Tag: finance

Authored by Mike Krieger via Liberty Blitzkrieg blog,

Just when you thought air travel couldn’t get any more invasive, authoritarian and downright miserable, the Department of Homeland Security and two U.S. carriers are determined to prove you wrong.

Yesterday, Harrison Rudolph, a law fellow at the Center on Privacy & Technology at Georgetown Law, wrote a very troubling article at Slate titled, DHS Is Starting to Scan Americans’ Faces Before They Get on International Flights. Here’s some of what we learned:

Decades ago, Congress mandated that federal authorities keep track of foreign nationals as they enter and leave the United States. If the government could record when every visitor stepped on and off of U.S. soil, so the thinking went, it could easily see whether a foreign national had overstayed a visa.

 

But in June of last year, without congressional authorization, and without consulting the public, the Department of Homeland Security started scanning the faces of Americans leaving the country, too.

 

You may have heard about new JetBlue or Delta programs that let passengers board their flights by submitting to a face recognition scan. Few realize, however, that these systems are actually the first phase of DHS’s “Biometric Exit” program.

 

For certain international flights from Atlanta and New York, DHS has partnered with Delta to bring mandatory face recognition scans to the boarding gate. The Delta system checks a passenger is supposed to be on the plane by comparing her face, captured by a kiosk at the boarding gate, to passenger manifest photos from State Department databases. It also checks passengers’ citizenship or immigration status. Meanwhile, in Boston, DHS has partnered with JetBlue to roll out a voluntary face recognition system for travelers flying to Aruba. In JetBlue’s case, you can actually get your face scanned instead of using a physical ticket.

 

While these systems differ in details, they have two things in common. First, they are laying the groundwork for a much broader, mandatory deployment of Biometric Exit across the country. Second, they scan the faces of everyone—including American citizens.

 

Treating U.S. citizens like foreign nationals contradicts years of congressional mandates. DHS has never consulted the American public about whether Americans should be subject to face recognition. That’s because Congress has never given Homeland Security permission to do it in the first place. Congress has passed Biometric Exit bills at least nine times. In each, it has been clear: This is a program meant for foreign nationals. In fact, when President Trump issued an executive order in January on Biometric Exit, it was actually reissued to clarify that it didn’t apply to American citizens.

 

Behind the scenes, DHS is already handling your face recognition photo in ways many travelers might find alarming. For instance, after JetBlue scans your face, your photo is temporarily stored in DHS’s threat modeling ecosystem. What is it doing there? While there is no indication right now that DHS is, for example, comparing your face against a hotlist of known or suspected terrorists, it’s easy to imagine DHS pulling the trigger. People with foreign-sounding names have already struggled for years with false matches on the No Fly List. Will people with “foreign-looking” faces encounter the same discrimination?

 

And this may only be the beginning. According to U.S. Customs and Border Protection’s John Wagner, Homeland Security is in internal negotiations to bring face recognition to the TSA security checkpoint.

 

What might mission creep look like? One possible scenario involves DHS deciding to search your face against state and local law enforcement databases. Would you be comfortable with your face being compared to the faces of wanted criminals simply because you flew home to see your parents? Or maybe DHS could decide to share your face with the FBI. That could mean your face being compared with unknown suspects in security camera footage. Imagine being investigated for a crime you didn’t commit because, while passing through the airport, an algorithm matched your face to a suspect in a grainy surveillance video.

This is absolutely absurd.

Meanwhile, here’s Delta’s announcement of the facial-recognition test. They write it as if customers will be excited about this Orwellian surveillance.

Delta customers departing Hartsfield-Jackson Atlanta airport and New York-JFK for international destinations this summer will be part of a test that captures customers’ biometrics upon exit of the United States at the same time they self-scan their boarding pass. Delta is the first airline Customs and Border Protection has partnered with to test new biometric exit immigration procedure and technology designed to give CBP an enhanced ability to record when visitors depart the U.S.

 

Delta’s tests, powered by biometric identification and management providers Vision-Box at JFK (pictured) and NEC Corporation of America at ATL, confirms passenger identity using advanced facial recognition technology and Delta ticketing information in a single, automated, reliable and highly secure solution. Upon successful screening at JFK, the eGate will open for individual customers to pass into the boarding area. In Atlanta, a different, self-contained unit will capture and verify customer’s identity before the customer continues on to boarding. All customer data is securely managed by CBP.

 

“Delta is always willing to partner with the CBP as it continues testing new technologies to improve its processes,” said Gil West, Delta’s Chief Operating Officer. “Its spirit of innovation aligns with Delta’s as we continue pioneering our own biometric customer experience solutions to enhance the airport travel experience for customers while giving employees the ability to focus on higher-touch customer needs.”

 

Delta’s JFK test launched June 12 at gate B24, while customers will start experiencing the one-step process in ATL at gates E10 and E12 later this summer. The Atlanta pilot will build on a year-long collaboration between Delta, NEC and CBP that has been testing facial recognition and boarding technology for exit screening on ATL gates F6 and F9.

 

“CBP has been working with our stakeholders to build a simplified, but secure travel process that not only meets the biometric exit mandate, but also aligns with CBP’s and the travel industry’s modernization efforts,” said John Wagner, Deputy Executive Assistant Commissioner, Office of Field Operations, CBP. “We are happy to be working with partners, like Delta, to expand the use of facial biometric technology to create an innovative, more efficient travel experience for passengers.”

 

Technology providers Vision-Box and NEC added:

 

“Vision-Box is excited to partner with Delta to provide an innovative self-boarding e-Gate system that combines airline boarding and biometric exit capture capabilities in a single process,” said Miguel Leitmann, Vision-Box CEO. “Passenger experience, high biometric accuracy and personal data protection are among the key metrics the pilot is addressing in order to establish a foundation to scale up to other airports.”

 

NEC Corporate of America Senior Vice President Raffie Beroukhim said, “Utilization of biometrics is perhaps the only means of balancing increased safety and security with passenger convenience. As a leading provider of such technologies, NEC is proud of the partnership with Delta and CBP in Atlanta, the progress made to date, and further potential in improving both safety and passenger convenience.”

If you fly Delta, you may want to make your opinions on this issue crystal clear.

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One week after the second biggest weekly inflow to Wall Street on record, the “risk on” rotation ended abruptly in the ensuing five days, when as Bank of America writes overnight, it observed “Inflows to structural “deflation”, outflows from cyclical “inflation”; with oil the “poster child” for this trend.”

Half a year after central bankers around the globe rejoiced that the Trump victory may finally spur the long-delayed period of global reflation, that hope is now dead and buried (even as the Fed keeps hiking into some imaginary inflation wave) which BofA’s Michael Hartnett observes not only in asset prices, but also in fund flows.

As the BofA strategist writes in a note aptly titled “Bubble, bubble, oil & trouble”, the big flow message “is structural “deflation” dominating cyclical “inflation” (oil price is the “poster child” for victory of deflation): outflows from TIPS; first outflows from bank loans in 32 weeks; outflows from US value funds in 8 of past the 9 weeks; 1st inflows to REITS in 11 weeks; biggest inflows to utilities in 51 weeks.“

More importantly the tsunami of recent inflows, mostly into US equities, appears to finally be slowing: following sizable inflows to equities & bonds last week ($33.5bn in aggregate), a week of modest flows: $5.0bn into bonds, $0.5bn into equities, $0.8bn outflows from gold. Additionally, after the recent “tech wreck”, flows show confirm that contrarians – or simply stopped out algos – have flirted with sector rotation as inflows to energy ($0.4bn) were offset by outflows from tech ($0.2bn) & growth funds ($2.1bn);

Looking at BofA’s client base, Harnett notes that private clients were also sellers of tech past 4 weeks; and adds that despite the 20% YTD decline in oil price, energy funds ($2.8bn) and MLPs ($2.6bn) see inflows in 2017.

As we have extensively discussed, institutional bullishness remains restrained by the structural shift from active to passive courtesy of $3.1tn inflows to passive bond & equity funds vs. $1.3tn outflows from active bond & equity funds (since 2007 – Chart 2); Hartnett says that the “shift is deflationary for both active & passive managers.”

Those who claim that there is no bubble may find some enjoyment in the next observation by Hartnett: “you’ll know it’s the “big top” when Millennials start buying (new investors a classic late-cycle signal); recent survey by AMG shows millennials have just 30% in equities versus 46% for older age groups.”

And while Hartnett makes another case for the lack of irrational exuberance…

Thus far, limited irrational exuberance in flows/positioning; and important to note investor “greed” is much tougher to end than “fear”… Nasdaq fell >10% on 6 separate occasions in 12 months leading to bubble peak in 2000 … and greed easier to pop if bond yields rising (Treasuries rose 200bps in ’99, JGB yields rose 250bps in ’89).

… he concedes that there are plenty of signs of Wall St excess in 2017:

• S&P 500 at 2620 means US stock market cap as % of nominal GDP will hit an all-time high;
• In 2017, global issuance of High Yield bonds is annualizing $499bn, a record high;
• Argentina, a country that has spent 33% of the past 200 years in default and has defaulted 3 times in the past 23 years, has just announced a 100-year bond offering;
• Facebook’s market cap now exceeds the market cap of MSCI India (FB has 18,800 employees, India has 1,280,000,000 people);
• Inflows to tech funds are rising in 2017 at their fastest annualized rate (21% of AUM) in 15 years;
• In a classic late-cycle signal, global investors are long the Eurozone (June FMS shows 3rd largest overweight on record);
• And finally, the MOVE index of US Treasury market volatility is almost at an all-time low; S&P realized vol at 20-year lows.

What does it all mean from the man who coined the “Icarus Trade” concept (and which will soon be replaced with the “Humpty Dumpty market: it means that we are now just months from the “big top”:

“Greed/Icarus take time to kill but peak liquidity (Fed now wants vol) & peak profits (chart) = big top in autumn“

Hartnett’s conclusion is, as usual, both enlightening and chilling: 

Central banks, the reason behind high asset prices and low vol, are now in desperate dilemma: politically unacceptable for bubble on Wall St, but central banks will be tightening into deflation; inflection point for volatility is upon us and we recommend investors buy volatility; we stick with view the that Icarus followed by Humpty-Dumpty when peak liquidity & peak profits (Chart 1) combine in the autumn; Fed tightening in 2017 could easily be followed by easing in 2018, in our view.

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As US (and global) economic data has disappointed at a rate not seen since Bernanke unleashed Operation Twist and QE3, so traders are shrugging off declining earnings expectations and weak macro data in favor of the continued belief that The Fed (or ECB or BoJ or BoE or PBOC or SNB) has their back. So, as former fund manager Richard Breslow notes below, it appears the 'data' that everyone is 'dependent' upon is very much in the eye of the beholder…

Via Bloomberg,

We’re all data-dependent. It’s not just the central banks that hide behind that aphorism. Traders and investors operate that way too. It’s just that data is a very poorly defined word and concept. The dictionary speaks of facts and specifics. But in reality it includes, biases, positions and a whole lot of other subjective factors. You and I can, quite properly, look at the same data and react differently.

So while it’s a universally held concept that is proudly used to denote dispassionate rationality, it’s in fact a meaningless one.

The European composite PMIs that were released this morning were all misses. Good numbers, but misses nevertheless. But the euro has been up versus the dollar all day. Why? Because while it’s also trading near the bottom of its recent range, people are, for the moment, emotionally invested in desperately hoping the euro will go up and the dollar down.

European politics is now good and U.S. politics bad. Emmanuel is even better looking than Jared. There must be fire behind the smoke of the Treasury flatteners and the ECB’s PSPP is what a healthy, growing economy just does. Whatever it is doesn’t matter, just look at the data. Well, your data.

I’ll be the first one to admit that numbers have both probative and confirmation bias effects. It’s also why a picture really is worth a thousand words. Technicals help us own up to reality. Or at least force us to explain ourselves.

The 10-year Treasury yield hasn’t moved in over a week and has had a two basis-point range so far today.

Yet, when it was at 2.165% I read that if it breaks 2.23% it could really motor. And at 2.145%, it was setting up for a retest of year-to-date lows. Same data, not meaningful, but sang to different people in widely different and visceral ways. Of course the response to both should be, “sit down and be quiet.”

So what’s my “data driven” bias on a, so far, quiet Friday? I’m looking at the bounce in gold as my sentiment indicator of what risk wants to do today.

And I would trade accordingly. But, psst, I still like the dollar and hate bonds, regardless of your data.

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A day after US student Otto Warmbier was laid to rest at a funeral service in his home town of Cincinnati on Thursday, the North Korean foreign ministry released a statement to local state-controlled television saying his death was a mystery and dismissing accusations that he had died because he was tortured and beaten during his captivity, according to Reuters.

Instead, the North’s foreign ministry blamed the Obama administration for Warmbier's death, which never formally requested Warmbier’s release, claiming Warmbier was “a victim of the policy of strategic patience.”

"The fact that Warmbier died suddenly in less than a week just after his return to the U.S. in his normal state of health indicators is a mystery to us as well," the foreign ministry was quoted by KCNA as saying.

Warmbier, 22, was arrested in the reclusive country while visiting as a tourist. He was sentenced to 15 years of hard labor for trying to steal an item bearing a propaganda slogan from his hotel, North Korea state media said. He was brought back to the United States last week with brain damage, in what doctors described as state of "unresponsive wakefulness", and died on Monday. US doctors who had traveled to the North last week to evacuate him had recognized that the former student had been provided with medical treatment, according to a ministry official.

"Although Warmbier was a criminal who committed a hostile act against the DPRK, we accepted the repeated requests of the present US administration and, in consideration of his bad health, sent him back home on humanitarian grounds," the spokesman said.

The exact cause of Warmbier's death remains unclear. Officials at the University of Cincinnati Medical Center, where he was treated after his return from the North, declined to provide details, and his family asked the Hamilton County Coroner on Tuesday not to perform an autopsy.

In a written statement, the foreign ministry claimed the US was spreading lies about North Korea’s role in Warmbier’s death.

“The smear campaign against DPRK staged in the US compels us to make firm determination that humanitarianism and benevolence for the enemy are a taboo and we should further sharpen the blade of law.”

“The US should ponder over the consequences to be entailed from its reckless and rash act.”

#DPRK foreign ministry says Otto Warmbier was a criminal and it’s America’s fault he died. http://pic.twitter.com/065SGpmaHs

— Steve Herman (@W7VOA) June 23, 2017

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• One year after Brexit: Forget euro zone breakup, sterling now deemed riskier (Reuters)
• Senate Holdouts Seek Upper Hand in Perilous Health Bill Talks (BBG)
• Senate Bill Poses Risks to Health-Care Companies (WSJ)
• Trump’s Tape Ruse Risks Fresh Legal Jeopardy in Russia Probe (BBG)
• Arab states demand Qatar closes Jazeera, cuts back ties to Iran (Reuters)
• Qatar Seen Rejecting List of Severe Demands to End Gulf Crisis (BBG)
• Turkey rejects call to shut military base in Qatar (Reuters)
• From Music to Maps, How Apple’s iPhone Changed Business (WSJ)
• How Killing Obamacare Might Save Obamacare, For a While (BBG)
• Baghdadi death near 100 percent certain: Interfax quotes Russian senator (Reuters)
• Japanese warship takes Asian guests on cruise in defiance of China (Reuters)
• FBI Director Nominee’s Client List Could Hinder Oversight of Investigations (WSJ)
• Buffett’s Home Capital Bet Backs Turbulent Canada Housing Market (BBG)
• China’s authorities tighten noose around online video content (Reuters)
• Deadly London apartment blaze began in Hotpoint fridge freezer, police say (Reuters)
• Trump’s Steel Tariff Threat Faces Resistance From Lawmakers (WSJ)
• ‘Fair’ or ‘vague’? EU sizes up May’s Brexit rights offer (Reuters)
• Canada Ponders an Unusual Drug Problem: a Shortage of Marijuana (BBG)
• North Korea tests rocket engine, possibly for ICBM: U.S. officials (Reuters)
• Venezuelan soldier shoots protester dead in airbase attack, minister says (Reuters)

Overnight Media Digest

WSJ

– Qatar Airways said it aims to buy a significant stake in American Airlines Group Inc – a brash attempt by the fast-growing Middle East carrier to push into the U.S. amid political upheaval back home. on.wsj.com/2s1XafN

– Mylan NV’s board nominees were elected in full at the pharmaceutical company’s annual meeting Thursday despite pressure from a group of institutional investors unhappy over high executive pay. on.wsj.com/2s1OoyH

– Tesla Inc said it is exploring with government officials in Shanghai the possibility of opening a facility to build electric vehicles for the Chinese market. on.wsj.com/2s1Xn2I

– The U.S. Department of Agriculture suspended imports of fresh beef from Brazil, citing recurring safety concerns. The USDA’s move came after Brazil earlier Thursday suspended beef exports from five slaughterhouses to the U.S. on.wsj.com/2s1WZRN

– Samsung Electronics Co is in late-stage discussions to invest about $300 million to expand its U.S. production facilities at a factory soon to be vacated by Caterpillar Inc according to people familiar with the matter, with an announcement expected as early as next week. on.wsj.com/2s1XoUj

FT

Prime Minister Theresa May offered to allow EU citizens who had lived in Britain for five years to continue staying after Brexit, as she tried to regain the initiative on exit negotiations at a European summit in Brussels on Thursday.

The UK’s deal with EDF SA to build the Hinkley Point C nuclear plant could cost British electricity consumers 30 billion pounds ($38.03 billion) above market prices, the National Audit Office said in a report.

Bank of England policymaker Kristin Forbes, whose three-year term on the bank’s Monetary Policy Committee ends next week, said on Thursday that senior staff were too busy to take monetary policy decisions sufficiently seriously and worried too much about bad press and their public profiles.

NYT

– Tesla Inc is in discussions to establish a factory in Shanghai, its first in China, a move that could bolster its efforts in one of its major markets even as it further lifts China’s position as a builder of electric cars. nyti.ms/2swu9wo

– The largest U.S. banks breezed through the first phase of their annual Federal Reserve stress tests, demonstrating that they have enough capital to withstand the type of financial shock that nearly ruined the industry and the world economy in 2008. nyti.ms/2sx12ZR

– Berkshire Hathaway Inc, run by Warren Buffett, agreed to buy a stake in Home Capital Group Inc, which has struggled amid accusations of fraud. nyti.ms/2swtnzu

– Akbar al-Baker, the chief executive of Qatar Airways, recently approached his counterpart at American Airlines Group Inc, a bitter rival, with some news: His state-owned company wanted to buy a 10 percent stake in American. nyti.ms/2sx3kZa

– Martin Shkreli, former hedge fund manager, “pharma bro” and self-styled bad boy, sat in federal court for a hearing before his fraud trial begins next week. nyti.ms/2swFb4B

Britain

The Times

* A state-backed Chinese operator is among the companies shortlisted to run the new HS2 railway, the first bidder for a rail franchise from mainland China. bit.ly/2rXiuYL

* Central banking may have become too political and policymakers too overstretched to manage interest rates properly, a leading Bank of England ratesetter, Kristin Forbes, suggested yesterday. bit.ly/2rWrxcJ

The Guardian

* Britain’s vote to leave the EU has squeezed living standards, hit consumer spending and dampened the country’s growth prospects, according to an analysis by Guardian of economic news over the year since the referendum shows. bit.ly/2rWSg8R

* The price of British strawberries could rise by more than a third if the UK cannot ensure access to European workers after Brexit, The National Farmers’ Union said. bit.ly/2rX92EJ

The Telegraph

* Peter Hambro has lost his bid to stop a major Russian investor from filleting the board of Petropavlovsk, the gold mining company he co-founded more than 20 years ago. bit.ly/2rXhHHv

* Fears of a clampdown on China’s swashbuckling corporate empire builders are mounting after authorities in Beijing began gathering financial intelligence on big-spending conglomerates. bit.ly/2rWDwqt

Sky News

* The new chief executive of GlaxoSmithKline, Emma Walmsley, is pursuing a sale of MaxiNutrition, which was bought in 2010 for 162 million pounds ($205.38 million) , according to Sky News. bit.ly/2rWRW9Y

* Malcolm Barr, who works for JP Morgan, one of the world’s largest banking institutions, said of the Brexit negotiations: “I’m not convinced that (the UK is) really very well prepared at all, to be perfectly blunt.” bit.ly/2rX2VR0

The Independent

* The reckless rise of artificial intelligence is going to be much more disruptive for the London technology scene in the longer run than Britain’s departure from the EU, according to musician, will.i.am. ind.pn/2rX1KB1

* McDonald’s has launched its long-awaited home delivery trial in the UK after teaming up with Uber’s takeaway service across parts of London, Nottingham and Leeds. ind.pn/2rWHRtZ

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A little more than a week after launching the strike that reportedly killed ISIS leader Abu Bakr Al Baghdadi, Russian navy ships and a submarine launched six cruise missiles at ISIS targets in Syria’s Hama province, destroying an ISIS command center and ammunition depot, according to Russia Today. The missiles were launched from the eastern Mediterranean by Russian Navy frigates the Admiral Essen and the Admiral Grigorovich, the Defense Ministry said.

The cruise missile strike follows a similar attack by Russian forces on May 31, when a nearly identical arrangement of Russian warships and a submarine also struck ISIS targets near Palmyra.

And, like three weeks ago, today the missiles were launched from Russian Navy frigates: the Admiral Essen and the Admiral Grigorovich, as well as a submarine, the Krasnodar, from the eastern Mediterranean, the Defense Ministry said in a Friday statement. The submarine fired its missiles while submerged.

The strikes targeted Islamic State command and control centers, as well as ammunition depots in the Syrian province of Hama, and hit a large ammunition depot near the town of Aqerbat, which detonated after being hit. Russia had warned Israel and Turkey in advance about the strikes via a military-to-military hotline.

But, apparently, not the US.

The strike was launched after a large Islamic State convoy, comprising 39 vehicles and 120 militants, was spotted outside the city of Raqqa.

“The terrorist convoy of 39 pickup trucks was detected and destroyed by the air force on its way to Palmyra,” a military source told RT. The trucks had been equipped with large-caliber machine guns.

Over the past week, Islamic State militants made numerous attempts to escape the besieged city of Raqqa and head towards Palmyra using a “southern corridor,” RT reported, citing sources in the Russian military. The terrorists were moving forces through rugged terrain to the Hama province during the night and setting up command posts and ammunition depots in large buildings there, it added.

The movements of IS militants in the area are being monitored by Russian surveillance, the military said, adding that any potential targets detected will be hit with precision strikes by the Air Force. As noted above, on the last day of May the same warships fired four cruise missiles that hit combat vehicles and militants outside the Syrian city of Palmyra. Back in August of last year, the Russian Black Sea Fleet also fired Kalibr cruise missiles over unpopulated areas to destroy a command post and munitions production site of another terrorist group operating in Syria, the Al-Nusra Front.

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By ZeroPointNow, originally published at iBankCoin

Two days after a confused US State Department formally inquired about what is going on between Arab States and Qatar, the countries of Egypt, Saudi Arabia, Baahrain, and the UAE sent a list of 13 demands to the tiny Gulf nation to be met within 10 days in order to lift their total blockade of the country.

Among them – reducing diplomatic relations with Iran, shutting down broadcaster Al Jazeera (and affiliates), and immediately cease working to open a Turkish military base announced in May of 2016 and halt military co-operation with Ankara. Also interesting is the demand that Qatar give up their intel on terrorist groups they have supported and “provide all databases related to oppositionists…” (Scroll down for full list of demands)

This formal list comes on the heels of a June 6th rumor that Arab States issued a list of 10 demands to be fulfilled within 24 hours, however Qatar said they never received them according to Al Jazeera journalists who are now dusting off their resumes.

The list of demands encompasses other accusations that have already been denied by Qatari officials, raising the prospect of deadlock in the worst crisis to hit the Gulf in decades. Qatar’s foreign minister previously said any demand to close Al Jazeera would be rejected, describing the channel as an “internal affair” linked to Qatar’s sovereignty that should not be the subject of external interference. Arab states have long complained that Al Jazeera’s Arabic language channel is a propaganda tool that stokes tensions in the region. Al Jazeera insists it has editorial independence

The list specifies that Doha sever ties to radical jihadist groups such as Isis, al-Qaeda and its branch in Syria, as well as Lebanon’s Shia group Hizbollah. Qatar, the world’s top exporter of liquefied natural gas, admits that it supports Islamist groups, but denies backing or financing terrorism.

“These requirements must be met within 10 days from the date of delivery or they will be considered void,” the Arab states said in their list of demands. Their document added that compliance would be heavily monitored — once a month for the first year, every three months the second year and once a year for 10 years after that.

Embargo

On June 5th, news broke that Bahrain, the UAE, Saudi Arabia, and Egypt had cut off diplomatic ties with Qatar over accusations of ‘spreading chaos’ by ‘funding terrorism and supporting Iran’ – shutting down all land, sea, and air crossings with the tiny energy-rich nation that has the highest per capita income in the world. Qatari visitors and residents were given two weeks to leave – while diplomats had just 48 hours.

While Qatar has been friendly with Iran for years, the prelude to the embargo began after a broadcast which showed Qatari Emir Tamim bin Hamad Al Thani speaking with no audio – and scrolling text at the bottom of the screen which stated his support for Iran and terrorist groups. Qatar claims the broadcast was ‘hacked.’

After the broadcast, Saudi Arabia and the UAE blocked Qatari news organization Al-Jazeera.

Amid Qatar’s denials, Saudi-owned satellite television networks immediately began airing repeated stories about the disputed comments. By early Wednesday morning, those living in the UAE and subscribers to local cable providers couldn’t access the channels of Al-Jazeera, the pan-Arab satellite broadcaster based in the Qatari capital, Doha.

 

Attempts to reach its websites brought up a warning from the UAE’s Telecommunications Regulatory Authority saying the site “contains content that is prohibited.”

 

In Saudi Arabia, internet users also found Al-Jazeera websites blocked with a warning from the kingdom’s Culture and Information Ministry.

–WaPo

Full List of demands (translated by @hxhassan)

1. Qatar must reduce diplomatic representation with Iran
2. Qatar must immoderately shut down the Turkish military base that is being established
3. Qatar must announce severance of ties with terrorist, ideological & sectarian orgs: MB, ISIS, AQ, HTS, Hizbollah
4. Qatar must cease any funding activities to extremist and terrorist individuals
5. Qatar must hand over all designated terrorists
6. Qatar must shut down Al Jazeera and all affiliated channels
7. Qatar must stop interference in these countries’ domestic andforeign affairs; stop naturalisation of their citizens; extradite such citizens
8. Qatar must provide reparations to these countries for any opportunity costs incurred over the past few years because of Qatari policies. (How do they even begin to comply with this in 10 days?)
9. Qatar must become in sync with its Gulf and Arab neighbourhood on all levels, and to activate Riyadh Agreement 2013/2014
10. Qatar must provide all databases related to oppositionists that it provided support to & clarify what help was provided.
11. Qatar must all media outlets backed by it directly or indirectly, like Arabi21, Rasd, New Arab, Middle East Eye, Mkamlin, Sharq etc
12. These demands must be agreed within 10 days, otherwise they would be invalidated.
13. Agreement will involve clear goals and mechanism, monthly reports in the first year, every three months the next & annually for 10 years

If these demands are not met, and they likely won’t be – it may only be a matter of time before Qatar catches a case of regime change now that the Saudi alliance will have a “pretext” demonstrating Qatari non-compliance with a “goodwill” offer.

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Welcome to the one year anniversary of the Brexit vote. Welcome also to the annual Russell rebalance, traditionally one of the busiest trading days of the year: according to Bloomberg, last year’s rebalance helped propel a near record turnover of over 15 billion shares, as a result of the $8.5 trillion in stocks linked to the various Russell indices. In fact, in four of the last five years, reconstitution day ranked in the 10 busiest trading sessions.

Yet despite the traditional annual surge in volume, the rebal rarely leads to spikes in volatility or major market moves: since 2008, the S&P 500 has moved more than 0.5% on the day of rebalancing only twice, in 2011 and 2016. According to Jefferies’ Steven DeSanctis, the reason why the transition at the end of the day on June 23 rarely leads to turmoil is because investors are prepared for the changes, . For the broader Russell 3000 index, DeSanctis sees 196 additions this year compared with 183 in 2016.

“Russell rebalancing gives the small-cap market a bit more liquidity and trading volume, and managers could take advantage of the better volume,” DeSanctis said. “We could also see some swings in performance from a handful of individual names, and that too can help active managers.”

A boost in volume is what this somnolent market urgently needs, with little of note taking place in the overnight trading session as European stocks drop -0.3%, set to end the week lower. While Asian stocks rose, U.S. futures slide fractionally into the red moments ago after Retuers quoted a souce saying that the “scarcity of Bunds makes extending Qe difficult for the ECB and will be a factor for consideration when deciding whether to taper or extend existing program.”

And as another central bank hints that the Fed is not alone in its tapering intentions, a reminder that global stocks have never been higher. The two are probably linked, as Bank of America and many others have hinted recently.

Looking at regional markets, there was little of note in the Asian session which saw the MSCI Asia Pacific Index rise 0.2%. ASX 200 (+0.1%) and Nikkei 225 (+0.1%) traded relatively flat, with the former restricted by weakness in its largest-weighted financial sector. Shanghai Comp (-0.7%) and Hang Seng (+0.1 %) fared no better amid increased regulatory scrutiny with the CBRC probing loans to the large deal-making firms and after the PBoC refrained from open market operations due to current high liquidity levels. PBOC weakened the daily CNY fixing for fourth straight day;
skipping open market operations and draining another 50 billion yuan in
liquidity after the PBOC said liquidity levels are sufficient. Bank of Japan keeps bond purchases unchanged; Nikkei and yen little
changed.

European equities slipped, extending the longest run of weekly losses in a year as U.K.-listed stocks struggled on the anniversary of Britain’s vote to leave the European Union. The Stoxx Europe 600 index dropped for a third week, with food and beverage companies leading declines after Stifel Financial Corp. downgraded brewer Heineken NV’s stock. Shares in the U.K. were were set for a fourth day of losses, while the pound pared its weekly decline with Brexit negotiations under way.  The FTSE 100 Index was down 0.3 percent on Friday, heading for a 0.6 percent weekly decline.

The dollar is a tad softer and many benchmark sovereign yields are not far from seven-month lows after Bullard became on Thursday the fifth Fed speaker this week to urge rate hike patience; The pound rose 0.4 percent to $1.2734, paring drop this week to 0.4 percent. The euro rose 0.2 percent to $1.1169. The yen rose less than 0.1 percent to 111.27 per dollar.

Futures on the S&P 500 Index fell less than 0.1 percent. The underlying gauge fell less than 0.1 percent on Thursday.

In politics, UK PM May unveiled proposals for EU citizens at Brussels summit including a proposal that would allow 3 million EU citizens to stay in the UK Permanently. There were later comments German Chancellor Merkel who stated that UK PM May’s offer on EU citizens’ rights was a good start but many issues still need to be resolved, while Austrian Chancellor Kern stated UK PM May’s offer leaves a long, long way for negotiations, with many citizens’ concerns not covered.

WTI crude nears $43 after halting a three-day losing streak although it is poised for a fifth weekly decline after sinking into a bear market.  In China, Dalian iron ore modestly firmer. Gold rose 0.5 percent to $1,256.77 an ounce, for a third day of gains.

In rates, the yield on 10-year Treasuries rose one basis point to 2.16 percent. U.K. 10-year gilt yields rose two basis points to 1.04 percent, led by losses in shorter-dated securities as U.K. money markets push odds of a rate hike by the end of 2017 over sixty percent.

Economic data today includes new home sales and the Markit U.S. Services PMI.

Market Snapshot

• S&P 500 futures down less than 0.1% to 2,431.00
• STOXX Europe 600 down 0.4% to 387.01
• MXAP up 0.2% to 155.17
• MXAPJ up 0.2% to 504.96
• Nikkei up 0.1% to 20,132.67
• Topix up 0.06% to 1,611.34
• Hang Seng Index down 0.02% to 25,670.05
• Shanghai Composite up 0.3% to 3,157.87
• Sensex down 0.2% to 31,221.04
• Australia S&P/ASX 200 up 0.2% to 5,715.88
• Kospi up 0.4% to 2,378.60
• German 10Y yield rose 1.1 bps to 0.263%
• Euro up 0.3% to 1.1182 per US$
• Italian 10Y yield unchanged at 1.617%
• Spanish 10Y yield fell 0.2 bps to 1.384%
• Brent Futures up 0.6% to $45.51/bbl
• Gold spot up 0.5% to $1,256.56
• U.S. Dollar Index down 0.3% to 97.31

Top Overnight News

• Bullard says Fed’s current rate hike path unnecessarily aggressive: WSJ
• Fed’s stress test shows all 34 banks exceed minimum requirement
• Fed Tests Show Better Real Estate Credit Quality, Cards Stress
• Theresa May says 3 million EU citizens in the U.K. can stay after Brexit
• BOE Forbes: Lift-off of U.K. rates should not be delayed any longer
• China is willing to coordinate with U.S. on North Korean issue: Xinhua
• PBOC says Chinese banks confident about ample end-June liquidity
• Mexico rate pause could last through another Fed hike, Carstens says
• Senate Holdouts Seek Upper Hand in Perilous Health Bill Talks
• Obamacare Taxes Torched in Senate Bill, Drawing Democratic Ire
• Bed Bath & Beyond Falls After Comps Miss, Dragging Peers Lower
• Tokyo Exchange to Demote Toshiba to Second Section From Aug. 1

Looking at Asian equity markets, there was little activity amid quiet newsflow and after a subdued Wall St. close in which stocks posted a 3rd consecutive day of losses. ASX 200 (+0.1%) and Nikkei 225 (+0.1%) traded relatively flat, with the former restricted by weakness in its largest-weighted financial sector. Shanghai Comp (-0.7%) and Hang Seng (+0.1 %) fared no better amid increased regulatory scrutiny with the CBRC probing loans to the large deal-making firms and after the PBoC refrained from open market operations due to current high liquidity levels. 10yr JGBs edged gains in late trade, although
upside has only been minimal despite an indecisive risk tone and the BoJ in the market for JPY 880b1n in JGBs. PBoC refrained from open market operations for a net weekly drain of CNY 60bIn vs. CNY 410bIn injection last week.

Top Asian News

• Noble Group Lures Goldilocks as Major Holder as Bears Prowl
• China Webcasting Crackdown Seen Dragging on Weibo Stock: Roundup
• $100 Billion Chinese City in the Sea Is Hit by Capital Controls
• China Steel Scrap Exports Surge Amid Illegal Furnace Crackdown
• China Fines Russian Speed Trader $101 Million, Issues Jail Terms
• Saudi- Led Bloc Presents 13 Demands to End Qatar Crisis, AP Says
• Hong Kong Needs Close China Ties to Prosper, Next Leader Says
• Carlyle Co-CEO: Asia Valuations About 20% Lower Than U.S.
• ACCC Says Won’t Allow Tobacco Companies to Act Together
• China Says Trump Open to Cooperating on Silk Road Projects

In Europe, In equities, major EU bourses trade lower, albeit modestly so with the Eurostoxx 50 lower by just 0.3%. Sector performance downside is somewhat broad-based with some slight underperformance in energy names in what has been a tough week for oil prices. In terms of stock specifics, major moves are on the light side with IN (+2.1%) top of the FTSE 100 after a broker upgrade at Morgan Stanley.
In fixed income markets, it’s been a quiet end to the week with Bunds modestly lower and Gilts underperforming after gapping lower at the open as participants continue to try and gauge the future path of BoE policy and what kind of a deal PM May will walk away with from Brussels. Peripheral yields trade lower with yields softer by circa 1-2bps with Bonos leading the way.

Top European News

• Euro-Area Momentum Eases as Best Quarter in Over Six Years Ends
• Juncker Calls May’s Citizens-Rights Proposal ‘Not Sufficient’
• Ireland Raises 3 Billion Euros in Allied Irish Banks Sale
• Bank Risk Is in Demand as $113 Billion Fund Strikes ‘Big’ Deals
• ECB Demands Power Over Clearing as Brexit Talks Start: Chart
• Gilts Dip as BOE Hike Pricing Rises; Citigroup Recommend Fading
• ‘Everything Appears Bad’ for ITV, But Valuation Attractive: MS
• Lagardere, Solocal, SFR, Les Echos in Online Ad. Alliance

In currencies, The early FX flow was dominated by GBP buying as the market reacted to news that PM May was to unveil proposals that will allow 3 million EU citizens to remain in the UK. Such concessions augur well for the EU talks ahead, but a mixed response so far from leading figures, but a softer approach from the UK will benefit the Pound. Cable has rallied, but stalled into the 1.2740-60 zone. EUR/GBP remains offered neared the session lows, but this is down to EUR/USD pulling back again from the daily highs just in front of 1.1190, but modestly so as yet. EU PMIs are lower in the composite on weakness in the services component, but manufacturing exceeded expectations. The US PMIs due later today, and may have some impact on the USD which continues to range against the EUR, JPY and CHF as US Treasury yields meander inside near term ranges. USD/JPY support ahead of 111.00, having met with demand after the brief dip under here yesterday.

In commodities, widespread gains across the commodity spectrum today, and with focus on the Oil price rout, the near-term stabilisation in WTI circa USD43.00 may add some relief to the energy sector. Amid the volatility, the WTI/Brent spread widen briefly to around USD3.00, but this has since narrowed back to the uniform USD2.50 level as specs take a breather on Light Texas. There is still little prospect of a significant recovery as the sell-off is based largely on US production, and this shows no signs of slowing. Metals have had a healthy second half to the week as Copper has pushed higher with a little more verve through the USD2.60 mark. The gains today have been matched by Zinc and Nickel, the former up 8% from the early Jun lows. Gold is now edging higher to settle into a near term range circa USD1250-65, having based off the low USD1240’s and reacting to recent, but modest USD weakness.

Looking at the day ahead, we’ll also receive the flash PMIs along with new home sales for June. Away from the data a busy week for Fedspeak continues with Bullard (11.15am), Mester (12.40pm) and Powell (7.15pm 2;15) all scheduled to speak. It’s worth noting that Dudley will also speak this Sunday.

US event calendar

• 9:45am: Markit US Manufacturing PMI, est. 53, prior 52.7
  • Markit US Services PMI, est. 53.5, prior 53.6
  • Markit US Composite PMI, prior 53.6
• 10am: New Home Sales, est. 590,000, prior 569,000; New Home Sales MoM, est. 3.69%, prior -11.4%
• 11:15am: Fed’s Bullard Speaks about Monetary Policy in Nashville
• 12:40pm: Fed’s Mester Speaks in Cleveland
• 2:15pm: Fed’s Powell Speaks in Chicago on Central Clearing

* * *

DB’s Jim Reid concludes the overnight wrap

Today is a bit of a landmark day. Indeed it is exactly one year since the UK held the historic referendum vote on EU membership. Whether you think that has passed quickly or not probably depends on if you’re a Sterling FX trader, in which case it’s more than likely been a long year. It’s been an impressive rally for risk despite an outcome which has seen political Europe enter unknown territory. On that any hopes that the UK political situation would be resolved or at least stabilise essentially came to an end following the snap election earlier this month. The possibility of another election in the future hasn’t necessarily gone away either while the Conservatives and DUP parties are still to come to an agreement. What that means for Brexit talks is also still a bit of an unknown which is why there is a fair bit of focus on the two-day EU summit which kicked off yesterday. This is the first summit since the election for Theresa May and also coincides with Brexit negotiations having kicked off on Monday. Yesterday May proposed a “fair and serious” offer to guarantee the rights of EU citizens living in Britain, telling leaders of the EU that no EU citizens living in Britain lawfully at the time in which Britain leaves the EU would be asked to leave. The Austrian Chancellor was noted after the meeting saying that many of the details are still however left open so negotiations still have a long long way to go. Germany’s Merkel also reiterated this point. It’s worth noting that May is due to make a statement to Parliament on Monday afternoon.

The summit continues for a second day today so it’s worth keeping an eye on any further headlines which emerge from that. Also of note today are the global flash PMIs for June. These should provide an early indication of how the global economy has tracked into the end of Q2. The market consensus is for a very modest decline in the manufacturing reading for the Euro area (-0.2pts to 56.8) while the US is expected to show a slight improvement (+0.3pts to 53.0). This morning in Japan the manufacturing reading was revealed as declining 1.1pts in June to 52.0 and to the lowest since November last year.

Over in markets yesterday it had looked like US equities would finally snap back following two consecutive days of declines but markets seemingly ran out of steam in the final hour of trading with the S&P 500 (-0.05%) and Dow (-0.06%) both slipping to small losses. A decent rally for Biotech stocks (Nasdaq Biotech +1.30% and the highest in 18 months) helped after the long awaited US healthcare proposal for replacing Obamacare was issued and indicated an additional $50bn in spending over four years to stabilize insurance exchanges. However four Republican senators also immediately opposed the bill which threatens to derail the passage to clearing the Senate with Republicans only able to afford to lose two GOP votes.

In other markets yesterday Oil prices finally stabilized (WTI +0.49%) although still remain well down over the week. European equities were also little changed (Stoxx 600 +0.01%) after recovering into the close while sovereign bond markets were quiet with 10y Treasury and Bund yields finishing 1.6bps and 1.3bps lower, respectively. This morning in Asia markets have been fairly directionless. With Oil stabilizing for a second day (WTI just below $43/bbl) the Hang Seng (+0.28%), Kospi (+0.07%) and ASX (+0.03%) are a touch firmer and the Nikkei and Shanghai flat to very slightly lower. Elsewhere US equity index futures are +0.10% after the Fed Bank Stress Test results last night revealed that all 34 of the largest banks in the US had passed.

Moving on. Following a quiet week there was a reasonable amount of data out yesterday although none of which particularly moved the dial. In the US the Kansas City Fed’s manufacturing index in June jumped 3pts and more than expected to +11. The conference board’s leading indicator rose +0.3% mom which lifted the six-month annualised growth rate to a new high. Initial jobless claims were confirmed as edging up a modest 3k to 241k last week and finally the FHFA house price index rose +0.7% mom in April. Meanwhile in Europe the European Commission’s flash consumer confidence index for June rose 2pts to -1.3 and in doing so hit a fresh 16-year high. Confidence indicators in France also tracked higher while in the UK the CBI Industrial Trends survey revealed that total orders rose to 16 in June (from 9) and in fact hit their highest since 1988. The export gauge is also now at the highest reading in 22 years. Before we wrap up, there was a bit of Fedspeak to note yesterday too. Governor Powell spoke on bank regulation in front of the Banking Senate Committee and said “we should assess whether we can adjust regulation in common-sense ways that will simplify rules and reduce unnecessary regulatory burden without compromising safety and soundness”. Meanwhile the Fed’s Bullard (a non-voter) argued that the projected path of tightening is aggressive and also that the softness in inflation is more widespread than expected.

Looking at the day ahead now. This morning in Europe we’ll be kicking off with the aforementioned flash PMIs for June where the consensus is for a very modest decline in the composite PMI of the Euro area to 56.6. Away from that we’ll also get the final Q1 GDP revisions in France this morning. This afternoon in the US we’ll also receive the flash PMIs along with new home sales for June. Away from the data a busy week for Fedspeak continues with Bullard (4.15pm BST), Mester (5.40pm BST) and Powell (7.15pm BST) all scheduled to speak. It’s worth noting that Dudley will also speak this Sunday.

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Former Texas Congressman Ron Paul likes to joke that when he gets invited to speaking engagements in Washington, DC,  audiences typically don’t applaud. But at the Future of Freedom Foundation, Paul was right at home, delivering a speech entitled "Enemies: Foreign And Domestic" about how to apply the principles of non-interventionism in domestic and foreign policy.

He spoke about how his stint in Congress made him more skeptical of government and wary of the deep state’s capacity for maliciousness, beginning with his early days in Washington.  

“When I went to Washington, I thought I had a pretty good understanding of the Constitution and we went back and forth and it turned out my understanding was completely wrong and they had to convince me. But I had a little trouble listening to their arguments. They told me that the Constitution should be more flexible, it should be a living document, that it shouldn’t be overly rigid, that’s how you get into trouble. I sort of struggled with that tremendously."

Paul says he didn’t strive to be the chairman of an important committee during his time in Congress. Instead, he studied the bureaucracy and concluded that government had become far too large.

"My goal wasn’t to be the chairman of the committee because to do that you have to sell your soul and raise money. In my case, I do believe that when people say I didn’t join the gang, it’s true. Matter of fact the longer I was there, I became more skeptical about the government…the government is way too big,  too intrusive and I think it’s important we stick to our principles. I left Congress more opposed to big government."

When it comes to the question of Republicans vs. Democrats, Paul thinks this separation is a false distinction. Both parties share a philosophy of supporting welfare for both corporations and people.

“The bickering we hear has nothing to do with the most important issue and that is philosophy. I don’t believe there are two parties, I think there’s only one party. I think bipartisanship is very bad, everything that’s been done is done on bipartisanship. They agree on funding and not even examining the security documents in the CIA or when we go to war, they say ‘we’ll finance them.’”

 

"I remember one time one member of Congress he was working to get a credential that he was against corporate welfare and he wanted to cut the export-import bank by 5%, which meant nothing. We tried to cut it and it didn’t pass. The next vote I had, I wanted to abolish the export-import bank, so I supported his amendment to cut it a bit, but then he wouldn’t support mine."

Commitment to free markets should be absolute, Paul says. You can’t advocate for a little bit of intervention, or you surrender to the idea that intervention is right.

"But one problem, whether its foreign or domestic policy, if you concede the principle, you concede 100% of it. If we do such and such welfare program, or a little bit of war and a little bit of intervention, you concede this whole principle that we’re supposed to do it. You should take this principle of noninterventionism, and I love that term because noninterventionism tells you what liberty is all about and it would go a long way for foreign policy as well."

 

"If we believe in the cause of liberty, we should all be noninterventionist. We should have a government that does not intervene in peaceful activity of all citizens, just let us mind our own business and…if you believe in markets, you should have a noninterventionist market that doesn’t try to regulate the economy, just think of the 1000s of pages of regulations it’s too much regulation and in foreign policy it’s way overblown there’s way too much intervention."

 

"But there was a time when I started reading revisionist history when I started reading about the lead up to World War Two that there was supposedly knowledge about what was going to happen at Pearl Harbor – but I just didn’t want to believe that of my government it took a long time to soften my stand. I was drafted during 1962 during the Cuban crisis…I was flight surgeon at the airport in San Antonio when Kennedy was killed, but there was no way at that time that I would’ve said ‘well our government might’ve been involved – I wouldn’t have wanted to hear any part of that."

Noninterventionism is anathema to both political parties and many other elements embedded in the US government – the intelligence agencies, for example – which is why Paul warns that those who’ve sworn to uphold the Constitution – i.e. lawmakers – "don’t understand the damage they’ve inflicted."

"This whole idea of defending and supporting the Constitution is pretty important. How many people have said this oath in our government yet there’s not a whole lot of defense and support of the Constitution. The oath says against all enemies foreign and domestic. I’ve concluded if you really want to do that, then you only have about 50% of that responsibility because….there are a lot of enemies that are internal."

Paul singeled out the Department of Education as an example of government intervention gone horribly wrong. By turning on the student-debt spigot, the DOE ushered in the era of cheap student loans, triggering the beginning of the massive inflation in the cost of higher education.

"How did we get to this point where we’re so out of whack for what the intent was with our Constitution one of the most important issues that deals with it is the educational system…we have this totally bizarre monstrosity of cultural Marxism that is pushed by our universities Kid ends up with a degree and $70,000 worth of debt and he can’t get a job and he’s supposedly educated. The longer the federal government has been involved, the worse the education system has become."

 

"There’s no authority in the Constitution for the Federal government to be involved in education."

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