Caterpillar Tumbles, Drags Dow Lower On Huge Miss, Poor Guidance; Blames China

All eyes were on industrial bellwether Caterpillar’s Q4 earnings this morning for confirmation whether the China slowdown is indeed trickling down into China-facing US companies (after China reported overnight that total industrial profits posted a second consecutive Y/Y decline in December, sliding -1.9% vs -1.8% in November), and that’s precisely what CAT reported, when it announced Q4 EPS of $2.55, a huge miss to expectations of $2.99, on revenue of $14.3BN, also slightly below the $14.36BN expected.

While the numbers were not a disaster on a comparable basis, with sales up 11% from a year earlier, while adjusted EPS also rising 18% from Q4 2017, the EPS miss was the biggest in over 3 years as Wall Street failed to adjusted its expectations lower for what is clearly a China slowdown story.

Some more troubling highlights from the report via Bloomberg:

  • For 2018, the mark-to-market adjustment on pension and OPEB plans was a net loss of $495 million, primarily due to lower than expected returns on plan assets, partially offset by higher interest rates
  • During the fourth quarter of 2018, CAT recognized a $50 million increase to the estimated charge for the cost of mandatory deemed repatriation of non-U.S.
  • Dealer machine and engine inventories increased about $200 million during the fourth quarter of 2018
  • At the end of the fourth quarter of 2018, the order backlog was $16.5 billion, about $800 million lower than the third quarter of 2018

Just as troubling as the huge historical miss was the company’s guidance, with the company now expecting “2019 profit to increase to a range of $11.75 to $12.75 per share”, which is dangerously on the low end of Wall Street’s consensus of $12.72

Adding to investor angst, the company said that after several quarters of stellar growth, CAT is now assuming “modest sales increase based on the fundamentals of our diverse end markets as well as the macroeconomic and geopolitical environment.”

Sure enough, just like Apple, CAT was quick to blame… who else: “Sales in Asia/Pacific declined due to lower demand in China, partially offset by higher demand in a few other countries in the region” the company said in its earnings reports, adding that “unfavorable currency impacts also contributed to the sales decline.”

It was not all bad news, however, with the company making the following comment on the energy sector where Caterpillar is a major supplier of pumps and engines, noting that oil and gas-related sales were up due to higher engine demand, citing oil and gas-related activities helping construction equipment demand in North America. All this despite the big dip in oil prices during the fourth quarter.

Furthermore, despite concerns that a global trade war will hurt demand for industrial metals, miners are still spending. Caterpillar said “mining activities were robust as commodity market fundamentals remained positive.” Although judging by the EPS miss, just not “positive enough.”

There was another troubling note in the CAT Financial results, where the company’s Financial Products’ operating profit was lower primarily “due to an increase in the provision for credit losses, which was mostly driven by a $72 million unfavorable impact from an increase in allowance rate and an increase in write-offs of $13 million, due to continued weakening in the Cat Power Finance portfolio. “

Despite, or perhaps due to the slowdown in the business, CAT was even busier repurchasing stock, and in Q4 Caterpillar repurchased $1.8 billion in company stock, and $3.8 billion for the full year.

And after what may be the first big earnings miss of the quarter – aside from Apple’s guidance cut of course at the start of the year – CAT stock is tumbling more than 5%…

… and is not only dragging its peers such as Deere  and CNH Industrial lower by more than 1.5%, but has also hit the Dow Jones index, adding over 50 points in losses to the industrial index.

via ZeroHedge News http://bit.ly/2RUbpW5 Tyler Durden

Vale Crashes 20%, Suspends Dividend After Deadly Dam Breach

Vale SA, the world’s largest iron ore miner, suspended its planned shareholder dividends, share buybacks and executive bonuses as it braces for the financial fallout from a Friday catastrophe in which a dam breach left at least 58 people dead and more than 300 missing. Vale’s board of directors also created independent committees to investigate the causes of the Friday dam burst in the state of Minas Gerais and monitor relief efforts in the devastated town of Brumadinho and surrounding area.

As Bloomberg notes, the collapse of a tailings dam at the Feijao mine in the rural state of Minas Gerais is Vale’s second fatal disaster since 2015, when the Samarco mine spewed billions of gallons of waste. More importantly for investors, Mayor Avimar de Melo of the city of Brumadinho, which was partly leveled by the spill, is seeking millions in damages and blamed Vale’s “incompetence” for the incident.

Flood waters in Brumadinho, Brazil, on Jan. 27

And, as many expected, the response from the market was instant, with Vale stock plunging 20% on Monday morning.

Worse, this may just the beginning of pain for investors, given that this is the second dam burst linked to Vale, we would expect more stringent remediation requirements and tougher penalties,” Macquarie Capital Ltd. analysts including Grant Sporre wrote on Monday. The company’s 750 million euro bond due in January 2022 dropped the most on record, tumbling 10 cents on euro to about 100 cents.

Meanwhile, as noted earlier, iron ore futures in China surged to the highest in more than a year on concern that global supplies will be interrupted.

As Bloomberg adds, the disaster will be the first major test of Vale Chief Executive Officer Fabio Schvartsman, who took the job less than two years ago. His predecessor, then-CEO Murilo Ferreira, was heavily criticized for his early reaction to the Samarco disaster. The seemingly lackluster response was later used against him by rivals eager to replace him.

Schvartsman said the latest disaster must spur the company to raise safety standards to a level “far superior to what we have today.” The Feijao project is one of its smaller operations, producing 7.8 million tons of ore in 2017.

Adding to the uncertainty facing the company, on Sunday, Renan Calheiros, a candidate for Senate president, tweeted that Vale’s top management should resign. Meanwhile, S&P Global Ratings put Vale’s bonds on CreditWatch on Friday, warning that it may be forced to shut some operations. Three judges have already frozen almost $3 billion of the miner’s funds to ensure it will be able to compensate victims and pay for the clean-up. Vale has also agreed to set up committees to probe the disaster and support the victims.

The disaster also comes less than a month after the inauguration of Brazil President Jair Bolsonaro and may upend his plans to ease environmental restrictions and boost mining production through reforms in Congress.

Following this perfect storm for the company, late on Sunday, Vale’s board decided to halt dividends after an extraordinary meeting. It was initially unclear whether dividends had been suspended or the board had just debated the possibility because an English-language statement on the company’s website said it “deliberated” over the matter. But a spokesperson for Vale in Beijing later directed Bloomberg toward the Portuguese statement.

Analysts at Macquarie estimated that the earnings hit would be limited because of the company’s balance sheet strength and robust cash generation.

“The company can cover the remediation cost with ease,” Macquarie said. “However, Vale’s equity re-rating story was in part a reputational one which has now been dealt a body blow.”

via ZeroHedge News http://bit.ly/2B9qIQi Tyler Durden

Global Stocks Slide Ahead Of Crazy Week; Iron Ore Soars

It’s a sea of red in global equity markets as Friday’s euphoria fizzled after President Donald Trump made clear he won’t take no for an answer in his effort to construct a border wall while investors are hunkering down ahead of an action-packed week which includes the UK Parliament’s Brexit “Plan B” vote, a Fed meeting, a new round of US-China trade talks, the deadline for the Huawei CFO extradition notice, a potential Venezuela showdown, January US payrolls report and the busiest week of earnings season.

While stocks jumped on Friday after Trump “caved” and agreed to reopen the government, the party moody was dented after Trump tweeted “Does anybody really think I won’t build the WALL?” late on Sunday as the committee of lawmakers crafting a plan for the southern U.S. border is expected to start meeting this week. On Sunday, Trump told the WSJ he’ll get the funding even if he has to use emergency powers while Trump’s acting chief of staff said he’s prepared to shutter the government again or declare an emergency if needed to get the wall money.

The dollar was flat as were 10Y TSY yields, while iron ore prices soared following a deadly dam collapse at a mine in Brazil which killed at least 58 people in a huge blow to Brazil mining giant Vale, the world’s biggest producer iron ore, which announced overnight it would suspend its dividend as it shores up liquidity ahead of what could be a crushing legal penalty.

Asian markets started off the week mixed, as bourses in Shanghai, Hong Kong, Tokyo and Seoul all losing ground: Japanese shares retreated along Chinese peers due to trade tensions, while stocks in Hong Kong pared gains to close little changed. The yuan appreciated to its strongest against the dollar since July, the CNH rising some 400 pips tracking the weaker dollar, before Vice Premier Liu He’s trip to Washington for trade talks, and as the People’s Bank of China freed up a potential $37 billion for bank lending and a new chief was named to lead the country’s main securities regulator.

Overnight concerns about China’s slowing economy re-emerged after earnings at China’s industrial firms shrank for the second straight month, suggesting trouble ahead for manufacturers struggling with falling orders, job layoffs and factory closures amid a protracted trade war with the United States.

“A slowdown in the Chinese economy could be sometimes taken as an idiosyncratic event which would be dealt with by Beijing,” said Philip Shaw, chief economist at Investec. “It’s pretty clear that the current situation is more global, in terms of the tariff tension between the U.S. and China and the threat of that dispute spilling over more widely.”

Investors are now waiting for Chinese Vice Premier Liu He’s visit to the United States on Jan. 30-31, for the next round of trade negotiations with Washington. But with the sides still far from resolving trade issues, the dollar stood firm as traders sought a safe haven as they await news from U.S.-China talks on Tuesday and Wednesday.

The MSCI world equity index, which tracks shares in 47 countries, fell 0.1 percent, while MSCI’s main European Index dropped 0.5 percent. The broader Euro STOXX 600 index also fell 0.5%, failing to rebound from a slide at the open after two days of gains, with most sectors falling except miners which followed the rising price of iron ore. West Texas oil fell below $53 a barrel after America’s rig count rose for the first time this year.

In addition to Trump’s border wall crusade, traders will focus on negotiations between the US and China which are set to resume in a very busy week which also include: Fed chair Jerome Powell will host a press briefing after the U.S. central bank’s policy decision, some of the biggest technology companies including Apple, Microsoft, Facebook are reporting Q4 results, and there will be another series of potentially key votes in the U.K. Parliament about Brexit. To cap it all, a flurry of American economic figures including GDP and jobs data are also set for release.

Elsewhere, Bitcoin fell again, putting the biggest cryptocurrency on track for its lowest close since December. Emerging-market stocks edged lower while their currencies climbed. Gold retreated. Russia’s MOEX stock index touched an intraday record high after sanctions were lifted on Rusal, before reversing gains to trade lower as oil prices slumped.

The dollar index, a gauge of its value versus six major peers, was flat at 95.801 as the dollar recovered following the Tokyo fix and Treasuries gained as global stocks started the week on a defensive note. “In this environment the dollar was holding up well,” said Thu Lan Nguyen, a forex strategist at Commerzbank. “I assume that this will continue to be the case, even as the conflict intensifies at the end of the week.”

The dollar will also get a strong steer from this week’s Fed meeting, where the central bank is expected to signal a pause in its tightening cycle and to acknowledge growing risks to the world’s biggest economy. Though the Fed has forecast two more interest rate hikes for 2019, a darkening global economic outlook and highly volatile stock markets have clouded the policy picture.

Elsewhere in currencies, sterling drifted lower as investors consolidated positions ahead of crucial votes in the British parliament designed aim to break the Brexit deadlock. The British currency edged down a quarter of a percent lower to $1.3164. Lawmakers earlier this month rejected Prime Minister Theresa May’s EU withdrawal agreement, which included a nearly two-year transition period to help minimize economic disruption. That defeat set up a series of votes on Tuesday through which lawmakers and the government will try to find a way forward.

Emerging-market currencies rose to the strongest level since June before the rally lost steam, while oil prices consolidated.

In commodities, Brent crude futures were down 1.8 percent, at $61.01 a barrel. Oil prices fell amid signals that crude output may rise further, and worries grew over the signs of economic slowdown in China, the world’s second-largest oil user. Gold was slightly down. Spot gold was down 0.2 percent at $1,300.56 per ounce, hovering just below a more than 7-month high of $1,304.40 reached earlier in the session.

Market Snapshot

  • S&P 500 futures down 0.4% to 2,652.00
  • STOXX Europe 600 down 0.3% to 356.69
  • MXAP down 0.1% to 154.68
  • MXAPJ up 0.01% to 504.86
  • Nikkei down 0.6% to 20,649.00
  • Topix down 0.7% to 1,555.51
  • Hang Seng Index up 0.03% to 27,576.96
  • Shanghai Composite down 0.2% to 2,596.98
  • Sensex down 1% to 35,665.99
  • Australia S&P/ASX 200 up 0.7% to 5,905.61
  • Kospi down 0.02% to 2,177.30
  • German 10Y yield rose 0.4 bps to 0.197%
  • Euro unchanged at $1.1406
  • Brent Futures down 1.8% to $60.51/bbl
  • Italian 10Y yield fell 1.0 bps to 2.293%
  • Spanish 10Y yield rose 0.4 bps to 1.235%
  • Brent Futures down 1.8% to $60.51/bbl
  • Gold spot down 0.3% to $1,301.52
  • U.S. Dollar Index up 0.04% to 95.83

Top Overnight News

  • Trump said in an interview Sunday with the Wall Street Journal that he doubted whether a group of 17 lawmakers could strike a deal before the next lapse in government funding in less than three weeks and vowed to build a wall anyway, even if he has to use emergency powers
  • Prime Minister Theresa May risks losing control of Brexit in a series of votes in Parliament this week that could see her forced to suspend the entire divorce or sent back to Brussels to negotiate the impossible.
  • According to weekend news reports, European Commission President Jean-Claude Juncker told Theresa May in a private phone call that the price for the EU revising the Irish backstop would be a permanent customs union for the U.K.
  • U.K. Prime Minister Theresa May has told cabinet ministers she won’t take the country out of the EU without a deal, the Sun reported, citing people familiar with meetings between May and her ministers over the past week
  • Trump is prepared to close the federal government again if he and congressional leaders are unable to strike a budget deal that includes funding for a U.S.-Mexico border wall, acting White House Chief of Staff Mick Mulvaney said
  • One Bank of Japan board member said it would be very difficult to make out the underlying price trend in the year starting in April because of a sales tax hike, softening oil prices and a reduction in cell- phone related fees, Dec. minutes show
  • Europe’s retail crisis deepened as companies in the U.K. and Germany are set to cut thousands of jobs as online shopping accelerates the erosion of sales from traditional stores
  • U.S. and China will hold a pivotal round of talks this week in an attempt to end their trade war. Interpreting if they’d made real progress toward a truce won’t be an easy matter

Asian equity markets initially began the week mostly higher as the region resumed the positive momentum seen on Friday in the US, where all majors gained and President Trump agreed with lawmakers to end the record-long government shutdown. This lifted sentiment across the Asia-Pac bourses in early trade with ASX 200 and Nikkei 225 (-0.7%) the exceptions as Australia remained closed for holiday and Japanese stocks were hampered by recent currency flows, with Japan Display among the worst hit after it flagged a severe situation regarding its FY net. Elsewhere, Hang Seng (U/C) and Shanghai Comp. (-0.2%) positive for most the session as corporate updates also provided a catalyst in which Sinopec were underpinned by an increase in preliminary FY net and revenue. However, the region later failed to hold on to early gains amid several factors including PBoC liquidity inaction, a consecutive monthly decline in Chinese Industrial Profits and looming risk events including US-China trade discussions. Finally, 10yr JGBs were relatively uneventful with only brief support despite the underperformance of Tokyo stocks and BoJ presence in the market for JPY 1tln of JGBs, while the BoJ minutes from the December meeting also failed to garner a reaction as it provided no surprises and considering there was also a more recent meeting held last week.

Top Asian News

  • Here Are Three Scenarios for U.S.-China Trade Talks This Week
  • India Stocks Extend Drop as Company Share Pledges Sour Sentiment
  • How Low Can China Bond Yield Go? 10-Year Rate Flirts With 3%
  • Morgan Stanley’s Quant Signals Say to Stay Long Emerging Markets

Major European equities are in the red [Euro Stoxx 50 -0.5%] following on from a negative end to Asia ahead of key risk events US-China talks and the Brexit ‘Plan B’ vote. Sectors are similarly in the red, energy names are underperforming (amid the price action in the complex) with some outperformance seen in telecom names; with the likes of Dixons Carphone (+3.1%) in the green after being upgraded at Morgan Stanley. Other notable movers include, Telecom Italia (+1.4%) who were initially at bottom of the Stoxx 600, though the company pared losses amid reports suggesting that Enel’s (-0.3%) open fibre unit are said to be seeking a pact with the Co. Elsewhere, London-listed Ocado (+2.7%) are towards the top of the Stoxx 600 following reports that the Co. have held talks with Marks and Spencer (+0.4%) concerning the launch of a food delivery service. Finally, miners are initially outperformed (Rio Tinto +1.6%) amid hopes of rising iron ore prices following the dam collapse at the Vale mine in Brazil.

Top European News

  • U.K. PM Told Cabinet Ministers She Will Rule Out ‘No Deal’: Sun
  • Poland Vows to Stop ‘Speculators’ as Soros Bids for Radio Zet
  • Scottish Investors See CPI-Linked Gilts as ‘Unrealistic’: DMO
  • Kering Drops on $1.6 Billion Tax Fine From Italy Over Gucci

In FX, GBP – The main G10 underperformer ahead of Tuesday’s Brexit vote, as Cable recoils from 1.3200+ overnight peaks and Eur/Gbp bounces off circa 0.8637 lows to trade around 1.3150 and 0.8670 respectively. Consolidation, profit-taking and/or position paring has stemmed the latest advance in Sterling, along with a broader stabilisation in the Dollar and relative resilience in the single currency (holding above 1.1400 vs the Usd) following firmer than forecast Eurozone M3 data. Note, decent Eur/Usd option expiry interest between 1.1400-15 as 1.4 bn rolls off at the NY cut. Back to the Pound, some chance of additional impetus via BoE members today including Governor Carney, Broadbent and Ramsden, but in truth tomorrow’s Plan B Parliament judgement will likely be the next major driver.

  • NZD – The Kiwi tops the major league, albeit helped by external factors, like a firmer Yuan and Aud cross flows, as Australia’s national day celebrations spilled over to Monday. Nzd/Usd is pivoting 0.6850 and Aud/Nzd has dipped below 1.0500, while Aud/Usd hovers just under 0.7200. Back to the Kiwi, NZ trade data looms and could be key.
  • DXY – As noted, the Buck appears to have gleaned some traction in the run up to the FOMC, US-China trade talks and NFP, with perhaps a degree of support coming via the deal to re-open Government. However, the index still looks vulnerable sub-96.00 within a 95.920-671 range, and as the Greenback remains softer vs the Jpy and Chf circa 109.50 and 0.9915.

In commodities, Brent (-1.6%) and WTI (-1.7%) are both firmly in the red, weighed on by risk sentiment, ahead of this week’s key events including US-China trade talks in Washington. Furthermore, Friday’s Baker Hughes rig count showed the number of active oil rigs increased by 10 (first increase this year); adding additional downward pressure to the complex.

Gold (-0.2%) is marginally in negative territory, weighed on by dollar strength despite of the negative risk sentiment, as the yellow metal detaches itself from its safe-haven status (again). Elsewhere, the US has removed sanctions on Rusal and two other firms connected with Russian billionaire Deripaska; with the move returning some certainty to the aluminium markets supply. Separately, iron ore prices have moved higher as markets react to news of a dam collapse at the Corrego do Feijao iron ore mine in Brazil; for reference the mine has an approximate capacity of 7.8mln tonnes.

The focus today will be central banks, with the ECB’s Draghi speaking at a European parliament hearing in Brussels, while the BoE’s Carney, Broadbent, Ramsden, Place and Woods will also be speaking. In terms of data, there is the Chicago Fed National Activity Index for December and the Dallas Fed Manufacturing activity for January. We also have earnings from Caterpillar and the US Congressional Budget Office will be releasing its Budget and Economic outlook.

US event calendar and backlogged econ data:

  • Jan. 28-Feb. 4: Advance Goods Trade Balance, est. $76.1b deficit, prior $77.2b deficit, revised $77.0b deficit
  • Jan. 28- Feb. 4: Retail Inventories MoM, prior 0.9%, revised 0.8%
  • Jan. 28- Feb. 4: Wholesale Inventories MoM, est. 0.45%, prior 0.8%
  • Jan. 28-Feb. 4: New Home Sales, est. 567,000, prior 544,000
  • Jan. 28- Feb. 4: New Home Sales MoM, est. 4.22%, prior -8.9%
  • Jan. 28-Feb. 4: Construction Spending MoM, est. 0.2%, prior -0.1%
  • Jan. 28-Feb. 4: Factory Orders, est. 0.3%, prior -2.1%
  • Jan. 28-Feb. 4: Factory Orders Ex Trans, prior 0.3%
  • Jan. 28-Feb. 4: Durable Goods Orders, est. 0.8%, prior 0.8%
  • Jan. 28-Feb. 4: Durables Ex Transportation, prior -0.3%
  • Jan. 28-Feb. 4: Cap Goods Orders Nondef Ex Air, prior -0.6%
  • Jan. 28-Feb. 4: Cap Goods Ship Nondef Ex Air, prior -0.1%
  • Jan. 28-Feb. 4: Trade Balance, est. $54.0b deficit, prior $55.5b deficit
  • Jan. 28-Feb. 4: Monthly Budget Statement, est. $10.0b deficit, prior $204.9b deficit
  • Jan. 28-Feb. 4: Retail Sales Advance MoM, est. 0.1%, prior 0.2%
  • Jan. 28-Feb. 4: Retail Sales Ex Auto MoM, est. 0.0%, prior 0.2%
  • Jan. 28-Feb. 4: Retail Sales Ex Auto and Gas, est. 0.4%, prior 0.5%
  • Jan. 28-Feb. 4: Retail Sales Control Group, est. 0.4%, prior 0.9%
  • Jan. 28-Feb. 4: Business Inventories, est. 0.3%, prior 0.6%
  • Jan. 28-Feb. 4: Net Long-term TIC Flows, prior $31.3b
  • Jan. 28-Feb. 4: Total Net TIC Flows, prior $42.0b
  • Jan. 28-Feb. 4: Housing Starts, est. 1.25m, prior 1.26m
  • Jan. 28-Feb. 4: Building Permits MoM, est. -2.93%, prior 5.0%
  • Jan. 28-Feb. 4: Housing Starts MoM, est. -0.48%, prior 3.2%
  • Jan. 28-Feb. 4: Building Permits, est. 1.29m, prior 1.33m
  • 8:30am: Chicago Fed Nat Activity Index, prior 0.2
  • 10:30am: Dallas Fed Manf. Activity, est. -2.7, prior -5.1

DB’s Jim Reid concludes the overnight wrap

Here we go again. It’s January, yesterday was bitterly cold with wind and hail in equal measure, I played a miserable round of golf not helped by being battered by the elements and what happens when I get home? Yes a bout of golf club foliage related hay fever kicked in. I spent much of the evening sneezing and rubbing my itchy eyes. Good job my new house (when it’s ready in April) isn’t opposite the entrance to the golf club!! Oh wait it is. Time for my annual ingesting of daily anti-histamines, nasal sprays, local honey and eye drops.

This always happens to me at the golf club from January onwards and how time has flied since last year’s bout. In markets, with only 4 days of January left we are fast coming up to the first anniversary of the vol shock we had after a surprisingly high average hourly earnings print in the January 2018 US payroll report. As you’ll remember the VIX traded over 50 at the intra-day peak in the first week of February as ETF vol products saw a massive unwind. One year on, this Friday will see the latest payroll report with very few people worried about inflation. That surprise print a year ago was +2.8% YoY. Last month we again surprised on the upside at +3.2%. So US inflation has still been building up over the last 12 months, and if you want a curveball for 2019 it’s that inflation continues to edge up and the Fed has to choose between controlling it on one hand and appeasing financial markets on the other, with the latter making it quite clear that it doesn’t want tighter policy. Indeed hopes of the Fed ending its balance sheet wind down early and positive thoughts about China’s latest stimulus (see Zhiwei Zheng’s note on how this moves them closer to QE here ) helped markets end last week on a high.

Updating our screens this morning, Asia has opened the week on a mixed note following Friday’s rally. Although the Hang Seng (+0.42%), the Shanghai Composite (+0.32%) and the KOSPI (+0.44%) have opened higher, the Nikkei (-0.38%) and other Japanese markets are trading lower as investors await the outcome of US-China trade talks and the latest batch of earnings reports. Ahead of those trade talks, the Chinese yuan appreciated to its highest level against the dollar in six months, while in commodity markets WTI oil is trading lower (-0.63%) as investors assess the implications of the current political turmoil in Venezuela.

Back to the week ahead now. Outside of payroll Friday the highlights are the FOMC on Wednesday, fresh Brexit votes from Tuesday, Chinese Vice Premier Liu He arriving in Washington for 2-days of trade talks on Wednesday, the very important global manufacturing PMIs on Friday and 123 S&P 500 companies reporting with Europe’s earnings season also kicking into gear.

Going through these in a little more detail, Wednesday’s Federal Reserve meeting is the first to be followed by a press conference as they all now will. No change is expected to interest rates, but investors will be closely watching Powell’s comments as they aim to discern the future path of monetary policy this year. With no change expected the focus might be on questions on an early end to balance sheet reduction. For a full discussion of DB’s expectations see “January FOMC preview: See you in June” (link here ).

On an approximate basis as I’ve lost count, Brexit reaches pivotal week number 25 with the other 24 or so not in the end proving that pivotal. The UK parliament votes on the possible next steps on Tuesday. MPs will be further debating the government’s Brexit plan, and have the opportunity to vote on a variety of different amendments, which have been proposed by MPs from across the political spectrum. These could include one that says parliament should be able to hold indicative votes on different Brexit outcomes, one that requires the Prime Minister to extend Article 50 if the House of Commons has not approved a Brexit deal by February 26, another simply that the UK should not leave without a deal, and another calls for an expiry date on the backstop. The Speaker of the House of Commons will decide which are to be debated by MPs. The one regarding having an expiry date on the Irish backstop seems to be one both the PM and Tory party Brexiters are gravitating towards at the moment so it will be interesting to watch the support for this. However the Irish and the EU have both suggested there is no wiggle room on renegotiating the backstop. So we will see!!

Last night the Sun reported that Prime Minister May has privately told cabinet ministers that she wouldn’t leave the EU without a deal, with reports suggesting it is being kept on the table as a negotiating tactic. Sterling rallied on the news, trading above $1.3200 for the first time since October as investors priced in the decreasing likelihood of a no-deal outcome. This continues a trend (the pound has gained against the dollar for the last six consecutive weeks) of sterling gains, and comes after a majority in the House of Commons, including a number of Conservative ministers and backbenchers, have made clear their opposition to a no-deal outcome.

The other major political event for markets this week comes as Chinese Vice Premier Liu He visits Washington for trade talks on Wednesday, meeting with Treasury Secretary Mnuchin and US Trade Representative Lighthizer. Last week saw a host conflicting headlines on how much progress has been made so expect more of the same.

Earnings season continues, with 123 companies in the S&P 500 reporting this week and the European season building. Those reporting globally include Caterpillar today (always lots of snippets on how they see global activity), Apple, Pfizer and SAP on Tuesday, Microsoft, Facebook, Boeing and Alibaba on Wednesday, Amazon and Samsung on Thursday, and on Friday, we have Exxon Mobil, Chevron, Merck and Sony. With 109 companies in the S&P 500 having reported, 75% have beaten earnings expectations and 59% have beaten sales expectations.

For payrolls DB is forecasting a gain of 165k jobs which is around the same as consensus. The aforementioned average hourly earnings is expected to remain at 3.2%, the joint highest since the GFC. Other releases of note will be the Q4 GDP data on Wednesday and the Core PCE Price Index on Thursday. With the shutdown now over – for at least the next three weeks – also expect to see the backlog of data slowly come out. Finally, keep an eye out today for the US Congressional Budget Office who will be releasing its Budget and Economic Outlook, including ten-year economic budget projections. These were quite shocking this time last year in terms of the debt and deficit projections. On a rounded up basis the US wasn’t expected to see a deficit below 5% of GDP over the next decade and indeed out to the end of their forecasting period 30 years ahead. Pretty stunning stuff.

Turning to Europe, there are number of data highlights. On Thursday, we have the first release of Q4 GDP for the Euro Area, which will give an indication of whether the slowdown of the European economy continued through the end of the year. Markets are expecting quarter on quarter growth of 0.2%, as in Q3. Elsewhere, Wednesday will see the European Commission release its consumer confidence indicator for January, while Friday will see the release of manufacturing PMIs for January as well as the flash estimate of January’s CPI for the Euro Area. The full week ahead is at the end.

Turning to a recap of last week now where we saw the S&P 500 dip slightly for its first weekly decline of the year, dropping -0.22% (but +0.85% on Friday). The DOW and NASDAQ were close to flat, up +0.12% and +0.04%, respectively (+0.75% and +1.27% Friday). Semiconductor stocks outperformed, with the Philadelphia semiconductor index gaining +4.30% after strong earnings reports (+2.17% Friday). In Europe, the STOXX 600 advanced +0.22% (+0.61% Friday), with equities across the continent gaining. The exception was the UK, where the FTSE 100 fell -2.28% (-0.14% Friday) as the pound rallied +2.52% versus the dollar (+0.99% Friday). As mentioned, the pound’s outperformance was due to the perception that the worst case risk for Brexit is diminishing though the dollar retreated more broadly, with the DXY index down -0.56% (-0.84% Friday) and EM currencies up +0.46% (+0.22% Friday).

Sovereign bonds rallied on the week, with yields on Bunds and Treasuries down -6.9bps and -2.6bps, respectively (+4.3bps and +1.3bps Friday). Flash European PMIs came in soft and the ECB shifted its balance of risks to the downside, boosting safe havens. Peripheral yields rallied as well, with BTPs -8.1bps on the week (-1.0bps Friday) partly as markets started to price in a likelihood of fresh TLTROs even if Draghi gave no additional hints at Thursday’s ECB meeting. Despite a rally on Friday, HY credit ended the week +6bps and +2bps wider in the US and Europe respectively (-10bps and -4bps Friday respectively). WTI oil retraced a drop of as much as -3.73% early in the week to close the week down only -0.20% (+0.90% Friday).

The focus today will be central banks, with the ECB’s Draghi speaking at a European parliament hearing in Brussels, while the BoE’s Carney, Broadbent, Ramsden, Place and Woods will also be speaking. In terms of data, there is the Chicago Fed National Activity Index for December and the Dallas Fed Manufacturing activity for January. We also have earnings from Caterpillar and the US Congressional Budget Office will be releasing its Budget and Economic outlook.

via ZeroHedge News http://bit.ly/2sQsb9x Tyler Durden

Ghosn Arrest Backfires On Nissan As SEC Launches Probe Into Executive Pay

Former Nissan Chairman and Renault CEO Carlos Ghosn remains locked in a Japanese jail cell after Tokyo prosecutors filed new charges against the legendary auto executive earlier this month. But as the French government begins to question the terms of his detention while raising questions about his living conditions in detention, rumors that Ghosn’s downfall was engineered by restive elements within Nissan – led, many believe, by  CEO Hirohito Saikawa – have continued to simmer, spurred by a New York Times story published late last year that included speculation that Ghosn’s ouster was part of a coup.

But as the Japanese automaker struggles to move on from the scandal, its executives are experiencing unprecedented backlash thanks to suspicions surrounding the provenance of the “internal probe” that eventually led to Ghosn’s arrest. And now, the allegations that Ghosn and another executive (American Greg Kelly, who was also arrested and charged) conspired to underreport the income of the man who created the Nissan-Renault-Mitsubishi alliance have drawn an SEC investigation.

According to Bloomberg, the US securities regulators is investigating whether Nissan’s executive-pay disclosures were accurate and whether the carmaker maintained adequate controls to prevent improper payments. Because Nissan shares trade in the US using ADRs, the SEC believes it has jurisdiction over the automaker, despite that most of the activities under investigation took place in Japan and Europe. Nissan shares slid nearly 3% on Monday after the company confirmed that it will cooperate with the probe.

Ghosn

The Wall Street Journal, which initially broke the story, reported that because the SEC has broad authority to bring penalties, Ghosn and Nissan could eventually face fines or charges in the US.

The SEC investigation ramps up pressure on the carmaker, has been indicted in Japan, which will allow prosecutors to lay out formal charges. But the involvement of a foreign regulator means the Ghosn scandal has officially gone international.

The SEC inquiry, launched out of its Washington headquarters, is focused on whether lapses by Nissan in reporting on its executives’ pay violated U.S. securities law, one of the people said. The regulator’s work was slowed by more than a month of partial U.S. government shutdown, another said.

While the SEC’s civil inquiry is in its early stages and may not point to wrongdoing, it adds a layer of complexity for Nissan and the two former executives. The SEC, which often works closely with law enforcement, could seek financial penalties and injunctions to prevent violation of laws or SEC rules.

John Nester, a spokesman for the SEC, declined to comment.

Aubrey Harwell Jr., an attorney for Kelly, said his client hasn’t received an SEC subpoena and declined further comment. U.S.- and Japan-based representatives for Ghosn declined to comment.

In a memo to staff last month, Nissan Chief Executive Officer Hiroto Saikawa, who succeeded Ghosn as CEO, said oversights in the company’s corporate governance “permitted the situation to continue, which clearly calls for grave reflection.”

Ghosn and Kelly were indicted in Tokyo for conspiring to underreport Ghosn’s income. Ghosn has also been indicted for allegedly shifting trading losses on to Nissan’s books. Kelly, a Tennessee resident who was once known as the “Ghosn whisperer”, was released on bail last month and has pledged to remain in Japan. Ghosn allegedly conspired to avoid reporting income that had been set aside for his retirement. Prosecutors claim the income should have been disclosed in the company’s financial statements. Ghosn has spent more than two months in a Tokyo jail.

And according to the latest round of charges, it appears that he could remain there for a while longer. But if the SEC has its druthers, it looks like he and Kelly might not be the only executives who could wind up in hot water.

via ZeroHedge News http://bit.ly/2DEUPRd Tyler Durden

‘Election-Meddler’ Wasserman Schultz Now “Fixing Democracy” In Venezuela

Regime change and foreign interventions are things that the two US ruling parties agree on regardless of how much they exchange blows at home. Venezuela is the latest place where Republicans and Democrats have found common ground.

If you watch the US media, you know what is happening in Venezuela: Dictator Nicolas Maduro is brutally suppressing the people he has been robbing for years, and now they have revolted and elected a true representative of their interest, the one true legitimate acting president Juan Guaido.

And now, as RT’s Alexandre Antonov reports below, it’s up to America to ‘fix’ democracy by whatever means necessary.

The House Foreign Affairs Committee has even offered a simple explanation on how a ‘dream team’ of Democrats have prepared a package of laws, which will ensure Venezuela’s transition into a better future.

Debbie Mucarsel-Powell will be bringing humanitarian aid, Donna Shalala will stop the arming of Maduro’s thugs with batons and tear gas, while Debbie Wasserman Schultz gets arguably the hardest task of them all – taking on Russia’s President Vladimir Putin.

You know, the one who – according to the current dogma of the American left establishment – already denied the Democrats the presidency in 2016 and whose puppet Donald Trump is currently trying to topple the Venezuelan government for some reason that only a 5-dimensional-chess master can understand.

Wasserman Schultz may hold a personal grudge against Putin. She had to resign as the Chair of the Democratic National Committee after leaked documents revealed how it was playing on the side of Hillary Clinton and against Bernie Sanders in 2016. The leak is widely attributed to Russia by American politicians and media.

The irony of Wasserman Schultz now being on the frontline of bringing democracy to Venezuela didn’t go unnoticed by Jill Stein, the head of the Green Party.

Stein is one of a handful of American politicians, who has publicly rejected American interference in Venezuela, saying it would be a greed-motivated disaster similar to those the US brought to Libya, Syria, Yemen, Honduras and Ukraine.

But who cares? Americans were told already that Stein is just a Putin tool stealing votes from Clinton and working for RT. Those were smears, but ‘alternative facts’ are not an invention of the Trump administration.

Opposing Washington’s regime change is a dangerous cause. Say a word of doubt, and you’ll find yourself in a virtual concentration camp for Putin puppets, Assad apologists and Maduro mouthpieces.

Just let the people who know how to cook up real democracy do their good work, right?

via ZeroHedge News http://bit.ly/2TnJKcR Tyler Durden

Yellow Vest Organizer “Handicapped For Life” By French Riot Police: Lawyer

A 40-year-old French construction worker known for his role in organizing Yellow Vest protests has been “handicapped for life” after he was struck in the eye with a rubber police bullet, his attorney said Sunday. 

“He is in shock. He will be handicapped for life. It is a tragedy for him and his family,” said Rodrigues’s layer, Philippe de Veulle in an interview with BFM Television.

The bearded Rodrigues, who has become a well-known figure in the “yellow vest” movement with 50,000 followers on Facebook, was live-streaming the protest on the website when he was hit.

De Veulle said Rodrigues was struck with a “flashball”, referring to the 40-mm (1.6-inch) rubber projectiles used by French riot police.

The devices — which are not used in most European countries — have become deeply controversial in France since the protests began in November, blamed for dozens of serious injuries. –AFP via Yahoo!

Speaking from his hospital bed, Rodrigues told LCI television that he was also hit with a stingball grenade. 

“Everything happened very quickly. They threw a grenade at me and I took a (rubber) bullet. I was attacked twice — a grenade to the foot, and the bullet.”

In a video of the incident, Rodrigues can be heard warning protesters to leave the Bastille due to far-left “black bloc” agitators who had arrived to attack the police. 

via ZeroHedge News http://bit.ly/2Sb6C1E Tyler Durden

Brickbat: The Grass Is Always Greener

LawnA St. Peters, Missouri, woman’s battle with the city over her yard has reached a federal appellate court. A city ordinance requires all lawns to be at least half turf grass. But Janice Duffner says she’s allergic to that. Her yard is filled with bushes and flowers. It also has a small fountain. A neighbor complained, and the city is trying to force her to plant at least some grass.

from Hit & Run http://bit.ly/2UmIs1w
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The Real Enemy Of The People

Authored by Kevin Smith via Off-Guardian.org,

We are all familiar with the terms ‘conspiracy theorist’ and ‘apologist’ used by the establishment and media to smear independent journalists, experts and other commentators. For some time this has been particularly evident in the debates we see over the Middle East wars and Russia. It’s common knowledge that people who use these terms can’t argue rationally so resort to smears.

Western government support for terrorism, staged events and spreading disinformation via groups such as Integrity Initiative has come under closer scrutiny recently. As more revelations of wrongdoing by our governments and misreporting by our media have been exposed, the censorship and smears against independent media has intensified.

“What’s it like being a traitor?” John Sweeney being just as subtle, unbiased and classy as you expect from the BBC Panorama team.

A DISTURBING NEW RHETORIC

I’m sure some of us have noticed that the language used has been ramped up yet again. I came across one example recently of someone promoting the anti-Russia narrative on Twitter making an analogy between one researcher’s legitimate investigation and criticism of Integrity Initiative and the actions of the World War II traitor, ‘Lord Haw-Haw’. And I think many readers will be familiar with this post from John Sweeney of the BBC and clip from his programme on Sputnik News.

To call someone a traitor is probably the most serious accusation you can make so let’s look at its meaning:

traitor – a person who is guilty of treason or treachery, in betraying friends, country, a cause or trust.

And lets consider these ‘betrayals’ and who by extension these accusations of disloyalty might be intended to apply to:

  • UK citizens who work for Russian media are traitors to their country. But I guess if you apply this warped viewpoint, foreign nationals working for the BBC are traitors too.

  • Independent journalists operating in Syria and reporting the truth that the West and not Russia and the Syrian Government, holds the main responsibility for the war and for supporting Al Qaeda terrorists.

  • Researchers, academics and an increasing number of Individuals on social media, who simply question and raise doubts about the anti-Russian and Syrian narrative by the UK press and others such as Bellingcat and Integrity Initiative.

  • By extension this betrayal could apply to many western citizens troubled by the wars in the Middle East who care about all humanity and the truth and have grave concerns that the proxy-war in Syria could lead to a global conflict.

Obviously it is ridiculous to label the vast majority of the above groups as ‘conspiracy theorists’, Assad or Putin ‘apologists’ let alone traitors to their country. But this newer language suggests those making these allegations are losing the plot. Watch some of the old McCarthy hearings from the 1950s and compare the language to what we’re hearing and seeing in the media today.

McCarthy claimed he was trying to establish the truth that there were traitors within the US State Department (and everywhere else) and this paranoid and delusional language seems to be playing out more and more these days.

To find the real truth about events in the world, the last people you’d want on the case are the likes of McCarthy and Sweeney. As any detective will tell you, an open mind and studying motive is key.

ESTABLISHING THE TRUTHFUL NARRATIVE – FOLLOW THE MONEY.

It’s probably fair to say that there’s little to suggest the majority of the people challenging official narratives are motivated by money, power or ideology. Some sections of the mainstream press have come out with ridiculous notions that there is some huge pro-Russia network operating in the West which is trying to spread disinformation on social media.

This sounds very much like WMD in Iraq and Cameron’s discredited assertion that there were 70,000 moderate rebels in Syria. It sounds McCarthyite. It’s interesting to note that very little of the research carried out and findings (for example on the White Helmets) by independent media and researchers has been shown to be inaccurate. And as history shows, yesterday’s ‘conspiracy theorists’ challenging narratives such as Iraq and Libya have been shown to be spot on.

In contrast those pushing the official narrative over Russia and Syria (and Iraq and Libya before) are motivated by power, money and defending the wars. Murdoch and other newspaper barons have vested interests in Israel, Saudi Arabia and the outcome of Middle East wars. Arm sales and perpetual war sustains the establishment. Highly paid career journalists at the BBC and The Guardian are unlikely to deviate from a government narrative which pursues regime change and war. As recent events show some journalists are even prepared to blatantly lie to enhance or protect their careers.

The US and UK are declining in world power and influence. Illegal regime change is central to defending this empire against this decline and to distract from problems at home. Their track record of war and regime change speaks for itself. In summary, power, money and defending an increasingly under question narrative, to distract from their criminal behaviour in Iraq, Libya, Syria and Yemen are the motives. The establishment is pulling out all the stops. As well as deploying a compliant media, it supports and funds the likes of Bellingcat and shadowy groups such as Integrity Initiative to muddy the waters further.

So the establishment has all the motives to orchestrate wars on false pretexts and mislead their public to maintain the deceit and their huge salaries. I think it’s clear which narrative on world events is the closest to reality.

PSYCHOLOGICAL PROJECTION

As I say, the narrative and language being used by the establishment is becoming more unhinged and desperate. When this happens the offenders become openly irrational, more brazen and project their wrongs on to their opponents. Projection is about shifting blame. Broadly, psychological projection is a defence mechanism in which an individual attributes characteristics they find unacceptable in themselves to others.

Examples of projection are evident in several world leaders involved in the Syria war. Encouraged by the lack of any statesmanship and moral leadership in the West, Erdogan and the Saudi leadership accuse their opponents of supporting terrorism while being the biggest supporters of terrorism in Syria and elsewhere. Likewise Netanjahu of Israel projects his criminal aggressive behaviour on to others such as the Palestinians and Iran.

Bolton and Pompeo in the US regime accuse other states of the same type of crimes they routinely commit and as recent statements from these two have shown, their delusions are off the scale. Like their predecessors these people are power freaks and dangerous psychotics who hide behind patriotism, projecting their lack of credentials in this respect on to their opponents.

Establishment ‘liberals’ justify their support for continuous war by hiding behind ‘humanitarian intervention’. They project their lack of humanitarian values and empathy on to their critics in a similar way.

This mind-set has become the norm to the media acclimatised to 25 years of war under Clinton, Blair, Bush and Obama. The media legitimises regime change, support for terrorism and mass murder, by projecting western crimes on to those states under attack like Syria and particularly Russia which is trying to prevent the chaos.

The media are the propaganda wing and an extension of a psychotic establishment, which explains why we are seeing more and more journalists reacting aggressively when challenged over their lies. And calling others traitors is shifting their share of the betrayal of the public on to their opponents and critics.

THE ENEMY WITHIN – THE REAL TRAITORS

But for those of us living in the real world, what does all this mean? Well, we know the truthful narrative and we’re not the ones betraying our country. In fact, we are the patriots trying to stop our countries being obliterated by the selfish, ignorant fools who would cause a global war.

It seems from the lastest language being used that the establishment including the media are becoming increasingly delusional and dangerous. The media have a professional and moral duty to report the facts – not least because they have such a huge influence on world events. So they share the responsibility for all the wars which could have been prevented, had they done their jobs.

But calling someone a traitor is a serious business as I said before but perhaps by reflecting on the list of events below, this word can be assigned to where it really belongs. A reminder of the definition again:

traitor – a person who is guilty of treason or treachery, in betraying friends,country, a cause or trust.

And a list of some of the betrayals.

  • The West invades Iraq under a false pretext – ISIS are created and terrorist attacks are later carried out in the West, allegedly by Al Qaeda and ISIS. Many refugees flood Europe from this conflict.

  • The West attacks Libya and supports islamist groups against the government. Again, the same terrorists who the UK and the West support go on to attack the UK and Europe. Refugees arrive in Europe and to this day Libya is in chaos.

  • Syria is attacked, the West using Al Qaeda as a tool for regime change. More refugees in Europe and after seven years the UK and other governments are still supporting Al Qaeda through taxpayers funds. Bombing has been carried out on Syria on no evidence of chemical attacks by the Syrian Government and parts of Syria are occupied illegally. On more than one occasion the continued interference and attacks have nearly caused a direct confrontation with Russia. The media misreporting of all these events have made these wars possible and encouraged escalation.

  • The Salisbury incident, Ukraine and other events. Over the last few years, Russia has been blamed for various events. These accusations have been hasty and with little evidence. An anti-Russia propaganda media campaign has ensued, dramatically increasing tensions and the risk a spark which could start World War III. The rhetoric of some journalists has been reckless to the extreme and in some cases have been proved to be bare-faced lies. This climate of hysteria has been generated by the government with the assistance of the media. Anyone outside of this bubble with any common sense can see continuing on this path represents a grave risk to humanity.

  • Further disinformation campaigns. Various organisations, like Integrity Initiative have been created specifically to shore up the establishment narrative on regime change wars and Russia. In the background of highly unstable leaderships in the West, Israel, Turkey and Saudi Arabia, these organisations through their lies and distortions only increase further the risk of a major conflict.

So I would suggest that if we are going to use a word such as ‘traitor’ in these debates the above would be a more accurate list of behaviours to attribute it to. Creating floods of refugees and terrorists to our shores and funding terror through our taxes goes against all our interests and is a betrayal. Recklessly creating the conditions in Syria and elsewhere for a full scale nuclear war is the ultimate betrayal.

If the likes of John Sweeney, Integrity Initiative, Bellingcat, Oliver Kamm, Luke Harding, Carole Cadwalladr and others can’t or won’t accept they share a responsibility for the escalating conflicts in the world, it may only be a matter of time before their dereliction of duty and betrayal comes back to bite them hard. That day could come quite soon considering the speed their credibility has been crumbling lately.

via ZeroHedge News http://bit.ly/2UmvuAR Tyler Durden

Russia’s New Military Exoskeleton Can Break You

The Russian army has developed an exoskeleton which has already been field tested Syria, according to Sergei Smaglyuk, president of Moscow-based “GB Inzhiniring,” which developed the suit along with TsNIITochMash, according to RIA Novosti. 

Weighing in at around 15 lbs, the carbon fiber and metal suit allows a soldier to carry heavy mortars and a 700-round belt-fed machine gun long distances without fatigue. According to the report, the suit can also be used to help evacuate wounded people in disasters, and will allow troops to march much further without getting tired. 

Based on recommendations from the Russian military, GB Inzhiniring incorporated the ability for the suit to eject its cargo in an emergency. They also developed a special backpack for the machine gun which feeds ammunition through a special sleeve. 

Other modifications under consideration for future versions of the suit include a more flexible chassis and a more heavily armored version. A battery will also allow soldiers to use and charge various equipment while on the move, such as a walkie-talkie, an electronic commander’s tablet and navigation gera. 

The exoskeleton is set to enter mass production soon, while foreign buyers have reportedly expressed interest in the device once it receives an export passport. 

According to Smaglyuk, “This is already much closer to the science fiction. In the future, such equipment will increase the strength and speed of the serviceman. As soon as this happens, the very next day, a boom of exoskeleton of very different designs and purposes will begin. Today we are considering the concept of feeding an active exoskeleton from an onboard network, for example, a truck. machine with ammunition, the soldier puts “suit” that can be connected to the car battery and starts unloading. Such a project could be useful logistics unit.” 

via ZeroHedge News http://bit.ly/2RVJDs4 Tyler Durden

Escobar: Eurasian Davos & The Rise Of The Global South

Authored by Pepe Escobar via The Asia Times,

How Astana Is Leading The Way In Central Asia

Kazakhstan, which lies at the center of Eurasian integration, is a mix of privatization and protectionism, where the state welfare fund is trying to cut state domination in some industries and protect others

Kazakhstan sits at the heartland of the Great Game of the 21st century, which is all about Eurasia interconnectivity and integration. Astana is a member of both the China-driven New Silk Roads, or Belt and Road Initiative, and the Russia-led Eurasia Economic Union.

Kazakhstan, the “snow leopard economy” as branded by President Nursultan Nazarbayev over the past decade, could not be more quintessentially Eurasian, its landlocked steppes crisscrossed by 60% of China to Europe rail cargo.

The country also functions as a sort of massive power station for the New Silk Roads, overflowing with oil and gas but also significantly investing in solar, wind and nuclear power.

Astana happens to be the only financial hub between Moscow and Beijing, boasting the Astana International Financial Centre, where the Shanghai Stock Exchange is a major investor and Chinese banks and businesses are listed.

A fascinating mix of privatization and protectionism is also in play.

Samruk Kazyna, the Kazakh national welfare fund, is seeking to reduce the government’s share of the economy, which ranges from energy to banking, from 90% to 20%, even as Astana has made it clear that some strategic commodities and industries are closed to foreign, especially Chinese, investment.

With all that as background, it’s more than natural that Kazakhstan’s unique Eurasian crossroads status has been discussed in detail at the Astana Club.

Its 2018 report, ‘Toward a Greater Eurasia: How to Build a Common Future?’, focuses on everything from geoeconomics and the Central Asian renaissance to geopolitical and security risks. Of particular interest is a new report on the global risks ahead for Eurasia.

Kazakhstan and the ‘stans’ between Russia and China. Map: University of Texas

The Eurasian Davos

There’s near universal consensus across the Global South, including key Eurasian latitudes, that in a new, emerging, extremely complex geopolitical matrix, globalization as we knew it is “no longer a universal good”, given how states are grappling mightily with the rise of protectionism. There’s also plenty of debate on how the dwindling “Western liberal order” will be remixed, side by side with the consolidation of the Fourth Industrial Revolution.

These concerns are discussed not only by the jaded Western elites who gathered at Davos this week. It has been a recurrent theme studied by the Institute of World Economics and Politics in Astana, which operates under President Nazarbayev.

Assisted by the International Strategy Partners Group, the Institute conducted a survey among 1,000 executives in 60 countries plus 30 international experts to find out how Eurasia may be able to anticipate the New Great Game’s extreme challenges, such as the US-China trade war, the US-Russia geopolitical and nuclear impasse, the shifting chessboard in Southwest Asia – what the West calls the Middle East, the rise of ethnic and religious conflicts, the inexorable march of high-end technology, and the appalling degradation of the environment.

Under the survey, the number one risk for Eurasia was considered to be the escalation of US-China military and political confrontation, closely followed by confrontation between Russia and the West. The conflict most likely to be exacerbated was seen to be the US and Iran. Meanwhile, protectionism was the key concern for 56% of respondents.

Serious questions may be posed about the relevance of some of the experts featured in the final report. Still, there’s some sound analysis. Evgeny Buzhinsky, vice-president of the Russia International Affairs Council, ominously stressed how further escalation of the US-Russia high-stakes game could “lead to armed confrontation not only with the use of conventional means of destruction, but also to a nuclear conflict”.

Buzhinsky also sought to make it clear that his country won’t initiate an arms race, saying Russia firmly adheres to the principle of “reasonable sufficiency”.

The multi-vector way

The Astana report does show in some detail the “first symptoms of a crisis of global institutions”. Yet, in parallel, there’s a tendency in some Western latitudes to interpret the crisis as an outcome stemming from the rise of what could be described as Asiatic imperialism.

Turks with a passion for the Ottoman Empire, such as former Foreign Minister Ahmet Davutoglu, may have dreamed of tying up again with citizens from “Sarajevo to Damascus, Benghazi to Erzurum”, but not so much in the spirit of a recent, lovely travel book revisiting imperial latitudes.

The Syria debacle has proved that President Erdogan’s expansion project will have to be substantially tamed, as it must fit with the geopolitical reach of another former empire, Russia, as well as a backlash from the Arab world. There’s no neo-Ottoman way when Egypt, Iraq, Jordan, Lebanon and the UAE, among others, are now in favor of patching up their formerly fractured relationship with Damascus.

A case can be made that Erdogan may be aiming towards a new brand of Eurasianism, just as Russian intellectuals have evolved the concept of Greater Eurasia, where the notion of Russkii Mir (the Russian World) is expanded in an inclusive, geoeconomic and geopolitical way, and not as a form of domination.

Russia is, after all, a de facto supranational civilization, not a mere nation-state, just as China is a de facto “civilization-state”. Russian culture reigns all across Central Asia, where Russian, also crucially in social media, is the lingua franca.

Erdogan could do worse than invest in a similar, inclusive notion incorporating all Turkic-speaking peoples across Central Asia.

In a nutshell, comparisons with the eve of WWI, as far as Eurasia is concerned, are premature. The discussions in Astana show that the way ahead is multi-vector, multi-cultural, and multi-polar.

via ZeroHedge News http://bit.ly/2RjIgym Tyler Durden