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Just as the US-China trade talks are set to resume at the highest level, the WTO has made a second front in the global trade war far more likely, when moments ago the World Trade Organization gave President Trump a green light to impose tariffs on as much as $7.5 billion worth of European exports annually in retaliation for illegal government aid to Airbus SE.

• WTO ON WEDNESDAY ISSUED RULING ON 15-YEAR-LONG U.S. TRADE CASE VS. AIRBUS
• WTO SAYS U.S. CAN RETALIATE AGAINST $7.5B IN EU GOODS A YEAR
• U.S. EXPECTED TO IMPOSE TARIFFS ON EU BEFORE NEGOTIATING SETTLEMENT
• U.S. HAS RIGHT TO RETALIATE FOR ILLEGAL EU SUBSIDIES TO AIRBUS -WTO

The decision represents one of the last hurdles before the U.S. can announce which products from the European Union it will target with tariffs selected from an initial list that includes:

• Airbus planes and parts
• Wine and spirits produced by LVMH, Remy Cointreau SA, Pernod Ricard SA and Diageo PLC
• Leather goods manufactured by Christian Dior SE and Hermes International

The new tariffs can take effect after the WTO adopts the report, which is expected to happen at a meeting in Geneva this month. According to Bloomberg, the award is the largest in WTO history, and is nearly twice as large as the previous record of $4.04 billion set in 2002.

More importantly, the long-awaited ruling marks a milestone in the WTO’s longest-running dispute that will further test transatlantic relations which have deteriorated under Trump’s “America First” approach to international ties, with tariffs now virtually assured. It’s also an example of Trump getting a favorable ruling from an organization he has threatened to pull out of.

The development is terrible news for Europe, which is effectively already in a recession with European manufacturing contracting sharply as a result of the ongoing U.S. trade war with China; any wider flareup of tit-for-tat tariffs with Europe will further threaten the global economy and accelerate Europe’s contraction.

Not coincidentally, just one day earlier, on Tuesday, the WTO cut its own trade growth forecast for this year to the weakest level in a decade, warning against a “destructive cycle of recrimination”, a cycle which it itself ironic stoked just one day later.

The S&P 500 is testing a crucial CTA “trigger” level at 2903, but more broadly, all the major US equity indices have broken down below key technical support levels…

• Nasdaq below 100DMA

• Dow below 100DMA

• S&P below 100DMA

• Russell 2000 below 200DMA

Bond yields and the dollar are unchanged.

Authored by Richard Trzupek via The Epoch Times,

The message was clear: “There is no climate emergency.”

With those five simple words, a global network of scientists and professionals attempted to inject reasonableness and decorum into what should be a robust discussion about a complex scientific and public policy issue, but has instead degenerated into an ever more intense mud-slinging contest over the years.

People on one side of the argument dismiss their opponents as wild-eyed socialists attempting to leverage public fear and ignorance to further their political agenda. On the opposite side, people dismiss those who disagree with their supposedly settled scientific conclusions as nothing more than knowing shills or ignorant dupes of evil energy interests.

In between those extremes that are so popular with armies of public relations professionals, who shape the messages of public interest groups and professional politicians to maximum effect, are a not-so-quiet silent majority of scientists and professionals who take a more measured, reasoned view of the science when considering the supposed climate emergency some say we’re facing.

A group of 500-some scientists and professionals signed on to the “European Climate Declaration” that was released last week. This simple, short, and understandable statement proposed how analysis of any public policy issue involving complex science should be approached from a reasoned, fact-based perspective.

Statements such as “97 percent of climatologists agree that anthropogenic climate change is occurring” isn’t a statement of fact, it’s an opinion twice removed. It’s an opinion that involves evaluation of the legitimacy of how the results of the poll in question were sorted to dismiss some answers and allow others, and it’s an opinion in terms of how representative the sample size is with respect to all climate professionals.

Statements such as “modeling shows that catastrophic climate change will occur in the next [pick a number] years unless drastic changes are made” is also an opinion. It’s an opinion because the results of any model, and in particular any model that purports to predict the future of anything as complex as the entire planet’s climate system, necessarily relies on a multitude of choices made by the model’s designer. The relative importance of the many, many factors that go into the model’s complex calculations are based on the judgments of the model designer, and those judgments are matters of opinion, not statements of fact.

In a letter sent to António Guterres, secretary-general of the United Nations, the leaders of the European Climate Declaration urged the U.N. to “follow a climate policy based on sound science, realistic economics, and genuine concern for those harmed by costly but unnecessary attempts at mitigation.”

Hundreds of scientists and professionals from 13 European nations signed on to the Declaration, supported by fellow signatories from 10 other countries outside the European Union. I was honored to be asked to be one of the signatories from the United States and most enthusiastically agreed to do so.

There is likely to be much criticism of the professional qualifications of many of the signatories, since many, like me, are not climatologists. And yet, so many people speaking out on the issue of climate change who are convinced there is a climate emergency have so little personal understanding of the science involved in the discussion.

Politicians such as Rep. Alexandria Ocasio-Cortez (D-N.Y.), would-be politicians like Tom Steyer, and pundits such as MSNBC’s Chris Matthews have little or no personal understanding of the actual scientific principles involved. They can point to their preferred “expert” and declare that we should trust him or her without question, but they don’t know why.

Even professionals such as mechanical engineer Bill Nye and astronomer Phil Plait, who are very much experts in their own fields, have demonstrated that they have little personal knowledge of the nuances of climate science, though they use their positions and popularity to assume positions of authority regarding this singular issue. Other vocal non-climatologists such as Lord Monckton, Anthony Watts, Mark Steyn, Steve McIntyre, or a chemist and air quality professional who moonlights as a contributor to The Epoch Times, grasp the principles far more.

I will close with three important claims that form part of the European Climate Declaration. I believe each to be accurate, and hope that reasonable people can use these claims, and the others contained in the declaration, as the basis for civilized, respectful, and meaningful discussions in the future.

One: “The world has warmed at less than half the originally predicted rate, and at less than half the rate to be expected on the basis of net anthropogenic forcing and radiative imbalance. It tells us that we are far from understanding climate change.”

Two: “Climate models have many shortcomings and are not remotely plausible as policy tools. Moreover, they most likely exaggerate the effect of greenhouse gases such as CO2. In addition, they ignore the fact that enriching the atmosphere with CO2 is beneficial.”

Three: “There is no climate emergency. Therefore, there is no cause for panic and alarm. We strongly oppose the harmful and unrealistic net-zero CO2 policy proposed for 2050. If better approaches emerge, we will have ample time to reflect and adapt. The aim of international policy should be to provide reliable and affordable energy at all times, and throughout the world.”

Well said. Well said, indeed.

With Quad Witch behind us and China’s Golden Week upon us, the regularly-scheduled “global growth scare” has taken front-page headlines (for now) and is sparking equity derisking as safe-haven flows have sent gold and bond (prices) higher.

And, as Nomura’s Charlie McElligott notes, while the ugly ISM miss was the short-term macro-catalyst, US equity markets are now testing levels where more technical forced selling will exaggerate the markets’ volatility.

1) A now much deeper and more sizeable “Short $Gamma” position for Dealers in both SPX (flipped “short” under 2978, with combined $Gamma of SPX / SPY at -$7.1B, just 11.7th %ile back to 2013) and Nasdaq (“flipped” short under 190.63, with $Gamma in QQQ of -$317.3mm, just 7.8th %ile since 2013)

 

2) We now see net “Negative $Delta” in index / ETF options now significant as well, with SPX / SPY at -$103.9B (15.6th %ile, flipped “negative” below 2962) and QQQ at -$7.4B (8.0th %ile, flipped “negative” below 191.45)

3) The final “escalation flow” comes from CTA Trend “triggers” being hit, as the Nomura CTA model estimates that both the S&P- and Nasdaq- futures positions would be DELEVERAGING / REDUCING from the prior “+100% Long” to now a “+54%” signal (the 3m window “flipped” short for both), with S&P selling on the closes below 2960 and Nasdaq selling below 7778 yesterday, which is likely some of the flow we seen going through the market now during the overnight / early hours session

Fleshing out CTA positioning in Global Equities futures and further triggers from here:

• SPX position would turn outright SHORT on a break lower and close below 2903 – yet would re-leverage back to “+100% Long” on a close above 2972

• For Nasdaq, the position would turn outright SHORT on a break lower and close below 7569 – yet would re-leverage back to “+100% Long” on a close above 7825

And across other asset classes…

Trade accordingly.

Authored by Paul Joseph Watson via Summit News,

President Trump has accused Democrats of conducting a “coup” to remove him from office, commenting, “We’re at war, these people are sick.”

“As I learn more and more each day, I am coming to the conclusion that what is taking place is not an impeachment, it is a COUP, intended to take away the Power of the People, their VOTE, their Freedoms, their Second Amendment, Religion, Military, Border Wall, and their God-given rights as a Citizen of The United States of America!” tweeted Trump.

….People, their VOTE, their Freedoms, their Second Amendment, Religion, Military, Border Wall, and their God-given rights as a Citizen of The United States of America!

— Donald J. Trump (@realDonaldTrump) October 1, 2019

During separate comments that were made at a reception in New York City after the United Nations General Assembly, Trump also made clear that he was on a war footing.

“We’re at war. These people are sick, they’re sick and nobody’s called it out like I do. I don’t understand, people are afraid to call it out, they are afraid to say that the press is crooked, we have a crooked press, we have a dishonest media,” said Trump.

Democrats have become so unhinged in their efforts to remove Trump from office, Rep. Maxine Waters demanded that Trump not just be arrested, but placed in solitary confinement.

“I’m calling on the GOP to stop Trump’s filthy talk of whistleblowers being spies & using mob language implying they should be killed. Impeachment is not good enough for Trump. He needs to be imprisoned & placed in solitary confinement,” she said.

*  *  *

My voice is being silenced by free speech-hating Silicon Valley behemoths who want me disappeared forever. It is CRUCIAL that you support me. Please sign up for the free newsletter here. Donate to me on SubscribeStar here. Support my sponsor – Turbo Force – a supercharged boost of clean energy without the comedown.

After repeat threats over the past weeks, Turkey looks to finally make good on its threat to unilaterally invade Syria after its end of September deadline for the United States to assist in jointly establishing a ‘safe zone’ has passed. 

“We may suddenly arrive one night,” Erdogan told reporters after a speech to parliament in Ankara on Tuesday, referring to a possible cross-border offensive in northeast Syria. “We have tried every means, with great patience, to solve this problem together with our allies… Turkey doesn’t have a single day left to lose on this issue,” Erdogan said.

The Turkish lira weakened on the news for the second day ahead of the possible cross border offensive, which would inevitably lead to direct clashes with US proxy forces in Syria’s northeast, especially the Kurdish YPG arm of the Syrian Democratic Forces (SDF). 

Last week at the UN General Assembly President Erdogan presented his plan to set up a massive 300 mile long ‘safe zone’ along the border, which would be almost 20 miles deep into Syrian territory, where with international support Turkey would resettle up to 2 million refugees. 

Turkey’s allies and foes alike, however, have immediately recognized the likely ethnic cleansing and dramatic demographic shift that would unfold under the Turkish plan. As Reuters has noted:

But Turkey’s new emphasis on the refugee transfer, which would move large numbers of Sunni Arab Syrians into a traditionally Kurdish heartland, could face resistance from allies opposed to changing the region’s demographic balance.

The Turkish and allied administered territory would be off limits to US-backed YPG/SDF, which Ankara sees as a terror arm of the PKK, something which has remained a key deal-breaker for Washington. 

“Someone is trying to have us kneel down through terrorism and the burden of refugees,” Erdogan added during his Tuesday evening remarks. He said Turkey will never accept such a “fait accompli and blackmail” against it; however, Erdogan the one recently issuing public threats of blackmail.

Early last month he warned that if his plan weren’t implemented he would flood Europe with Syrian refugees: “We will be forced to open the gates. We cannot be forced to handle the burden alone,” he said at the time, and has since repeated. 

One day after the Fed raised eyebrows when it accepted $55BN in collateral in its first repo operation after the notorious quarter-end liquidity crunch, an amount that was just higher than the first repo op the Fed concluded in mid-September after a 10+ year hiatus ($53.2BN) and which some saw as too high for a new month with $139BN still locked up in 2-week term repos, moments ago the Fed concluded the second overnight repo operation for October, one which confirmed that the recent repo turmoil appears to again be easing, as $42.05BN in collateral was submitted (and accepted) in the $75BN operation, a $13BN decline from the $54.85BN repoed yesterday.

The composition of the repo showed that while Treasury collateral declined from $50BN to $35BN, MBS actually increased modestly from $4.75BN to $7.05BN, with no Agency use again.

While the drop in total repo use was certainly an improvement from yesterday’s operation, the continued demand for reserves, even with $139BN in liquidity locked up in 2-week term repo which expire in the second week of October, suggests that the funding shortage is anything but a calendar event, and confirms that there is an acute reserve shortage, one which the Fed will have to address, most likely by resuming POMO operations to the tune of roughly $20BN per month… which for all the QE denialists, will be the same size as QE1.

Submitted by Michael Every of Rabobank

In monetary policy terms, this is now clearly a race to the bottom. The Fed have cut twice, and Evans’s comments from yesterday aside, are expected to cut far more (we say to zero); the ECB have reintroduced QE already, at EUR20bn a month for now; the BOJ are expected to stir at this month’s meeting; the PBOC are pledging to do what they can to get rates lower for firms; the RBNZ surprised a while back with a 50bp cut; and the RBA cut 25bp again to 0.75% yesterday, partly on the basis that ‘everyone else is doing it so how can we not?’ Moreover, that’s just a sample of broader trend to slash rates, which also runs right across emerging markets too.

Crucially, the US is losing this race, and badly. The Fed is hardly a leader in this rate cycle, and more likely to be a laggard as things stand. Cue yet more withering commentary from US President Trump about that relative lack of action and the impact it is having on the USD. Meanwhile, EUR and AUD, for example, are heading downwards at a pace that their respective central banks will be quite pleased about. Just don’t call it a race to the bottom, because that triggers nasty memories of periods of history that markets and politicians don’t like to recall.

In no way a coincidence, it’s also a race to the bottom in manufacturing PMIs. Over in the workshop of the world, China is at 49.8, which is bad; Japan at 48.9; South Korea at 48.0; and only India at 51.4 and booming Vietnam at 50.5. In Europe we have Germany at 41.7, which is shocking and heading towards June 2009 lows, and the UK at 48.3. Even Russia, isolated and proud, is at 46.3! And now in the US we have an ISM print of 47.8, meaning that even the US manufacturing sector is slumping (although Markit printed at a healthier 50.9). Yes, there are a few pockets of growth, but the general picture of a synchronised downturn in manufacturing across the global economy. Which is of course why we are going to see rates slashed and a race to the bottom in currencies; and that deflationary effect is going to reinforce the need to slash rates.

That’s all worrying enough. But then you have to ask two other questions.

First, is industry going to drag the services economic down, or can we all live on lattes and haircuts alone? (Or, more accurately, on housing markets and apps?) For now, it appears we can – otherwise this would be a global recession already. However, the historical track record is not good on that front. If we are going to start shedding manufacturing jobs globally, and not just in the West, that is going to knock demand for goods and for services, absent further consumer borrowing…and aren’t we close to being tapped out on that front? Or to painting ourselves into a corner if we do?

Second, how long until we get a sufficiently robust policy response? We know that there is much muttering of fiscal policy being used, and even of Modern Monetary Theory (MMT). Indeed, an interesting aside is that on a recent visit to see financial European clients, everyone was immediately familiar with the term MMT when in previous years this was not always the case. However, seeing the logical inevitability of the need for a new radical policy is one thing. Actually seeing it put in place in a way that helps the global economy is another. That’s because we seem to be on a race to the bottom in terms of politics as well.

Starting with Asia again, we can probably rely on China–which just celebrated the PRC’s 70th birthday in North-Korean-meets-Busby-Berkley extravaganza with a chorus-line of glittery nuclear missiles, even as Hong Kong saw serious unrest–to put in place more stimulus. In fact that’s a given. What isn’t a given is that this will sit alongside a stable CNY as capital flight is still evident in the balance of payments data. Moreover, stimulus to date is either not working or is being ring-fenced for the home market unless you sell raw materials: how else can one have an economy growing nearly 6% y/y in real terms and yet see flat or deeply negative y/y import growth from a swathe of countries, not just the US? Likewise, the track record says if the BOJ acts again that will mean a weaker JPY not a stronger market for foreign goods; the same is true for South Korea; and the rest of Asia just doesn’t offer enough heft to matter much, relatively.

In Europe, can we really expect self-flagellating hair-shirt governments to push for MMT when they have found it so incredibly hard to move the needle on any fiscal stimulus at all, even as populism raises its head across the continent? In particular, will Chancellor Merkel, in her twilight, suddenly reverse years of hoarding and instead start splurging…knowing that the splurge will be spent across Europe and not on German goods? Really? And even if Berlin does go that route, will it not see EUR fall and European net exports pick up anyway, meaning Europe is exporting global over-capacity rather than absorbing it? Europe would need to splurge globally to help matters globally, and that is just not on the cards.

The UK does appear to be about to embrace gun and butter and anything not nailed down fiscal activism under this new Tory administration…but then again it isn’t actually in power while it is in office, so talk is cheap; and given PM Johnson’s latest Irish backstop proposals, which are a major concession, are still being described by EU sources as being as palatable as “a bucket of cold sick”, we are soon going to get either a Hard Brexit that will hit the global economy harder, or a new caretaker rebel administration just to delay Brexit that will have no political ability to stimulate the economy at all. Excelsior!

And then we come to the US. President Trump has obvious proclivities towards spending vast amounts of money and taxing as little as possible, and the US is, despite popular misconception, still propping up global demand from everyone except China (which as noted, looks and smells mercantilist – and yet gets none of the public opprobrium for such). Yet the US political environment is once again focused on trying to impeach the president, or on stopping that happening. Grand economic schemes are not generally dreamed up in this kind of environment, and even if Trump were to pull one out of a hat, it seems highly unlikely Congress would want to give him the win when much of it is going for the kill (with “deep sadness”).

In short, it’s a wacky race to the bottom in races to the bottom. Choose yourself who is the Dick Dastardly in it all (Trump?); the Mutley (John Bolton?); the Rufus, Ruffcut, and Buzzsaw (populist voters?); the Peter Perfect (Biden?!); the Penelope Pitstop (Merkel?); the Luke and Blubber Bear (the rest of the EU?); the Ant Hill Mob (Australia?); the Professor Pat Pending (central banks?); and the Gruesome Twosome (China and Russia?). But it doesn’t matter who wins because as things stand we are all losing.

And as such it is any wonder bond yields are starting to go that route again,…and that the USD is still holding its footing? US 10-year yields, and indeed most 10s, are still far above recent lows even if they are also above recent highs.