Bernd Lünser was by all accounts a popular, promising student.
He was studying civil engineering at the State Engineering School of Architecture in West Berlin in 1961.
Unfortunately, he lived in East Berlin. And during the summer break of that year, the Berlin Wall was completed, shutting off access from Western administered West Berlin from Soviet controlled East Berlin.
Suddenly the 22 year old Lünser found his prospects for a good education and prosperous life dashed.
In a desperate attempt at freedom, Bernd Lünser attempted to escape over the wall; he was one of the first East Berliners to do so.
Lünser climbed over some buildings that were part of the wall, and planned to scale down the other side with a clothesline.
But he was discovered and chased by guards on the East German side. Lünser ran, and ended up at a very high point on the wall.
Jumping from that height would kill him. But so would the East German guards in pursuit.
Luckily, firefighters from the Western side noticed his escape attempt, and they raced towards the wall with a net to assist Lünser. But they were fired upon by the East guards. West guards returned fire.
When Bernd Lünser finally got the chance to jump, he missed the net, and fell to his death. East German authorities did not allow his mother to attend the funeral.
Last weekend marked the 30th anniversary of the fall of the Berlin Wall– the literal barrier which cut off the free world from the dystopian hell of socialist rule.
Countless people died trying to regain their freedom. For East Berliners, free speech, freedom of expression, the freedom to get a good education, was just over the wall.
Yet today, many Westerners are ready to flush these freedoms down the toilet.
For instance, a recent survey from Campaign for Free Speech found the majority of Americans respondents think the First Amendment is outdated.
And it was especially pronounced among younger people. 57% of Millennials agreed with this statement:
“The First Amendment goes too far in allowing hate speech in modern America and should be updated to reflect the cultural norms of today.”
The survey didn’t define hate speech, it just left it open to interpretation.
Almost a quarter of millenials thought hate speech should carry jail time.
And 62% said “The government should be able to take action against newspapers and TV stations that publish content that is biased, inflammatory, or false.”
“Content that is biased, inflammatory, or false,” of course, means any content they don’t agree with.
American college students protest visiting speakers who hold different opinions. You can’t offend them or invade their safe spaces with ideas that don’t fit into their rigid ideology.
A minority view is being shouted the loudest and forced on everyone.
These people ignore science when it suits them (gender fluidity) but cling to science when it supports their view (climate change).
Frankly I couldn’t care less if someone wants to identify as a seedless watermelon. And I certainly have no problems taking rational steps to treat the environment better.
But the problem is that all conversation is shut down by these Bolsheviks. Everyone is supposed to build their own little walls, and self-censor to make sure any “microaggressions” don’t slip out.
Nothing lasts forever. At some point you have to consider if where you were born is still the best place for you.
Even amid consequences as severe as death, some people believed escaping East Berlin was their best option.
Luckily we aren’t at that point right now in most of the West.
But it never hurts to know what your options are, and to have a Plan B lined up ahead of time.
And just last week we updated our report about the eight easiest passports to get, which can give you more freedom to travel. That way, no single country has a monopoly over you.
Boeing Backlash Builds: Airbus To Win Huge 120 Plane Order From Air Arabia
Two Reuters sources have been informed that Air Arabia, an Emirati low-cost airline, will abandon its interest in Boeing 737 MAX jets and order over 100 Airbus A320 jets as soon as next week.
The decision comes after Boeing’s 737 MAX jet remains grounded worldwide following two fatal crashes.
The sources said the Emirati budget carrier would likely order 120 jets from Airbus at the Dubai Airshow next week.
The order would more than double the size of the carrier that currently operates 55 narrowbody aircraft.
The sources said Air Arabia was divided between Airbus and Boeing, but the two 737 MAX crashes created too many uncertainties for the carrier that had to side with Airbus for fleet expansion.
Last month, Florida-based Spirit Airlines was assessing if it should buy Airbus or Boeing planes. It decided to order 100 new Airbus A320s over the 737 MAX.
Airbus is on track this year, for the first time since 2011, to outpace Boeing in annual deliveries amid the 737 MAX groundings.
Airbus expects to deliver 571 jets in the first nine months of 2019.
Delivers for A321 Neo jumped 57% for the first nine months, hitting a four-month high in September.
Boeing has since halted 737 MAX deliveries and cut production by 20% to 42 per month.
The 737 Max crisis has allowed Airbus to take in a flood of new orders.
Boeing is dealing with the company’s most massive crisis in 100 years.
The backlashing against Boeing is only in the beginning innings.
The political theatrics that begin today raise several questions. For starters, will Joe Biden be investigated for mounting evidence of corruption? And why is the corporate media turning the CIA “whistleblower” into a phantom in plain sight?
Now that “Russiagate” has failed and “Ukrainegate” neatly takes its place, many questions arise. Will the Democratic Party, this time in open collusion with the intelligence apparatus, succeed in its second attempt to depose President Donald Trump in what might fairly be called a bloodless coup? Whatever the outcome of the thus-far-farcical impeachment probe, which is to be conducted publicly as of Wednesday, did the president use his office to pressure Ukraine in behalf of his own personal and political interests? Did Trump, in his fateful telephone conversation last July 25 with Volodymyr Zelensky, Ukraine’s president, put U.S. national security at risk, as is alleged?
All good questions. Here is another: Will Joe Biden, at present the leading contender for the Democratic presidential nomination, get away with what is almost certain to prove his gross corruption and gross abuse of office when he carried the Ukraine portfolio while serving as vice president under Barack Obama?
Corollary line of inquiry: Will the corporate media, The New York Times in the lead, get away with self-censoring what is now irrefutable evidence of the impeachment probe’s various frauds and corruptions? Ditto in the Biden case: Can the Times and the media that faithfully follow its lead continue to disregard accumulating circumstantial evidence of Biden’s guilt as he appears to have acted in the interest of his son Hunter while the latter sat on the board of one of Ukraine’s largest privately held natural gas producers?
Innuendo & Interference
It is not difficult to imagine that Trump presented Zelensky with his famous quid pro quo when they spoke last summer: Open an investigation into Biden père et fils and I will release $391 million in military aid and invite you to the White House. Trump seems to be no stranger to abuses of power of this sort. But the impeachment probe has swiftly run up against the same problem that sank the good ship Russiagate: It has produced no evidence. Innuendo and inference, yes. Various syllogisms, yes. But no evidence.
There is none in the transcript of the telephone exchange. Zelensky has flatly stated that there was no quid pro quo. The witnesses so far called to testify have had little to offer other than their personal opinions, even if Capitol Hill Democrats pretend these testimonies are prima facie damning. And the witnesses are to one or another degree of questionable motives: To a one, they appear to be Russophobes who favor military aid to Ukraine; to a one they are turf-conscious careerists who think they set U.S. foreign policy and resent the president for intruding upon them. It is increasingly evident that Trump’s true offense is proposing to renovate a foreign policy framework that has been more or less untouched for 75 years (and is in dire need of renovation).
Ten days ago Real Clear Investigations suggested that the “whistleblower” whose “complaint” last August set the impeachment probe in motion was in all likelihood a CIA agent named Eric Ciaramella. And who is Eric Ciaramella? It turns out he is a young but seasoned Democratic Party apparatchik conducting his spookery on American soil.
Ciaramella has previously worked with Joe Biden during the latter’s days as veep; with Susan Rice, Obama’s recklessly hawkish national security adviser; with John Brennan, a key architect of the Russiagate edifice; as well as with Alexandra Chalupa, a Ukrainian-born Democratic National Committee official charged during the 2016 campaign season with digging up dirt on none other than candidate Donald Trump.
For good measure, Paul Sperry’s perspicacious reporting in Real Clear Investigations reveals that Ciaramella conferred with the staff of Rep. Adam Schiff, the House Democrat leading the impeachment process, a month prior to filing his “complaint” to the CIA’s inspector general.
This information comes after Schiff stated on the record that the staff of the House Intelligence Committee, which he heads, had no contact with the whistleblower. Schiff has since acknowledged the Ciaramella connection.
Phantom in Plain Sight
No wonder no one in Washington will name this phantom in plain sight. The impeachment probe starts to take on a certain reek. It starts to look as if contempt for Trump takes precedence over democratic process — a dangerous priority. Sperry quotes Fred Fleitz, a former National Security Council official, thus: “Everyone knows who he is. CNN knows. The Washington Post knows. The New York Times knows. Congress knows. The White house knows…. They’re hiding him because of his political bias.”
Here we come to another question. If everyone knows the whistleblower’s identity, why have the corporate media declined to name him? There can be but one answer to this question: If Ciaramella’s identity were publicized and his professional record exposed, the Ukrainegate narrative would instantly collapse into a second-rate vaudeville act — farce by any other name, although “hoax” might do, even if Trump has made the term his own.
There is another half to this burlesque. While Schiff and his House colleagues chicken-scratch for something, anything that may justify a formal impeachment, a clear, documented record emerges of Joe Biden’s official interventions in Ukraine in behalf of Burisma Holdings, the gas company that named Hunter Biden to its board in March 2014 — a month, it is worth noting, after the U.S.–cultivated coup in Kiev.
There is no thought of scrutinizing Biden’s activities by way of an official inquiry. In its way, this, too, reflects upon the pantomime of the impeachment probe. Are there sufficient grounds to open an investigation? Emphatically there are. Two reports published last week make this plain by any reasonable measure.
‘Bursimagate’
John Solomon, a singularly competent follower of Russiagate and Ukrainegate, published a report last Monday exposing Hunter Biden’s extensive contacts with the Obama State Department in the early months of 2016. Two developments were pending at the time. They lie at the heart of what we may well call “Burismagate.”
John Solomon. (Gage Skidmore/Flickr)
One, the Obama administration had committed to providing Ukraine with $1 billion in loan guarantees. In a December 2015 address to the Rada, Ukraine’s legislature, V–P Biden withheld an apparently planned announcement of the credit facility.
Two, coincident with Hunter Biden’s numerous conferences at the State Department, Ukraine’s prosecutor general, Viktor Shokin, was swiftly advancing a corruption investigation into Burisma’s oligarchic owner, Mykola Zlochevsky, who was by early 2016 living in exile. Just prior to Biden’s spate of visits to Foggy Bottom, Shokin had confiscated several of Zlochevsky’s properties—a clear sign that he was closing in. Joe Biden wanted Shokin fired. He is, of course, famously on the record boasting of his threat [starts at 52.00 in video below]to withhold the loan guarantee as a means to getting this done. Shokin was in short order dismissed, and the loan guarantee went through.
Solomon documents his report with memos he obtained via the Freedom of Information Act earlier this year. These add significantly to the picture. “Hunter Biden and his Ukrainian gas firm colleagues had multiple contacts with the Obama State Department during the 2016 election cycle,” he writes, “including one just a month before Vice President Joe Biden forced Ukraine to fire the prosecutor investigating his son’s company for corruption.”
Last Tuesday, a day after Solomon published his report, Moon of Alabama, the much-followed web publication, posted a granularly researched and well-sourced timeline of the events surrounding Shokin’s dismissal at Vice President Biden’s request. This is the most complete chronology of the Burismagate story yet available.
In an ethical judicial system, it or something like it would now sit on a prosecutor’s desk. There is no suggestion in the Moon of Alabama’s timeline that Shokin had shelved his investigation into Burisma by the time Biden exerted pressure to get him sacked, as Biden’s defenders assert. Just the opposite appears to be the true case: The timeline indicates Shokin was about to pounce. Indeed Shokin said so under oath in an Austrian court case, testifying that he was fired because of Biden’s pressure not to conduct the probe.
It is important to note that there is no conclusive evidence that Joe Biden misused his office in behalf of his son’s business interests simply because there has been no investigation. Given what is beginning to emerge, however, the need for one can no longer be in doubt. Can Democrats and the media obscure indefinitely what now amounts to very strong circumstantial evidence against Biden?
We live in a time when the corporate media make as much effort to hide information as they do to report it. But as in the case of Ciaramella’s identity, it is unlikely these myriad omissions can be sustained indefinitely — especially if Biden wins the Democratic nomination next year. Forecast: If only because of Burismagate, Joe Biden will never be president.
As everyone in Washington seems to understand, it is highly unlikely Trump will be ousted via an impeachment trial: The Republican-controlled Senate can be counted on to keep him in office. Whatever Trump got up to with Zelensky, there is little chance it will prove sufficient to drive him from office. As to the charge that Trump’s dealings with the Ukrainian president threatened national security, let us allow this old chestnut to speak for itself.
Price of Irresponsible Theatrics
This leaves us to reckon the price our troubled republic will pay for months of irresponsible theatrics that are more or less preordained to lead nowhere.
More questions. What damage will the Democrats have done when Ukrainegate draws to a close (assuming it does at some point)? What harm has come to U.S. political institutions, governing bodies, judiciary and media? The corporate press has been profligately careless of its already questionable credibility during the years of Russiagate and now Ukrainegate. Can anyone argue there is no lasting price to pay for this?
More urgently, what do the past three years of incessant efforts to unseat a president tell us about the power of unelected constituencies? The CIA is now openly operating on American soil in clear breach of its charter and U.S. law. There is absolutely no way this can be questioned. We must now contemplate the frightening similarities Russiagate and Ukrainegate share with the agency’s classic coup operations abroad: Commandeering the media, stirring discontent with the leadership, pumping up the opposition, waving false flags, incessant disinformation campaigns: Maybe it was fated that what America has been doing abroad the whole of the postwar era would eventually come home.
What, at last, must we conclude about the ability of any president (of any stripe) to effect authentic change when our administrative state — “deep,” if you like — opposes it?
All Products From Israeli Settlements Must Be Labelled: EU Court In Landmark Ruling
In a controversial new landmark ruling that has enraged and frustrated Israeli leaders, Europe’s top court has ordered that all goods produced by Israeli settlements in the West Bank, East Jerusalem and the Golan Heights be labeled as such.
Specifically the European Court of Justice decision on Tuesday forbids any products from settlements to be labeled simply as “made in Israel”; instead, they must have a “clear and non-misleading indication of origin” in line with the EU’s consumer policy, as stated by an EU official communicating the ruling to Tel Aviv.
Activists who have for years campaigned against illegal Israeli settlement expansion into the West Bank have hailed it as a victory, and as taking the European publica step closer to recognizing Israel as an ‘apartheid state’ akin to South Africa’s recent history.
“Foodstuffs originating in the territories occupied by the State of Israel must bear the indication of their territory of origin, accompanied, where those foodstuffs come from an Israeli settlement within that territory, by the indication of that provenance.”
The court ruled further that “Israel is present in the territories concerned as an occupying power and not as a sovereign entity.”
The ruling follows prior 2015 guidelines mandated by the EU for member states to require specially labeling goods from settlements, but which not all followed. This also led to lawsuits where it was enacted, such as in France, brought by Israeli businessmen who sought to get the policy thrown out.
This week’s ruling was in response to these legal actions and lack of uniformity across the EU in implementing and enforcing prior policy.
Pro-BDS sign painted on a wall in the West Bank town of Bethlehem, via AFP/Getty.
A spokeswoman at the EU embassy in Tel Aviv said, “The EU has a longstanding and well-known position that it will not recognize any changes to pre-1967 Israeli borders other than those agreed by the parties to the Israeli-Palestinian conflict.”
But she also emphasized this wasn’t an attempt at endorsing “any form of boycott or sanctions against Israel”— in reference to the Boycott, Divestment, Sanctions (BDS) movement.
Israeli leaders have sought to fiercely push back, given it will have a big impact on Israeli trade with the EU, and could also negatively effect US trade with Europe.
Israeli winemaker Psagot, based in the West Bank, will have to carry a special label in EU countries. Image via the Jewish Chronicle.
They’ve urged the White House and Congress to pressure the EU not to implement the label ruling, with Israeli Prime Minister Benjamin Netanyahu personally urging Secretary of State Mike Pompeo and Treasury Secretary Steve Mnuchin to put the issue front and center.
Several US Senators have also reportedly gotten involved, according to Axios, sending letters to the EU’s ambassador in Washington and US trade representative Robert Lighthizer, pressuring them to ignore the ruling.
Blain: Since Trump Came To Power, He’s Been The SIngle Most Dominant Mover Of Markets
Blain’s Morning Porridge, submitted by Bill Blain
“Surely we should have clever people in Parliament?”… “Seems like a good idea, why don’t we try it?”
I’ve been writing the Porridge since 2007. I started in finance in 1985, and my career has been dominated by market moves, innovation, central banks, economic direction, and more recently political driven shifts. Through the whole of the Obama presidency I think I might have referred to Barak once or twice, and usually in passing. Since Trump came to power he’s been the single most dominant feature moving markets. Trump is a disruptor.
Yesterday’s speech to the Economic Club of New York has been covered to death in the press – but the key takeaways are fascinating; renewed trade threats are just one aspect of how Trump is set to continue dominating markets:
First, forget last week’s much hyped “trade truce” – Trump is still lollygagging about he’s still wondering whether to make a deal, and how China are waiting for him to opine on their options. It’s utter nonsense. A trade deal is at best a 50/50 call. It’s something that could happen, but equally it might not. On one hand, any trade agreement is subject to Trump’s mood. Markets moving on a capricious president’s whims and hopes of winning an election does not seem like a promising foundation on which to base long-term investment strategies.
The reality is a trade agreement/accommodation with China is not in America’s gift – it’s a two-sided negotiation between two empowered nation states. It is not for Trump to dictate terms on the basis of how it plays to his electorate – Xi and the Chinese increasingly understand.
Interesting to note the new BoA fund manager survey shows 50% of respondents are worried about the China/US trade war (39%) or a China slowdown (11%). The reality is China dominates markets. Trump is the factor that can set it off. (16% fear a bond meltdown…)
Second, was Trump’s plea to the electorate via his Wall Street address – read all about it here. He can point to the S&P being 23% higher through 2019 – but we all know the level of the stock market sends a very strong signal of national strength which voters love, right up to moment they still lose their livelihoods. In reality a booming stock market means diddley squat to improving the lot of the electorate, and that is clearly biting in the critical rustbelt and agri-states where the next election will be won or lost. If the Trump dividend is not filtering down to the electorate, he’s in trouble. That’s why the Democrats are playing to income inequality and the tax-the-rich agenda.
The third issue is how unstable US politics could yet become. If Trump sounded a little bit desperate to please his Wall Street Audience yesterday, he still has to appease his own party even more. The impeachment hearings go public this week – but we all know Trump will only lose if his own Republicans disown him and vote against him. That’s what happened to Nixon – Republican Senators saw which way the wind was blowing and chose Ford, a man who famously “could not walk and chew gum at the same time”, as a better choice to win the next election.
The choice in front of Republican senators is not complex: They don’t love Trump, they find him uncouth, unreliable, he’s not-one-of-them, but he has done well for them enacting tax cuts and putting pressure on the Fed to create a favourable economic boom. But he’s now a liability. They can wait a while – to see how the electorate react to the public hearings. At the moment the public distrust how the Democrats have handled the impeachment – thus far. That could turn. There is something classically compelling about who might strike the fatal blow – Et tu Giuliani?
What’s to stop Republican senators standing up declaring for indecent decency, pushing Trump aside, and letting Pence takeover? Then they can elect one of their own to step into the breach and win the next election against a disunited left-leaning Democrats? Interesting thought. Does it sound like something out of I Claudius? Keep a very close eye of the next few days as the Impeachment hearings progress. Watch for signs of the Republicans making a switch.
If the Republicans think they are doing well from Trump’s pumping of the stock markets, think how well they might react were he to go – and the chances of a real trade settlement rise dramatically!
Hong Kong
The fly in the ointment in such a positive US scenario might be Hong Kong. It feels close to ignition point. It seems the basic decency of the Hong Kong police has gone, and the protestors have turned hard-line. The city is divided – apparently even a mumble in Mandarin well get the speaker beaten up. Something is going to happen – which could change everything. Does China march in to restore order, to protect citizens, to support the police? And how will the west react?
With The Fed reportedly on hold – but data-dependent – October’s consumer price gains were expected to mimic September’s in both headline and core, but the actual data saw a divergence.
Headline CPI rose 1.8% YoY (hotter than the +1.7% expected) but core CPI rose just 2.3% YoY (below the +2.4% expectation)
Source: Bloomberg
Along with the indexes for medical care and for recreation, the indexes for used cars and trucks, for shelter, and for personal care all rose in October, though the increase in the shelter index was the smallest since October 2013 (but YoY remains elevated – Rent was 3.74%, vs 3.83% last month, Shelter was 3.34% vs 3.51% last month).
The apparel index fell in October, as did the indexes for household furnishings and operations, for new vehicles, and for airline fares.
The recreation index rose 0.7 percent in October, its largest increase since February 1996. Most of its major component indexes rose, including admissions (2.1 percent) and cable and satellite television services (0.7 percent). The index for used cars and trucks rose 1.3 percent in October after falling 1.6 percent in September.
Source: Bloomberg
The energy index increased 2.7 percent in October after recent monthly declines and accounted for more than half of the increase in the seasonally adjusted all items index; increases in the indexes for medical care, for recreation, and for food also contributed. The gasoline index rose 3.7 percent in October and the other major energy component indexes also increased. The food index rose 0.2 percent, with the indexes for both food at home and food away from home increasing over the month.
“It’s Now June 4, 1989” – Hong Kong Paralyzed For 3rd Day As Demonstrators Prepare For War
Violent protests continued in Hong Kong for a third day on Wednesday, crippling transport links and clogging roads, and prompting many major companies in the city, including HSBC and BNP Paribas, to instruct employees to stay home from work to avoid the risk of physical harm.
And in anticipation of more violence tomorrow,the Hong Kong Education Bureau has said that all kindergartens, primary schools, secondary schools and special education needs schools will cancel class on Thursday for safety reasons, according to an official statement. Most universities in Hong Kong have suspended classes until next week or converted them to online-only for the rest of the semester. And after the clashes from earlier this week, more than 80 mainland Chinese students have been evacuated for their own safety.
Protesters set up an elaborate roadblock on Wednesday in the city’s Central district, a direct attack on one of the city’s main business hubs, while also disrupting travel on other major thoroughfares in Kowloon Tong, Yuen Long and Tai Po.
According to Reuters, about 1,000 protesters were busy manning the roadblocks come lunchtime. Some hurled bricks at luxury-brand stores and other prime real-estate.
“It’s now 4th June 1989,” was scrawled on the windows of fashion store Georgio Armani, a reference to the crackdown by Chinese troops on pro-democracy protesters in Beijing’s Tiananmen Square.
As the violence escalates, a video has surfaced briefly online purportedly showing a man lying motionless on the ground in Sheung Shui as a group of black-clad protesters can be seen hurling bricks. The man’s condition is believed to be “very bad”, or near fatal, according to the SCMP.
Another video showed a man shouting at police in English.
A man confronts police, saying in English: “You, commander, bring disgrace to the uniform you are wearing.” Two officers warn him in Cantonese not to incite the crowd
In other news, Hong Kong police addressed an incident that took place Tuesday when police raided the Chinese University of Hong Kong because they believed it was being used as a staging ground to create petrol bombs being used by demonstrators. Police didn’t find any evidence of this, and the incident has badly affected relations between police and the public.
Police spokesman Tse Chun-chung said Wednesday that the action was taken after riot police guarding a pedestrian bridge next to the campus came under repeated attack.
“Rioters’ violence reached a very dangerous and even deadly level,” Tse said, adding that he suspected that some university campuses were being used to manufacture the petrol bombs. The police have every right to crack down on “rioters and criminals,” he said.
“Nowhere in Hong Kong is a lawless land.”
Of course, with the protests now stretching into the work week, previously neutral territory, many analysts are wondering: What comes next for Hong Kong? Protesters have paralyzed the city for the third straight day.
The turmoil marks an important shift: With Hong Kong’s economy already in recession, protests on weekdays are a serious threat to the city’s business community. And increasingly, the protesters’ numbers have dwindled to a small group of hard-core individuals who have no qualms about battling the police in the streets.
The burst of violence has sent Hong Kong stocks to 3-week lows, stoking anxieties ahead of a secondary offering from Alibaba.
Hong Kong CEO Carrie Lam has sought to assuage residents’ concerns by insisting that the city and its police force can contain the violence. Lam has insisted that her government won’t cave to any more of the protesters demands. And with elections set for later this month, the clock is ticking.
Meanwhile, Communist Party-controlled media has hinted about the possibility of Beijing employing “direct intervention” under the Basic Law. Mainland media has already accused the “black-clad rioters” of acting like “terrorists”. To be sure, fears of Chinese intervention have persisted for months, yet the central government has held back (despite reports of pro-Beijing forces massing across the border in Shenzen).
In its latest statement, Beijing accused the demonstrators of falling prey to a sense of “hormone-fuelled” rebellion.
“It is foolish and naive to believe that Hong Kong would be better off by eliminating all mainland factors. Particularly, since the mainland is the main source of fresh water, electricity and the largest supplier of food to the city.”
Over in the US, Congressional leaders like Mitch McConnell have vowed to work on legislation supporting pro-democracy protesters in Hong Kong. The bill would subject the city’s special US trading status, which for decades has functioned as Hong Kong’s gateway to the capitalist west, to annual reviews, and would also allow for sanctions against officials deemed responsible for undermining Hong Kong’s “fundamental freedoms and autonomy,” according to Bloomberg. Unsurprisingly, Beijing has sharply opposed the law.
But back in Hong Kong, analysts are still wrestling with the fact that the anti-government sentiment is profound enough to allow the protests to continue.
“There has been a gradual escalation,” said Joseph Cheng, a retired political science professor and pro-democracy activist. “But the mood so far is still very much against the government, and that explains why the disruptions on weekdays are still being tolerated.”
For now, we wait to see whether Beijing moves to cancel the upcoming elections, which are due to take place on Nov. 24.
Pessimism is spreading like wildfire on Wall Street, and this is particularly true among one very important group of investors.
And considering how much money they have, it may be wise to listen to what they are telling us. According to a very alarming survey that was recently conducted by UBS Wealth Management, most wealthy investors now believe that there will be a “significant” stock market decline before the end of next year. The following comes from Yahoo Finance…
Wealthy people around the globe are hunkering down for a potentially turbulent 2020, according to UBS Global Wealth Management.
A majority of rich investors expect a significant drop in markets before the end of next year, and 25% of their average assets are currently in cash, according to a survey of more than 3,400 global respondents. The U.S.-China trade conflict is their top geopolitical concern, while the upcoming American presidential election is seen as another significant threat to portfolios.
Of course this could ultimately become something of a self-fulfilling prophecy if enough wealthy investors pull their money out of stocks and start increasing their cash reserves instead. Nobody wants to be the last one out of the barn, and it isn’t going to take too much of a spark to set off a full-blown panic. Perhaps the most troubling number from the entire survey is the fact that almost 80 percent of the wealthy investors that UBS surveyed believe that “volatility is likely to increase”…
Nearly four-fifths of respondents say volatility is likely to increase, and 55% think there will be a significant market sell-off before the end of 2020, according to the report which was conducted between August and October and polled those with at least $1 million in investable assets. Sixty percent are considering increasing their cash levels further, while 62% plan to increase diversification across asset classes.
During volatile times for the market, stocks tend to go down.
And during extremely volatile times, stocks tend to go down very rapidly.
Could it be possible that many of these wealthy investors have gotten wind of some things that the general public doesn’t know about yet?
Of course the truth is that anyone with half a brain can see that stock valuations are ridiculously bloated right now and that a crash is inevitable at some point.
And as I noted yesterday, corporate insiders are currently selling off stocks at the fastest pace in about two decades.
But why is there suddenly so much concern about 2020?
A majority of respondents – 62% – believe a recession will happen within the next 18 months. Private companies are particularly worried that a recession lurks in the near term, with 39% anticipating a recession in the next 12 months. This compares with 33% of public company respondents who felt the same way. About one-quarter – 23% – of respondents do not expect a recession within the next two years.
62 percent is a very solid majority, and without a doubt we are starting to see businesses pull back on investment in a major way.
In fact, according to Axios business investment in the United States has now dropped for six months in a row…
Business investment has fallen for six months straight and declined by 3% in the third quarter, the largest drop since 2015.
The retrenchment by businesses helped turn Wednesday’s U.S. workforce productivity report — a key economic metric that compares goods-and-services output to the number of labor hours worked — negative for the first time in four years.
I know that I bombard my readers with numbers like this on an almost daily basis, but I cannot stress enough how ominous the economic outlook is at this point.
And it isn’t just the U.S. that we need to be concerned about. Two other surveys that measure the business outlook for the entire globe just fell to their lowest levels in a decade…
The IHS Markit global business outlook—which surveys 12,000 companies three times a year—fell to the worst level since 2009, when data was first collected.
The Ifo world economic outlook, which surveys 1,230 people in 117 countries, fell in the fourth quarter to the worst level since the second quarter of 2009.
Markit’s poll found optimism for activity, employment and profits in the year ahead were all at the lowest level since the financial crisis. Markit also reported a decline in planned investment spending, with inflation expectations at a three-year low.
It is really happening.
The global economy really is heading into a major downturn.
And once this crisis really gets rolling, it is going to be exceedingly painful.
All across America, big companies are already starting to go under at a pace that is absolutely frightening. For instance, on Tuesday one of the biggest dairy companies in the entire country filed for bankruptcy…
Dean Foods – whose more than 50 brands include Dean’s, Land O’ Lakes and Country Fresh – said it intends to continue operating.
The company said it “is engaged in advanced discussions” for a sale to Dairy Farmers of America, a national milk cooperative representing farmers, producers and brands such as Borden cheese and Kemps Dairy.
I have quite a few relatives in Minnesota, and I have always had a soft spot for Land O’Lakes butter. So it definitely saddened me to hear that this was happening.
But a lot more major casualties are coming.
Of course the economic optimists will continue to insist that we are just experiencing a few bumps on a path that leads to a wonderful new era of American prosperity. They will continue to tell us of a great “financial harvest” that is about to happen even when things are falling apart all around us.
You can believe them if you want, but most wealthy investors and most business owners believe that hard times are dead ahead.
I have never seen so much pessimism about a coming year as I am seeing about 2020 right now.
There is a growing national consensus that it is going to be a very chaotic year, and I would recommend using what little time you have left to get prepared for it.
“Confidence Could Crumble”: Global Markets Slide After Trump Threatens More China Tariffs, Hong Kong Tensions Soar
One day after Trump’s long-awaited NY Economic Club speech proved to be a dud, with the president having nothing positive or “optimistic” to say about the China trade deal instead slamming the Fed again for not cutting rates to negative, the investing public today will focus on Fed Chair Powell’s testimony in Congress in which he lays out his own take on things.
Until then, however, US futures and global stocks are a sea of red after Trump threatened to “substantially” increase tariffs if China failed to agree a trade deal and said there may also be tariffs to come for other countries “that mistreat us”, while European stocks followed Asia into the red following a subdued start, with Hong Kong tensions also denting sentiment.
“The market was anticipating something more positive from Trump, but he didn’t deliver,” said Legal and General PM Justin Onuekwusi. “In recent weeks, we saw the balance of probabilities shift to the positive side, risks being taken off the table, but people have realized that risk is still there,” Onuekwusi said. He’s been reducing his equity allocations.
The Eurostoxx 600 dropped 0.6% from four-year highs with banks and auto sectors weighing, while Treasuries led a bond rally, with the 10Y yield sliding from 1.94% to 1.87% one day after Dennis Gartman said the 30Y TSY bull market has run its course.
The value/momentum reversal is over, buy TSYs:
“the case can be made that the three decade long bull run in 30 Year Treasuries has run its course to the end.” – Gartman
Wall Street was set to open weaker as well, equity futures showed, with the S&P 500 index indicated 0.5% lower; the S&P 500 backed off record highs after Trump spoke. Nasdaq and Dow Jones futures were also down 0.5%. The S&P 500 has risen 2% this month and 23% so far in 2019 thanks to interest rate cuts, trade hopes and NOT QE by the Fed even as the S&P is now officially in a profit recession.
Besides Trump slamming once again slamming China, the other issue weighing on sentiment is the intensifying unrest in Hong Kong which many fear will lead to a Chinese crackdown. That pushed Hong Kong shares 2% lower and down over 1000 points in the past few days, while weighing on markets across Asia.
MSCI’s index of world shares slipped 0.3%, following a 1% fall in Asian shares outside Japan. Asian stocks retreated, led by financial firms, as U.S. President Donald Trump threatened more tariffs on Chinese goods and Hong Kong protesters disrupted public transit for a third straight day. Nearly all markets in the region were down, with Hong Kong leading declines. Japan’s Topix fell 0.6% as service-sector companies and food producers weighed on the gauge, while the Nikkei slipped almost 1%, moving further off last week’s 13-month highs. The Shanghai Composite Index dropped 0.3% to a six-week low, with large insurers and PetroChina among the biggest drags. Hong Kong’s Hang Seng Index declined 1.8% as local property developers led losses. India’s Sensex slipped 0.1%, dragged by ITC and ICICI Bank, as investors awaited the outcome of a new round of trade talks between Indian and U.S. officials.
Asian markets were also rattled by Trump’s speech and Hong Kong’s turmoil. Onshore spot yuan fell to a low of 7.0270 per dollar at one point, the weakest since Nov. 5. Hong Kong protesters planned to paralyze parts of the city for a third day, with transport, schools and many businesses closing after violence escalated across the city.
European markets were down across the board with the Stoxx 600 Bank Index falling 1.4% in early trading, making it the worst performing sector on the broader gauge, as trade and macro sensitive groups decline while an index of European auto companies slipped 2%. Spanish banking stocks remain weak amid the prospects of political uncertainty following Sunday’s election. Bankinter fell 3.4%, the biggest decliner in the SX7P, while Bankia is down 3.1% and Banco Santander is down 2.3%. ABN Amro dropped 3.4% after 3Q earnings missed estimates amid ongoing costs for anti-money laundering projects.
Markets were disappointed after Trump’s speech threatened to raise tariffs on China, but he also said a trade deal was “close”, without offering details on when or where it would be signed. He also criticized EU trade policies before a Nov. 14 deadline to decide whether to raise tariffs on European and Japanese carmakers. That deadline will probably be extended, but investors remain jittery. A pan-European equity index fell 0.6, coming off Tuesday’s four-year highs, when optimism before Trump’s speech and better-than-expected economic indicators from Germany boosted stocks.
Expectations for “phase 1” of a trade deal this month have supported stocks and riskier assets recently. Investors were led to cut the share of cash in their portfolios to six-and-a-half-year lows, according to Bank of America Merrill Lynch’s monthly survey of global managers. The poll also showed growth optimism at 18-month highs.
However, lack of progress on an agreement has started to increase doubts about whether a trade truce will happen at all.
“I’m absolutely concerned. The clock is ticking,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney. “Markets are now expecting substantial progress in the next week or so, and if not, then confidence could crumble.”
A more prolonged standoff will revive fears for the world economy. Oxford Economics estimates the trade war has trimmed eight-tenths of a percentage point off U.S. growth. Having started 2019 with 3.1% growth, the economy eased to 1.9% in the third quarter, they noted.
In other news, Fed’s Kashkari (2020 Voter, Dove) said he is feeling a little bit better about the US economy than a few months ago and there is a lot of consensus at the Fed that monetary policy is modestly accommodative, perhaps as a result of the $60 BN in monthly liquidity injections by the Fed.
Separately, the National Association of Manufacturers was hacked over the summer and hired a cybersecurity firm, who concluded the attack came from China, according to two sources said; noting, that the incident occurred before a round of formal negotiations between US and Chinese government officials over the contents of potential deal.
In FX, the U.S. dollar gained continued its relentless gains, rising to fresh three-week highs. The damage to risk appetite pushed down yields on U.S. and German safe-haven debt. Yields on 10-year Treasury notes fell to a six-day low around 1.87% as noted above; 10-year Bund yields were down 4 basis points to minus 0.28%. Hong Kong interbank rates rose, with one-month HIBOR at its highest since Aug. 6.
The standout currency performer was the New Zealand dollar which jumped 1% after the central bank unexpectedly left interest rates unchanged at 1%. RBNZ kept the Official Cash Rate unchanged at 1.00% vs. consensus for a 25bps cut, while it said it is prepared to act and will add further monetary stimulus if needed but noted economic developments do not warrant a change to monetary policy at this time and that low rates, as well as government spending will support domestic demand. RBNZ Governor Orr also commented there was no urgency to further ease at this point and suggested ups and downs in data since the August statement broadly offsets each other, while RBNZ’s Hawkesby commented that data will determine what the RBNZ does.
In geopolitics, senior US administration official said President Trump’s priorities in northeast Syria are to prevent IS resurgence and prevent atrocities in the region, while the official added the US has no intention to end alliance with Kurdish-led SDF militia and needs to resolve the issue with Turkey regarding the latter’s purchase of the Russian S-400 system. Additionally, President Trump and Turkish President Erdogan are due to meet today at noon.
In commodities, Brent crude oil futures fell more than 1% as the diminishing prospects for a resolution to the 16-month long trade war suggested less future demand for energy.
Markets now await data that is expected to show U.S. inflation rose in October. Federal Reserve Chairman Jerome Powell will also testify to a Congressional committee. The main economic focus is the October CPI report where expectations are for a +0.2% mom core reading. Away from the data we’ve got the aforementioned speech from Powell before the Joint Economic Committee, while Kashkari speaks later this evening. Elsewhere, Turkish President Erdogan is due to meet President Trump. Canada Goose, Cisco, and NetApp are among companies reporting earnings.
Market Snapshot
S&P 500 futures down 0.4% to 3,079.75
STOXX Europe 600 down 0.7% to 404.22
MXAP down 0.9% to 164.30
MXAPJ down 1.1% to 524.62
Nikkei down 0.9% to 23,319.87
Topix down 0.6% to 1,700.33
Hang Seng Index down 1.8% to 26,571.46
Shanghai Composite down 0.3% to 2,905.24
Sensex down 0.4% to 40,169.02
Australia S&P/ASX 200 down 0.8% to 6,698.36
Kospi down 0.9% to 2,122.45
German 10Y yield fell 2.9 bps to -0.281%
Euro up 0.04% to $1.1013
Italian 10Y yield fell 4.3 bps to 0.871%
Spanish 10Y yield fell 2.6 bps to 0.417%
Brent futures down 1% to $61.44/bbl
Gold spot up 0.5% to $1,463.40
U.S. Dollar Index little changed at 98.31
Top Overnight News from Bloomberg
President Donald Trump said the U.S. will increase tariffs on China in case the first step of a broader agreement isn’t reached. “If we don’t make a deal, we’re going to substantially raise those tariffs,” he said Tuesday in a speech to the Economic Club of New York.
President Donald Trump renewed his assault against the Federal Reserve, saying it was hurting the U.S. by not copying other central banks in deploying negative interest rates.
Hong Kong’s security chief John Lee cautioned that “unthinkable” consequences may come if violence continued, as the city’s financial center braced for a third-straight afternoon of protest.
New Zealand’s two-year swap rate jumped the most in a decade on Wednesday as the central bank defied money- markets pricing for more easing.
Boris Johnson chairs a meeting of the British government’s “Cobra” emergency committee after opposition parties accused him of downplaying the severity of flooding in northern England — a key battleground in the election campaign. Around 400 homes have been flooded and 1,200 properties have been evacuated, according to the BBC.
Global oil demand will hit a plateau around 2030 as the use of more efficient cars and electric vehicles ends an expansion that dominated the past century, the International Energy Agency predicts.
Asian equity markets were lower across the board and US equity futures pulled back from record levels amid continued uncertainty and disappointment following US President Trump’s speech at the Economic Club of New York which failed to provide any fresh insight on US-China trade, with news the USTR office will submit a report on possible auto tariffs to the White House also clouding over the risk climate. ASX 200 (-0.8%) and Nikkei 225 (-0.9%) declined as weakness in the energy, mining and financials sectors weighed on Australia, while Tokyo was also subdued by underperformance in commodity stocks and detrimental currency inflows. Hang Seng (-1.8%) and Shanghai Comp. (-0.3%) conformed to the downbeat tone after US President Trump largely stuck to the script regarding US-China trade but also renewed his criticism on China and threatened higher tariffs if they fail to reach an agreement, with the losses in Hong Kong exacerbated again due to the current no end in sight for the disruption which has already plunged the city into a recession. Finally, 10yr JGBs were in recovery mode after the prior day’s slump with the rebound aided by support around 152.50 and the broad risk averse tone in the region.
Top Asian News
Alibaba Said to Win HKEx Approval for Mega Hong Kong Listing
Lebanon Crisis Has Templeton Uttering R-Word as Debt Woes Deepen
Apple Assembler’s Profit Beat Signals Good iPhone 11 Demand
Thai Anti-Graft Agency Seeks Charges Against Sino-Thai President
Risk off trade sees major European bourses (Euro Stoxx 50 -0.8%) lower this morning, following a cautious APAC session in light of US President Trump’s disappointing speech at the Economic Club of New York and separate reports that the USTR office is to submit new potential auto tariffs which Trump could implement on the EU. Potentially contributing to the jitters; today is the approximate deadline for US President Trump to make a decision on EU auto-tariffs. European autonames, including Peugeot (-2.7%) and BMW (-2.0%), are amongst the underperformers. Sector performance is reflective of the markets lack of risk appetite; the more defensive Consumer Staples (+0.7%), Utilities (-0.5%) and Health Care (+0.2%) sectors are the outperformers, the latter buoyed by gains in GlaxoSmithKline (+0.5%), whose Phase III study of Nucala met its primary endpoint. Strong earnings from SSE (+2.0%), meanwhile, is helping to prop up the Utilities sector. The Financial sector (-2.0%) is the marked underperformer; yields have been coming off but the downside likely has as much to do with soft ABN AMRO (-5.5%) earnings. In terms of other notable movers; strong earnings from Salvatore Ferragamo (+3.3%), Bechtle (+1.6%) and Deutsche Wohnen (+1.7%) saw their respective share prices underpinned. Conversely, soft earnings from Lanxess (-3.3%) saw the Co.’s shares pressured. Elsewhere, ArcelorMittal (-3.5%) shares were on the back foot on the news that Italy’s Foreign Minister said he did not seek Chinese investors for the Ilva plant and it would be too soon to discuss alternative options. Finally, Tullow Oil (-26.0%) sunk on after the Co.’s FY19 group oil production forecast came in slightly below guidance, largely due to performance in Ghana.
Top European News
U.K. Inflation Hits 3-Year Low as Energy Price Cap Takes Effect
European Industry Delivers Surprise Gain at End of Third Quarter
Sexual-Harassment Whistle-Blower Sues Lloyd’s of London Insurer
Steel Royalty No More, Thyssenkrupp Sells Itself Off to Survive
In FX, in stark contrast to its non-US Dollar counterparts and other high beta/risk sensitive currencies, the Kiwi is sharply outperforming, albeit off 0.6400+ overnight highs vs the Greenback and 1.0670 against the Aussie, on the back of an unexpected unchanged OCR from the RBNZ. To recap, the Bank confounded forecasts for a 25 bp cut that were underpinned and actually rising in wake of a dip in NZ inflation projections just ahead of the latest policy meeting, but the RBNZ opted to hold fire given no immediate need to ease further at the current juncture and with Governor Orr noting that data since the August assessment has been broadly balanced (netting beats and misses vs consensus). Conversely, Aud/Usd is languishing towards the base of a 0.6825-60 range and Usd/Cad has rebounded back above 1.3250 amidst a broad downturn in risk appetite and less optimism on the global trade front after US President Trump failed deliver good news about Phase 1 or auto tariffs late yesterday.
CHF – The next best G10 performer and only partially heeding more verbal SNB intervention following a meeting with the Swiss Government to discuss a variety of issues, but pertinently fragile FX markets and a Franc that is still deemed to be highly valued. Usd/Chf skirting 0.9900 and Eur/Chf 1.0900.
GBP/JPY/EUR – All relatively flat or rangebound against the Buck as Cable pivots 1.2850 and largely shrugs off UK inflation data including headline CPI that slowed to 1.5% vs 1.6% expected, but bang in line with the BoE estimate, while the Yen straddles 109.00 and Euro holds above 1.1000, albeit after a miniscule downside breach and as the DXY drifts back from a fresh recent peak of 98.449 to the middle of its band (down to 98.289 at the other extreme).
NOK/SEK – The Scandi Crowns are slipping in wake of more Swedish data raising questions over the Riksbank’s commitment to hiking the repo in December, with Eur/Sek up over 10.4400 at one stage and Eur/Nok soaking up offers at 10.1600 before fading and also fuelled by a retracement in crude prices
EM – Amidst widespread losses vs the Dollar, Usd/Zar has revisited 15.0000+ territory against the backdrop of Eskom’s ongoing power travails and with SA retail sales missing the mark by some distance. However, Usd/Try is hovering below highs ahead of Turkish President Erdogan’s meeting with his US peer and Usd/Rub is meandering mid-range into Russian Q3 GDP and after the Finance Minister pulled a 2025 OFZ offering.
The crude complex is lower, in fitting with the market’s risk-off feel. Front month WTI and Brent futures have been moving lower in line with equities, with WTI earlier testing Monday’s USD 56.25/bbl low and Brent easily clearing this level and making progress towards last week’s USD 60.70/bbl low (although, at USD 61.30/bbl, Brent is still some way off). In terms of crude specific developments; ahead of the December 5-6th OPEC and OPEC+ meetings, OPEC Secretary General Barkindo said it is too early to say if further output cuts are needed. As a reminder; sources have noted that Saudi Arabia and Russia do not want to bear the brunt of deeper reductions, with the former wanting members to comply with the current pact, which could see around 500k BPD out of the market. In separate news, the IEA forecast that global oil demand growth is expected to slow from 2025 as fuel efficiency improves and the use of electrified vehicles increases but is unlikely to peak in the next two decades. Elsewhere, Nigeria’s NNPC said current crude output stands at 1.6-1.7mln bpd (vs. 1.93mln in October), and assured the nation will continue to comply with OPEC cuts. Looking ahead, EIA’s Short-Term Energy Outlook is set for release in the afternoon, followed by API Inventory data after the US equity market close, both having been delayed one day due to a Monday holiday in the US. Over in metals, gold prices are modestly firmer and Copper softer, as the broader lack of risk appetite gives havens a boost at the expense of more risk sensitive assets. Following a steep decline so far in the month of November, the precious metal has managed to stabilise, and reclaim the USD 1460/oz mark from USD 1450/oz lows. Meanwhile, downside for copper is being cushioned on the news that further strikes are disrupting operations at Chilean Codelco’s northern copper mines.
US Event Calendar
8:30am: US CPI YoY, est. 1.7%, prior 1.7%; CPI MoM, est. 0.3%, prior 0.0%
CPI Ex Food and Energy YoY, est. 2.4%, prior 2.4%; CPI Ex Food and Energy MoM, est. 0.2%, prior 0.1%
8:30am: Real Avg Weekly Earnings YoY, prior 0.85%
2pm: Monthly Budget Statement, est. $130.0b deficit, prior $100.5b deficit
DB’s Jim Reid concludes the overnight wrap
Let me start by sharing with you a WhatsApp message I got overnight from my wife as I woke up a short while ago. “Jim. You mixed up the twins and put them to bed in the wrong bedrooms last night. They both started crying at 2am and it took me ages to work out why as I couldn’t tell them apart in the dark and didn’t think I’d need to check. You slept right through it. Nightmare!!” The lack of kisses or an emoji indicates I’ll be in the doghouse tonight and Bronte will be taking my place in the bedroom. Whoops.
I was obviously tired from listening so intensely to the highly-anticipated speech from President Trump yesterday lunchtime NY time. However, it ended up not containing any major policy announcements. There had been some expectation for an announcement or new news on trade, either regarding a deal with China or a decision about auto tariffs on Europe. Today is the decision deadline after the 6-month extension on whether to impose them. As we discussed yesterday, Politico highlighted on Monday night that the decision is likely to be postponed again for a similar period of time but we should hear for sure today. Bloomberg also carried a story yesterday suggesting that there’s been an intense and successful lobbying campaign by German carmakers that have included plans to shift global production to American suppliers.
Back to President Trump’s speech. He used it to tout the US’s recent economic performance and record-high equity valuations, which he attributed to his tax and regulatory policies. On trade, President Trump did say that a deal “could happen soon,” but he also said that “if we don’t make a deal, we’re going to substantially raise those tariffs.” There were separate reports that US negotiators had reached an agreement with China to roll back tariffs but that President Trump had vetoed the deal, but this remains unconfirmed. Elsewhere, the WSJ reported overnight that tariffs are emerging as the main stumbling block in efforts by the US and China to come to a limited trade deal.
US equities were already trading higher going into President Trump’s speech, partially boosted by his tweet forecasting “yet another record day,” which some interpreted as a signal that he would use his speech to deliver some market-boosting news. Ultimately, the major indexes retraced a bit to close slightly higher. The S&P 500 and NASDAQ closed +0.16% and +0.26%, while the DOW traded flat. That’s the first time that the DOW has ended a trading session exactly flat since 2014, and only the third time over the last 20 years. In Europe the STOXX 600 finished +0.38% to push the index back up to within 1.73% of its all-time high in April 2015. As for bond markets, 10y Treasuries were hovering around 1.930% before Trump and finished lower at 1.912% – a -3.0bps move on the day after being closed on Monday. The 2s10s curve flattened -0.3bps to 25.7bps. Meanwhile, EM equities retreated -0.65%. The big news in EM land was the price action in Chile – including the biggest decline for the Peso since 2011 (-2.26%) – as the fallout from anti-government protests and riots hit new heights.
A quick check on Asia this morning shows that the Hang Seng (-2.02%) is leading the declines as the city faced a third-straight day of heightened protests and the city’s security chief John Lee cautioned that “unthinkable” consequences may come if violence continued. The Nikkei (-0.88%), Shanghai Comp (-0.19%) and Kospi (-1.01%) are also heading lower. As for FX, the New Zealand dollar is up +1.09% after the country’s central bank shied away from cutting rates at today’s monetary policy meeting saying there are signs that the domestic economy will stop slowing and inflation will pick up. The decision also caused two-year swap rates to jump the most in a decade surging by as much as 21bps. Elsewhere, futures on the S&P 500 are down -0.31% while yields on 10yr USTs are down -1.4bps. In commodities, spot gold prices are up +0.27% while WTI crude oil prices are down -0.33%.
The U.K. opinion polls were a mixed bag yesterday. A Survation poll conducted last week (but only released yesterday) showed only a 6% lead for the Tories (down 2% on the previous week) but a YouGov poll conducted after the Brexit Party stand down news showed a 14% lead (up 1% from before the news). These polling agencies have generally been at the extreme ends of the scale in terms of how much the Conservative Party is leading. Most other polls have split the difference, such as the latest ComRes poll late last night which gives the Conservatives an 8% lead (up 1% from the previously week), though it was conducted before the Brexit Party news. Sterling had traded down as much as much as -0.31% on the day but ended the session flat after responding well to the YouGov poll.
As far as today is concerned, Powell’s testimony before the Joint Economic Committee of Congress at 4pm GMT will garner some attention. That being said it would be a surprise if Powell deviates much from his post-FOMC press conference in which he emphasised that the easing done to date has supported the economy and helped offset some of the external risks stemming from slowing growth. Our US economists do, however, expect the Chair to stress that, given that the balance of the incoming economic data has largely held in, it would take a “material reassessment” of the outlook for the Committee to consider further rate cuts. The House Intelligence Committee will also hold its first public hearings in their impeachment inquiry of President Trump.
Though Powell will be the most market-moving Fed official to speak this week, there were remarks from three other FOMC members yesterday. Barkin and Harker both leaned hawkishly, with Barkin saying the labour market is currently tight, though he is not a voting member of the committee. Harker explicitly said that he was against cutting rates at the last meeting, which is noteworthy since he will be a voter next year and there seems to be a growing wing against any further rate cuts. Lastly, Vice Chair Clarida discussed the fall in long-term interest rates but did not update his macro or policy outlook, though he did mention some pros and cons regarding “make up strategies” as the Fed continues its policy review.
Back to yesterday where Spain’s IBEX (-0.87%) underperformed the rest of Europe after reports that the Socialists had reached a preliminary post-election agreement to form a coalition with the far-left Podemos. The important point to note though is that this would be a minority government and therefore will still require the support of smaller or regional parties in order to form an administration, likely coming down to Catalan separatists and/or Citizens and Basque regionalists according to our economists. For completeness, Spanish 10y bond yields were +1.4bps higher yesterday. That compares with a -0.9bps move for Bunds. BTPs were down -4.4bps yesterday after a near 7bps climb the previous day.
Staying in Europe, the November ZEW survey in Germany was again slightly mixed. The current situations component improved 0.6pts to -24.7 but that was still weaker than the -22.3 expected. More encouraging though was the 20.7pt jump in the expectation component to -2.1. That matches the May level and marks an impressive improvement of 42.0pts from the August low.
Meanwhile, in the UK the latest earnings data was softer than expected with basic wage growth slowing to +3.6% 3m/yoy in September compared with estimates for +3.8%. The unemployment rate did, however, tick back down to 3.8% – a decrease of one-tenth – however the overall pace of hiring remained weak. For completeness, in the US the October NFIB small business optimism reading rose 0.6pts to 102.4 (vs. 102.0 expected).
Looking at the day ahead, this morning we’ll get confirmation of the final October CPI revisions for Germany followed later by the October CPI/PPI/RPI data dump in the UK. Also out this morning is September industrial production for the Euro Area while in the US the main focus is the October CPI report where expectations are for a +0.2% mom core reading. Away from the data we’ve got the aforementioned speech from Powell before the Joint Economic Committee, while Kashkari speaks later this evening. Elsewhere, Turkish President Erdogan is due to meet President Trump.
Google Launches Checking Accounts In Big Tech’s Latest Move On Wall Street
Move over, Apple.
At a time when customers (including the company’s co-founder Steve Wozniak) have been non-stop complaining on Twitter about the Apple credit card (brought to you via a partnership with Goldman Sachs), Google has decided that now is the time to make its big leap into the consumer finance business.
According to WSJ, Google will soon offer checking accounts to consumers. The project, code-named Cache, is expected to launch next year with accounts run by an interesting partnership: Citigroup, and a small credit union at Stanford University, a tiny lender located in Google’s backyard.
Big Tech sees finance as the next frontier in their race to monopolize the American economy: It brings users – and their valuable data – closer into the product fold of companies like Google and Apple.
Facebook yesterday announced plans to expand its payments app, and its CEO Mark Zuckerberg recently endured another round of Congressional interrogations about its “Libra” cryptocurrency finance project. But regulators, and the banks’ army of lobbyists, are already doing whatever they can to slow Silicon Valley’s march onto their turf.
Unlike Apple’s deal with Goldman, Google’s project looks more like an equal partnership, with Citigroup getting equal billing for the accounts. In turn, Google will leave the job of navigating the financial plumbing to the banks, making them the interface for all regulatory concerns.
In other Google-related news, the company’s internal struggle with the ‘labor activists’ working among its ranks recently led the company to fire one employee for leaking names of staff and personal details to the media. Others were put on leave for allegedly violating company policy, according to Bloomberg.
We imagine the army of SJWs who work at Google will love the company’s latest decision to jump into bed with the ‘evil’ Wall Street banks.
