Global Economic Outlook, with a number of key speakers, including ECB President Lagarde, IMF Managing Director Georgieva, Bank of Japan Governor Kuroda.

With regards to the ECB meeting on Thursday, the main focus will be perhaps be on whether Lagarde announces something on the upcoming strategic review. See here for a preview of the ECB meeting on Thursday and here for the BoJ meeting tomorrow.

In terms of data, the main highlight will be the preliminary January PMIs coming out on Friday. One in particular to follow will be the UK reading, as it comes ahead of the Bank of England’s decision the following week, where investors have recently ratcheted up their expectations that the BoE might cut rates. Also worth keeping an eye on is Germany, where the composite PMI was back in expansionary territory in December for the first time since August. The rest of the day by day data calendar is at the end.

Elsewhere earnings season continues apace this week with Europe starting to join in. Highlights include Netflix, UBS Group and IBM tomorrow. Then on Wednesday, we’ll hear from Johnson & Johnson, Abbott Laboratories, ASML and Texas Instruments. Thursday sees releases from Procter & Gamble, Intel, Comcast and Union Pacific. Lastly, on Friday, there’s American Express and NextEra Energy.

Over the weekend U.K. chancellor Sajid Javid said in an interview with the FT that the U.K. will not be looking to align itself with the EU in many sectors after Brexit thus hinting that the government won’t be looking towards the close relationship that the market wants. He also reiterated that the government doesn’t plan an extension to the transition period. Overnight the pound is trading down -0.15% to 1.2996. It was above $1.31 early Friday before the week data (see below).

Oil has been a major mover in Asian trading this morning with Brent oil prices being up +1.31% at $65.71 after Libya’s biggest oil field began to halt production as armed forces shut down a pipeline. The country’s oil output is likely to be limited to 72,000 barrels per day, the lowest since August 2011, once its storage tanks are full and down from more than 1.2 million barrels a day on Saturday. This coincided with the ongoing protests in Iraq which led to a temporary closure of an oilfield yesterday with the production from another facility at risk of closure today. Meanwhile, most Asian equity markets are advancing this morning with the Nikkei (+0.28%), Shanghai Comp (+0.49%) and Kospi (+0.77%) all up. The Hang Seng is trading down (-0.58%). In terms of overnight data releases, the UK’s January Rightmove house price data showed that prices increased by +2.3% mom (vs. -0.9% mom last month), the most for any January since the data became available in 2002. In London, they gained +2.1% mom, also the highest for this time of the year since 2002. There will have been a post-election bounce but with Brexit battles looming it’s unlikely that this will be prolonged.

To recap last week now, the global equity advance continued, with the S&P 500 up +1.97% (+0.39% Friday) to yet another record high, having risen for 13 of the last 15 weeks. The NASDAQ also climbed +2.29% over the week (+0.34% Friday) to another new record, and it was very much the same story in Europe, where the STOXX 600 rose +1.29% (+0.96% Friday) to a record high. Although as we said last week record highs for Europe leave it only c.5% above the peaks seen in 2000 and 2007. The US market has more than doubled since these two points. Over in commodities, Brent crude ended the week down -0.20% (+0.36% Friday), its second successive weekly decline, but the real story was going on with Palladium, which rose for a 12th consecutive day, up +7.98% on Friday, its strongest day since December 2009 and a record high for the commodity. The metal has been affected by a supply deficit, and on a YTD basis it’s now up +28.41%!

Over in sovereign debt the picture was more muted, with 10yr Treasury yields up +0.2bps on the week (+1.4bps Friday) to close at 1.821%, while the 2s10s curve steepened +1.3bps (+2.1bps Friday) to 26.0bps. 10yr bund yields fell -1.6bps (+0.3bps Friday), though peripheral spreads over bunds widened, with the spread of Italian 10yr debt over bunds up +7.1bps last week (partly on ongoing political uncertainty – see here our economists’ recent piece for more) while the Spanish spread over bunds was up +3.9bps.

In terms of the data from Friday, US housing starts were incredibly strong in December, coming in at a seasonally-adjusted annual rate of 1608k (vs. 1380k expected), surpassing all expectations on Bloomberg and their highest level since December 2006. Building permits were slightly below expectations, however, at 1,416k (vs. 1,460k expected). Staying with the US, the University of Michigan’s consumer sentiment index dipped slightly to 99.1 for the preliminary January reading, (vs. 99.3 expected), while the current conditions index ticked up slightly to 115.8 (vs. 115.3 expected), its highest level since December 2018. Lastly, US industrial production fell -0.3% in December (vs -0.2% expected), and the number of job openings available fell to 6.8m in November, the lowest since February 2018. The falling number of job openings provides some evidence of weakening labour demand, something we’ve already seen with lower wage growth recently, after the previous week’s jobs report showing wage growth in December was at its lowest since July 2018.

It’s also worth noting the UK data, where retail sales unexpectedly fell -0.6% (vs. +0.6% expected) in December, helping to fuel investor expectations that the Bank of England will cut rates at their meeting next week. It follows weak data on inflation and growth earlier in the week. The odds of a rate cut have moved up to 70.5% on Friday, having been at 61.6% on Thursday and after starting the week at just 23.1%. The data from the UK this week (employment on Tuesday and PMIs on Friday) will therefore take on added significance for the decision.