With the WeWork IPO roadshow expected to start as soon as next week as the company’s bankers feel a sense of growing urgency to take the company public asap in the aftermath of such recent bombs as Uber, Lyft, Chewy and most recently, Slack, which crashed yesterday wiping out all post-IPO gains, there was one big piece of the puzzle that was still missing: at what valuation would WeWork go public?
Now, according to Bloomberg, we know, with Bloomberg reporting that the New York-based office-rental startup whose lofty mission statement is to “elevate the world’s consciousness”, is seeking a valuation of about $20 billion to $30 billion in its U.S. initial public offering.
Considering that WeWork generated $1.54 billion in revenue in the first six months of 2019 and posted a net loss of $904 million, while losing an insane $1.4 trillion from operations, that would make the upper end of the range roughly 10x on sales and idiotic on a cash flow, EBITDA, or profit basis.
What is even more remarkable about this valuation is that it represents a massive haircut to the company’s latest private founding round: as a reminder, WeWork It started at a $97 million valuation with its Series A in 2009, and by its Series C in 2011, investors had valued the co-working behemoth at $4.8 billion, according to Craft, a website that tracks corporate financial data.
By 2015, WeWork’s valuation had reached $16 billion. Four billion dollars from Softbank last year boosted WeWork into $40 billion territory, and the funding round in January brought it to $47 billion.
In other words, at the $20 billion, low-end valuation, WeWork would be taking an almost 60% discount to the latest idiotic valuation round led by, who else, venture capital’s equivalent of “throw shit at the wall and see what sticks while revaluing the shit higher with every toss”, SoftBank.
To be sure, terms of the offering will likely still change and will be dependent on the market for the mood of its possible investors. WeWork is still discussing potential terms for the share sale, and the eventual valuation could change depending on investor demand, Bloomberg said citing sources. One thing is certain, however: insiders can’t wait to cash out, and none more so than CEO Adam Neumann, who recently sold some of his stock in the company and borrowed against his holdings to generate roughly $700 million, according to the Wall Street Journal – a surprising decision given that founders usually wait at least until after a company goes public before cashing out their shares.
via ZeroHedge News https://ift.tt/32y7aQN Tyler Durden
We really should focus on the signals emanating from bond markets. Forget the current political madness – yesterday saw a number of key moments for bond markets: UK Chancellor Sajid Javid hitting the spend button in the UK (whether it actually happens is a moot point), another $30 bln new issuance day in the US, BAWAG launching a 10-year negative yield Covered Bond, Spain about to launch a 50 year issue at a smidge over nothing, and Christine Lagarde lecturing the European Parliament about the need for Fiscal Policy initiatives.
It really feels like we are at something of a nexus for bonds and fiscal spending. Central Bankers and politicians are tinkering with new ideas (ie: old ones rehashed) about Monetary policy – because nothing they tried re QE and zero rates really worked the last 10-years. I can’t help but feel it’s like something out of The Walking Dead – the Neo-Keynesians have suddenly risen and now stalk the Earth. (Queue Thriller on the turntable…)
Politicians now see low interest rates as a phenomenal opportunity to sort out the bleak mess of the last 10-years of Austerity driven under-investment, and spend economies back into growth. It looks attractive. And, if they’d started 10-years ago.. then we’d probably not be where we are today…
Of course, corporates would be mad not to take advantage of current ultra-low rates to borrow. But what are they going to spend the money on? More distorting stock buy-backs and dividend recharges back to private equity owners? Should investors be worried about the growing leverage? If the crunch comes – well, 5% of issuers might default, but the rest will be fine… ish. Meanwhile, ultra-low rates are great for stocks. Not because companies are inherently more profitable, but largely because low rates make stocks relatively more attractive compared to low-yielding bonds, and encourage corporate buy-backs which further push up prices!
The problem is… the global bond market is now in excess of $115 trillion (a very very big number) and its grown dramatically since the 2008 crisis. It’s just about tripled according to one set of numbers I looked at. When the bond market crunch comes, let’s assume there will be some very very large losses – and all the systemic bad consequences that will go with that. Worry less about how index funds, or ETFs will trigger the next crisis, but what happens when bond markets collapse on a few points of interest rate rises, triggering massive defaults, while chronic illiquidity creates the biggest value trap of all time. Ouch.
Argentina just got caught in the jaws of the classic repay in dollars trap – again. Just a few years ago we were expecting Spain to go bust on the back of its borrowings in someone else’s currency – the Euro. Now its about to launch a half-century bond! In a currency it has absolutely no real control over!
Next week markets expect the ECB to further ease rates into negative territory – where most bonds are already priced – and even to restart its bond buying programme. Yet an increasing number of bankers and theorists are warning it makes little sense. I’ve said it myself many times: years of lower rates to kick start economies hasn’t kickstarted growth, but has simply distorted financial asset prices (stocks and bonds) in very dangerous ways. Under QE the rich have got richer, and the poor remain fortunate to hold badly paid jobs. Monetary experimentation has proved about as effective as pushing a hefty rock uphill with a wet length of wool.
I will go as far as to opine Central Banks are no longer a solution – they have become the Risk. If they deliver more easing they will simply further distort prices in already tortured and bubbilicous financial asset markets. If they don’t ease, then markets will throw volatile tantrums, forcing intervention. There is nothing healthy about the current mutual dependency between Central Banks and Markets. Time for a purge..
When even the CEO of Deutsche Bank is warning about the dangers of negative rates then is must be obvious to the ECB: “Few economists believe cheaper money on this level will do anything.” He went on to say central banks have few options to deal with a real crisis. (No Sh*t Sherlock award on its way to the Towers in Frankfurt.) When Germany’s big banks are as rubber-ducked as Commerz and Deutsche, you have to wonder how close the next banking crisis is. (That’s a rhetorical question. Let me put it another way: name me a single European bank south of Schleswig-Holstein you really trust?) But what else can central banks do? Their cupboards are bare.
It’s time for government to step up and take responsibility – hence the growing fascination with a return to fiscal boosts and the attractions of New Monetary Theory. Its just another iteration of Keynesian spending policies – and we know how these usually end… with a panic about debt loads.
Christine Lagarde laid out her stall as new ECB head yesterday in Brussels. As part of her confirmation process, she told the European Parliament low deficit successful countries should be playing the fiscal spending card to power Europe out of downturn – that’s a clear challenge for the Rich North to effectively end the current “stability pact” budget rules, and agree the bail out of the Poor South. Lagarde is doing as expected – showing her colors as Macron’s girl. Good luck selling the concept to the Burgers of Dresden.
Sadly, instead of answering deeply penetrating questions from the parliament on how to restore growth, establish a proper budget and energise recovery across the Eurozone, she blathered on about combating populism and how to address climate change as a macro-economic priority – favoring green bonds in any new asset purchase program. Europe is doomed.
There may be a sweet spot – Spain is doing rather well. Its politics rank 3rd in the European disaster league table (Behind the UK and Italy), but the fact Spain is growing as a result of naked domestic consumption is a great thing. Government mandated pay hikes boosted consumer spending (including a massive 20% hike in minimum wages). Stuff Austerity! It worked. Helicopters anyone? But Spain’s fiscal boost is probably unsustainable – the nation still has to address the fundamental problem: not just paying people more, but actually getting them to produce more to justify it (a long term fundamental structural reform issue – boosting productivity!)
This is an issue for all governments to ponder before they embark on a fiscal spending binge: can spending on social and physical infrastructure projects pass the critical test of adding to productivity in a degree that beats the spending? That’s a pretty simple test – if making education free and better costs billions but adds trillions to the nation’s GDP, then do it! If building a new railway costs trillions but adds a few million to GDP, then forget it.
However, I fear the penny/cent may have dropped too late. We may already be at or near “Peak Bond”. Politicians are waking up to fiscal spending just as the cycle is about to turn (discounting the looming recession). Some countries, like the UK and US, maintain superbly liquid government bond markets, but Europe’s is fractionalised and split and too dependent on the ECB’s formula. If rates turn or a crisis develops – it may already be too late for some countries to spend our way out.
What’s the answer? My own axe would be to forget about financial assets and invest in real things. Got some great deals in real estate, commercial property, aviation, clean energy, CO2, and if you are interested in the improving opportunities in Africa, then we really need to talk!
At least 14 women are suing ride sharing company Lyft for allegedly allowing a pattern that “induces” young, unaccompanied or intoxicated female passengers to use its service and then subjects them to harassment and sexual assault, according to NBC News.
The complaint was filed in California and shines a spotlight on predatory drivers, alleging that as early as 2015, Lyft was aware that some drivers were sexually assaulting, and even raping, female customers. The suit alleges that even though complaints were made to the company, it “continues to hire drivers without performing adequate background checks” or implement “reasonable driver monitoring procedures.”
The complaint continues:
“Lyft’s response to this sexual predator crisis amongst Lyft drivers has been appallingly inadequate.”
The lawsuit, filed in Superior Court in San Francisco, claims: “Unfortunately, there have been many sexual assaults much worse than the ones suffered by plaintiffs as alleged herein, where victims have been attacked and traumatized after they simply contracted with Lyft for a safe ride home.”
The plaintiffs in the suit are seeking unspecified damages. Estey & Bomberger, the law firm representing the plaintiffs who hail from several states (California, Illinois, North Carolina and others), says that Lyft received “almost 100” sexual assault complaints against drivers from 2014 to 2016.
The lawsuit claims that an LA area woman was raped after her driver told her in October 2018 “I love you” and took her phone. Lyft never even told the woman if the man was fired after she said she filed a police report, according to the suit.
A second plaintiff claimed that she was asked to pay for her ride with money and sexual favors in Charleston, South Carolina this past March. Her driver allegedly told her “gratuity is for pocket and yummy is for me.” She jumped out of the car before the ride ended and filed a police report, but claims she was also never told if the driver was fired.
The lawsuit mirrors complaints made on various social media sites by women who have claimed that the company fails to take their concerns seriously.
For instance, a woman named Anna Gilchrist tweeted earlier this year that she was “scared for her life” after a driver asked if her boyfriend was home and refused to unlock her door during a ride. She claimed she had to “pry the door open” and jump out. Gilchrist said that after contacting the company, “it truly felt for all intents and purposes like I was speaking to a robot.”
After her tweet went viral, Lyft removed the driver from its platform.
Attorney Meghan McCormick, whose San Francisco firm has filed 13 cases against Lyft within the past month, says that’s not typical behavior for the company. “These cases are coming to us at a rate of five to 10 per week,” McCormick said. She continued: “I would hope that it becomes evident to Lyft and the public that this is almost an epidemic and these are only the cases we know about that are reported.”
Lyft responded by telling NBC News that it “holds itself to a higher standard by designing products and policies to keep out bad actors.” The head of trust and safety for Lyft, Mary Winfield, said: “The experiences described by the victims have no place in the Lyft community. Our commitment is stronger than ever, as we dedicate more resources in our continued effort to ensure our riders and drivers have the safest possible experience.”
She did not directly address how Lyft planned on responding to the lawsuit, which claims that Lyft has not met the minimum reasonable consumer safety expectations, has not warned about its risks through its app and has negligently hired drivers without proper reference checks and anti-sexual assault training.
Lyft has said that it conducts criminal record checks of its drivers “continually” and that it offers optional anti-harassment training. Lyft has also said that it is planning further safety improvements. However, because drivers are technically contractors, they can’t be forced to complete such training.
Lyft also said in August that it was going to release a transparency report similar to the one that Uber released last summer. The report detailed sexual assault reports and other incidents reported by its users. Uber also put a button on its app that allows users to directly contact police last year.
Interest rates have plunged lately as concerns about a recession in the U.S. economy have risen. This has led many media commentators to suggest the bonds are now wildly overvalued. To wit:
“When evaluating the desirability of government bonds as a long-term investment, it’s imperative to compare the prevailing yields of bonds with the earnings yields for stocks.”
While this is a common comparison, it is also wrong. Let’s compare the two:
Earnings Yield:
“Earnings yield” is the inverse of P/E ratios and only tells you what the yield is currently, not what the future will be.
Investors do not “receive” an “earnings yield” from owning stocks. There is no “yield payment” paid out to shareholders, it is simply a mathematical calculation.
There is no protection of principal.
Treasury Yield:
Investors receive a specific, and calculable to the penny, “yield” which is paid to the holder.
A Government guaranteed return of principal at maturity.
As we noted previously, it is essential to align expectations and investing requirements. Stocks have liquidity, and potential return (or loss), but no safety of principal. Treasuries have a stated return, and a high degree of safety. However, in order to guarantee the stated return, Treasuries must be held to maturity and may not be liquid if that is your goal.
For most investors, completely discounting the advantage of owning bonds over the last 20-years has been a mistake. By reducing volatility and drawdowns, investors were better able to withstand the eventual storms which wiped out large chunks of capital. Some may look at the graph below and say ‘hey, but in the end bonds and stocks are now at the same point’. True, but the heart burn and risk taken with stocks was needless. It is also worth pointing out that stocks are once again grossly overvalued and a large drawdown is probable in the coming years.
All risk, all the time, has repeatedly led to bad outcomes for investors unwilling to evaluate the benefits of owning fixed income because they are comparing a “phantom yield” to a “real yield.”
Valuations
However, this does not answer the question of “valuation” as it relates to bonds. For that analysis, we need to look at three factors:
Economic growth and inflation
Current trader positioning
Relative yields
(We are specifically focusing on the U.S. Treasury market since this is the market which is specifically affected by monetary policies.)
“I agree that stocks are indeed overvalued. Since investors pay a price for what they believe will be the future value of cash flows from the company, it is possible that investors can misjudge that value and pay too much. Currently, with valuations trading at the second highest level in history, it is not difficult to imagine that investors have once again overestimated the future earnings and cash flows they might receive from their invested capital.”
“However, bonds are a different story.”
Unlike stocks, bonds have a finite value. At maturity, the principal is returned to the holder along with the final interest payment. Therefore, bond buyers are very coherent of the price they pay today, for the return they will get tomorrow.
Sincethefuture return of any bond, on the date of purchase, is calculable to the 1/100th of a cent, a bond buyer is not going to pay a price that yields a negative yield to maturity. (This is assuming a holding period until maturity. A negative yield might be purchased on a trading basis if benchmark rates are expected to decline further and/or in a deflationary environment.) “
In other words, it is very difficult for a bond to be tremendously “overvalued” as rates are ultimately set by the supply and demand for credit. As I have discussed many times in the past, interest rates are a function of three primary factors: economic growth, wage growth, and inflation. The relationship can be seen in the chart below. (I have included debt, which I will discuss momentarily.)
We can clean up the chart by combining inflation, wages, and economic growth into a single composite for comparison purposes.
As you can see, the level of interest rates is directly tied to the strength of economic growth and inflation. Since wage growth is what allows individuals to consume, which makes up roughly 70% of economic growth, the level of demand for borrowing is directly tied to the demand from consumption. As demand increases, businesses then demand credit for increases in capital expenditures or production. The interest rates of loans are driven by demand from borrowers. Currently, as shown below, the level of demand is consistent with the interest rates currently being charged. (Also: note the sharp drop in activity over the last several months which has been previously consistent with recessionary onsets)
The debt is also an important determinant of the “fair value” of interest rates. In an economy that is dependent on debt for consumption (70% of GDP), if interest rates rise, consumption immediately falls given the inability to afford higher payments. As I noted last week:
“This is why the “gap” between the “standard of living” and real disposable incomes is more clearly shown below. Beginning in 1990, incomes alone were no longer able to meet the standard of living so consumers turned to debt to fill the “gap.” However, following the “financial crisis,” even the combined levels of income and debt no longer fill the gap. Currently, there is almost a $3200 annual deficit that cannot be filled.”
Since “borrowing costs” are directly tied to the underlying economic factors that drive the NEED for credit; interest rates, and therefore bond values can not be overvalued.
Furthermore, since bonds have a finite value at maturity, there is little ability for overvaluation in the “price paid” for a bond as compared to its future “finite value” at maturity.
Still Way To Many Bond Bulls
Another signal that bonds are potentially still “undervalued” can be seen by looking at the Commitment of Traders report to see the net positioning on U.S. Treasuries.
“[June 2019] The reversal of the net-long positioning in Treasury bonds will likely push bond yields lower over the next few months. This will accelerate if there is a ‘risk-off’ rotation in the financial markets in the weeks ahead.
However, as shown in the chart below, despite the sharp drop in rates, traders are still betting on a surge in rates and the net-short positioning on the 10-Year Treasury is at the second-highest level on record. Combined with the recent spike in Eurodollar positioning, as noted above, it suggests that there is a high probability that rates will fall further in the months ahead; most likely in concert with the risks of a recession.”
“The chart below looks at net-short positioning ONLY when net-short contracts exceed 100,000. Since peaks in net-short contracts generally coincide with peaks in interest rates, it suggests there is more room for rates to fall currently.”
Despite rates falling to multi-year lows, traders are still at some of the most extreme net-short positioning on rates in history. This net short positioning provides “fuel” for further price increases in bonds, and declines in rates, as traders are ultimately forced to cover their positioning.
Since “over-valuation” is mostly a function of sentiment, given the extreme short-positioning in bonds suggests that bonds are still “under-valued” from an investment perspective. When the short-positioning is reversed, rates are going to quickly approach zero at which point it will be fair to say bonds are “fully valued.”
All Rates Are Relative
Lastly, rates are ultimately directly impacted by the strength of economic growth and the demand for credit. While short-term dynamics may move rates, ultimately the fundamentals, combined with the demand for safety and liquidity, will be the ultimate arbiter.
When you have $17 Trillion in negatively yielding sovereign debt, money will flow to the bonds with the highest, and safest, yield. Today, the sovereign debt with the highest yield, and most safety, is the U.S. Treasury.
As money flows into the U.S. Treasuries for safety, security, and return, from both domestic and foreign purchasers, yields are driven lower. (This will be exacerbated by the short-squeeze in bonds as noted above.)
Take Japan, for example. Rates can’t rise in one country, while a majority of global economies are pushing low to negative rates. This is simply a function of monetary flows which will find the highest, safest, and most liquid yield. Therefore, given the global status of the U.S.. Treasury as a “safe haven,”the Treasury is “undervalued” relative to the other relatively stable sovereign bonds which currently all sport substantially lower yields.
Not unlike Japan, the U.S. faces many of the same demographic and economic challenges which suggest that yields are not only “undervalued,” but will approach full valuation during the next recession.
Unfortunately, for the current Administration, the reality is that cutting taxes, tariffs, and sharp increases in debt, is unlikely to change the outcome in the U.S. The reason is simply that monetary interventions, and government spending, don’t create organic, sustainable, economic growth. Simply pulling forward future consumption through monetary policy continues to leave an ever-growing void in the future that must be filled.
Conclusion
The problem with the statement that “bonds are in a bubble,” is the assumption we are only talking about the isolated case of a shifting of asset classes between stocks and bonds.
However, the issue of rising borrowing costs spreads through the entire financial ecosystem like a virus. The rise and fall of stock prices have very little to do with the average American and their participation in the domestic economy. Interest rates are an entirely different matter.
Since interest rates affect “payments,” increases in rates quickly have negative impacts on consumption, housing, and investment which ultimately deters economic growth.
Given the current demographic, debt, pension and valuation headwinds, the future rates of growth are going to be low over the next couple of decades. Even the Fed’s own “long run” economic growth rates currently run below 2%.
Bonds are at a minimum “fairly valued,” but most likely “under-valued” based on the factors set out above.
While there is little room left for interest rates to fall in the current environment, there is also not a tremendous amount of room for increases. Therefore, bond investors are going to have to adopt a “trading” strategy in portfolios as rates continue to trade in a flat line over the next decade.
Of course, that line will be closer to zero than not.
Don’t believe me? You don’t have to look much further than Japan for your answer.
via ZeroHedge News https://ift.tt/2PPHZI3 Tyler Durden
ADP reports that jobs growth rebounded for the second month in a row in August, up 195k (crushing expectations of a 148k rise and above the highest analyst estimate).
Source: Bloomberg
“In August we saw a rebound in private-sector employment,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute.
“This is the first time in the last 12 months that we have seen balanced job growth across small, medium and large-sized companies.”
Service-proving jobs dominated once again, adding 184k, with goods-producing jobs rising 11k in August.
Mark Zandi, chief economist of Moody’s Analytics, said, “Businesses are holding firm on their payrolls despite the slowing economy. Hiring has moderated, but layoffs remain low. As long as this continues recession will remain at bay.”
This is a great jobs report, especially given BLS’ revisions, but is it too good to allow Powell to cut next week?
via ZeroHedge News https://ift.tt/2NXzDv4 Tyler Durden
“We will be forced to open the gates. We cannot be forced to handle the burden alone,” Turkish President Recep Tayyip Erdogan warned on Thursday while demanding that European countries give political support to his controversial ‘safe zone’ plan in northern Syria.
Ankara is currently in tense negotiations with the United States over Erdogan’s plan to militarily carve out a large swathe of territory along the Turkish-Syrian border which would serve as a buffer zone of sorts where US-backed Kurdish militias could not operate.
Erdogan said one million refugees could settle in the new buffer territory, thus alleviating the crisis on Turkish soil, and ultimately for Europe as well.
Syrian refugees in a Turkish camp. Image source: AP
Turkey sees the YPG core of the Syrian Democratic Forces (SDF) as a terrorist extension of the outlawed PKK. Turkey has of late vowed to carve out the proposed ‘safe’ territory on a unilateral basis if it can’t make progress with Washington.
Also during the speech Turkey’s president complained his nation “did not receive the support needed from the world” to help it cope with the refugee crisis through the eight-year long war.
“You either support us to have a safe zone in Syria, or we will have to open the gates. Either you support us or no one should feel sorry. We would like to host 1 million refugees in the safe zone,” he said.
It goes without saying that the territory in question is not his to control or dole out, and Damascus has slammed what it sees as a big Turkish land-grab.
Turkey has pressed hard for the proposed safe zone east of the Euphrates for the past year (‘safe zone’ envisioned in blue in map below):
It’s also the case that many analysts see Turkey as a prime external party to the conflict that’s done more than any other to exacerbate and prolong the war, including fueling the rise of ISIS.
Turkey’s president previously claimed the country has spent a total of $35 billion on hosting some 4 million Syrian refugees, but that the European Union hasn’t upheld previously agreed to commitments under a refugee settlement plan.
Erdogan speaks to his ruling party officials Thursday in Ankara, Turkey, via the AP.
It’s not the first time Ankara has threatened to allow Syrian refugees and migrants to leave for EU countries and it likely won’t be the last, but it’ll be interesting to see if Erdogan’s blackmail will witness any positive movement out of Europe.
via ZeroHedge News https://ift.tt/2LlZSd5 Tyler Durden
In a world where every single trading day’s mood is set by the latest trade war news, headlines, rumors and innunedo, it should come as no surprise that following news that the US and China are set to agreed to restart high-level trade talks in early October in Washington, that global stocks and US equity futures will be another sea of green, with the S&P jumping 26 point and now just 2% below its all time highs.
The latest round of talks, which was announced just 4 days after even higher tariffs were slapped on US and Chinese goods, was agreed to in a phone call between Chinese Vice Premier Liu He and USTR Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin, China’s commerce ministry said in a statement on its website. China’s central bank governor Yi Gang was also on the call.
“Both sides agreed that they should work together and take practical actions to create good conditions for consultations,” the ministry said. “Lead negotiators from both sides had a really good phone call this morning,” ministry spokesman Gao Feng said in a weekly briefing. “We’ll strive to achieve substantial progress during the 13th Sino-U.S. high-level negotiations in early October.”
The glimmer of hope in the global trade war – officials from the U.S. and China had been struggling to agree on new talks – added to a broad risk-on mood that took hold Wednesday, when British lawmakers moved to block an imminent no-deal Brexit and Hong Kong’s leader sought to quell unrest in Asia’s key financial hub. Focus will now shift to remarks from Fed Chair Jerome Powell and the latest U.S. jobs report, both due Friday, amid expectations for further monetary easing.
While it is virtually certain that nothing tangible will emerge from this latest attempt at de-escalation, which is meant to calm the popular mood around China’s October 1 National Day holiday, it was predictably sufficient to boost algo trading optimism and sent stocks sharply higher around the globe.
Indeed, news of the early October talks lifted most Asian share markets on Thursday, raising hopes these can de-escalate the U.S.-China trade war before it inflicts further damage on the global economy. Asian stocks climbed, led by technology firms and material producers. Almost all markets in the region were up, with Japan leading gains. The Topix jumped 1.8% for its biggest gain since July 19, as electronics firms and machinery makers advanced. The Shanghai Composite Index rose 1%, buoyed by large insurers and banks, while Hong Kong’s Hang Seng Index closed little changed following a 3.9% rally on Wednesday. China’s cabinet signaled further monetary easing to counter economic headwinds. India’s Sensex dropped 0.1% as investors assessed waning economic growth
European stocks followed Asia’s lead, pushing higher on renewed trade optimism as China and the U.S. are set resume talks next month. The Stoxx Europe 600 Index rose for a second day, led by technology, autos and industrials, with every major national benchmark except the U.K.’s FTSE 100 in the green and carmakers setting the pace. Traders ignored the latest batch of dismal German economic data, which saw German industrial orders fell more than expected in July on weak demand from abroad, suggesting that struggling manufacturers could tip Europe’s biggest economy into a recession in the third quarter. Orders for “Made in Germany” goods were down 2.7% from the previous month in July, driven by a big drop in bookings from non-euro zone countries. Consensus had expected a -1.5% drop. The June reading was revised up to an increase of 2.7 from a previously reported 2.5% increase.
“The misery in manufacturing continues. The decline in new orders significantly increases the risk of a recession for the German economy,” VP Bank analyst Thomas Gitzel said. “The danger is great that negative growth will also be recorded in the third quarter,” Gitzel added, eyeing the possibility of a technical recession after German GDP contracted by -0.1% in Q2, with Q3 GDP now widely expected to shrink as well.
Bond yields rose across most curves, with 10-yr bund and UST yields rising 3bps and 5bps, respectively. European yields curves steepened across the board as investors take heed of the doubters in the European Central Bank over a fresh package of quantitative easing. China’s government bonds advanced as sentiment got a boost from Beijing’s call for monetary easing and inclusion in a major global index. The yield on 10-year sovereign bonds fell 3 basis points to 3.02%, the lowest since Aug. 15. China’s cabinet has called for the “timely” use of tools such as reserve-ratio cuts to support the economy. Adding to the optimism, JPMorgan said it will include some onshore bonds into its benchmark emerging-market indexes, a move that would spur capital inflows. Meanwhile, traders are bracing for a PBOC cut in the RRR: “China is starting a new round of easing,” said Ming Ming, head of fixed-income research at Citic, adding the 10-year government yield could fall toward 2.8%. “The central bank will likely reduce broad RRR and also ease in a targeted manner to support smaller companies. We also can’t rule out a cut to interest rates.”
In FX, the pound added to Wednesday’s big gains following Parliament’s move to block both a no-deal exit from the European Union and an early British election. The dollar fell for a third day, sliding 0.1% lower, while the euro edged higher despite disappointing factory data in Germany. The SEK lead G-10 gains after the country’s central bank defied expectations it would turn more dovish, sticking with its plan to withdraw stimulus from the biggest Nordic economy.
Elsewhere, West Texas oil fluctuated. Florida orange groves seemingly escaped major damage from Hurricane Dorian, but concern is now turning to soy, corn and cotton fields as well as livestock in Georgia and the Carolinas as the storm churns northward.
Today, US investors will look forward to several big data points, including Challenger job cuts, jobless claims and services
Market Snapshot
S&P 500 futures up 0.8% to 2,962.25
STOXX Europe 600 up 0.5% to 385.24
MXAP up 1.1% to 155.32
MXAPJ up 0.8% to 502.11
Nikkei up 2.1% to 21,085.94
Topix up 1.8% to 1,534.46
Hang Seng Index down 0.03% to 26,515.53
Shanghai Composite up 1% to 2,985.87
Sensex down 0.4% to 36,593.44
Australia S&P/ASX 200 up 0.9% to 6,613.17
Kospi up 0.8% to 2,004.75
German 10Y yield rose 2.7 bps to -0.647%
Euro down 0.02% to $1.1033
Brent Futures up 0.2% to $60.83/bbl
Italian 10Y yield fell 6.3 bps to 0.472%
Spanish 10Y yield rose 4.8 bps to 0.197%
Gold spot down 0.7% to $1,541.85
U.S. Dollar Index down 0.08% to 98.37
Top Overnight News from Bloomberg
Boris Johnson was humiliated by Parliament for a second day running, with his do-or-die Brexit strategy derailed and even his plan for a general election rejected. But having bet everything on getting Britain out of the European Union by Oct. 31, he can’t back down.
China and the U.S. announced that face- to-face negotiations aimed at ending their tariff war will be held in Washington in the coming weeks, amid skepticism on both sides that any substantive progress can be made.
Hong Kong leader Carrie Lam said her decision to scrap extradition legislation was only the “first step” to addressing the city’s unrest, but resisted protesters’ calls to immediately meet the rest of their demand
Mario Draghi’s bid to reactivate bond purchases in a final salvo of stimulus is being threatened by the biggest pushback on policy ever seen during his eight-year reign as European Central Bank president.
German factory orders fell in July, aggravating an industrial slump that has pushed Europe’s largest economy to the brink of recession. Demand fell 2.7% from June, when it rose at the same pace, as orders from outside the euro region plunged
Asian equity markets traded higher across the board as the region took impetus from the upside in global peers after dovish Fed rhetoric and positive developments in Hong Kong in which the extradition bill was fully withdrawn, while US-China trade hopes exacerbated the gains after the sides agreed to hold talks in Washington early next month. ASX 200 (+0.9%) and Nikkei 225 (+2.1%) were boosted by the trade developments and with the energy sector frontrunning the gains in Australia due to the recent advances in oil prices, while exporter names in Tokyo benefitted from a weaker currency. Hang Seng (U/C) and Shanghai Comp. (+1.0%) conformed to the heightened risk appetite after the phone call between China’s Vice Premier Liu He with US Treasury Secretary Mnuchin and USTR Lighthizer in which the sides also agreed on trade consultations mid-September ahead of next month’s talks and will take action to create good conditions for the consultations. Furthermore, expectations of PBoC easing after China’s Cabinet announced it will implement RRR reductions ‘in time’ have added to the optimism, although the advances in Hong Kong were restricted considering its benchmark had already surged just shy of 1000 points or a near-4% gain yesterday due to the extradition bill withdrawal. Finally, 10yr JGBs briefly slipped below the 155.00 level amid pressure across global bond futures triggered by the US-China trade talk announcement, although prices later nursed some of the losses after a mostly firmer than previous 30yr JGB auction.
Top Asian News
Thailand’s Death Toll From Tropical Storms, Floods Rises to 16
Singapore’s CXA Says Seeking $50 Million in New Funding Round
China Strongly Opposes Escalation of Trade War, Gao Says
Indonesia Allows Miners to Add Export Quotas; Nickel Tumbles
A positive session thus far for most of the major European bourses [Eurostoxx 50 +0.8%] as the region follows suit from a mostly positive Asia-Pac session as trade optimism bolstered sentiment after China’s Mofcom announced a US/China meeting in Washington next month, although an explicit date has not been reported. UK’s FTSE 100 (-0.7%) is the laggard and has slipped further due to a strengthening GBP after UK PM Johnson received a double whammy with UK Parliament voting to pass the bill to delay Brexit and defeated the PM’s bid for snap elections. Sectors are mixed with the IT sector the clear outperformer as chip names rally on US-China optimism; meanwhile defensive sectors are in the red amid the risk appetite. In terms of individual movers, Equinor (+7.9%) shares spiked higher after the Co. began a USD 5bln share buyback programme which is to be completed at the end of 2020. Elsewhere, Safran (+6.1%) and Melrose (+6.3%) rose on the back of earnings. On the flip side, William Hill (-1.7%) shares opened lower following on from the resignation of its CEO.
Top European News
Drop in German Factory Orders Aggravates Recession Risk
Italy’s New Finance Minister Is a Peace Offering to Europe
Equinor Jumps After Starting $5 Billion Buyback Program
Thyssenkrupp DAX Ouster a Sign of the Times for Struggling Group
In FX, The Swedish Crown is rallying in wake of the Riksbank policy meeting as a hike by the end of 2019 or in Q1 next year is still on the agenda even though the accompanying statement acknowledged looser monetary policy elsewhere, a deterioration in sentiment and included the caveat that the Central Bank will adjust rates if prospects for the domestic economy and inflation change. Moreover, the projected repo path was lowered and the Riksbank reiterated the need to proceed with caution. Nevertheless, Eur/Sek has tested support below 10.7000 in the form of the 100 DMA on relative policy outlooks given that the ECB is widely tipped to unleash more stimulus next week.
NOK/NZD/AUD/CAD/GBP – Although Statistics Norway believes rates have peaked, the Norges Bank retains guidance for a further 25 bp tightening by the end of the year, and Eur/Nok is also retreating further from recent peaks amidst a broad upturn in risk sentiment with the cross eyeing 9.9250. Elsewhere, the Kiwi and Aussie are also buoyed by reports that the US and China are planning to hold trade talks in early October, while the Loonie is extending its post-BoC gains (less dovish than expected stance) through 1.3200. However, the Antipodean Dollars have switched places as Nzd/Usd builds a firmer base above 0.6350 and Aud/Usd is capped around 0.6825 with the Aud/Nzd cross topping out just above 1.0700 accordingly, perhaps in response to overnight Australian trade data revealing a moderately narrower than forecast surplus. Note also, decent option expiries between 0.6790-0.6800 may be hampering the Aussie. Meanwhile, a generally softer Greenback (DXY just off another new recent low, at 98.185, and under a key 50% Fib level of 98.464) alongside manoeuvres in Westminster to block a no deal Brexit continue to prop up the Pound, with Cable nudging above 1.2300, to just shy of 1.2350 at best, and Eur/Gbp back down under 0.9000 even though the single currency is outpacing the Buck as well.
EUR/JPY/CHF – All narrowly mixed vs the Usd, as the Euro edges further above 1.1000 to test offer and option expiry interest at 1.1050 where 1.6 bn resides, but the Yen and Franc lose a bit more safe-haven appeal on the aforementioned improvement in market morale, with Usd/Jpy and Usd/Chf pivoting 106.50 and 0.9825 respectively.
EM – Some loss of recovery momentum for the Lira ahead of next Thursday’s CBRT rate verdict as Turkish President Erdogan contends that more cuts are coming, while the Rand’s bull run has been somewhat hampered by worse than expected SA Q2 current account metrics. Usd/Try has bounced from circa 5.6500 and Usd/Zar is firmer after a temporary dip below 14.7500, but the PBoC set its Usd/Cny reference rate a smidge lower against the recent trend.
In commodities, WTI and Brent futures are relatively flat as the benchmarks take a breather yesterday’s above 4% rally which was fuelled by heightened risk appetite, a weaker USD and geopolitical tensions after US imposed sanctions, targeting the shipping network controlled by the IRGC, whilst last night’s surprise build in API crude stocks (+0.401mln vs. Exp. -2.5mln) did little to sway prices. WTI remains above the 56.0/bbl with its 200 and 50 DMAs at 56.13/bbl and 56.19/bbl respectively, meanwhile its Brent counterpart re-eyes 61.0/bbl to the upside. Next up, participants will be eyeing the delayed release of the weekly DoE crude stocks at 1600BST/1100EDT with the headline expected to print a drawdown of 2.488mln barrels. Traders may also take note of US production, which reached a record of 12.5mln BPD last week, ahead of next week’s JMMC meeting (12th Sept). Elsewhere, gold has retreated further below the 1550/oz despite a weaker USD amid safe-haven outflows whilst the risk appetite buoys copper and iron, with the former reclaiming 2.60/lb to the upside.
US Event Calendar
8:15am: ADP Employment Change, est. 148,000, prior 156,000
8:30am: Nonfarm Productivity, est. 2.2%, prior 2.3%; Unit Labor Costs, est. 2.4%, prior 2.4%
8:30am: Initial Jobless Claims, est. 215,000, prior 215,000; Continuing Claims, est. 1.69m, prior 1.7m
9:45am: Bloomberg Consumer Comfort, prior 62.5
9:45am: Markit US Services PMI, est. 50.9, prior 50.9; Markit US Composite PMI, prior 50.9
10am: Factory Orders, est. 1.0%, prior 0.6%; Factory Orders Ex Trans, prior 0.1%
10am: Durable Goods Orders, est. 2.1%, prior 2.1%; Durables Ex Transportation, est. -0.4%, prior -0.4%
10am: Cap Goods Orders Nondef Ex Air, prior 0.4%; Cap Goods Ship Nondef Ex Air, prior -0.7%
10am: ISM Non-Manufacturing Index, est. 54, prior 53.7
DB’s Jim Reid concludes the overnight wrap
There will be a lot of tears at home today although I’m not sure who will shed the most between my wife, daughter or me. Little Maisie starts at nursery today at the school she’ll be at until she’s 13 – assuming she’s not expelled. She may cry the least as I know my wife will be in floods of tears. As for me I’ve just paid my first ever school fees cheque and the tears will start to flow when I realise how many more years I’ll be paying for my children. I’m pretty sure it’ll be into the 2040s.
I’m half wondering whether we’ll still be debating Brexit into the 2040s. Yesterday in isolation was another dramatic day and the Government suffered another two big headline defeats including one asking for an election on October 15th (it still may happen). However given recent events, in a wider context the session wasn’t that remarkable so we’ll push the Brexit news down the pecking order to give you all a break. We may all need to pace ourselves over the coming weeks.
After the gloominess of Tuesday’s bad US manufacturing ISM print, markets staged a recovery yesterday as the service sector ISM in China and Europe held up reasonably well. Signs of political tensions easing in Hong Kong, Italy and hints of China stimulus helped. Not to break my promise but the fact that the no deal Brexit probabilities decreased a little also seemed to help a bit. Today’s US non-manufacturing ISM is going to be pretty important as to near term direction.
The positive momentum is continuing overnight as China’s Ministry of Commerce said in a statement that Vice Premier Liu He agreed to a visit “in early October” to Washington during an overnight telephone call with the US Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer. Meanwhile, the statement from the USTR’s office was a bit more cautious in nature and stated that ministerial-level discussions will take place in “the coming weeks,” without specifying when. The Chinese commerce ministry added that lower-level officials will have “serious” discussions this month to prepare for the talks while the USTR said that deputies will seek “to lay the ground-work for meaningful progress.”
Adding to the positive sentiment this morning, Hong Kong leader Carrie Lam told a news conference that her decision to formally withdraw the controversial bill allowing extraditions to China and other moves would only be the “first step to break the deadlock in society.” She further said, “it’s obvious to many of us the discontentment in society extends far beyond the bill,” and “We can discuss all these deep-seated issues in our dialogue platform to be established.”
This morning in Asia markets are moving up with the Nikkei (+2.30%), Shanghai Comp (+1.56%) and Kospi (+1.12%) all up. Hang Seng is up a more modest +0.38% after it advanced +3.90% yesterday. In FX, the Japanese yen is down -0.16% while the Chinese onshore yuan is up +0.17% to 7.1340. Elsewhere, futures on the S&P 500 are up +0.90% while the yield on the 10y UST is up 3.7bps this morning and the 2y yield is up 4.5bps. In commodities, spot gold prices are down -0.47% to 1545.17/ troy ounce while copper futures are up c. +2.46%.
For yesterday, the S&P 500 closed up +1.09% as cyclical sectors led the move while the NASDAQ and DOW ended +1.30% and +0.91% respectively. The broad rally came despite further confrontational comments from President Trump, who described the trade war with China by saying “to me, this is much more important than the economy,” perhaps undermining the view that he will prove to be responsive to economic pain. Energy was a significant driver, with energy stocks gaining +1.39% as WTI oil rallied +4.47%, its best day in two months. Crude was helped by evidence that the US is tightening sanctions on Iranian oil as well as comments from Russian energy minister Novak which signalled lower domestic production this month. As a result, HY spreads also tightened -3.5bps. Investment grade spreads traded -0.9bps tighter, amid a cascade of issuance (a reported $54bn over the last two days) as companies take advantage of low yields. Even though US IG spreads are +56bps wider from their lows last year, IG yields are at their lowest levels in three years at 2.79%.
Bond yields spent most of the first half of the day climbing with 10yr Gilts and Bunds +10.7bps and +6.8bps higher at their peak. However they closed up +8.7bps and +3.2bps respectively but with Gilts still seeing the largest move since April. In the US, Treasuries sold off as much as +4.0bps but retraced to close flat after some dovish Fedspeak. As you’ll see above yields are back up in the Asian session. US 2s10s steepened back into positive territory at 2.5bps, the highest since 20 August. Bucking the yield sell off trend in Europe was Italy which rallied another -6.4bps to 0.81% on the back of the announcement of Conte’s new ministers including Roberto Gualtieri as finance minister which was seen as market friendly, especially towards Europe. In any case, yesterday move means that the spread to Bunds is now down to 148.5bps. Just a -90bps move in less than a month then.
So to Brexit. As expected after the prior day’s proceeding, MPs voted in favour of legislation that seeks to avoid a no-deal Brexit, and then went on to reject Prime Minister Johnson’s call for a general election. The argument is mostly on the grounds that the legislation to prevent no-deal should be passed into law first.
The Press Association has reported overnight citing new chief whip Lord Ashton of Hyde that the UK government has agreed that all stages of legislation designed to stop a no-deal Brexit on Oct. 31 will be completed in the House of Lords by Friday 5pm. If Mr Johnson wants an election it is arguably now in his interest for this to be fast tracked and then argue that nothing now stops the country going to the polls. Suggestions are that there could be another vote on Monday for a General Election after the bill has been fully locked down. However it would not be impossible for the opposition parties to stall beyond that and put Mr Johnson into a very difficult situation. They would have to weigh this up against how it would look to the electorate if they were seemingly running scared of a poll. Indeed overnight, the BBC has reported that Labour’s Mr Corbyn will not allow an election before October 31 Brexit date. A few more fascinating days ahead.
Sterling rallied, up +1.21% against the dollar to $1.223 as markets perceived the likelihood of a no-deal exit to have fallen now that MPs have backed the principle of another extension. The rally came in spite of the UK services PMI coming in at 50.6 (vs. 51.0 expected), which along with the sub-50 manufacturing and construction PMIs earlier in the week suggest that the UK economy could be on course for another contraction this quarter.
Gilts may have taken some additional signalling from Chancellor Sajid Javid that there would be a review of the current fiscal framework ahead of the Budget. This spending round just covered 2020-21, with the next multi-year review planned for next year, but there was a real-term increase in day-to-day departmental spending of 4.1% compared to 2019-20, the biggest in 15 years. Anyone would think there was an election around the corner.
And finally on the UK, Governor Carney testified before the Treasury Select Committee, where the Bank of England’s updated assessment of the worst-case Brexit scenario was less severe than previously, as a result of progress in preparations for a no-deal exit. In this worst-case scenario, they now see a peak-to-trough fall in GDP of 5.5%, rather than 8% as before. It’s worth noting though that this is a worst-case scenario rather than a forecast of the most likely outcome.
Meanwhile as discussed above, Treasuries and global bonds did catch a bid after some of the Fedspeak yesterday. Kaplan said that risks to his forecasts are to the downside and that it’s “relevant that Fed Funds is above the whole yield curve”. Williams highlighted the usual series of headwinds affecting the US economy, but interestingly also referenced recent downward revisions to GDP and payrolls as signalling less momentum than previously thought. That was the first instance of a Fed official making this argument and bolsters the case for additional rate cuts. Evans said later in the day that “there’s increased uncertainty among the business community as a result of the new trade policy.” Later in the day, the Fed’s beige book of economic commentary indicated that the US economy expanded modestly in August, as “concerns regarding tariffs and trade uncertainty continued, (but) the majority of businesses remained optimistic.”
Over in Europe there was some anticipation ahead of ECB Chief Economist Lane’s speech. However it ended up a non-event with the presentation almost entirely technical in nature. This means we’re still starved of comments from the important trio of Draghi, Lane, and Coeure. Early in the morning we did hear from incoming ECB President Lagarde however, where some of the notable takeaways included agreement with the view of the Governing Council that a highly accommodative policy is warranted but also that “there are important questions on the horizon.” She also emphasized the side effects of policy easing and said that there needs to be a cost benefit analysis. At the margin she seems to be hinting at a slightly more concerned view as to the side effects of extreme monetary policy than Draghi has. Early days though.
European Banks got a boost from her comments, closing up +1.21% and outperforming the STOXX 600 (+0.89%). Staying with Europe, the final PMIs didn’t really move the dial all that much but there was some relief that they are not following manufacturing lower at the moment. The services reading was revised up 0.1pts to 53.5 for the Euro Area which left the composite at 51.9 versus 51.5 in July. The data for France and Germany was a little bit stronger along with Spain where the services reading rose 1.4pts to 54.3 (vs. 53.0 expected). However Italy disappointed with the services reading dropping 1.1pts to 50.6 (vs. 51.6 expected).
In the US the July trade deficit was a touch wider than expected at $54.0bn. The prior month was revised wider as well, weakening the trend for US net exports. As a result, the Atlanta Fed’s third quarter GDP forecast fell another 0.2pp to 1.5%, with the downward revisions concentrated in consumption and business equipment spending. Later on the August vehicle sales data surprised on the upside with reading at 16.97m (vs. 16.80m expected).
To the day ahead now, which this morning includes July new factory orders in Germany and August new car registrations for the UK. In the US this afternoon it’s a busy session for data. We’ve got the August ADP employment report, final Q2 nonfarm productivity and unit labour costs revisions, jobless claims, the final August PMI revisions, July factory orders and final capital and durable goods revisions, and last but by no means least the August ISM non-manufacturing print. If that wasn’t enough then we’re also due to hear from the ECB’s Guindos at two separate events this morning and the BoE’s Tenreyro.
via ZeroHedge News https://ift.tt/2ZJCPNm Tyler Durden
One day after his brother suffered a string of humiliating parliamentary defeats at the hands of a ‘rebel alliance’ of (now-former) Tory MPs and the Labour-led opposition, Jo Johnson said he’s quitting politics, signing off with what the Financial Times described as a “thinly veiled” attack on his brother’s leadership.
Johnson, who served as minister for universities in his brother’s cabinet and the MP for Orpington in Kent since 2010 said on Thursday that he wouldn’t run again during the next election.
But in the tweet announcing his plans, Johnson said that in recent weeks he’d been “torn between family loyalty and the national interest”, implying that he feels a ‘no-deal’ Brexit…isn’t in the national interest.
“It’s been an honour to represent Orpington for 9 years & to serve as a minister under three PMs.”
It’s been an honour to represent Orpington for 9 years & to serve as a minister under three PMs. In recent weeks I’ve been torn between family loyalty and the national interest – it’s an unresolvable tension & time for others to take on my roles as MP & Minister. #overandout
Of course, that Johnson opposed his brother’s hard-line strategy for the Brexit negotiations is hardly news. Jo Johnson previously resigned his post as the minister of state for transport back in November, citing his opposition to Theresa May’s withdrawal agreement. When May was PM, Johnson spoke openly about favoring a second Brexit referendum.
Happier times…
Now, the pro-remain Tory is giving his brother the same treatment.
During an interview from 2013, Boris Johnson was asked if he and Jo were “like” the Milibands, whose infamous rift captivated the British political establishment when – in the aftermath of his brother’s humiliating defeat at the hands of David Cameron – David Miliband did a round of interviews criticizing his little brother. Johnson said only “socialists” could “shaft” a family member like that.
Days after slamming the Detroit automaker for moving jobs to China while shrinking its US workforce, President Trump will meet with GM CEO Mary Barra in the Oval Office on Thursday, Reuters reported.
The meeting comes at a critical time: The White House is scrambling to convince GM and other automakers not to sign on to an agreement with the State of California to impose stricter fuel efficiency standards on their cars.
But that’s not the only issue that will be discussed.
According to Reuters, the agenda for the meeting will include the US-China trade conflict, ongoing contract talks between GM and its union employees and revising vehicle fuel efficiency standards. The White House confirmed Trump would meet with Barra at 1:45 p.m. ET in the Oval Office. GM declined to comment on the meetings.
Barra, of course, commands a massive blue-collar workforce spread across the Midwest, including tens of thousands of workers in critical swing states like Michigan and Ohio. She’s in the middle of contentious negotiations with UAW workers (of which the company employs some 46,000) over a new contract, and UAW leaders have threatened to strike. Trump definitely wants to keep those workers happy so they’ll have a reason to back him in 2020.
Trump also bashed GM, once “the Giant of Detroit”, for moving “major plants to China, BEFORE I CAME INTO OFFICE.”
General Motors, which was once the Giant of Detroit, is now one of the smallest auto manufacturers there. They moved major plants to China, BEFORE I CAME INTO OFFICE. This was done despite the saving help given them by the USA. Now they should start moving back to America again?
The president has sought to portray himself as a friend to American blue-collar workers, and union workers in Detroit are part of a key constituency for him that’s stretched across several swing states in the midwest, including Michigan and Ohio. Previously, Trump attacked GM for moving production to Mexico while closing plants in Michigan, Ohio and Maryland. The president has threatened to end subsidies to GM, and in June his administration threatened to end subsidies for the automaker, while rejecting a request made in June to waive tariffs on Buick Envisions made in China.
GM has repeatedly insisted that its China operations aren’t a threat to US jobs.
Back in July, several of the world’s biggest automakers signed a deal with the state of California to implement more strict fuel economy standards. The White House has vehemently opposed this deal, and have been begging GM not to join the agreement.
Trump even tweeted about the deal a few weeks ago, accusing the signatories of “rolling over” by agreeing to charge consumers more for a car that isn’t as “safe or good.”
The Legendary Henry Ford and Alfred P. Sloan, the Founders of Ford Motor Company and General Motors, are “rolling over” at the weakness of current car company executives willing to spend more money on a car that is not as safe or good, and cost $3,000 more to consumers. Crazy!
The verdict is in: Hong Kong chief executive Carrie Lam’s attempt to pacify furious pro-democracy protesters by fully withdrawing the extradition bill that inspired the at-times-violent protests hasn’t worked. Protesters took to the streets Wednesday night (local time) shortly after Lam withdrew the bill, and more rallies are scheduled for this weekend, including another sit-in at Hong Kong International Airport, which – if the recent past is any guide – will likely turn violent.
An editorial in the Communist Party-controlled China Daily (via Reuters) warned that protesters have “no excuse” to continue the violent rallies after the “olive branch” from Beijing. And adding to the confusion surrounding the situation, the home of media tycoon Jimmy Lai was attacked early Thursday by two masked men who hurled firebombs before speeding off on a motorbike. Fortunately, nobody was hurt.
Lai’s security guards responded by quickly putting out the fire, Bloomberg reported, before reporting the incident to police. Though it’s not clear who orchestrated and ordered the attack, it’s certainly possible that the incident was intended as a warning for Lai to keep quiet.
Lai’s publications, which include the Apple Daily newspapers, have drawn the ire of senior officials in Beijing over their overt stance in support of the protesters. Lai has been denounced as a traitor by the Chinese state media, and it’s certainly possible that the attack was intended as an act of intimidation.
It’s also possible that government-aligned thugs staged the attack as a “false flag”, and intends to blame protesters. Moreover, protesters may have staged the attack with the intention of blaming pro-government thugs.
Whatever happened, we imagine more details, and possible some arrests, will be forthcoming.
Two masked men threw firebombs at the gate of Lai’s home at around 1 a.m. local time Thursday before leaving, Cable TV news reported people at the scene as saying, adding Lai’s security guard put out the fire and called police.
Police put out a statement concerning a firebomb incident but didn’t mention whose residence was attacked. Police said they received a report from a security guard at the site, saying that the suspects had thrown what are believed to be petrol bombs before fleeing by motorcycle.
Lai, whose publications such as the Apple Daily newspapers have championed Hong Kong’s three-month-old democracy movement, has been labeled a traitor by Chinese state media over the months-long protests in the Asian financial center.
Apple Daily has been sending photographers to the front lines of the protests, even as violence has escalated over the past month, often broadcasting live online the skirmishes between protesters and police.
Meanwhile, on Thursday, Lam said during a press conference that Beijing “understands, respects and supports” her government’s decision to pull the extradition bill in an effort to help her city “move forward” from months of unrest. Lam dodged questions about why it took her so long to pull the bill, saying it’s “not exactly correct” to describe her decision as “a change of mind.”
“Throughout the whole process, the Central People’s Government took the position that they understood why we have to do it. They respect my view, and they support me all the way,” said Lam, according to Reuters.
Protesters have insisted that the government must meet all five of their demands. The four others are: retraction of the word “riot” to describe protests, release of all 1,100+ demonstrators who have been arrested, an independent inquiry into perceived police brutality and the right for Hong Kong people to choose their own leaders.
For what it’s worth, Lam announced other measures, including opening a “platform for dialogue” to address young peoples’ deep-rooted concerns about social mobility. But demonstrators insist that this is too little, too late.
via ZeroHedge News https://ift.tt/2NQllwp Tyler Durden
