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The Mueller report hasn’t even been completed yet, and already Congressional Democrats are already preparing to go to war with the DOJ to make sure its contents receive a public hearing (ignoring the virtual certainty that Mueller’s team will likely preempt them by leaking the text to the New York Times and Washington Post).

To wit, during an appearance on ABC’s “This Week” with George Stephanopoulos on Sunday, Intelligence Committee Chairman Adam Schiff – who was recently accused by WSJ columnist Kimberly Strassel of being the Dems’ “resident collusion conspiracy theorist” – vowed to take his fight for the release of the Mueller report to court if necessary after AG William Barr said he doesn’t intend to publish the contents of the report, and would instead offer a summary of its findings to Congress. Barr, who noted during his confirmation that the special counsel statutes state the findings of the report should be “confidential”, said he would release only as much information as is required by statute. He also noted that it was “DOJ policy” to withold potentially disparaging information about those who have not been accused of a crime.

In response, Schiff and six other House committee chairs wrote to Barr on Friday to argue that the DoJ had provided to the House in recent years “substantial amounts of investigative material, including classified and law enforcement sensitive information” and that this had set a new precedent for such disclosures.

During his interview with Stephanopoulos, Schiff doubled down on this, insisting that Barr has a “responsibility” to release the full report (note: he does not) and that Dems would demand not just Mueller’s final report in full, but also the “underlying evidence” from his investigation.

If these intimidation tactics don’t work, Schiff said he would subpoena the report, or even haul Mueller in for a public Congressional hearing if necessary to allow him the publicly detail the contents of the report (note: during the nearly two years since the probe began, Mueller has made almost no public appearances).

When Mueller’s investigation is complete, the report must be made public.

If Attorney General Barr tries to hide it, we’ll subpoena the report, insist on the underlying evidence, have Mueller testify, and take it to court, if needed.

The American people deserve the facts. pic.twitter.com/vZAb5zsgUU

— Adam Schiff (@RepAdamSchiff) February 24, 2019

But even once the protocol has been set aside, Schiff said that there’s an “intense public need to know” that trumps any precedent, pardon the pun. And if Mueller doesn’t cooperate with the Dems push to publicize the report, Schiff warned that it would forever “tarnish” his legacy.

Read a transcript from the Schiff interview below:

STEPHANOPOULOS: Well, that gets to a question about the Mueller investigation. If it turns out, as the president has said so many times, that he did not collude with the Russians to interfere in the election, but, in fact, he was pursuing this Trump Tower at the same time, if that’s not criminal, does Mueller have a responsibility to report it or no?

SCHIFF: He does have a responsibility to report it; and, in fact, if you take the position, and I think it’s a flawed one, but if you take the position that the president cannot be indicted, and the only remedy for improper, illegal or other conduct is impeachment, then you cannot withhold that information from congress, or essentially the president has immunity. So that cannot be allowed to be the case. Bob — or Bill Barr has committed in his testimony to making as much of the report public as he can. And the regulations allow him to make it all. We’re going to insist on it becoming public. And more than that, George, we’re going to insist on the underlying evidence because there is certain evidence is only in the hands of the Department of Justice that we can’t get any other way. There were searches conducted, for example, of Roger Stone and Paul Manafort. There’s no other way to get the information that was seized except through the department and we can’t tell the country fully what happened without it.

STEPHANOPOULOS: As — as you — as you know, William Barr may have quite a different view of what those regulations require than you do. They could allow him to release the entire report, but under Justice Department regulations, officials have said that if you decline to prosecute someone, then the underlying evidence should not be released.

SCHIFF: But George, the department has violated that policy repeatedly and extendedly, you know, to a — to a great extent over the last two years. And in fact, I’ve had this conversation with Rod Rosenstein and others down at the Justice Department as they turned over thousands and thousands of pages of discovery in the Clinton e-mail investigation and there was no indictment in that investigation, that this was a new precedent they were setting and they were going to have to live by this precedent whether it was a Congress controlled by the Democrats or Republicans.

So they’re going to have to abide by that. And I think also, quite separate apart from the precedent they’ve already set, is the intense public need to know here, which I think overrides any other consideration.

STEPHANOPOULOS: You — you say — you say the Justice Department’s going to have to live by that precedent, but what if they don’t? What if they say no, we’re not going to release the underlying evidence. What options do you have.

SCHIFF: Well we will obviously subpoena the report, we will bring Bob Mueller in to testify before Congress, we will take it to court if necessary. And in the end, I think the department understands they’re going to have to make this public. I think Barr will ultimately understand that as well. Barr comes into this job with two strikes against him. He applied for the job by be demonstrating a bias against the Mueller investigation. Indeed that’s part of the reason he was hired. He’s also not been willing to commit to following the advice of the ethics lawyers. Indeed that was part of the reason he was hired.

If he were try to withhold, to try to bury any part of this report, that will be his legacy and it will be a tarnished legacy. So I think there’ll be immense pressure not only on the department, but on the attorney general to be forthcoming.

STEPHANOPOULOS: You’re talking about public pressure. Are you prepared to take the administration to court?

SCHIFF: Absolutely. We are going to get to the bottom of this. We are going to share this information with the public and if the president is serious about all of his claims of exoneration, then he should welcome the publication of this report.

STEPHANOPOULOS: The president has said no collusion many times, as I said. You said many months ago that you’ve already developed evidence of collusion. We haven’t seen that from Robert Mueller. Do you have any evidence at all that the president colluded?

SCHIFF: George, there’s ample evidence of collusion of the campaign and it’s very much in the public record, and it’s everything from what we have seen recently about Paul Manafort meeting with someone linked to Russian intelligence and sharing polling data, and not top line data, not this is why we think Trump is going to win data, but raw data, complicated data. We’ve seen evidence of Roger Stone in communication with Wikileaks, we’ve seen the president’s son having a secret meeting at Trump Tower that was presented to him as part of the Russian government’s effort to help the Trump campaign, his acceptance of that help, his interest in getting that.

All of this is evidence of collusion and there’s much, much more. Whether that will amount to a criminal conspiracy that can be proved beyond a reasonable doubt, we’ll have to wait for Bob Mueller to tell us. But to — to not see what is plainly in front of us means you — you basically don’t want to see the evidence of collusion because it is quite abundant.

* * *

In summary, after bashing the FBI – then led by James Comey – for violating DOJ protocol by releasing so much information about its information into Hillary Clinton, the Dems are preparing to argue that it’s only fair the DOJ do the same for Trump.

via ZeroHedge News https://ift.tt/2Vi3WNy Tyler Durden

As Deutsche Bank’s Jim Reid writes overnight, for those in the capital markets who have had enough of politics “I suggest you go on holiday for a few days as this topic should dominate proceedings.” To wit: we have continued US-China trade discussions but with the March 1st tariff deadline pushed back overnight, a second summit between Trump and Kim Jong Un (Weds/Thurs), another Brexit parliament vote (Weds), Michael Cohen (Mr Trump’s ex-lawyer) giving two days of congressional testimony, including an open session on Wednesday, and the Mueller Russia investigation may be completed even if the results aren’t expected this week. We’ve got Powell’s semi-annual testimonies to Congress (Tues/Weds), US Q4 GDP (Thurs) and PCE data (Fri), European inflation data (Thurs/Fri) and final PMIs (Friday), and PMIs due out in China (Thurs).

While the week will be extremely busy by all counts, as Bloomberg quips, Wednesday will be especially challenging for TV producers managing the split screens. On that day:

• The U.S. president and the North Korean leader begin their second summit in Hanoi.
• Michael Cohen, Trump’s former lawyer, testifies at an open Congressional hearing on what he knows about the 2016 campaign.
• U.S. Trade Representative Robert Lighthizer gives an update on trade talks with China to the House Ways and Mean Committee.
• U.S. Federal Reserve Chairman Powell will address the House Financial Services Committee, his second of two days of testimony.

A closer look at the key developments:

Trade

Friday was the original deadline that the US and China set to negotiate an agreement before US tariffs on $200bn of Chinese imports rise from 10% to 25%. However Trump tweeted just before futures opened on Sunday night that “I will be delaying the U.S. increase in tariffs now scheduled for March 1,” citing productive talks with China while adding, “the U.S. has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues.” He also said that if both sides make further headway in negotiations then he will meet China’s Xi Jinping at his Mar-a-Lago resort in Florida to conclude an agreement, though he didn’t offer any details on the timing of the meeting or how long he expects the tariff extension to last. However, Mnuchin had said last week that the meeting between Trump and Xi is being tentatively planned for late March. The news unleashed the biggest rally for Chinese stocks since the summer of 2015, even as China’s state-run Xinhua news agency published a commentary on trade talks overnight saying that talks will be harder at the final stage. We should note that Lighthizer is due to testify to the House Ways and Means Committee on Wednesday which should shed some light on where things stand although the media are picking up on disagreements between Trump and Lighthizer.

Trump in Nam

Staying with Trump, expect there to be some focus on Wednesday’s second summit between the President and North Korea’s Kim Jong Un. The summit is due to take place in Vietnam over two days and a joint statement is expected following the summit. As Bloomberg notes, the regional implications could be huge for allies such as South Korea, where 30,000 U.S. troops are based, and Japan. There’s concern that Trump will give up too much if Kim makes some kind of sweet-sounding offer, a U.S. official said. Trump tweeted Sunday that he has a “great relationship” with the North Korean communist leader. They’re expected to meet one-on-one at some point during the Feb. 27-28 summit. Kim headed to Vietnam by train.

Brexit

The Brexit Parliament vote is scheduled for Wednesday with UK PM May updating the House of Commons the day prior. In all likelihood, given recent developments, the vote won’t be on a new withdrawal agreement and so therefore remains to be seen what PM May can offer MPs to stave off a Boles/ Cooper revolt which would extend Article 50. Expect a delicate few days of negotiations ahead before MPs go into that vote. Playing for time, May on Sunday promised a binding vote on her divorce deal by March 12. But she’s promised to give Parliament a general vote on Wednesday, which members are threatening to use to delay Brexit. Also keep an eye out for comments by Emmanuel Macron and Angela Merkel in Paris.

Mueller Probe

There’s a chance that the US Justice Department will announce the completion of Mueller’s Russia investigation. At this stage, it’s not known if the findings will be made public with a story on Bloomberg this week suggesting Democrats were seeking to potentially subpoena Mueller if the results aren’t publically released. One to potentially keep an eye on.

Cohen Testimony

Whether or not Mueller completes his report, attention will turn to Michael Cohen, Trump’s former fixer sentenced to three years in prison in December. He’ll be giving two days of congressional testimony, including an open session on Wednesday. As Bloomberg notes, it’s a chance for Democrats to explore topics such as pre-election hush money paid to women who alleged they had affairs with Trump, and what Cohen knows about Russian influence in the 2016 presidential campaign. What’s more, federal prosecutors in New York are still looking into Trump’s company, presidential campaign and inaugural committee.

Lighthizer Testimony

US Trade Rep Lighthizer testifies on Wednesday, and may give a sense of how likely the U.S. is to impose tariffs on auto imports. The European Union is threatening to hit back. U.S. fourth-quarter gross domestic product, due Thursday, is expected to show 2.5 percent expansion last year, short of the Trump administration’s ambitious goal.

Powell

The main focus for Fed watchers this week will be Fed Chair Powell’s testimony to the Senate Banking Committee on Tuesday and House Financial Services Committee on Wednesday where he will deliver the Fed’s semi-annual monetary policy report. Expect the focus to be on the balance sheet, the current thinking on inflation and also how Powell now views the economic outlook, particularly.

US Economy

In terms of economic data, the main highlights are at the back end with a first look at Q4 GDP on Thursday and then the December PCE reading due on Friday. Expectations for Q4 GDP are for a +2.5% qoq annualized reading which would be down from +3.4% in Q3, while core PCE is expected to rise +0.2% mom which would be enough to hold the annual rate at +1.9% yoy and therefore more or less in line with the Fed’s target. Other data worth highlighting in the US next week include December housing starts, building permits and consumer confidence on Tuesday, the December advance goods trade balance on Wednesday, and February ISM manufacturing on Friday.

European Economy

In Europe the main highlights next week are the preliminary February CPI readings in France and Germany on Thursday and the Euro Area on Friday, as well as the final February manufacturing PMIs, including a first look at the non-core. China’s February PMIs on Thursday is likely to be the main highlight in Asia. We should also note that China’s NPC Standing Committee is due to meet for two days from Tuesday ahead of the annual NPC which begins the week after. Finally, it’s another busy week for central bank speakers. Away from Powell we’re due to hear from Clarida on Monday and Thursday as well as Bostic, Harker and Kaplan on Thursday. Powell then speaks again on Friday along with Mester and Bostic. Over at the ECB, Lane, Coeure and Mersch are due to speak on Tuesday.

Fed Speakers

 Away from Powell we’re due to hear from Clarida on Monday and Thursday as well as Bostic, Harker and Kaplan on Thursday. Powell then speaks again on Friday along with Mester and Bostic. Over at the ECB, Lane, Coeure and Mersch are due to speak on Tuesday

Below is a summary of key events in the week ahead sorted by day:

• Monday: A quiet day for data with the releases focused in the US where we get the January Chicago Fed national activity index, December wholesale inventories and trade sales and February Dallas Fed manufacturing activity index. Away from that, the BoE’s Carney and Fed’s Clarida are due to speak.
• Tuesday: The main focus will be Fed Chair Powell’s testimony on the semiannual monetary policy report in front of the Senate. As for data, in Europe we get consumer confidence readings in Germany and France as well as the UK’s January finance loans for housing. In the US, we get December housing starts and building permits, Q4 house price index, December FHFA house price index, February Richmond Fed manufacturing index and February consumer confidence.  Meanwhile, the BoE’s Carney, Ramsden, Vlieghe and Haskel will all speak at a Parliamentary committee hearing while the ECB’s Mersch and Coeure are also due to speak. UK PM May will address the House of Commons while German Chancellor Merkel is also set to addresses a Federation of German Industries. Finally, China’s NPC Standing Committee is due to meet for two days ahead of the annual NPC which begins the week after.
• Wednesday: The scheduled UK parliament Brexit vote will likely be the main focus, along with Powell’s testimony to the House panel and a second summit between President Trump and North Korea’s Kim Jong Un. As for data, overnight we will get the UK’s February BRC shop price index followed by the release of Euro Area January M3 money supply and February confidence indicators. In the US, we get the latest weekly MBA mortgage applications, December advance goods trade balance and retail inventories, January pending home sales and December factory orders along with the final December capital and durable goods orders. Late evening, we will get Japan’s preliminary January industrial production and retail sales. Elsewhere, the BoJ’s Kataoka is due to speak. US Trade Representative Lighthizer is also due to testify to the House Ways and Means Committee on where trade talks between the US and China stand.
• Thursday: The main data highlight is a first look at Q4 GDP in the US and preliminary February CPI readings in Europe for France,  Germany, Italy and Spain. Prior to that, we will get China’s official February PMIs overnight and in Europe, we will get France’s January PPI and consumer spending along with preliminary Q4 GDP. In the US, we get the latest weekly initial jobless and continuing claims readings along with the February Chicago PMI and Kansas City Fed manufacturing activity index. Away from the data, the BoJ’s Suzuki and Fed’s Clarida, Bostic, Harker and Kaplan are all due to speak.
• Friday: The final February manufacturing PMIs in Europe, US, Japan and China should be the main data highlight on Friday. Away from that, we will also get the UK’s January money and credit aggregates data and the Euro Area’s advance February CPI and January unemployment rate readings. In the US, we get January personal income and December personal spending data along with December core PCE, February manufacturing ISM, vehicle sales and final University of Michigan survey results. Elsewhere, the Fed’s Bostic is due to speak.

Finally, here is Goldman looking only at key events in the US, where the key economic data releases this week are the initial Q4 GDP estimate on Thursday and the core PCE report and ISM manufacturing report on Friday. There are several scheduled speaking engagements by Fed officials this week, including Chairman Powell’s semiannual testimony to Congress on Tuesday and Wednesday.

Monday, February 25

• 10:00 AM Wholesale inventories, December preliminary (consensus +0.4%, last +0.3%)
• 10:30 AM Dallas Fed Manufacturing index, January (consensus +4.8, last +1.0)
• 11:00 AM Fed Vice Chairman Clarida (FOMC voter) speaks: Fed Vice Chairman Richard Clarida will speak at a Fed Listens event, followed by a moderated discussion with Dallas Fed President Robert Kaplan.

Tuesday, February 26

• 08:30 AM Housing starts, December (GS +1.5%, consensus -0.5%, last +3.2%); Building permits, December (consensus -2.8%, last +5.0%): We estimate housing starts rose 1.5% in December, reflecting a moderate boost from mild winter weather.
• 09:00 AM FHFA house price index, December (consensus +0.4%, last +0.4%)
• 09:00 AM S&P/Case-Shiller 20-city home price index, December (GS +0.4%, consensus +0.3%, last +0.3%): We estimate the S&P/Case-Shiller 20-city home price index increased 0.4% in December, following a 0.3% increase in November. Our forecast of a solid increase largely reflects the appreciation in other home prices indices such as the CoreLogic house price index in December. We continue to look for slower home price growth in the coming months.
• 10:00 AM Richmond Fed manufacturing index, February (consensus +6, last -2)
• 10:00 AM Conference Board consumer confidence, February (GS 124.5, consensus 124.0, last 120.2): We estimate that the Conference Board consumer confidence index increased by 4.3pt to 124.5 in February, reflecting higher equity prices and some reversal of the government shutdown impact.
• 10:00 AM Fed Chairman Powell appears before the Senate Banking Committee: Federal Reserve Chairman Jerome Powell will appear before the Senate Banking Committee to deliver the Fed’s semi-annual Monetary Policy Report to Congress and answer questions from lawmakers.

Wednesday, February 27

• 08:30 AM U.S. Census Bureau Report on Advance Economic Indicators; Advance goods trade balance, December (GS -$74.7bn, consensus -$74.3bn, last -$71.6bn); Wholesale inventories, December (consensus +0.4%, last +0.3%): We estimate that the goods trade deficit rebounded to -$74.7bn in December, reflecting a rebound in inbound container traffic. The goods trade deficit fell sharply in November, as imports and exports of goods both declined.
• 10:00 AM Pending home sales, January (GS flat, consensus +0.8%, last -2.2%): We estimate that pending home sales remained unchanged in January based on mixed regional home sales data, following a 2.2% decline in December. We have found pending home sales to be a useful leading indicator of existing home sales with a one- to two-month lag.
• 10:00 AM Factory Orders, December (GS -0.6%, consensus +0.9%, last -0.6%); Durable goods orders, December final (last +1.2%); Durable goods orders ex-transportation, December final (last +0.1%); Core capital goods orders, December final (last -0.7%); Core capital goods shipments, December final (last +0.5%): We estimate factory orders decreased 0.6% in December following a 0.6% decline in November, primarily due to large declines in the price of oil in prior months.
• 10:00 AM Fed Chairman Powell appears before the House Financial Services Committee: Federal Reserve Chairman Jerome Powell will appear before the House Financial Services Committee to deliver the Fed’s semi-annual Monetary Policy Report to Congress and answer questions from lawmakers.
• 10:00 AM USTR Ambassador Lighthizer speaks: US Trade Representative Ambassador Robert Lighthizer will testify before the House of Representatives Ways and Means Committee on US-China trade issues in advance of the March 1 deadline to reach an agreement before the tariff rate on $200bn of imports from China steps up on March 2. The hearing will be streamed on the Ways and Means Committee website.

Thursday, February 28

• 08:00 AM Fed Vice Chairman Clarida (FOMC voter) speaks: Fed Vice Chairman Richard Clarida will speak at the annual NABE conference in Washington.
• 08:30 AM GDP, Q4 initial/second (GS +1.9%, consensus +2.4%, last +3.4%); Personal consumption, Q4 initial/second (GS +2.3%, consensus +3.5%, last +3.5%): We estimate a 1.9% increase in the initial release of Q4 GDP (qoq ar). We expect the composition of the report to reflect deceleration in personal consumption (+2.3%), but a pickup in business fixed investment (+4.2%) alongside a significant boost from federal government spending (+4.0%). We expect a significant slowdown in housing investment (-6.0%).
• 08:30 AM Initial jobless claims, week ended February 23 (GS 220k, consensus 224k, last 216k); Continuing jobless claims, week ended February 16 (last 1,725k): We estimate jobless claims increased 4k to 220k in the week ended February 23. The claims reports of recent weeks suggest that the pace of layoffs remains low, though it probably remains somewhat higher than in early fall.
• 08:50 AM Atlanta Fed President Bostic (FOMC non-voter) speaks: Atlanta Fed President Raphael Bostic takes part in a panel discussion on the economic and housing landscape at the Atlanta Fed. Audience Q&A is expected.
• 09:45 AM Chicago PMI, February (GS 56.7, consensus 57.6, last 56.7): We estimate that the Chicago PMI remained unchanged at 56.7pt in February, following a 7.1pt decline in January. The continued slowdown in global manufacturing may weigh on business sentiment in this report.
• 11:00 AM Kansas City Fed manufacturing index, February (last +5)
• 11:00 AM Philadelphia Fed President Harker (FOMC non-voter) speaks: Philadelphia Fed President Patrick Harker will discuss the economic outlook. Prepared text is expected.
• 1:00 PM Dallas Fed President Kaplan (FOMC non-voter) speaks: Dallas Fed President Robert Kaplan will speak in a moderated Q&A in San Antonio. Media Q&A is expected.
• 7:00 PM Cleveland Fed President Mester (FOMC non-voter) speaks: Cleveland Fed President Loretta Mester will speak on women in economics in a moderated Q&A at the Second Annual Women in Economics Symposium at the Federal Reserve Bank of St. Louis. Prepared text and audience Q&A are expected.
• 8:15 PM Fed Chairman Powell (FOMC voter) speaks: Fed Chairman Jerome Powell will discuss “Recent Economic Developments and Longer-Term Challenges” at a Citizens Budget Commission conference in New York. Prepared text is expected.

Friday, March 1

• 08:30 AM Personal income, January (GS +0.3%, consensus +0.3%); Personal income, December (GS +0.6%, consensus +0.5%, last +0.2%); Personal spending, December (GS -0.4%, consensus -0.1%, last +0.4%); PCE price index, December (GS +0.04%, consensus flat, last +0.06%); Core PCE price index, December (GS +0.20%, consensus +0.2%, last +0.15%); PCE price index (yoy), December (GS +1.74%, consensus +1.7%, last +1.84%); Core PCE price index (yoy), December (GS +1.91%, consensus +1.9%, last +1.88%): Based on details in the PPI, CPI, and import price reports, we forecast that the core PCE price index rose 0.20% month-over-month in December, or 1.91% from a year ago. Additionally, we expect that the headline PCE price index increased 0.04% in December, or 1.74% from a year earlier. We expect a 0.6% increase in personal income and a 0.4% decline in personal spending in December following the weak retail sales report, and a 0.3% increase in January personal income.
• 09:45 AM Markit Flash US manufacturing PMI, February final (consensus 54.9, last 53.7)
• 10:00 AM ISM manufacturing index, February (GS 55.3, consensus 55.6, last 56.6): Our manufacturing survey tracker – which is scaled to the ISM index – declined by 1.1pt to 53.0, reflecting mixed-to-weak manufacturing surveys so far in February. Following a 2.3pt rise in January, we expect the ISM manufacturing index to decline by 1.3pt to 55.3 in February.
• 10:00 AM University of Michigan consumer sentiment, February final (GS 95.8, consensus 95.8, last 95.5): We expect the University of Michigan consumer sentiment index to edge up 0.3pt from the preliminary estimate for February. The report’s measure of 5- to 10-year inflation expectations declined by three tenths to 2.3% in the preliminary report for February.
• 1:15 PM Atlanta Fed President Bostic (FOMC non-voter) speaks: Atlanta Fed President Raphael Bostic will speak on the economic outlook and monetary policy at a NABE conference in Washington. Audience Q&A is expected.
• 5:00 PM Lightweight Motor Vehicle Sales, February (consensus 16.8m, last 16.6m)

Source: BofA, DB, Bloomberg, Goldman

via ZeroHedge News https://ift.tt/2H1S2Dz Tyler Durden

Blain’s Morning Porridge, submitted by Bill Blain

Back on Planet Market, the big news is Trump postponing his threatened March 1 tariff hike on Chinese goods. Trade war threats are not over yet – there is still plenty of aggravation on the Tech side and for Huawai in particular – but the Chinese market went stellar on the news. As yet, there is no trade agreement – just Trump being magnanimous! Yet markets are partying.

A number of clients have pointed out the increasing number of disconnects they see between the economic data and what they see in markets. While data continues to disappoint to the downside, the markets seem quite glib to accept more risk – the rise in stocks since the December bottom highlights we’re back into “Risk On” environment. Thus, we have stronger stocks but a worsening economic picture – which is somewhat illogical. Despite the uncertainty on growth and a rising number of negative estimates, markets seem happy to discount these fears. Bond markets are very strong, confirming an expectation of lower rates for longer!

In terms of volatility, all the fear indicators have retreated – VIX has straight-lined down from 35 to 14, strongly suggesting everyone is sleeping sounder at night. After a decent US earning seasons – spiced with enough downside surprises to make sure everyone remains just a little uncomfortable – US stocks have staged a pretty decent rally back from the Dec lows. Not quite record breaking, and perhaps a tad complacent, but demonstrating investors still have faith in… something? That ongoing cheap money will keep corporates in buy-back mode? Or that returns from stocks are still likely to outperform bonds in the era of free money? Or just a lack of imagination and FOMO (fear of missing out.)

I’m unconvinced the risk is out the market. Maybe the picture is just a little cloudy?

I’m wondering if markets are something like “shell-shocked” and beginning to ignore some of the realities? At the core is the uncertainty re global trade and growth. Naturally any investor will be concerned if the sudden imposition of trade tariffs is going to dramatically reduce global trade volumes. But we’ve now got experience of the Donald Trump approach to trade – it’s not a strategic approach, but a series of tactical small individual agreements before moving to the next “negotiation”. Last night was just another example.

Markets now perceive a clear pattern to Trump’s approach to Trade Negotiations: He threatens to take us to the wire but never actually pulls the trigger. That has two effects: 1) the damage to sentiment is inflicted by the initial threat (which tends to quickly show up in sentiment and order data), and 2) the threat isn’t carried out leaving upside potential. The result is markets are ignoring the early signals (ie pulled factory orders) and focusing on the likely non-tariff agreement upside which Trump then claims as his trade victory.

I’m trying to work out how this kind of herd behaviour translates to the widely articulated fears of global slowdown and imminent recession. If Trump’s bark is worse than his bite, are the 40% of strategists now discounting future growth overly scared of trade dislocation? And will a quick few positive noises, such as more cheap Trump declarations of victory, turn around market sentiment just as quickly? And what is the real damage in the real economy for companies planning their production schedules based on what they see the White House say and do? Real world vs financial world?

While the World Bank and IMF outlooks are still negative, and project Brexit Fear can generate any number of horror stories, maybe the reality is real growth in 2019 as a potential upside surprise. Is the noise of Trump, Brexit and the rest obscuring the likelihood of a longer sustained Global Boom?   

Politics is fascinating at present. I won’t comment on Brexit, because I really don’t have the patience anymore, and can’t understand why we’ve got to wait for March 12 for the next vote to not happen. But, there is a classic Wolfgang Munchau article: “The future belongs to the left, not the right”, in this morning’s FT. It resonates very strongly with what I’ve seen and heard in recent months in Europe and the US. Donald Trump and his swing towards the Right is more an aberration than the norm. The Right has rallied on the back of inflamed immigration threats in the US and across Europe where right wing parties threaten large gains in coming elections. 

The real debate in society; about income equality, opportunities, health and wellbeing, jobs and taxes, remains the agenda of the Left. It’s the likely rise of the left that poses greater challenges for mercantile economies. Bernie Sanders back on the stomp in the US. Corbyn still in charge despite so many missteps in the UK. The young firebrand congresswoman AOC in the states calling for a 70% tax rate on the wealthy – and naturally right wing say taxes will destroy any incentives for entrepreneurs to entrep! 

The rise of the Left might be the real issue to focus on through the year!

via ZeroHedge News https://ift.tt/2GXRS0a Tyler Durden

Avid readers of Warren Buffett’s annual investor letter complained over the weekend that the legendary investor’s 2019 missive was a little repetitive, as Buffett once again lamented that Berkshire didn’t see many options for investing its $100 billion cash pile – despite his desire to make another big deal. After accruing just $4 billion in GAAP profits for the full year, analysts and the WSJ described 2018 as one of Buffett’s “worst years ever”, as an unexpected $3 billion writedown on its investment in Kraft Heinz during Q4 helped lead to a $25 billion loss on the quarter.

But as Buffett revealed during an interview Monday morning on CNBC’s Squawk Box, it nearly wasn’t so.  Because while Berkshire Hathaway didn’t pull the trigger on any new deals last year, it did come close to pulling the trigger during Q4. However, the deal ultimately fell through, and Buffett said he didn’t think it was “still on the books.”

“We had at least one deal possible that would have been very large,” Buffett told CNBC’s Becky Quick from Berkshire-owned Nebraska Furniture Mart on Monday. “I liked stocks in the fourth quarter but I would like buying a business even better.”

In his letter, Buffett explained that, while the prospect of buying a company makes he and Berkshire No. 2 Charlie Munger’s “pulse rates soar”, the sky high valuations for any companies with decent long-term prospects meant that Berkshire would likely continue to focus on buying marketable securities in 2019.

“That disappointing reality means that 2019 will likely see us again expanding our holdings of marketable equities. We continue, nevertheless, to hope for an elephant-sized acquisition. Even at our ages of 88 and 95 – I’m the young one – that prospect is what causes my heart and Charlie’s to beat faster,” he said.

When asked for a hint about the mystery deal, Buffett said only that the company he had in mind was “on this planet.” Berkshire hasn’t bought a company since 2015, when it bought Precision Castparts in a deal valued at $32 billion. 

Watch a clip from the interview below:

Warren Buffett says he was close to making ‘very large’ acquisition in Q4 but it fell apart from CNBC.

via ZeroHedge News https://ift.tt/2tGe32R Tyler Durden

Following a handful of amicable M&A proposals in the gold mining space, the drive for consolidation in the industry appears to have taken a hostile turn, as Barrick Gold has made a hostile bid for US-based rival Newmont Mining, opening the door to a deal that would create a $42 billion mining supergiant.

 

After Newmont revealed Sunday night that Barrick (which closed an $18 billion merger with Randgold Resources last month, creating the largest miner in the world) had purchased a small stake in Newmont (1,000 shares in Newmont, out of a total of 535 million outstanding), and that, following the purchase, petitioned to lower the threshold to call for a shareholders meeting, Barrick followed up Monday morning with a $17.85 billion unsolicited, all-share offer, according to the Wall Street Journal.

Shares in Newmont have been climbing since Friday, when Barrick first revealed that it was considering making an offer. Now that an offer is officially on the table, it sets up a showdown between the management teams at two of the largest gold miners, and also threatens to scuttle Newmont’s deal with Goldcorp, which was set to close during Q2. This would be the second attempt at a tie-up between the two companies, after a previous attempt didn’t work out back in 2014.

Here’s more from WSJ:

The offer sets up a showdown between management teams at two of the mining industry’s fiercest rivals. Barrick has long considered merging with Newmont, America’s largest listed miner, to pair up their large gold-mining operations in Nevada and create an industry giant that would dwarf the nearest competitor. A combination would create a behemoth worth about $42 billion at today’s valuations. Barrick said Monday it would create opportunities to squeeze out over $7 billion in cost savings.

The last serious attempt at a deal faltered in 2014. Barrick’s renewed interest in its rival reflects heightened pressure to rein in costs for ore extraction and production as gold prices languish and ore reserves shrink.

The impetus for this rash of dealmaking is clear: After years of underinvestment as the price of gold languished, miners have been emboldened by the recent uptick in gold prices, and the possibility that the business cycle might be nearing its end. Since it would take years to ramp up mining operations, acquisitions and mergers are the best option to expand production ahead of a possible boom.

With this in mind, don’t expect Barrick to back off so easily.

via ZeroHedge News https://ift.tt/2VglZnj Tyler Durden

For the past two months, stocks were buying the rumor that a trade deal would happen, and since Sunday night they have been also buying the news, after Donald Trump announced he would postpone the date for boosting tariffs on Chinese imports, taken as a sign of progress in the trade talks. While bonds fell and the dollar retreated, it was the S&P that finally broke above the key 2,800 resistance level that had proven too much for market for the past four months…

… while global markets were a sea of green.

But no market was as excited to surge on the late Sunday news as China, where the recent $1 trillion rally pushed two more indexes into bull markets overnight on an explosion of volume: China’s CSI 300 Index surged 6% Monday and the Shanghai Composite Index climbed 5.6%, its biggest daily, gain in nearly 4 years and extending their gains from a Jan. 3 low to more than 20%, entering a bull market.

The ChiNext Index of small caps and technology stocks, which entered a bull market Friday, rose a further 5.5 percent. Turnover on Chinese exchanges rose beyond 1 trillion yuan to the most since 2015.

A big driver for this surge in Chinese stocks where the government now appears ok with reflating yet another stock bubble, is the recent increase in margin debt, which has exploded higher over the past two weeks at the fastest pace since 2015.

“Even if stocks retreat in the short term, there’s still room for further gains as leverage is still way below the peak despite the increase,” said Shen Zhengyang, a Shanghai-based strategist with Northeast Securities Co. “Investors also have to bear in mind that economic fundamentals are still bad, so in order to avoid getting burned in a likely more volatile market, it’s key to always remain wary.”

Meanwhile, suggesting that Beijing is indeed greenlighting another stock bubble, Chinese brokerage stocks were especially hot, after President Xi said in a Politburo meeting that China will deepen reform in the finance sector and further open the industry. Huatai Securities Co. was among the brokerages to climb by the 10 percent daily limit in Shanghai, closing at its highest since June 2015. Actually as Bloomberg notes, all 30 Shanghai and Shenzhen-listed stocks with the word “securities” in their names rose by the 10% daily limit. The market is reacting quite positively as it’s rare to see the capital market and financial industry the main focus of that top policy meeting, says XuFunds partner Wang Chen.

It wasn’t just China as MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.8%, touching its highest since September, and is now up 10% so far this year. The Japanese Nikkei also gained, closing half a percent up at its highest since December.

The euphoric investor sentiment also boosted the yuan, which is the best performer among major currencies since Feb. 1, strengthening 0.8 percent against the dollar. The currency was up 0.34 percent at 6.6928 as of 3:14 p.m. in Shanghai.

The fresh trade deal optimism quickly spread across the globe and boosted European carmakers and miners, sparking a rally in the Stoxx Europe 600 Index, and by mid-morning, MSCI’s world equity index was up 0.2 percent at its highest since October. There was some mild underperformance in the SMI (U/C) as index heavyweight Roche (-0.6%) is down as the Co. are to purchase Spark Therapeutics in a deal valued at USD 4.8bln, which is at a 122% premium to Spark’s Friday close and at a 19% premium to their 52-week intraday high. Sectors were mixed, with some slight outperformance in Financial names. Other notable movers include PostNL (+9.1%) who are at the top of the Stoxx 600 following their earnings. UK housebuilders are underperforming after Persimmon (-5.7%) are reportedly facing removal of their right to participate in the government’s Help to Buy scheme, following reports of poor standards and hidden charges; as such, Taylor Wimpey (-2.3%) and Barratt Developments (-1.8%) are down in sympathy.

Italy’s bonds rallied after Fitch Ratings kept the country’s credit rating unchanged, easing fears that it will be downgraded to junk anytime soon

Emerging-market currencies and shares advanced despite China’s state-run Xinhua news agency later publishing a commentary saying talks will be harder at the final stage. Treasuries and core European bonds slipped, while Italy’s securities advanced and the euro strengthened. Following Trump’s tweet, developing-nation equities headed for the longest rally in nine months. South Africa’s rand led currency gains, with its biggest advance this month, and Russia’s ruble was set to post its longest winning streak since April 2015. “Given this string of positive news, it is hard to see an inflection in the positive EM momentum today,” Guillaume Tresca, a Paris-based strategist at Credit Agricole SA, wrote in a report. “This could help to support EM sentiment, which has been fragile,” with emerging-market portfolio inflows decelerating in the past two weeks.

The official delay from the U.S. may give fresh impetus to extend a global rally in equities that was being tested amid an uncertain future on global trade and forecasts for global economic growth to ebb. Meanwhile, it is unlikely that the market euphoria will fizzle any time soon: Fed Chairman Jerome Powell, whose dovish capitulation has also helped to boost markets, will testify on U.S. monetary policy on Tuesday and Wednesday.

“Expect him to emphasize patience, stating that any more hikes this year would likely require some pickup in inflation,” wrote analysts at TD Securities in a note. Participants in currency markets shared that sentiment. “We expect more of the same…, with Powell generally supportive of risky assets,” said Adam Cole, chief currency strategist at RBC Market. “We think the mood of optimism and better bid for risk is probably something we live with for the week.”

The trade news was largely priced in to currency markets, with the risk-on mood nudging the dollar down 0.1 percent against a basket of currencies to 96.518. The pound gained after U.K. Prime Minister Theresa May pushed back the deadline for a so- called meaningful vote in Parliament on her Brexit deal as she tries to give herself more time to renegotiate the agreement with the EU. Aussie and Kiwi rose to a fresh day’s high versus the U.S. dollar in early London trading after whipsawing in Asian session amid conflicting headlines around the progress of U.S.- China trade talks; China’s official Xinhua News Agency echoed Trump’s tweet, citing “substantial” progress, but a commentary published later cautioned that the talks may face “new uncertainties,” noting that bilateral trade frictions are “long term, complicated and arduous.” The euro ticked up 0.1 percent against the greenback, trading around $1.1350 and staying within the $1.1213/1.1570 range that has held since mid-October.

In commodities, oil prices edged up toward 2019 highs on the trade news, and as sanctions and political uncertainty tightened supply in several producer countries. However, oil quickly reversed and tumbled to session lows after Trump tweeted just before 7am EDT that “Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike – fragile!”

Economic data include wholesale inventories. Earnings due from Oneok, Mosaic

Market Snapshot

• S&P 500 futures up 0.4% to 2,801.75
• STOXX Europe 600 up 0.4% to 372.70
• MXAP up 0.7% to 160.73
• MXAPJ up 0.7% to 528.35
• Nikkei up 0.5% to 21,528.23
• Topix up 0.7% to 1,620.87
• Hang Seng Index up 0.5% to 28,959.30
• Shanghai Composite up 5.6% to 2,961.28
• Sensex up 0.9% to 36,189.95
• Australia S&P/ASX 200 up 0.3% to 6,186.32
• Kospi up 0.09% to 2,232.56
• German 10Y yield rose 2.0 bps to 0.116%
• Euro up 0.1% to $1.1350
• Brent Futures up 0.07% to $67.17/bbl
• Italian 10Y yield rose 1.4 bps to 2.487%
• Spanish 10Y yield fell 0.7 bps to 1.168%
• Brent Futures up 0.07% to $67.17/bbl
• Gold spot down 0.06% to $1,328.55
• U.S. Dollar Index down 0.1% to 96.42

Top Overnight News

• There could be “new uncertainties” in the final stage of the China-U.S. trade negotiations and Beijing should do its best while preparing for the worst, Xinhua said in a commentary
• U.S. President Donald Trump said he’ll extend a deadline to raise tariffs on Chinese goods beyond this week, citing “substantial progress” in the latest round of trade talks
• The U.S. and China haven’t yet agreed on the critical issue of enforcement in a proposed currency deal that would ensure Beijing lives up to its promise to not depreciate the yuan, four people familiar with the matter said
• Theresa May once again postponed a final vote on her Brexit divorce agreement, setting a new deadline of March 12 for Parliament to vote on the accord she’s still trying to renegotiate. EU officials may tell the U.K. that if it wants to delay its departure date, the country must stay in the bloc until 2021
• New York Fed President John Williams voiced concerns that inflation expectations may have slipped downward after years in which price rises have failed to reach the central bank’s 2% target
• A Chinese state-backed borrower’s failure to make good on a payment on a dollar bond on Friday threatens to overturn assumptions that officials would step in to avert defaults by companies closely linked to local authorities
• JPMorgan Chase & Co. gained some of the biggest shares in both fixed-income and equities trading last year, solidifying its leadership in one and nearing the top in the other. Deutsche Bank AG lost ground in both markets while trying to restructure its business
• The U.K. and U.S. sought to allay fears of disruption in the multitrillion-dollar derivatives market, vowing to put in place emergency policies to ensure trading continues uninterrupted in the event of a no-deal Brexit

Asian stocks kick-started the week with modest gains following a strong lead from Wall Street where the DJIA notched a 9-week winning streak and reclaimed the 26,000 level to the upside amid optimism surrounding US-China trade talks. ASX 200 (+0.3%) opened marginally firmer but gains in the material sector were offset by underperformance in the utility and telecom names, whilst Nikkei 225 (+0.5%) advances were led by the IT and material sectors. Elsewhere, Shanghai Comp (+5.6%) outperformed as investors cheered US President Trump’s announcement of an extension to the China tariff deadline, citing good progress on key issues whilst also noting plans for a Summit with Chinese President Xi. Meanwhile the CSI 300 (+5.9%), formed of major companies listed in Shanghai and Shenzhen, surged into bull market territory, marking a 23% gain from cycle lows. Finally, Hang Seng (+0.5%) failed to grasp onto the same momentum as its mainland peers, as the index was weighed on by the utilities sector after China Resources Power fell over 5% amid reports of delisting.

Top Asian News

• Ping An Is Said to Plan IPO of Fintech Unit at $8 Billion Value
• China’s Stock Surge Puts World-Beating Bond Rally in Shade
• Failed Hijacker Was on Bangladesh’s Anti-Terror Agency Watchlist
• Fortis Asks Indian Regulator to Arrest Founders Accused of Fraud

Major European equities are in the green [Euro Stoxx 50 +0.4%] continuing the gains seen in Asia which were spurred by strong US markets. There is some mild underperformance in the SMI (U/C) as index heavyweight Roche (-0.4%) is down as the Co. are to purchase Spark Therapeutics in a deal valued at USD 4.8bln, which is at a 122% premium to Spark’s Friday close and at a 19% premium to their 52-week intraday high. Sectors are mixed, with some slight outperformance in Financial names. Other notable movers include PostNL (+9.9%) who are at the top of the Stoxx 600 following their earnings. UK housebuilders are underperforming after Persimmon (-4.4%) are reportedly facing removal of their right to participate in the government’s Help to Buy scheme, following reports of poor standards and hidden charges; as such, Taylor Wimpey (-2.5%) and Barratt Developments (-1.5%) are down in sympathy.

Top European News

• Twinings Owner Warns of Food Shortages After a No-Deal Brexit
• Huawei Frightens Europe’s Data Protectors. America Does, Too
• Italian Bonds Surge After Fitch Calms Fears of Rating Downgrades
• PKO Says Poland’s Stimulus Should Keep Economic Growth Above 4%

In FX, AUD/NZD/SEK/NOK The Aussie and Kiwi are just eclipsing the Swedish Crown at the helm of the G10 pack, partly on latest US-China trade news that has lifted broad risk sentiment, and for the Nzd also much stronger than expected data in the form of Q4 retail sales overnight. Aud/Usd has rebounded further from recent sub-0.7100 lows through the 50 DMA (0.7134) and just above  the 0.7161 (100 DMA) to a high of 0.7174 with last Thursday’s high (0.7207) next on the rader for bulls. Nzd/Usd is hovering just below the top of a 0.6883-27 range as the cross pivots 1.0400 again. Similarly, the Sek and Nok are benefiting from the general appetite for risk assets, with Eur/Sek extending its post-Riksbank minutes retreat to just under 10.5600 at best, while Eur/Nok has been down through 9.7400.

• GBP/EUR  The next best majors, but mainly at the expense of a softer Usd with the DXY slipping back below 96.500 on the aforementioned US-Sino tariff truce, as Cable maintains 1.3000+ status and the single currency keeps its head above 1.1300. However, the Pound has been choppy again amidst ongoing Brexit uncertainty and a barrage of contrasting headlines, and the Eur is still encountering chart hurdles above 1.1350, like the 30 DMA around 1.1365.
• CAD/CHF/JPY All narrowly mixed vs the Greenback, but the Loonie is consolidating closer to highs vs its US counterpart alongside crude prices and eyeing 1.3100 within a 1.3150-22 range and the Franc appears more settled above parity, while the Jpy has pared some overnight losses from 110.85 towards 110.50.
• EM Understandably, the Yuans have greeted ‘substantial’ or ‘concrete’ progress between the US and China on the trade issue with delight/huge relief, and from another softer PBoC Usd/Cny reference point have rallied further to test 6.6900+ levels. However, other regional currencies are also getting a boost on the prospect of a deal and wider repercussions for the global economy, with Usd/Zar down sharply from 13.9930 to 13.8480 at one stage, Usd/Rub under 65.2500 and Eur/Huf probing below 318.00 (Forint also appreciating Fitch’s Hungarian upgrade to BBB/stable outlook).

In commodities, WTI futures gave up opening gains despite the overall trade-driven optimism, although it is worth noting that Nigerian election polls have now closed with reports of dozens killed in election violence, however, there has been no reports of disrupted oil flow from the OPEC producer. Oil tumbled after president Trump tweeted a warning to OPEC that oil prices were getting too high. Also, in spite of the Baker Hughes rig count showing a drop of four active rigs, US production reached a record high last week at 12mln BPD according to EIA data. Elsewhere, spot gold benefitted from the easing buck and hovered near Friday’s highs, while copper traded choppy as initial trade-induced upside waned after Xinhua noted that US-China trade talks are said to become more difficult at the final stage. Iranian Supreme National Security Council Secretary said Iran has designed and put into practice initiatives to neutralise the US sanctions against Iranian oil exports. He also noted that Iran has options to stop oil flow if threatened, other than closing Strait of Hormuz.

US Event Calendar

• 8:30am: Chicago Fed Nat Activity Index, est. 0.2, prior 0.3
• 10am: Wholesale Inventories MoM, est. 0.3%, prior 0.3%
• 10am: Wholesale Trade Sales MoM, est. -0.3%, prior -0.6%
• 10:30am: Dallas Fed Manf. Activity, est. 4.9, prior 1

DB’s Jim Reid concludes the overnight wrap

Can you believe at the end of this week it will be March? Where does time go? The weather was unseasonably unbelievable across most of Europe over the weekend and I’ve caught the sun a little and have spent the entire weekend rubbing my eyes and sneezing non-stop. I now look forward to a week in polluted London to calm me down from countryside pollen. We move into our new house in around 8 weeks but as a measure of the banality of my life at the moment over the weekend we were told that the carpets we ordered throughout the house can only be laid on time if we have various joins between pieces. If we want one without joins anywhere it will be 10 weeks, more expensive and will delay the move date. My vote is for the joins and to get in the house on time but my wife is insistent that she’d rather wait. This debate has to be concluded one way or another tonight over dinner. When I woke this morning to watch clips of the Oscars I was desperately hoping I’d see subtle joins all down the red carpet so I could show my wife that if it’s good enough for Hollywood it’s good enough for us. Sadly I couldn’t see any.

From red carpets to colourful politics this week. Indeed if you’ve had enough of politics I suggest you go on holiday for a few days as this topic should dominate proceedings. We have continued US-China trade discussions but with the March 1st tariff deadline pushed back overnight, a second summit between Trump and Kim Jong Un (Weds/Thurs), another Brexit parliament vote (Weds), Michael Cohen (Mr Trump’s ex-lawyer) giving two days of congressional testimony, including an open session on Wednesday, and the Mueller Russia investigation may be completed even if the results aren’t expected this week. Away from that we’ve got Powell’s semi-annual testimonies to Congress (Tues/Weds), US Q4 GDP (Thurs) and PCE data (Fri), European inflation data (Thurs/Fri) and final PMIs (Friday), and PMIs due out in China (Thurs).

Touching on the highlights of these, Friday was the original deadline that the US and China set to negotiate an agreement before US tariffs on $200bn of Chinese imports rise from 10% to 25%. However Trump has tweeted overnight that “I will be delaying the U.S. increase in tariffs now scheduled for March 1,” citing productive talks with China while adding, “the U.S. has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues.” He also said that if both sides make further headway in negotiations then he will meet China’s Xi Jinping at his Mar-a-Lago resort in Florida to conclude an agreement, though he didn’t offer any details on the timing of the meeting or how long he expects the tariff extension to last. However, Mnuchin had said last week that the meeting between Trump and Xi is being tentatively planned for late March. Elsewhere, China’s state-run Xinhua news agency published a commentary on trade talks overnight saying that talks will be harder at the final stage. We should note that Lighthizer is due to testify to the House Ways and Means Committee on Wednesday which should shed some light on where things stand although the media are picking up on disagreements between Trump and Lighthizer. So lots of moving parts.

This morning in Asia risk has gained on the tariff delay tweet with Chinese bourses leading the advance – the CSI (+3.55%), Shanghai Comp (+3.32%) and Shenzhen Comp (+4.08%) are all up. The Nikkei (+0.53%) and Hang Seng (+0.39%) are also up while the Kospi (+0.00%) is trading flat. China’s onshore yuan (+0.39%) is also up – trading at the highest level since July while most EM FX is strong against the greenback this morning. Elsewhere, futures on the S&P 500 are up +0.28% erasing some of the gains after the more cautious news from the Xinhua news agency trickled in. In commodities, US corn and soybean futures are up +0.52% and +0.70% respectively.

Here in the UK the latest Brexit Parliament vote is scheduled for Wednesday with UK PM May updating the House of Commons the day prior. However yesterday Mrs May said that there will be no meaningful vote this week but promised one by March 12th. At this stage it’s not clear whether that will help stave off a Letwin/Cooper revolt which would effectively force the government to extend Article 50. Earlier, on Saturday, three cabinet ministers – Amber Rudd, David Gauke and Greg Clark – wrote a joint article warning that they cannot allow the UK to leave without a deal and suggested that they will vote to stop it on Wednesday, partly indicating that they might vote for a Letwin/Cooper amendment. Expect a delicate few days of negotiations and rumours ahead before MPs go into that vote. Bloomberg reported yesterday that many in the EU are leaning towards a 21-month extension to article 50, partly in an attempt to scare Brexiteers into voting for the existing deal as 21-months is a very long time and anything could happen to Brexit in that period. Sterling is trading (+0.13%) up this morning.

As an aside it’s been interesting to watch the opinion polls (like Survation, YouGov and Deltapoll) in the U.K. Since the new centrist Independence movement started a week ago, the initial polling has suggested that support for the opposition Labour Party is declining most with at least three polls (two over the weekend) suggesting the Tories have at least an 8 point lead. It’s possible this poor showing and threats of more departures could finally prompt Labour to endorse a second referendum so watch this space. It’s also remarkable that the Tories support remains rock solid at or just below 40% considering the perception of how they’ve handled Brexit. It could be argued though that if you voted to leave and still feel that way, then the only viable option is to vote Tory. However the party have a huge dilemma. Keep pursing Brexit (including leaving no-deal on the table) but risk multiple resignations/defections from pro-EU Tory MPs, or alternatively soften their stance and risk voter support and splits on the right wing of the party. The papers (like Guardian, Sky News) at the weekend suggested lots of moderate Tories are close to rebelling so the disunity that Labour is currently suffering from could easily spread to the Government this week. If Labour switch to a second referendum policy it might swing the momentum back towards them. Interesting and fluid times.

Politics also mixes with central bankers this week as we have Fed Chair Powell’s testimonies to the Senate Banking Committee on Tuesday and House Financial Services Committee on Wednesday where he will deliver the Fed’s semi-annual monetary policy report. Expect the focus to be on the balance sheet, the current thinking on inflation and also how Powell now views the economic outlook, particularly as it relates to the various crosscurrents that Powell has previously referred to.

Ahead of this many Fed speakers spoke at a conference in New York on Friday, including Vice Chair Clarida who said that yield curve control, where 10-year yields are pegged, is one potential option to fight a future recession. The Fed will conduct a thorough review of its policy framework later this year. NY Fed President Williams also spoke about potential changes to the framework, citing the risk of unanchored inflation expectations as a reason to reassess the current ‘inflation-targeting’ regime. While he said he takes the Phillips curve seriously and remains attentive to upside risks to inflation given the tight labour market, he noted that downside risks to inflation are elevated as well. San Francisco Fed President Daly spoke about targeting an average inflation rate of 2%, which could be interpreted dovishly as it would imply appetite to let inflation run higher in the near term to compensate for recent downside misses. Clarida also spoke about a higher inflation target, though he noted some of the negative effects of such a policy. Overall, it appears that there are many options on the table for the Fed to consider, and this story will remain in focus through the June conference where they will begin the office policy review which is likely to result in a final assessment next year.

In terms of data this week, the main highlights are at the back end with a first look at US Q4 GDP on Thursday and then the December PCE reading due on Friday. Expectations for Q4 GDP are for a +2.5% qoq annualized reading which would be down from +3.4% in Q3, while core PCE is expected to rise +0.2% mom which would be enough to hold the annual rate at +1.9% yoy and therefore more or less in line with the Fed’s target. Other data worth highlighting in the US next week include December housing starts, building permits and consumer confidence on Tuesday, the December advance goods trade balance on Wednesday, and February ISM manufacturing on Friday.

In Europe the main highlights this week are the preliminary February CPI readings in France and Germany on Thursday and the Euro Area on Friday, as well as the final February manufacturing PMIs, including a first look at the non-core. China’s February PMIs on Thursday is likely to be the main highlight in Asia. We should also note that China’s NPC Standing Committee is due to meet for two days from Tuesday ahead of the annual NPC which begins the week after.

The rest of the day by day week ahead guide is at the end. Before that let’s look at recap of Friday and last week.

On Friday, attention was focused on trade negotiations and communications from central banks. Equities rallied broadly on Friday taking the week into positive territory, with the S&P 500, DOW, and NASDAQ ending the week +0.62%, +0.57%, and +0.74% (+0.64%, +0.70%, and +0.91% on Friday), respectively. In Europe, the STOXX 600 gained +0.62% (+0.22% Friday), with the DAX outperforming, up +1.40% (+0.30% Friday). Commodities rallied as well, with Brent crude oil advancing +1.15% (-0.09% Friday) and copper posting its best week since last September to reach its highest level since last June, gaining +5.40% (+1.81% Friday).

On the trade front, President Trump met with Vice Premier Liu He, and both sides described the discussions as productive. Trump specifically mentioned a potential extension of the March 1 deadline, and top trade negotiator Lighthizer, who is one of the more hawkish members of the administration, said the sides had “made a lot of progress.” That said, he did say that some great hurdles remain, but markets seemed to focus more on the broader optimism, including Treasury Secretary Mnuchin’s announcement that the two sides reached an agreement in principle on currency-related matters. The offshore yuan appreciated +0.91% on the week (+0.21% Friday) to reach its strongest level since last July.

Quickly recapping Friday’s central bank speak. Banque de France Governor Villeroy mentioned that the ECB should “study pragmatically how to contain possible adverse effects on the bank transmission of our monetary policy”. That mirrored earlier comments from the BoJ Governor Kuroda, who said that any future easing would come via tools that have the “least side-effects”. These could be references to some alleviation of the harm from negative interest rates.

It is a quiet day for data with the releases focused in the US where we get the January Chicago Fed national activity index, December wholesale inventories and trade sales and February Dallas Fed manufacturing activity index. Away from that, the BoE’s Carney and Fed’s Clarida are due to speak.

via ZeroHedge News https://ift.tt/2XnL0io Tyler Durden

After months of radio silence, Trump the oil analyst has returned to complain about prices being too damn high.

For the first time since OPEC+ agreed to cut production at its December meeting, Trump has chimed in on Twitter to tell the cartel to “relax and take it easy” because oil prices are “getting too high.”

Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike – fragile!

— Donald J. Trump (@realDonaldTrump) February 25, 2019

OPEC and members of an ancillary group led by Russia have been cutting production since the start of the year after striking an agreement during OPEC’s December meeting in Vienna to lower output by an aggregate by 1.2 million b/d during the first six months of 2019.

Of those cuts, 800,000 bpd will come from OPEC members, while Russia and its allied producers will cut 400,000 bpd.

More recently, when Trump has tweeted about oil, he has been cheering the advances in US shale production that led the US to become a net exporter for the first time.

But with retail sales and home sales slumping and more economic data suggesting that the global economy could be in a period of synchronous global slowdown, Trump probably reckons that now would be a good time for a de facto “tax cut” – the kind that wouldn’t blow out the deficit.

Oil prices declined after the tweet, virtually ensuring that this won’t be the last we hear from Trump on this subject.

via ZeroHedge News https://ift.tt/2H1MhWL Tyler Durden

As President Trump departs for Vietnam on Monday for his second summit with North Korean leader Kim Jong Un, back home markets are rejoicing, with the S&P futures finally back over 2800 following the president’s decision to postpone the March 1 tariff deadline – which would have seen tariffs on some $200 billion in Chinese goods to rise by 150%.

I am pleased to report that the U.S. has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues. As a result of these very……

— Donald J. Trump (@realDonaldTrump) February 24, 2019

….productive talks, I will be delaying the U.S. increase in tariffs now scheduled for March 1. Assuming both sides make additional progress, we will be planning a Summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement. A very good weekend for U.S. & China!

— Donald J. Trump (@realDonaldTrump) February 24, 2019

While the market has clearly communicated its view – namely, that postponing the deadline confirms the pervasive optimism that a deal will be reached when Trump and Xi meet next month – a roundup of analyst comments published by Bloomberg showed that the consensus has decidedly shifted toward expecting an amicable resolution to the US-China trade war, though some reservations about its long-term efficacy remain. Several analysts said they expect the US’s tariffs on China to be completely unwound. Everyone now expects a deal, because both the US and China are looking to “stabilize business sentiment” and quell growing worries about a prolonged slump in global economic growth.

Ultimately, delaying the deadline will give Trump more leverage over the Chinese, and might even inspire Beijing to extend its menu of concessions – possibly to include more assurances on IP and a relaxation of its requirements for foreign companies to enter into joint ventures with domestic firms if they want to access the Chinese market.

But ominously, the comments largely ignored the tensions between Trump and the China hawks, led by US Trade Rep Robert Lighthizer, who is still technically in charge of US negotiations.

Here’s a roundup of analyst reactions (text courtesy of BBG):

• Hua Changchun, Guotai Junan Securities Co.

The two nations will likely reach a deal on all aspects in late March and the tariffs will not rise from the current levels, but that doesn’t mean the conflict between them will be over.  Tariff wars will be suspended and we’ll enter the ‘post-trade-war’ era, where the two nations will shift to championing companies, promoting advanced technologies and trying to increase control over global economic rules.

• Louis Kuijs, Oxford Economics

This is a positive sign but it’s clearly not the end of difficult negotiations, let alone of the underlying tension between the two countries. Amongst other things, it will be difficult to agree on language on the “verification and enforcement” insisted on by the U.S. but disliked by China. Underlying tensions on technology, China’s industrial policies and, more generally, the rise of China, are unlikely to subside any time soon. Nonetheless, the tariff suspension and, possibly, a more lasting agreement would be a positive for international trade and business in both countries, as well as the global economy more generally.

• Li Yishuang, China Securities

The extension of the tariff deadline shows that both sides have a strong will to reach an agreement. The focus is on how China is going to carry out its commitments, especially on government subsidies but there are also more granular issues. As long as both sides are willing to reach a deal, I think they eventually will overcome those obstacles and the probability of a final deal is good. A final deal will be reached after Xi and Trump meet, but on the enforcement of the deal, the two nations will still have some conflicts. This won’t be very smooth.

• Wang Huiyao, founder of the Center for China and Globalization

This is a good sign that both sides need a deal at this stage. This is good to stabilize business sentiment in both countries and around the world, and is also good for the stock market. It is also conducive for China’s reforms and opening up, and boosting China-U.S. cooperation.

• He Weiwen, former commerce ministry official

This shows that both sides share the will to continue the talks until a final deal, which will be decided by the meeting of Xi and Trump. The temporary no tariff increase creates a stable environment both for the talks and for markets. The ultimate results of the bilateral trade agreement should be the total scrapping of tariffs on $250 billion in Chinese goods, and subsequently on $110 billion of U.S. goods.

• Gene Ma, Institute of International Finance

Trump wants a deal, not a war. His time is also running short with the 2020 election on the horizon. Beijing has made a greater commitment to reduce the bilateral trade imbalance. Thus holding back on the additional tariffs in return for some further concessions is not a bad strategy. The question is what he can get at the end. I expect Beijing will offer a longer shopping list, no RMB devaluation, better intellectual property protections, and fewer forced joint ventures. Beijing may tone down “Made in China 2025” but I don’t think it can meaningfully scale back its industrial plans and support for SOEs.

• Jonathan Fenby, TSLombard

Trump has been leaning this way since the dinner in Buenos Aires, leading China to play for time — successfully. Xi and colleagues want to sideline the trade war while they deal with domestic economic challenges and try to pump up confidence. Now the question is whether the focus moves from tariffs to technology where China looks more vulnerable.

• Derek Scissors，chief economist, China Beige Book International

The tariff delay was essentially decided in early November. That’s when the President either lost his nerve due to stock market weakness or thought he could get important Chinese help on North Korea. Since then, the only important question has been whether the U.S. has agreed internally on a credible enforcement mechanism. It doesn’t appear that we have and, until we do, the talks are worthless.

* * *

In summary, analysts expect that Trump will prevail over the China hawks in his administration and strike a deal, regardless of whether Beijing commitments to “structural reforms”, like scaling back China 2025, reducing IP theft/forced transfers, and agreeing on necessary enforcement mechanisms. But that doesn’t mean that Lighthizer & Co. will quietly step aside and allow Trump to squander the leverage he has achieved with his tariffs. And if stocks do rally to new highs in response to a deal being struck, could we see more of a “sell the news” reaction this time around once investors realize that there’s not much in the way of substance beneath the headlines?

via ZeroHedge News https://ift.tt/2U8nqEa Tyler Durden

Authored by Burak Bekdil via The Gatestone Institute,

• One of Erdoğan’s regional policy priorities, as U.S. troops in neighboring northern Syria prepare to leave, is to prevent Turkey’s south from witnessing the emergence of “a Kurdish belt”.

• While the U.S. supports the idea of a buffer zone in northern Syria to keep Kurdish militants and Turkish troops at a safe distance from each other, Erdoğan insists on sole Turkish control over the planned 20-mile-deep strip.

• If Turkey, a NATO member, goes ahead with purchasing Russia’s S-400 air and anti-missile defense system, the U.S. Congressional bill requires the departments to include a detailed description of plans for the imposition of sanctions, pursuant to section 231 of the Countering Russian Influence in Europe and Eurasia Act of 2017 (Public Law 115-44).

If Turkey, a NATO member, goes ahead with purchasing Russia’s S-400 air and anti-missile defense system, it risks the imposition of sanctions under United States law, pursuant to section 231 of the Countering Russian Influence in Europe and Eurasia Act of 2017. Pictured: A Russian S-400 missile battery. (Image source: Vitaly Kuzmin/Wikimedia Commons)

The summer peak of the crisis between Turkey and the United States, two NATO allies in theory, has been replaced by cautious pessimism. Few Turks today remember the days of massive Turkish protests against President Donald Trump and his administration, often exhibited in childish ways such as groups gathering to burn fake U.S. dollars or smashing iPhones in front of cameras. This is, however, an extremely fragile tranquility.

On February 15, after keeping the position vacant since October 2017, Washington nominated David Satterfield, a career diplomat, as new ambassador to Ankara, an appointment that still needs to be confirmed by the Senate. In Ankara, a complex puzzle awaits Ambassador Satterfield.

There are no signs that Turkish President Recep Tayyip Erdoğan may rethink — or even recalibrate — his assertive neo-Ottoman foreign policy calculus. As the country awaits its critical local elections on March 31, his popularity is augmented by supportive masses who want to “Make Turkey great again.” A surprise defeat at the ballot box could be the beginning of the end of Erdoğan’s 17-year-old rule.

One of Erdoğan’s regional policy priorities, as U.S. troops in neighboring northern Syria prepare to leave, is to prevent Turkey’s south from witnessing the emergence of “a Kurdish belt”. The U.S. troop pullout could expose Syrian Kurds, U.S. allies in the multinational fight against Islamic State, to the risk of a Turkish military incursion. While the U.S. supports the idea of a buffer zone in northern Syria to keep Kurdish militants and Turkish troops at a safe distance from each other, Erdoğan insists on sole Turkish control over the planned 20-mile-deep strip. The Turkish strongman also rejects a plan by the United States for a multinational force to police the area.

Part of the Turkish-American puzzle is about a rigid plan by Erdoğan to make Turkey the first NATO ally to deploy the Russian-made S-400 air and anti-missile defense system. Turkish authorities, including Erdoğan, have repeatedly refused requests by Turkey’s Western allies to drop the Russian deal and go for a Western-made defense architecture. Most recently, on February 20, Turkey’s Undersecretary for Defense Industries in charge of military procurements, Ismail Demir, said that the S-400 system would become operational in October.

The S-400 issue is potentially another source of crisis between Washington and Ankara. Demir’s remarks looked very much like an official Turkish reply to Vice President Mike Pence who just days ago had repeated warnings to Turkey not to proceed with the S-400 purchase. Pence, speaking at the Munich Security Conference, told attendees “we will not stand idly by while NATO allies purchase weapons from our adversaries. We cannot ensure the defense of the West if our allies grow dependent on the East”.

Pence’s “we will not stand idly by” warning also involves another Turkish plan to purchase military gear, this time from the West. Turkey is part of a U.S.-led, multinational consortium that builds the F-35 next-generation fighter jet, and has committed to buy at least 100 aircraft. On February 19, Trump signed a spending bill that blocks the transfer of F-35s to Turkey. According to the spending bill, delivery of the jets to Turkey will be blocked until the U.S. Secretary of State and Secretary of Defense submit an update to the report regarding Turkey’s S-400 purchase.

If Turkey goes ahead with purchasing Russia’s S-400 systems, the Congressional bill requires the U.S. departments to include a detailed description of plans for the imposition of sanctions, pursuant to section 231 of the Countering Russian Influence in Europe and Eurasia Act of 2017 (Public Law 115–44).

Turkey’s systematic efforts to support various Islamist groups in the nearby Middle East, as well as in the less-nearby corners of the Mediterranean basin, are a cause of concern for Western countries, including the United States, that have a “stabilizing agenda” for the region. As a result of Erdoğan’s ideological kinship with groups such as Hamas and the Muslim Brotherhood, Turkey is already in a cold war with a long list of regional countries including Egypt, Saudi Arabia, the United Arab Emirates and Israel. New tensions were recently added to the list when Libya and Algeria slammed Turkish arms shipments to Islamist militants.

In December, Algerian authorities announced the discovery of an arms shipment from Turkey at the Algerian-Libyan border, including rockets and 48 million rounds of ammunition. An Algerian official told the newspaper al-Watan that “the purpose of such [Turkish] activity is to not only destabilize Libya, but send such an arsenal to unstable regions, including Algeria”.

Erdoğan’s anti-Western ideology often makes strange bedfellows for Turkey. The most recent is Venezuela, after Turkey joined Russia, China and Iran in backing the battered regime of Nicolas Maduro. When, in November, Trump signed an executive order authorizing sanctions on Venezuelan gold — after sending an envoy to warn Turkey off the trade — a mysterious Turkish company, Sardes, with just $1 million in capital, had already shuttled $900 million worth of the precious metal out of Venezuela.

With or without an American ambassador residing in Ankara, there is more than enough evidence to expect a badly bumpy road ahead for the former strategic allies that are now allies only in theory or, in a more realistic lexicon, ideological adversaries.

via ZeroHedge News https://ift.tt/2H6bbUS Tyler Durden