After President Trump ordered the extrajudicial killing of Iranian Gen. Qassem Soleimani, Secretary of State Mike Pompeo said publicly that this act of war was justified because of an “imminent” Iranian threat that put “dozens if not hundreds of American lives at risk.” He couldn’t share the intelligence, of course, given its top-secret nature—and then before you know it Pompeo and Trump had largely dropped that storyline.
When pressed for details, both men said they needed to kill another country’s general because Soleimani had been involved in attacks in neighboring Iraq that led to the deaths of Americans. The Iranian general was a loathsome fellow, of course, but a little context seems to be in order.
The George W. Bush administration had declared war on Iraq based on—how do I put this charitably?—claims about the 9/11 attacks that turned out not to be true. Our government’s endless meddling hasn’t led to a few hundred casualties, but to least 500,000 deaths. Some U.S. troops still are there, albeit with an uncertain future after Iraq’s parliament recently gave them the boot as payback for striking the Iranian target while he was in Baghdad.
My favorite recent meme blasts Iran for moving its country so close to dozens of U.S. military installations, thus jokingly getting close to the crux of the issue. Then there was that time the CIA helped overthrow the Iranian government, leading to a revolution that empowered the current imam-ocracy. Before democratic Americans bloviate about the evils of a previously unknown Iranian general, perhaps they should start glaring at their own officials.
“It’s a nearly ineffable mystery how it is decided that Saudi Arabia, womb of the 9/11 hijackers, a backwards and oppressive theocracy…gets to be designated as America’s great ally in the Muslim Middle East,” wroteTheAmerican Conservative‘s Scott McConnell. “And that Iran—with its prickly, hostile, but partially democratic regime, its large and at least latently pro-Western middle class…should be an implacable enemy.”
He lamented Trump’s Iran decision, even though he voted for this “disrespectful Washington outsider” because he was more likely than anyone else to ask tough questions about who gets to decide such foreign-policy matters. The good-news story is that, like McConnell, few Americans seemed to be getting caught up in the war fever.
Indeed, many Trump supporters (as opposed to his usual partisans and cheerleaders in Congress and the media) opposed the attack. Democrats were aghast at the president’s policies, as usual. Even more hawkish publications were unimpressed. “While some vague lip service has been given to the idea that America was acting in self-defense against an imminent threat of attack, no such threat has been identified, and no explanation has been offered as to how killing one man could thwart an imminent military strike,” opined The Bulwark‘s Philip Rotner.
Last month, The Washington Postpublished the Afghan Papers, an investigation that showed that our nation’s military and civilian leadership misrepresented their successes in Afghanistan and had little clue about their goals there. The report was largely ignored against the backdrop of impeachment, but it seems as if many Americans grasped the essential point—that government officials only propagandize about war when their lips are moving.
Fortunately, after threatening on Twitter to attack Iranian cultural sites, Trump decided to back down and move closer to President Barack Obama’s Iranian playbook. That’s OK, because the previous president’s negotiation-oriented policies with Iran—an effort that may even have helped defeat ISIS in the region—is more productive than a policy of bluster and a potential war.
“Donald Trump started with over-the-top, machismo rhetoric toward Iran,” Politico reported. “He ended by backing down so far that he sounded more like his predecessor.” The unnecessary fracas is particularly bizarre, given those much-circulated Trump tweets from 2011 warning that Obama would start a war with Iran to help get re-elected. Trump threatened war before backing down, so he may be more like Obama on Iran than Obama was himself.
The squabble showcases the best and worst aspects of the Trump presidency wrapped into one package. On the best side, Trump is enough of an outsider—and unconcerned about norms and the political establishment’s feelings—to challenge the bipartisan foreign policy status quo that leads from one costly war to another. He hasn’t done much to end wars, but he has seemed less likely than others to immerse the country in a new one. On the worst side, he’s unpredictable and narcissistic, and could bumble his way into trouble.
As of this writing, the country seems to have dodged a bullet. Few people are buying the U.S. government’s unconvincing explanations about “imminent” threats. U.S. troops might finally exit Iraq. A broad-based anti-war movement may be emerging. I never like when governments pound war drums, but Trump’s latest misfire is turning out OK.
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The indictment provides: “On or about June 19, 2019, in Valencia County, in the District of New Mexico, the defendant, ANTONIO CARRILLO, knowingly and willfully did transmit in interstate commerce via Facebook, and interstate social media company, a communication, specifically a social media post, to the American Civil Liberties Union, and the communication contained a threat to injure American Civil Liberties Union Personnel.”
The alleged threat was posted as a comment on a Facebook threat, and reads as follows: “You Bitches Want a Physical Civil War.. I’m Game..I’ll bring My Farm Implements and They will Never find your Bodies..AND for Fun I’ll BURN Every ACLU Office in the State.. GO TRUMP GO.!”
Defendant also allegedly made the following post on Twitter publicly directed to @realDonaldTrump: “@realDonaldTrump, YOU Say YOU are going to DEPORT Thousands.. People are Saying,; I’LL believe it when I see it..Personally When Civil War Starts.. I’m Going to Burn Down EVERY ACLU Office in New Mexico.”
The indictment charges Defendant for the Facebook post, but not the Twitter post….
Section 875(c) [of Title 18 of the U.S. Code] prohibits certain threats to injure in interstate commerce. Because the First Amendment rights may potentially be at issue, the United States Supreme Court has added an additional element to the statute: the threat must be a true threat. A true threat is a statement “where the speaker means to communicate a serious expression of an intent to commit an act of unlawful violence to a particular individual or group of individuals.” “[T]he government must prove the defendant transmitted the communication for the purpose of issuing a threat or with knowledge the communication would be viewed as a threat.” Although the Defendant must intend that the recipient feel threatened, the Defendant need not intend to carry out the threat.
The Court finds that the indictment sufficiently apprises Defendant that he is charged with making a true threat….
Defendant argues that his Facebook post is protected by the First Amendment and was mere hyperbolic political speech.
True threats are not protected by the First Amendment. Generally, at this stage, the Court inquires whether a reasonable jury could conclude that Defendant issued a true threat. “[I]f there is no question that a defendant’s speech is protected by the First Amendment, the court may dismiss the charge as a matter of law.” … “If the court determines a reasonable jury could find that the [] communication[s] constitute[] … true threat[s], then it may deny the defendant’s motion to dismiss.” … A court may dismiss the charges against a defendant “[i]f there is no question that a defendant’s speech is protected by the First Amendment.”
Here, a reasonable jury could conclude that Defendant communicated a true threat. Defendant stated: “You Bitches Want a Physical Civil War.. I’m Game..I’ll bring My Farm Implements and They will Never find your Bodies..AND for Fun I’ll BURN Every ACLU Office in the State.. GO TRUMP GO.!” Specifically, a reasonable jury could conclude that Defendant intended ACLU personnel to feel threatened, or he knew that by posting the comment ACLU personnel would view it as a threat of injury.
Defendant argues that his comment was mere political speech. Defendant’s message contained political speech, including reference to apparent political discourse regarding a “civil war”, and ending his message with “GO TRUMP GO.” However, that political speech does not shield Defendant from culpability from the true threats otherwise contained in his message. Therefore, the Court cannot say that there is “no question” that Defendant’s comment is protected by the First Amendment.
Defendant argues that he only posted the message on Facebook and did not specifically send the message to ACLU personnel. While Defendant posted his message on Facebook, he specifically targeted ACLU personnel in New Mexico. Under these circumstances, a “rational juror, considering the language and context of these posts could consider them to be true threats because they directed specific, deadly action against a number of individuals.”
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With the Fed flooding the market with hundreds of billions of excess liquidity, it’s hardly a surprise that every single day is a new all time high. In fact, writing these daily updates is getting downright boring.
One day after the US stock market exploded higher in the last hour of trading, melting up before our eyes on no news, world shares followed apace rising to record highs on Friday, with markets across the globe a sea of green…
…supported by Chinese data that showed GDP slumping to just 6.1%, a fresh 29 year low, suggested the world’s second-biggest economy was stabilizing. As reported last night, China’s economy grew 6% between October and December last year. Anemic domestic demand and the trade war with the United States led to growth of 6.1% in 2019, the slowest in 29 years. However, the data also reinforced recent signs of an improvement in Chinese business confidence as trade tensions eased after Beijing and Washington signed an initial deal on Wednesday to defuse their tariff war.
China’s industrial production “is quite telling, because more broadly it speaks to the bottoming out in the global industrial-production cycle, which we’ve been looking for and the market’s been looking for for the last six to nine months,” John Woods, chief investment officer for the Asia Pacific at Credit Suisse, told Bloomberg TV in Hong Kong. This suggests “the global economy is on a recovering path.”
The continuing rebound in Chinese data, along with easing trade tensions with the United States, sent the MSCI world equity index up 0.2% and further into record territory. The Chinese data fueled a rise in the Chinese yuan, which touch a six-month high of 6.8660 to the dollar.
And with China stable for now, investors turned their attention to improved growth prospects across the world. European shares gained 0.7% in early trade, with Frankfurt, Paris and London indexes up 0.5% to 0.7%. Emini S&P futures were also pointing up, continuing a virtually straight line levitation since the Iran escalation faded away, while upbeat earnings from Morgan Stanley, rising U.S. retail sales, a strong labor market and robust manufacturing data had helped to lift Wall Street to record highs. Google became the fourth US company to top a market value of more than $1 trillion, after its shares rose nearly 17% over the last three months.
“Investors that were last year buying risky assets rather defensively – not really removing their hedging – right now are deploying cash,” said Olivier Marciot, a portfolio manager at Unigestion. “A number of investors that were sitting on big piles of cash are starting reallocating. People are unloading cash positions into financial assets.” In other words, as we said over the weekend, everyone is going “all in” in a manic chase of performance, something observed just before every blow off top ends in tears.
Europe’s Stoxx 600 Index headed for its biggest gain in two weeks, with International Consolidated Airlines Group SA surging after removing a shareholdings limit, even as French Supermarket Casino slumped 12% after slashing its forecast for 2019 operating profit growth because of the damage from transport strikes in the fourth quarter.
Earlier in the session, Asian markets also rose chasing the US momentum and after the Chinese data, with MSCI’s broadest index of Asia-Pacific shares outside Japan gaining 0.4% and headed for a seven-week advance, which would be the longest winning streak in two years. China’s own blue-chip index ended just barely higher, down from an earlier rise of as much as 0.7% amid speculation of less stimulus. The index has rallied more than 8.5% since the beginning of December, fueled by hopes for improved trade relations with the United States. Shares in Australia and South Korea both rose, with Japan’s Nikkei climbing to a 15-month high while Japan’s Topix rose after two days of declines.
“This is all good news and positive for the China story,” said Daniel Gerard, senior multi-asset strategist at State Street Global Markets in Hong Kong.
Still, as Reuters notes, analysts say global equities may find it difficult to maintain momentum from their recent rally as optimism over the trade truce gives way to uncertainty over the next steps in trade talks. While the Phase 1 deal signed on Wednesday may defuse the 18-month trade row, analysts said it was unlikely to ease broader friction between the two countries. Most of the tariffs imposed during the dispute remain in place and a number of issues that sparked the conflict are still unresolved.
“The challenge from here is how long we can maintain these improvements,” said Steven Daghlian, market analyst at CommSec in Sydney.
In FX, the dollar held steady, reaching eight-month highs against the yen boosted by encouraging data from the United States on Thursday, before trimming its advance to 0.09% to 110.24, while the pound slumped after U.K. retail sales unexpectedly extended their worst run on record, increasing the probability of a Bank of England interest-rate cut later this month
Most major currencies were contained within tight ranges as large option expiries were in focus
In rates, the longest-dated Treasuries dipped and the U.S. yield curve steepened modestly after the Treasury said it would start issuing 20-year bonds in the first half of 2020 while German bonds were steady; the Italian bond curve bull flattened after Italy’s constitutional court rejected Matteo Salvini’s demand for a referendum on introducing a British-style first-past-the-post electoral system. Elsewhere, the yield on Taiwanese government debt fell to a record intraday low as insurers roared back into the market.
In commodities, Oil edged higher alongside gold. Emerging-market equities also climbed, on course for a seventh week of gains.
Earnings season ramps up next week with the likes of Procter & Gamble and Intel reporting. Friday’s economic data include JOLTS job openings, University of Michigan consumer sentiment. Schlumberger and State Street are due to publish results.
Market Snapshot
S&P 500 futures up 0.2% to 3,325.00
STOXX Europe 600 up 0.7% to 423.31
MXAP up 0.4% to 174.43
MXAPJ up 0.4% to 572.52
Nikkei up 0.5% to 24,041.26
Topix up 0.4% to 1,735.44
Hang Seng Index up 0.6% to 29,056.42
Shanghai Composite up 0.05% to 3,075.50
Sensex up 0.1% to 41,973.36
Australia S&P/ASX 200 up 0.3% to 7,064.13
Kospi up 0.1% to 2,250.57
German 10Y yield unchanged at -0.218%
Euro down 0.08% to $1.1128
Italian 10Y yield rose 3.5 bps to 1.265%
Spanish 10Y yield fell 1.7 bps to 0.45%
Brent Futures up 0.7% to $65.07/bbl
Gold spot up 0.1% to $1,554.69
U.S. Dollar Index up 0.1% to 97.38
Top Overnight News
The U.S. Treasury will start issuing 20-year bonds in the first half of 2020, expanding its roster of securities as the government seeks ways to fund a ballooning deficit
China’s economy stabilized last quarter, with the first acceleration in investment since June signaling that a firmer recovery could be underway. Industrial output rose 6.9% in December from the same period the previous year, versus the median forecast of 5.9% China’s economy displayed greater-than-expected strength in December, handing Beijing vindication of its new- found moderation in economic stimulus and suggesting the approach will continue through 2020
President Donald Trump plans to nominate Judy Shelton and Christopher Waller to join the Federal Reserve, the White House said. The two economists have widely different backgrounds, but their policy comments suggest they’d be inclined to be open to Trump’s calls for easier monetary policy.
The European Union’s new trade chief pulled no punches on an inaugural visit to Washington, saying President Trump’s tariff threats amount to short-sighted electioneering and warning him about widespread economic damage from protectionism
Oil held its biggest gain in almost two weeks on optimism a more conciliatory approach on trade from the U.S. will help revive growth, but was still headed for a weekly drop amid persistent demand concerns.
The White House budget office violated federal law when it withheld about $214 million appropriated by Congress to the Defense Department for security aid to Ukraine, an independent congressional watchdog agency concluded.
European Central Bank watchers are virtually convinced President Christine Lagarde will change the institution’s inflation goal for the first time in 17 years as she attempts to achieve the price stability that eluded her predecessor. Almost 90% of respondents in a Bloomberg survey predicted the ECB will officially alter its strategy to give equal weight to too-low and too-high inflation
The European Union’s trade chief said the race is on to avert an escalation in transatlantic commercial tensions as a result of U.S. objections to a French digital- services tax
The trade deal struck between U.S. President Donald Trump and Beijing will allow financial services companies from the U.S. to apply for licenses to buy Chinese non-performing loans directly from banks, cutting out the middle man they have to go through now
Asian equity markets traded positive after taking impetus from another record-setting session on Wall St. following the recent Phase 1 deal signing and where sentiment was underpinned by encouraging earnings and data, while participants also digested a flurry of key Chinese data including GDP which grew inline with expectations. ASX 200 (+0.3%) extended on all-time highs led by broad strength in mining names including Rio Tinto despite the Co. printing weaker Q4 iron ore shipments, although Nufarm was at the other end of the spectrum with double-digit losses after it flagged weaker earnings across several segments. Nikkei 225 (+0.4%) was kept afloat by favourable currency flows, while Hang Seng (+0.6%) and Shanghai Comp. (U/C) initially gained after the continued PBoC liquidity efforts and slew of tier-1 Chinese data in which GDP printed inline with expectations and both Industrial Production and Retail Sales topped estimates. However, the data showed China’s 2019 growth slowed to 6.1% from 6.6% Y/Y which was the weakest since 1990 albeit still within the official 6.0%-6.5% target range. Finally, 10yr JGBs were marginally higher in a reclaim of the 152.00 level with the rebound unfazed despite the positive risk tone and all metrics pointing to weaker results at today’s 20yr JGB auction.
Top Asian News
Emerging Market Fiscal Deficits No Longer the Bogeyman to HSBC
Indonesia Says Microsoft Plans to Build Local Data Center
Here’s What You Need to Know About Friday’s Gain in Asian Stocks
Japan Court Bars Operation of Shikoku Electric’s Reactor
An upbeat session for European equities thus far [Euro Stoxx 50 +0.8%] with firm gains seen across the board, following on from an overall positive APAC session as sentiment remains underpinned following reassuring earnings coupled and decent data. The CAC (+1.0%) DAX (+0.8%) lead the gains in the region, with FTSE 100 joining the party following early underperformance on currency dynamics. Sectors are mostly in the green with the exception of the energy names as oil stalled not far off YTD lows and natural gas prices slump. Meanwhile, sectors leading the advances include industrials, utilities, healthcare and IT, with the latter potentially feeling some tailwind from Alphabet joining the USD 1tln market cap club. In terms of move. In terms of individual movers – heavyweight Bayer (+1.0%) remains a top gainer in the DAX after reports stated the Co. could be weeks away from settling over 75k cancer claims in relation to its Roundup weed-killer. Elsewhere, Richemont (+5.0%) shares have been bolstered by a Q3 revenue beat against the background of Hong Kong protests – thus Swatch (+1.9%) are higher in tandem. On the flip side, Casino (-7.7%) shares slumped as much as 9% at the open amid dismal prelim results and a profit warning amid the French pension reform protests, with peer Carrefour (+0.8%) initially falling in sympathy but nursing losses in recent trade.
Top European News
U.K. Retail Sales Extend Worst Run on Record Despite Discounting
Cyberpunk Setback Sends Witcher Game Maker Shares Down 13%
Flybe Rescue Is Said to Include U.K. Subsidies for Some Routes
In FX, sterling was in the ascendency ahead of ONS retail sales data for the festive month of December, with forecasts for a firm rebound in consumption bolstered by the fact that Black Friday fell within the reporting period. However, longs and anyone front-running the release on the prospect or rumour of an upside surprise were left high and dry by another bleak set of numbers. Cable duly collapsed from 1.3100+ to sub-1.3050 and Eur/Gbp spiked from around 0.8487 to circa 0.8533 and back above a big 1.2 bn option expiry at 0.8500 in the process.
USD – In stark contrast to the whipsaw moves witnessed vs the Pound, trading ranges have been relatively sedate and exemplified by the DXY sticking between narrow 97.259-396 lines in the run up to another raft of US economic releases, including housing starts, building permits, ip, manufacturing output, JOLTS and Michigan Sentiment. However, the Dollar retains an underlying bid in wake of yesterday’s upbeat data and Philly Fed survey on balance, with a significantly steeper Treasury curve on longer end supply factors also lending support.
AUD/NZD/CAD/JPY/EUR/CHF – The Aussie and Kiwi have derived a degree of positive momentum from mostly encouraging Chinese macro news overnight to pare some declines against their US counterpart and hold around or above big figures, at 0.6900 and 0.6600 respectively. Consequently, the Aud/Nzd cross is pivoting 1.0400 and could yet rebound a bit further if hefty Aud/Usd expiry interest at 0.6925 (1.3 bn) exerts some upside influence. Elsewhere, the Loonie is still meandering either side of 1.3050 and near 1.1 bn expiries from 1.3030-40, while the Yen is consolidating in a lower band below 110.00 where 1 bn expiry interest resides and the Euro remains restrained under 1.1150 amidst even bigger expiries stacked from 1.1090 to 1.1200 (totalling almost 12 bn and fairly evenly spread). Conversely, the decent Usd/Chf expiries are not that close to current levels (0.9660 or so) and the Franc failed to glean any real impetus/direction from Swiss import/export prices even though firmer or less deflationary than previously.
EM – Pretty mixed/inconclusive performances vs the Buck thus far, but the Rand has clawed back some post-SARB weakness and Lira vice-versa as oil prices rebound to the benefit of the Rouble, while the Renminbi continues to grind higher in wake of the aforementioned upbeat (overall) Chinese data.
In commodities, WTI and Brent front-month futures have been lifted in recent trade in what seems to be more of a sentiment-driven move as opposed to oil-specific fundamental news. The former eyes USD 59/bbl to the upside having stalled just ahead of the psychological level, whilst the latter eclipsed USD 65/bbl. PVM notes that from this month’s oil market reports, the key takeaways are that global inventories will grow this year, with oversupply concerns continuing to persist in H1 2020, driven my rising Shale output and in-fitting with the latest US production figures with reached a record high of 13mln BPD. “In view of this, any lingering bulls ought to retreat into hibernation, remerging only in the summer when oil fundamentals shake off their bearish malaise.” – PVM states. The analysts also note that prices are underpinned after the Senate passed the USMCA trade deal yesterday but upside remains capped by concerns on whether China will live up to its promises to bolster US imports, which could bring an end to the ceasefire between the world’s two largest nations. Elsewhere, spot gold continues to consolidate from the parabolic price action seen since early December with prices currently steady just above the 1550/oz mark ahead of potential mild resistance around 1558/oz – with eyes remaining on the geopolitical landscape after US Central Command stated that 11 US troops were injured in last week’s Iranian attacks on the Al-Asad airbase, despite US President Trump claiming that there were no injuries. Copper prices meanwhile remain supported amid the overall market sentiment with price north of USD 2.85/lb, and potentially feeling some tailwinds from China’s GDP remaining within its target band.
US Event Calendar
8:30am: Housing Starts, est. 1.38m, prior 1.37m; Housing Starts MoM, est. 1.1%, prior 3.2%
8:30am: Building Permits, est. 1.46m, prior 1.48m;Building Permits MoM, est. -1.48%, prior 1.4%
9:15am: Industrial Production MoM, est. -0.2%, prior 1.1%
Capacity Utilization, est. 77.0%, prior 77.3%
Manufacturing (SIC) Production, est. -0.05%, prior 1.1%
10am: U. of Mich. Sentiment, est. 99.3, prior 99.3; Current Conditions, est. 115.3, prior 115.5; Expectations, est. 89, prior 88.9
10am: JOLTS Job Openings, est. 7,250, prior 7,267
DB’s Jim Reid concludes the overnight wrap
I’ve been in Zurich, Geneva and Paris this week with no end in sight to the travel over the next few weeks. I must admit this time of year the amount of calories my iWatch says I’ve burnt on a daily basis drops noticeably as I don’t have as much chance to go to the gym or don’t walk as much. I also eat bad food away from home. However I try to counter this by walking everywhere. Yesterday I had a delightful 6 mile round trip from Gard Du Nord to our office at either ends of the day whilst listening to a audio book on sustainability. Nearly 300 calories each way and 11,000 steps. Oh and helping the environment a little and not taking that much longer than a taxi would take. Although less helpful to the environment are the worn soles of my work shoes than need replacing regularly. What I’ve learnt about fitness over the years is that going to the gym 3 times a week for 40 minutes hardly moves the needle. If you can do that plus walk a lot every day then the weight starts to comes off. Given that I’m 2.5 stone (c.16kgs) lighter than I was 12 years ago I may bring out a fitness video in time for next Xmas. I confess that 1 stone of that came in 1 month just by cutting back alcohol intake massively at the start. That progress positively stunned me and has meant I’ve kept at around 10 units a week (save the odd blow out) for well over a decade now. It’s a bit dull and the younger me would find me very boring but it has meant that at no point have I cut back on enormous portions of food. So also look out for the (no) diet book for next Xmas as well then.
Markets don’t seem to be on a diet either at the moment as the bull run for equities showed no sign of slowing down yesterday as US stocks climbed to yet more record highs thanks to positive data and earnings releases (including decent data from China overnight – more later). It was a strong day across the board, with the S&P 500 (+0.84%), the NASDAQ (+1.06%) and the Dow Jones (+0.92%) all advancing to new highs. In the process Alphabet (+0.8%) became the fourth global member of the trillion dollar market cap club alongside Microsoft ($1.27tn), Apple ($1.38tn) and Saudi Aramco ($1.8tn). Amazon is the next cab off the rank having got very very close last year (reached it intra-day) but is now c.7% below that mark.
Although tech shone yesterday, the top performer in the S&P 500 was Morgan Stanley, which rose +6.61% following a strong set of earnings. The bank reported net income in Q4 of $2.2bn, up 46% compared with Q4 2018. Meanwhile net revenue of $10.9bn was also up +27%, beating estimates of a $9.7bn reading.
In Europe, the STOXX 600 closed up +0.22% at its own record high albeit only around 5% above the peaks in the summers of 2000 and 2007. So not much above where it was 20 years ago albeit with dividends having been paid. From the same market peaks the S&P 500 has more than doubled.
The risk-on sentiment spread across asset classes, with oil rallying yesterday, as WTI (+1.35%) and Brent crude (+0.81%) both performed strongly. Treasury yields also pushed higher following a strong set US data out yesterday, with 10yr yields up +2.44bps to 1.807%, while the 2s10s curve steeped by 1.4bps. That said, sovereign debt had a more varied performance in Europe, with the core countries seeing yields fall, including Bunds (-1.8bps), OATs (-1.1bps) and Gilts (-1.1bps), while in the European periphery all saw yields rise, with Italian (+3.5bps) and Spanish (+1.4bps) debt losing ground. BTP futures rallied back a bit just after the close as Italy’s constitutional court rejected the election law referendum. It’s a big few weeks in politics in Italy. For more on this see our latest research here.
In terms of those data releases from yesterday, the Philadelphia Fed manufacturing business outlook survey came in well above expectations, with the current general activity index up to 17.0 (vs. 3.8 expected), its highest level since May. Furthermore, the 6-month ahead general activity index rose to 38.4, its highest level since May 2018, suggesting a decent degree of optimism about the coming months. Given the area includes much of Pennsylvania, an important swing state narrowly won by President Trump in 2016, those numbers may be welcome news for his re-election campaign.
We also got a strong set of weekly initial jobless claims, at 204k last week (vs. 218k expected), which is the second-lowest reading since April 2019. The reading also sends the 4-week moving average down to 216.25k, its lowest since the start of November. Finally, retail sales rose +0.3% in December, in line with expectations, while the ex-autos reading was up +0.7% (vs. +0.5% expected), so a solid set of data overall notwithstanding some slight revisions to earlier retail sales.
Speaking of helpful developments for President Trump, just one day after the Phase One deal with China was signed, the US Senate passed the USMCA trade agreement yesterday in an 89-10 vote. The agreement will now head to President Trump’s desk for signing.
Overnight in Asia, markets are mixed with the Nikkei (+0.47%) and Shanghai Comp (+0.09%) being up while the Hang Seng (-0.03%) and Kospi (-0.06%) are making marginal loses. Elsewhere, futures on the S&P 500 are trading flat. More importantly we saw China’s monthly data dump. Going through it, Q4 GDP was in line with consensus at +6.0% yoy and YTD Q4 GDP came in one tenth lower than consensus at +6.1% yoy. Other data surprised on the upside with December industrial production coming in at +6.9% yoy (vs. +5.9% yoy expected) and retail sales printed at +8.0% yoy (vs. +7.9% yoy expected) while YTD fixed asset investment excluding rural came in two tenths higher than consensus at +5.4% yoy. So overall a strong set of December numbers came out from China pointing to a gradual recovery in economic activity.
In other news, the US Labour Department confirmed reports from earlier in the week that it will ban computers from the room where journalists receive advance access to major economic reports such as employment and inflation figures in an effort to ensure a level playing field. So don’t expect full stories immediately on the release of data anymore. The change will take effect from March 1. Elsewhere, Bloomberg reported that the US treasury will start issuing new 20 year bonds in the first half of 2020. Yields on 10y USTs are up +1.0bps overnight.
Back to yesterday and we also had the minutes released from Lagarde’s first ECB meeting in December yesterday. In terms of the key takeaways, it was clear that the Governing Council was happy with the monetary policy stance, with the minutes saying that “members widely agreed with the proposal … to keep the monetary policy stance unchanged, with a steady hand being warranted for monetary policy.” Notably, there seemed to be an increasing awareness of the side effects of policy, which were mentioned 5 times in the minutes, up from 1 at Draghi’s last meeting. So clearly something being thought about by the ECB. And we also had a paragraph on issues of climate change, with “members contending that there was a need to step up efforts to understand the economic consequences of climate change.”
Looking at the day ahead, we have a number of data releases coming out. In Europe, there’ll be the Euro Area’s current account and construction output for November, along with December’s CPI and core CPI, while from the UK we’ll get December’s retail sales. Over in the US, there’ll be December’s housing starts, building permits, industrial production and capacity utilisation, November’s job openings, and January’s preliminary University of Michigan sentiment reading. We’ll also hear from the Philadelphia Fed President Harker, who’ll be discussing the economic outlook.
Ayatollah Slams Trump: He’s A “Clown” Who Will Betray The Iranian People
In his first Friday prayers sermon in more than 8 years, Ayatollah Khamenei said that the IRGC will seek revenge against the US and take their fight beyond Iran’s borders.
That the Ayatollah picked now for the sermon is hardly a surprise: The Iranian public is furious at the regime for its botched downing of a Ukrainian passenger airliner filled with young Iranian students traveling back to college abroad. Many even suspect that the regime’s tepid public retaliation for the killing of General Qasem Suleimani has also helped undermine it, according to Haaretz.
Going on the offensive, the Ayatollah attacked not only the US but the EU member states that once tried so hard to save the Iran deal after President Trump pulled the US out. He assailed President Trump as a “clown” who will “betray Iranians,” whom President Trump has claimed to support.
“These American clowns who lie and say they are with the Iranian people should see who the Iranian people are,” the Ayatollah said Friday.
President Trump infamously tweeted a message in Farsi directed at the Iran people last week.
However, Iran’s feelings about its one-time European counterparts have substantially soured over the last day after the UK, France and Germany decided to lodge a complaint Tuesday alleging violation of the JCPOA by Iran, depriving them of any right to claim the moral high ground.
Yesterday, Iran accused its former European partners of sacrificing a troubled 2015 nuclear deal to avoid trade reprisals threatened by President Trump.
The European complaint could worsen Iran’s economic pain by leading to UN sanctions being re-imposed.
“Resistance must continue until the region is completely freed from the enemy’s tyranny,” Khamenei said, in a reference to the US.
The Ayatollah also renewed his call for American and coalition troops to leave neighboring Iraq and the wider Middle East. Her also defended Iran’s Quds Force, which coordinates with regional proxies to support Iran’s interests, as a “humanitarian” organization.
“The fact that Iran has the power to give such a slap to a world power shows the hand of God,” said Khamenei, in a reference to the strikes, adding that the killing of Soleimani showed Washington’s “terrorist nature.”
“The Quds Force is a humanitarian organization with human values that protects people across the region,” Khamenei said. “They are fighters without borders.”
For those who couldn’t attend the Ayatollah’s little speech, a twitter account that has often been linked with the Iranian regime appears to have tweeted a lengthy summary.
In minutes: Tehran’s Friday Prayer to be led by Imam Khamenei after 8 years
The past two weeks were eventful and exceptional weeks. There were bitter and sweet events for the Iranian nation to take lessons from during these two weeks.
What does “Allah’s Days” mean? It’s the day when one sees God’s power in events. The day when 10s of millions in Iran & 100s of thousands in Iraq & other countries took to the streets to venerate Martyr Soleimani creating the world’s largest funeral. This is one of Allah’s Days.
The day when IRGC’s missiles demolished the US military base in Iraq is also one of Allah’s days. A nation having the spirit to slap a global, harassing, Arrogant Power in this way shows God’s power and is one of Allah’s Days.
After 41 years since the #IslamicRevolution‘s victory, which power brought this unparalleled, massive crowd to the funeral of Martyr #Soleimani? Who created these love and enthusiasm? What factor could bring such a miracle other than God’s power?
The shameless US government was disgraced by calling Martyr Soleimani a terrorist when he was recognized by everyone as the most prominent & powerful commander in the fight against terrorism. Which other commander could do the great things he did?
The Zionist news empire tried to say the honorable General is a terrorist! The US’s President & Secretary of State repeated this. God did the opposite of what they wanted. Not only in Iran, but in various countries, people saluted this Martyr & burnt the Zionist & US flags.
The US govt killed Martyr Soleimani, not in the battlefield but thievishly & cowardly. This abased the US. Before that, such assassinations were the Zionist regime’s specialty.
Now, US president says he assassinated Soleimani. God smacks some people to make them confess.
The IRGC’s powerful response in attacking a US military base was a blow to the US govt. It was an effective military strike. More important and greater than a military strike, it was a blow to the dignity and awe of the US as a superpower.
For years, the US has been receiving blows from the #Resistance in Syria, Iraq, Lebanon & Afghanistan. But, bombing #alAssadbase was greater than these since it defied the prestige and awe of the US govt. They said they’ll intensify sanctions. This can’t win back their dignity.
The Quds Force is an entity with lofty, human goals. The Quds Force looks everywhere & at everyone with tolerance. They are combatants without borders who go wherever they are needed to protect the dignity of the oppressed. They make sacrifices to protect sanctities.
The combatants in the #QudsForce sacrifice their lives to assist the oppressed in the region. They help them to confront terrorism and Arrogance and push away the shadow of war, terror, and destruction from Iran and other countries.
With their turnout in the 10s of millions for Martyr #Soleimani‘s funeral, the Iranian nation showed they support #resistance against the enemy’s aggression.
These American clowns lie in utter viciousness that they stand with the Iranian people. See who the people of #Iran are.
Are the few hundred people who disrespected posters of Iran’s honorable Martyr General Soleimani “the people of Iran”? Or, are the millions who attended his funeral the Iranian people?
The villainous US govt repeatedly says that they are standing by the Iranian ppl. They lie. If you are standing by the Iranian ppl, it is only to stab them in the heart with your venomous daggers. Of course, you have so far failed to do so, & you will certainly continue to fail. pic.twitter.com/InyE31p12k
FInally, Khamenei called for national unity following the tragic downing of UIA Flight 752. He said Iran’s “enemies” were celebrating the unfortunate error, term usually used to refer to the United States and its allies, had tried to use the downing of Ukraine International Airlines flight 752 to shift attention from the killing of Soleimani.
US Warship Sails Through Contested Taiwan Strait After Election
Less than a week after Taiwan President Tsai Ing-wen won re-election and days after the U.S. and China signed a Phase 1 trade agreement, a U.S. guided-missile cruiser transited the Taiwan Strait on Thursday. Joe Keiley, a spokesman for the U.S. 7th Fleet, on Friday said the U.S.S. Shiloh (CG-67), a Ticonderoga-class guided-missile cruiser, conducted a “routine Taiwan Strait transit” freedom of navigation mission and demonstrated its “commitment to a free and open Indo-Pacific.”
“The U.S. Navy will continue to fly, sail and operate anywhere international law allows,” Keiley said, quoted by Reuters.
Naturally, China wasn’t pleased about a U.S. warship sailing through the strait. Chinese Foreign Ministry spokesman Geng Shuang said the warship was being tracked and asked the U.S. to respect China’s territorial integrity.
“The issue of Taiwan is about China’s territorial integrity, and the most important and sensitive issue for China-US relations,” Geng said, adding that the Trump administration must respect the one-China principle.
A statement from Taiwan’s defense ministry said the U.S. warship was on routine freedom of navigation mission when it sailed north, through the strait, a region that separates the island from China. The narrow strait has been a hotbed of tension between Beijing and Washington.
President Trump has given support to Taipei, especially with the re-election of President Tsai Ing-wen, who leads the pro-independence Democratic Progressive Party and is against China’s “one country, two systems” policy. In recent years, Washington has ramped up arms sales to Taiwan, including the sale of 108 Abrams main battle tanks, 66 F-16 fight jets, dozens of radar systems, and hundreds of missiles and torpedoes, to a nation that has emerged as one of Uncle Sam’s most reliable arms clients.
Ironically, ahead of last Saturday’s presidential election in Taiwan – China sailed its latest aircraft carrier through the strait, also a passive-aggressive attempt to show who’s boss. Less passively and more aggressively, Beijing recently sent fighters and bombers to encircle the island and conducted war drills in the waters around the country.
Beijing has said that Taiwan is “the most important and sensitive issue in China-US relations,” as it becomes clear that trade disputes between the U.S. and China aren’t the problem, it’s a great power competition that will only intensify in the years ahead.
Frontiero v. Richardson (1973) and United States v. Virginia (1996) were argued on the same day, twenty-three years apart. Ruth Bader Ginsburg argued the former case, and wrote the majority opinion in the latter case.
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For all the public sparring between the two inflated egos known as Donald Trump and James Comey, the president and the former FBI director have some important commonalities. For starters, they both hate it when the common people keep secrets from the ruling class of which they represent competing factions.
The point of agreement between the two political antagonists became clear on January 14, when President Trump complained that Apple executives “refuse to unlock phones used by killers, drug dealers and other violent criminal elements.” Some of us poked at our ears, wondering if we were hearing echoes. After all, not so long ago, as head of the FBI, Comey tried to force Apple to unlock encrypted cell phones and raged that Apple, Google, and other companies “market something expressly to allow people to place themselves beyond the law.”
Trump agreed with Comey back then, too, by the way; in 2016, he called for a boycott of Apple until such time as the company helped the FBI break iPhone security.
Apparently, not as much divides these two men as they like to let on.
In public, Trump calls Comey a “disgrace” and Comey fires back at a man he calls a “strange and slightly sad old guy.” But—aside from the fact that they’re both correct about each other’s flaws—that’s intramural combat between power addicts over who should wield the power. That the public should be poked, prodded, and intruded upon is a given for Comey and Trump. And it’s a sentiment that binds so many of our would-be lords and masters in public office.
The shared nature of official nosiness becomes clear when you remember last November’s bipartisan vote to extend the Patriot Act, a measure that the Electronic Frontier Foundation says “broadly expands law enforcement’s surveillance and investigative powers and represents one of the most significant threats to civil liberties, privacy, and democratic traditions in US history.” Even as Democrats debated impeaching Donald Trump—a move they later approved—they overwhelmingly joined with the Trump administration to support the surveillance bill’s extension.
Trans-partisan hand-holding on surveillance state measures is certainly nothing new among the political class. The Patriot Act originally passed during the presidency of Republican President George W. Bush, but with plenty of cross-aisle support.
“I drafted a terrorism bill after the Oklahoma City bombing,” senator and current leading Democratic presidential wannabe Joe Biden boasted to The New Republic after the Patriot Act’s passage. “And the bill John Ashcroft sent up was my bill.”
Later, as vice president, Biden threatened countries that considered offering asylum to surveillance whistleblower Edward Snowden.
Sen. Elizabeth Warren (D-Mass.), another leading contender for the Democratic presidential nomination, frets that the data encrypted communications will “allow companies to hide from ‘government spying’—such as text messages and chatroom transcripts—have proven to be ‘key evidence’ in previous regulatory and compliance cases.”
It seems Trump and Comey are in good company on the issue. Well, good-ish—for a certain D.C.-centric value of the word.
“Lawmakers are giving big tech firms an ultimatum: Give police access to encrypted communications or we’ll force you,” The Washington Postreported last month.
“It ain’t complicated for me,” Senate Judiciary Committee Chairman Lindsey Graham (R-S.C.) told representatives from Facebook and Apple at a Capitol Hill hearing in December. “You’re going to find a way to do this or we’re going to do it for you.”
“You all have got to get your act together or we will gladly get your act together for you,” said Sen. Marsha Blackburn (R-Tenn.), who also sits on the judiciary committee.
Ranking Democratic member Dianne Feinstein (Calif.), meanwhile, said she is “determined to see that there is a way that phones can be unlocked when major crimes are committed,” whether tech companies like it or not.
And so on. Trump and Comey’s frenemy act opposing communications privacy for people who don’t draw government paychecks is the rule, not the exception.
Sure, there are some surveillance skeptics and privacy advocates among the political class. But they’re rare, and except for a very few civil liberties-oriented and government-skeptic types who are usually on the outs with the real powerbrokers, they’re awfully unreliable on the issue.
The problem is that the Trumps, Comeys, Grahams, Bidens, Feinsteins, Blackburns, and Warrens of the world largely agree that the government that defines their lives and gives them importance should be vastly powerful. The rationales they come up with depend on the specific priorities of the politician in question, the cultural moment, and the audience, but they’re forever arguing in favor of an intrusive state from which we can keep no secrets.
“It had become clear, to me at least, that the repeated evocations of terror by the political class were not a response to any specific threat or concern but a cynical attempt to turn terror into a permanent danger that required permanent vigilance enforced by unquestionable authority,” whistleblower Edward Snowden wrote of his growing awareness of what lay behind the surveillance state in Permanent Record, his 2019 memoir.
Substitute “violent criminal elements” or “criminal action by Wall Street” or “child abusers” or any other justification politicians might come up with if you wish, but it all leads in the same direction. Ultimately, the members of the political class may fight tooth and nail, but it’s not over whether Leviathan should paw through our communications. They just disagree over who should be in charge of the pawing.
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Sure, you read Plato’s Republic in college, but how much do you really remember? Did you know that a 12th century French poem, “The Song of Roland,” influenced J.R.R. Tolkien’s Middle Earth?
Classical Stuff You Should Know is an aptly titled podcast whose weekly episodes tackle important names, writings, and events that influenced the evolution of Western civilization—and continue to influence modern culture—from the philosophy of ancient Greece to the bloodshed of the English Civil War, from the legends of King Arthur to the poet John Milton’s biblical fan fiction.
The series hits the right mix between banter and information that will make you wish your history classes had been half as entertaining. Hosts Graeme Donaldson, A.J. Hanenburg, and Thomas Magbee are educators at the Austin, Texas–based Veritas Academy. The school’s Christian values are evident in the podcasters’ perspective, but the breadth and depth of their knowledge make for good listening even if you don’t share that specific lens. Although some on the right talk about “Western civilization” as cover for an exclusionist xenophobia, this podcast delivers substance without nasty politics and reveals the West as a set of ideas and accomplishments that need not be connected to nation or race.
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Frontiero v. Richardson (1973) and United States v. Virginia (1996) were argued on the same day, twenty-three years apart. Ruth Bader Ginsburg argued the former case, and wrote the majority opinion in the latter case.
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For all the public sparring between the two inflated egos known as Donald Trump and James Comey, the president and the former FBI director have some important commonalities. For starters, they both hate it when the common people keep secrets from the ruling class of which they represent competing factions.
The point of agreement between the two political antagonists became clear on January 14, when President Trump complained that Apple executives “refuse to unlock phones used by killers, drug dealers and other violent criminal elements.” Some of us poked at our ears, wondering if we were hearing echoes. After all, not so long ago, as head of the FBI, Comey tried to force Apple to unlock encrypted cell phones and raged that Apple, Google, and other companies “market something expressly to allow people to place themselves beyond the law.”
Trump agreed with Comey back then, too, by the way; in 2016, he called for a boycott of Apple until such time as the company helped the FBI break iPhone security.
Apparently, not as much divides these two men as they like to let on.
In public, Trump calls Comey a “disgrace” and Comey fires back at a man he calls a “strange and slightly sad old guy.” But—aside from the fact that they’re both correct about each other’s flaws—that’s intramural combat between power addicts over who should wield the power. That the public should be poked, prodded, and intruded upon is a given for Comey and Trump. And it’s a sentiment that binds so many of our would-be lords and masters in public office.
The shared nature of official nosiness becomes clear when you remember last November’s bipartisan vote to extend the Patriot Act, a measure that the Electronic Frontier Foundation says “broadly expands law enforcement’s surveillance and investigative powers and represents one of the most significant threats to civil liberties, privacy, and democratic traditions in US history.” Even as Democrats debated impeaching Donald Trump—a move they later approved—they overwhelmingly joined with the Trump administration to support the surveillance bill’s extension.
Trans-partisan hand-holding on surveillance state measures is certainly nothing new among the political class. The Patriot Act originally passed during the presidency of Republican President George W. Bush, but with plenty of cross-aisle support.
“I drafted a terrorism bill after the Oklahoma City bombing,” senator and current leading Democratic presidential wannabe Joe Biden boasted to The New Republic after the Patriot Act’s passage. “And the bill John Ashcroft sent up was my bill.”
Later, as vice president, Biden threatened countries that considered offering asylum to surveillance whistleblower Edward Snowden.
Sen. Elizabeth Warren (D-Mass.), another leading contender for the Democratic presidential nomination, frets that the data encrypted communications will “allow companies to hide from ‘government spying’—such as text messages and chatroom transcripts—have proven to be ‘key evidence’ in previous regulatory and compliance cases.”
It seems Trump and Comey are in good company on the issue. Well, good-ish—for a certain D.C.-centric value of the word.
“Lawmakers are giving big tech firms an ultimatum: Give police access to encrypted communications or we’ll force you,” The Washington Postreported last month.
“It ain’t complicated for me,” Senate Judiciary Committee Chairman Lindsey Graham (R-S.C.) told representatives from Facebook and Apple at a Capitol Hill hearing in December. “You’re going to find a way to do this or we’re going to do it for you.”
“You all have got to get your act together or we will gladly get your act together for you,” said Sen. Marsha Blackburn (R-Tenn.), who also sits on the judiciary committee.
Ranking Democratic member Dianne Feinstein (Calif.), meanwhile, said she is “determined to see that there is a way that phones can be unlocked when major crimes are committed,” whether tech companies like it or not.
And so on. Trump and Comey’s frenemy act opposing communications privacy for people who don’t draw government paychecks is the rule, not the exception.
Sure, there are some surveillance skeptics and privacy advocates among the political class. But they’re rare, and except for a very few civil liberties-oriented and government-skeptic types who are usually on the outs with the real powerbrokers, they’re awfully unreliable on the issue.
The problem is that the Trumps, Comeys, Grahams, Bidens, Feinsteins, Blackburns, and Warrens of the world largely agree that the government that defines their lives and gives them importance should be vastly powerful. The rationales they come up with depend on the specific priorities of the politician in question, the cultural moment, and the audience, but they’re forever arguing in favor of an intrusive state from which we can keep no secrets.
“It had become clear, to me at least, that the repeated evocations of terror by the political class were not a response to any specific threat or concern but a cynical attempt to turn terror into a permanent danger that required permanent vigilance enforced by unquestionable authority,” whistleblower Edward Snowden wrote of his growing awareness of what lay behind the surveillance state in Permanent Record, his 2019 memoir.
Substitute “violent criminal elements” or “criminal action by Wall Street” or “child abusers” or any other justification politicians might come up with if you wish, but it all leads in the same direction. Ultimately, the members of the political class may fight tooth and nail, but it’s not over whether Leviathan should paw through our communications. They just disagree over who should be in charge of the pawing.
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