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daily briefing using big data

oct 28 Daily Briefing prepared using big data: Positive ECB AQR, Waiting for FOMC - expected dovish stands -, US midterms elections tide turning

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SNBDL Daily Briefing

Report prepared using big data solution Quid

 

 

Our take away from the last 24 hours news

 

Central banks news: 

The recent 24h news about central banks were all about two subjects: 1) take away from ECB stress tests and 2) October FOMC meeting.

On the Asset Quality Review, we were saying yesterday that the results are in line with our own assessment of the banks which have had for years (even before the Great Financial Crisis) strategic difficulties (Driss has been covering European Financial Institutions stock for more than a decade). The stress test eased worries and have been well received by the market. Except the criticism that the AQR did not run a specific scenario of a deflationary self-fulfilling scenario, the methodology and the assumption were widely accepted. On the deflationary scenario, ECB VP Constancio said that the ECB does not see any deflation and hints that the ECB will do whatever it takes to avoid deflation. This is in line with the communication made by the Fed in 2009, when the central bank run its stress test, which at that time was criticised for not having an economic scenario which take into account deflationary risk. Furthermore, as we were expecting a couple of months ago, chatters have started to talk about possible cross Eurozone M&A. These will help some banks to solve their existential problems such as the widely fragmented banking sector in Italy or the low margin in Spain or Germany.

Because the ECB test is widely seen as credible, and there is a strong willingness to restructure the banking sector through M&A, we see the likelihood of the lending activity resuming very high. This likelihood is high thanks as well to the recent monetary tools announced by ECB (T-LTRO and Private Asset QE) and the reforms announced by Italy and France (the two lagger in term of reform implementation in the Eurozone). We continue to have a very constructive scenario on the Eurozone, while we continue to see the market under pricing / under estimating the chance of success of the EZ.

 

While we see the market under estimating the EZ constructive scenario, we see the consensus wrongly hawkish when it comes to the Fed. While we consider that there are 55% chances that Fed delays ending QE tomorrow Wednesday, we consider that its more than 90% probability the Fed will indicate that it will be slow to normalise due to the uncertainties which are affecting (which might affect) the US economy: Ebola, US midterms elections, Oil prices collapse, Eurozone slow growth, China rebalancing etc. We do see the consensus speaking books instead of looking at evidences without too much bias. Should the Fed confirm our views, we consider that many investment portfolio would have to re-adjust which will create a short squeeze. We see 10Y US rates and USD as the most vulnerable asset classes in the short term. Furthermore, we consider that the market is near the exhaustion point when investors will jump off the guns and increase their exposure to stocks. Indeed the community has been quite cautious due to the excessive talks about rate normalisation and profits margin sustainability. Evidences from the earnings season and from the Fed are showing that again the consensus is likely to be proven wrong.

 

Economics News:

Europe: France and Italy announced additional efforts relative to the budget sent to the EU commission last week. The measures taken are mainly “cosmetic” to break a deal with the commission and move ahead to the investment program implementation (i.e. Juncker infrastructure program). As we were expecting, the UK Prime Minister has shown a hard line vis-a-vis of Europe in other to reduce the defection spree which have taken Tories voters to UKIP. While we consider that markets continue to interpret these announcements as a hard line vis a vis Br-Exit, we continue to see that Br-Exit has been discussed before Scotland independence vote and we understand that PM Cameron has been given guarantees that he will strike a deal with will help him campaign for No vote in the Britain in-out referendum. For instance, the populists parties strength in the parliament is a problem all EU members and the commission has to deal with in order to change the voters narrative relative to the EU. Draghi-nomics success is instrumental to strengthen the EU union and prepare for the next stage of integration.

BoJ has been the first central bank to discuss openly the effect of plummeting oil prices on its own inflation target. The central banks indicated that it may require more time to return to 2% target. This delay should not be interpreted as negative for Japan because the most important problem faced by Japan today is the level of the Energy Trade deficit (which have been deteriorating since March 2011 when Japan decided to stop nearly all nuclear power plans). A USD weakness, which may take place when markets reassess the timing of monetary normalisation, will be instrumental to reduce the pressure on the Energy trade deficit.

 

Earnings news: earnings continue to help calming the excessive markets’ nervousness that corporations profit margins will be unsustainable and will push stocks prices into a depressed territories.

The Earning season just started by the overall view is not as “depressing” as many have been painting for months (we have disagreed with this view at many occasions). Except some important misses due to idiosyncratic reasons, the profit margins still look healthy.

But the corporations continue to see “challenging” top line. In fact the “balance sheet deleveraging” dynamics continue to be at play. In a nutshell, corporation anticipates less top line growth, they protect their margins, using tax initiatives, financial engineering (such as buy-backs) or rationalise their staff. This dynamic is usually used by some populists groups to point to the class-struggle between Rich (shareholders) and Poor (workers). But there is an untold story, which explains that even with the very high level of inequalities, there is a very low probability for a XIX Century style revolution *though many would love to see it to challenge the current governance improvement trend*. The untold story is that among people leaving big corporation, there is an overwhelming number of entrepreneurs, innovators and good professionals which have reached the level of intolerance vis-a-vis some crony capitalism phenomenon. This is what we like to call “Stalinism Capitalism”: it works like capitalism for large shareholders and management while its Stalinism for workers, small shareholders (including Pension Funds). Should big corporation move away from Stalinism Capitalism, a trend which is already in place, we would with more than 75% probability: 1) improve profit margins, 2) improve workers pay and conditions, 3) improve gender equality - which empowers workers -, 4) improve consumer services. This trend is a certainty because political activism has been focusing on criticising states actions, it has just get organised to challenge private sector bad behaviour. Furthermore, G-20 in Australia is likely to press government to move toward good governance.

We would like to take the opportunity here to repeat that this trend toward the good governance is in place and supported by many policymakers (China, Australia, France etc.). But, reports on bad governance practices overshadow the changes. But we continue to see a need to accelerate the change in governance in other to regain the public trust (the most important “asset” of the XXI Century).

 

Ebola news

The Ebola quarantine controversy has become a chaotic brawl involving politics, science and the law. The conservatism hard liners (Rand Paul) have been criticising everything with a deliberate objective to spur fear (as we were showing in our recent report).

As we were expecting, the number of cases in the west has decelerated, while western Africain countries are tagged Ebola free by WHO. However, there is no time to reduce vigilance until the virus is getting controlled and Ebola vaccines would have proven their effectiveness. WHO sees a new treatment in the coming 2 weeks, and a vaccine to be tested as soon as December 2014.

The GOP continue to point to the need of additional measures such as Visa ban. But while Visa ban, alike travel ban, serves interests which want to inflict more pain to the economy (less trade, more pressure on an already fragile airline industry) it does not help reduce the outbreak.

In our special note on Ebola (Ebola a communication war) we stressed that Ebola virus will be more about communication issues than a medical problem. On one hand, we pointed to the excessive fear spurred by politically motivated participants on Twitter. On the other, we stressed that while spreading fear about Ebola could help short term interest groups such as increasing financial markets volatility which could help put the blame on excessive financial regulation. It does show how the Tea Party caucus and less moderate GOP are unprepared to take over the executive branch. If I was advising Marco Rubio or Rand Paul, I would have advised them to fire their communication and strategic teams. Why? For one simple reason, by emphasising the mistrust, both the two Senators are showing how unprepared, un-experienced they are to pretend running for office in 2016. 

1. Would anyone trust a leader who will start trashing all the administration and pushing the public to panic while they have to be focus finding solutions? 

2. Would anyone trust Marco Rubio, who continue to fight a XVI Century war against Science, to take the right decision while over seeing CDC operations? 

3. Would anyone trust Sen. Rand Paul to be the leader to calm the public when he was indicating that Ebola could be airborne (NB: this is not the case please see our report)?

Should the Senate goes to the GOP, it would be the first time in my 20 years career analysing politics that I would have been witnessing a group wining on the ground that : 1) they will spur fear instead of calming public nervousness and show they would be working, 2) they will trigger an economic crisis because they might be some highly hypothetical fear that Chair Yellen will be behind the curve, 3) they might call for President impeachment trial when the country is leading a coalition against terrorists (inc. ISIL). Will the US public prefer voting to help some private interests which have invested ~$1bn in ads? I doubt. I continue to believe that Tocqueville is right: the US is the best democracy invented so far.

The arrival of Ron Klain as a coordinator of the US administration efforts is likely to lead to a reduction in the excessive fear we have reached last week.

 

Gaza:

The balancing act continues to be fragile. On one hand, the more the international community moves toward a two-states solutions peace negotiation, the more Muslim Brotherhoods intensify the pressure to avoid a peace which could cost the movement all the political capital it still have. Northern Sinai terrorist plot which killed 30 Egyptian troops on Friday, making it the deadliest single attack in decades on the military. Egypt has been struggling to stem a wave of violence by Islamic extremists since the overthrow of Islamist President Mohammed Morsi. As indicated by Secretary of State Kerry, a genuine peace between Israel and Palestine could resonate into the region and reduce Muslim Brotherhoods political appeal. On the other hand, the weekend came with another unfortunate dead in the Palestinian side, which, unless Israel Defence Forces accept a transparent investigation, will be used as a way to spur more mistrust in Israel. Furthermore, Israeli decision to go ahead with 1000 units in Jerusalem, which intend to strengthen the administration ahead of the elections, is likely to increase the pressure on Israel to change its strategy.

In addition to UN Secretary General, China, US and EU calls for peace process to reopen, Russia has provided it support. We want to highlight that Russia enjoys a very strong support in the muslim world because it has been seen as the opponents to the U.S. which is seen as a supporter Israel. This time we see that Russia support aims pursuing the current status quo, in order to continue to support the geopolitical risk in oil prices. It’s obviously in Russia interest to push oil prices higher and any genuine peace could take some additional dollars out of oil prices which are already depressed.

We have been expressing worries after the decision to reconstruct Gaza because there is a genuine lack of traceability of funding. Hamas confirmed that some funds are redirected to re-militarize. This is in line with the fact that as Hamas is losing its political capital to Fatah of President Abbas. The organisation announcement is a gesture to regain some of its “lieutenants” defecting to other “hard liner” organisations.

We have been saying for some time that a fight against terrorism and radical Islam required to genuinely rebuild of trust which would phrase in 3 steps. First, reopen Palestine Israel peace process. Second, sell the narrative that this process is intend to be a win-win scenario (i.e. peace, jobs, and growth for the 2 countries). Third, reduce the speed of Jihadists hiring because those are getting radicalised by the feeling of “injustice” and a perceived war against palestinian and muslims in general.

Recent Secretary of State Kerry comments that a Palestinian - Israel two-state solutions will help derail ISIL are in line with the convictions we expressed since the start of Gaza war and the “fight for talents” terrorists organisation have been organising. Please see our comments on Iraq & Syria will indicate that the terrorists are loosing battle in the ground but want to keep their narrative alive in order to keep hiring (when the western countries are just realising that defeating ISIL will require defeating its hiring process).

 

Iraq & Syria: 

Since the beginning of the attacks against ISIL in Iraq and Syria, the western community started to fight radical extremists at home. In Australia, in the UK as well as in other countries, recruiters, preachers and financiers are brought to justice. But, we continue to believe that ISIL risk is much important and the global coalition response is still inadequate. The coalition has focused on the urgency: stoping ISIL from spreading in Middle East. But the coalition should be held accountable for its continuing lack of response to the more important reason behind the jihadists hiring: MISTRUST. We are puzzled by how media is giving airtime to ISIL by spreading videos, messages and communiques while moderate muslims have no voice (even when US President made reference to #NotInMyName community in his UN General Assembly speech). From a game theory prospective, we understand very well the reasons behind giving airtime to murders. By spurring the fear, some interests groups could imagine that they can derail the current trends toward good governance. In 2009, we were indicating : to solve today’s problems (financial, economic, ecological crisis), there is no way but improving governance. These interests groups will be defeated not because Terrorism is bad, but because terrorism and ISIL is an unstable equilibrium. Some are justifying this situation because it serves as a wake up call to move forward. We believe that the time has came to accelerate the G-20 initiatives and get rid of bad governance, because terrorism needs “dark” money to flourish and anyone who is link to these channels should be brought to justice.

 

Last week we were saying that, as soon as Turkey will have assurances that the Kurds will not use the current tension at Kobane to increase the tension over the Kurdish independence, ISIL is loosing this symbolic battle. We were indicating that Kobane is a must win for ISIL in order to pursue their “marketing campaign” borrowed from Spartacus and David & Goliath.

During the recent days, ISIL was loosing ground in Kobane and diverting its to-become-jihadists attention to Baghdad, Raqa / Anbar province to show how barbaric ISIL can be. These actions intend to keep the “to-become-Jihadists” (like Australian Abdullah Emir - click here-) attention on joining their fight. We have been witnessing that many non-affiliated groups have pledge allegiance to ISIL in order to keep hiring. We have seen for example that Algeria salafists groups have renamed themselves to “Califat fighters” to channel funding, weapons, supports etc. We would not be surprised if ISIL continues to spur disinformation that they can take their fight to the sky or that the have got access to US arms (as indicated by the US thanks message channeled by some extremists twitters.

By winning the communication war and cutting ISIL from attracting young fighters the coalition increases its chances to ultimately defeat ISIL.

We would like to remain our readers that ISIL is three groups: 1) psychopaths - drug addicted fighters  who are leading the fight because their illness have reduced their fear of death, 2) Some sunni army groups which have been betrayed by Al-Maliki government (these include Ba’aht party), 3) Some sunni tribes. The “non-psychopaths” are using ISIL as a threat to push the global community to pressure Iraqi government to be more genuinely inclusive and reduce bad governance. Reports over the nomination of the new government interior minister are one of the numerous example of the aftermath of Al-Maliki legacy.

We would not be surprised that Iraqi army would spur the information that they would be helping ISIL to take it fight to the sky, but let’s face facts, unless ISIL gets some government support, it’s very difficult to imagine how ISIL could have any chances vis-a-vis US and coalition airforces. As we were expecting, new intelligence indicate that ISIL have the ability to use Chlorine bombs.

IHS confirmed the estimates we had that ISIL was making ~$2millions per day from oil, before US Strikes. Recent reports, unconfirmed by Turkey, indicate that the oil transactions were going through Turkey. We would not be surprised because Muslim Brotherhood a radical political islam group have left Qatar to Turkey. These groups might be of help. Furthermore “money laundering” and terrorism financing is usually much easier in countries which lack high standards in term of governance. We do believe that the more data on this issues will be leaked the more the pressure on President Ergodan will intensify to find a solution to the Muslim Brotherhood ideology and to improve governance.

Two factors are important to watch in the coming days: 1) how President Ergodan will change his position when the situation deteriorates, 2) how the coalition will withstand two events (Iran nuclear negotiation and Saudi decision to let Oil prices stabilise at 70-80$). On the first topic, President Erdogan seems to be willing to provide help - sufficient help to keep ISIL away from Turkey where Muslim Brotherhood are reallocating after being “asked to leave” by Qatar. Second, the coalition is strong and seems to have accepted low oil prices.

 

Russia - Ukraine tension take away:

Pro-EU struck a historical win in Sunday 26th general elections. This is in line with our scenario for the development of the current tension between Ukraine and Russia. While we see this results as been positive for the fight against bad governance and corruption and increase the likelihood for Ukraine to move closer to EU, we consider that Russia is likely to escalade.

Chancellor Merkel attitude is in line with our view that she is using Putin threat to push EU to undertake more reforms and more integration, while keeping the threat of Russia isolation very high. Meanwhile, Russia economy continues to tank.

We would like to remain our reader that when it comes to whether Russia will cut gas delivery to Europe, we believe that it’s not a matter of “if” but “when”. Our study of Putin chess game enables us to see that a moment where fear over Ebola will reach the level where any non-lethal flu could become a source of panic and paranoia , would be the genuine timing for cutting gas. This will help populists (supported by Putin) to criticise Europe even more.

Actually, many other political groups are using the strategy of making allegiance to Putin in order to push some domestically driven agenda.

Reports out of Sweden relative to underwater activities indicate that Sweden is shifting away from its “neutral” stands and is heading to put some additional pressure on Putin. Should Sweden change stands as the recent evidence are starting to show, Ukraine tension might increase because it will leave President Putin without any example of neutrality Ukraine should be bind by. 

Comments by Swedish PM Lofven “[Sweden] have already say [it] will stay out of NATO” hint that the recent events are bringing the question back to the table (at least from the Russian prospective). The recent “tension” over military planes violating Estonia air space is another example of the fact that the situation is unlikely to settle before the beginning of next year.

Finally, U.S. is intensifying the pressure on Iran to move ahead with a deal, at a moment when Iranian media reported the dead of Ayatollah Mohammad Reza Mahdavi Kani, the head of Iran’s top clerical body after lying in a coma for months, leaving a gap in the only institution that has the authority to elect and dismiss the country's Supreme Leader. This does not create any short term change in the negotiation but it’s closing the window of opportunity for striking a deal. The fight between “hard-liners” and “conservatism” (supporters of Hassan Rohani) is likely to intensify going into 2016 election.

We continue to see only two possible outcomes: 1) Russia pursue its aggressive attitude and pushed for a separation of Ukraine at the expense of a full-fledge isolation, or 2) Russia opposition start to “challenge” President Putin to return to reforms. The second outcome is unlikely for now because intelligence from the ground is indicating that while the opposition is willing to change the trend, there is a serious lack of appetite to challenge President Putin be in openly or behind the scenes.

We foresee the situation to continue to deteriorate while Oil prices continue to plummet. Russian economy is likely to suffer a lot, while EU narrative is likely to change because the “communication war” which have been spurred by Russia and its supporters in the Western political groups is loosing traction.

 

Hong Kong take away:

Security chief Lai Tung-kwok yesterday attempted to lift the lid on "hate and violence" by Occupy protesters with a video of clashes with police - but found himself on the receiving end of a backlash amid accusations that he left out inconvenient events

We believe that the situation is likely to continue to ebb and flow between some “tension” and discussions with HK government. The IV-Plenum communique indicated, as we were expecting, that the Chinese government is moving ahead with an agenda which should please the Occupy movement in Hong Kong as well as in other countries: 1) improve governance, 2) crack down on Corruption, 3) introduction of the rule of law and 4) independence of justice. These steps are likely to help President Xi government to start finding a way out of the current “crisis”. While we consider the reforms path is pointing to the right direction, we consider that China can accelerate because the new normal is getting understood by the public, the business community though the financial markets are still lagging behind. President Xi might use HK as a platform for political reform experiment. In nutshell, we see Occupy and Umbrella Revolution to be a green shot toward helping government understand that accountability, democracy, and the rule of law need to be strengthened and that there is no other ways but political reforms

 

Catalonia: referendum called off, Rajoy opened discussion to give more autonomy to Catalonia, Russia’s RT News is pressing Catalonian to revolt. We were expecting it and we add Catalonia to the numerous subjects were big data has proven its accuracy. However, any delay in negotiation between Catalonia and Madrid could reverse the tied. Unfortunately, many politicians have been used to procrastination and may try to promise reforms without delivering them. This time Spain has to face the reality: all over the world, the public awareness of “moral faults” has increased. Not solving Catalonia problem is giving more argument to the mistrust camp. It suffices that one sees the overwhelming indication that mistrust helps to radicalise the public, to conclude that procrastination would be responsible for public radicalisation. The Elite in Spain does not understand that the old days of the Spanish Monarchy without accountability is ending. They’re better get used to that and move forward. King Felipe-IV  said last Friday "These feelings rooted and shared from North to South and from East to West in our territory, we should never forget them, much less lose them," when addressing the annual Prince of Asturias Awards 2014. "On the contrary, we have to preserve and nurture them," he added.

 

We were saying “calls for independence referendum is increasing pressure on both Madrid and EU to move forward to offer better conditions and better narrative to the public. We see PM Rajoy taking constitutional actions to deter Catalonia from conducting the referendum, at a moment where more the referendum is gaining support from the independence forces all over the world. Madrid may accept to open discussion to devote additional autonomy to Catalonia in order to reduce the pressure. This story is likely to push EUR existential threat higher short term, but we consider that EUR is likely to rebound by the end of this year, when these threats will be repriced as less likely.” (daily briefing Sept. 30 2014). Catalonia decision to suspend formal campaign is the first step in our constructive scenario. However, Artur Mas uses the threat of going ahead with the referendum, though the constitutional court has specified that’s un-constitutional. This threat is urging PM Rajoy to act which he did in Saturday by opening discussion of some kind of PM Cameron solution to Scotland independence call (i.e. more fiscal autonomy). Catalonia government will decide by October 15 on whether to hold referendum. We see the most likely scenario to be some deal with Madrid which would : 1) help Artur Mas to claim victory - he would have secured more autonomy - and 2) help PM Rajoy to de-escalade the tension over Catalonia. We see the next region to start a fight for more autonomy to be Bavaria (Germany’s most wealthy region which is pushing Alternative fur Deutschland - AfD - anti-EZ party wants to reduce its contribution to other regions - “lazy” EZ members states, in their parlance -. Business interest (Football Clubs) are starting to indicate the cost of a secession. Novo-Russia continue to support Catalonia, as a secession could help justify Crimea. Many have been talking about war in the East, the War against Russia is also taking place in Catalonia. The relations between populists parties in EU and Russia speaks volume. Czar Putin should make no mistake EU is one and indivisible. Populism is a cancer, EU is recovering from it.

US midterms elections:

November 4th midterm elections is coming with many uncertainties. Should GOP win the Senate, the US administration is likely to find itself stuck with a divided government which could make : debt ceiling, budget negotiation, Fed Transparency Bill negotiation, very hard. Some humorists have called the Tea Party caucus to be the “no-negotiators”. Without leaning toward a liberal Tea Party bashing, we would like to remind our readers of October 2013 debt ceiling talk. These period have created too much fear that the US might default that some Sovereign Wealth Funds (SWF) have been considering challenging the USD reserve currency privilege status. The average polls are giving 55% chance to the GOP to secure a win in the Senate. However, these polls do not track the weak signals narrative nor participation variable (a model we’ve built for Scotland Independence and which has proven a very good results). Koch donors story (politico here) is very interesting because it shows that Oil interest groups are busy trying to reduce the speed at which their wealth is evaporating. $1bn is the amount invested, hope that this investment does not include any link to gestures to destabilise the Homeland security. We are confident that private initiative such as Super Pac of Super Pacs (using public donation to cut interest groups campaign financing) would take over in the short term because Pension Funds and Investors will soon recognise that “Greed is NOT good” and better have a functioning democracy.

We continue to side with the consensus. But we consider that as soon as investors will start looking at the consequence of a GOP Senate majority win we might see some change in the dynamics. We have the opportunity to use a new source of big data information. We will be using it to bring the change in the narrative in the coming 3 weeks. Stay tuned and thanks for your support.

The recent polls which show a GOP turnout advantage, should be taken with a pinch of salt. The reason is that turnout is a very volatile variable and depend on the consequence of not showing in the polls. Countries differ in their reaction function to election. As a general view, the more a country struggles to get rights the more the public is fearing the return of any dark days and go to the polls. The more the media will focus on the fact that GOP are winning (with the consecutive effects) the more the voters might increase their turnout. We believe that this “reversibility of votes” is the “magic” bullet which might help save some efficacy for the second half of President Obama tenure as well as avoid an incredible economic headwinds (see here Ted Cruz agenda for GOP Senate). Should one add Senator Ted Cruz comments, those of Senator Rand Paul (which spur fear about Ebola), we might find ourselves in situation which would have many similarities to  Nero burning Rome (click here).

These are the reasons why we are less confident than many commentators in the US that GOP Senate majority is a given. The fear mongering is likely to play against GOP because it’s a sign of irresponsibility that a to-become-a-leader would cry to the wolf instead of tackling issues. Actually, GOP has tried to use the big data approach which helped Barack Obama to win twice the presidency. Unfortunately for the GOP the most social media active conservative are all from the tea party, Gold bugs ideological views. These are incapable of thinking of a negotiation because their aim is to destroy State. In that sense, we feel that they are very close to ISIL thinking.

 

US other news: 

Oil prices have reached our second target $80 much quickly than anticipated. However, we consider that they’ll plateau in the short term at these level until Iran nuclear negotiations go through. In the case of success we might see prices resuming their downward trend. U.S. administration just started to take seriously numerous report of ISIL funding through Oil trade. The administration threatened to take sanctions measures against those who buy Oil from ISIL. This may create some tension with Turkey, unless President Erdogan uses this approach to go after Muslim Brotherhood groups.

Gasoline prices have collapsed reflecting the recent development in Oil prices. This reduces any inflation pressure the Fed could be fearing ahead of today and tomorrow FOMC.

We have been sharing last week an interesting paper on why ISIS excels at recruiting American teens. This trend is the most worrying while the terrorists propaganda based, on the Apocalypse and the spread view that “institutions are rotten to the core”, is gaining traction is more forums (libertarians blogs for example). I was puzzled by the number of blogs and how some Hedge Funds have been financing libertarians views although they repeat all of them the same information, data, reasoning etc. This become clearer with the recent rush to sell to small investors energy funds, while the overwhelming data and news are supportive to do the opposite. It’s frustrating that the US SEC does not protect sufficiently investors by requiring to check how these funds are sold. From a 20 years marketing experience in finance, I witnessed at least one case over two deals where the investor has not been given the full information although salesmen knew it. In a world where data are everywhere and the tools to make the sense of it are already very efficient and cheap, I do believe that financial institutions have better to be very cautious. As we have been saying many times: last time financial institutions suffers multi-billions sanctions, next time (if these do not take the genuine actions to improve governance and marketing practices) it may end up into jail time. I doubt that oil funds salesmen discussed with their clients the situation in Iran negotiation and how this could take the oil into another plunge.

The US has announced in Kuwait a new coalition called “Cyber coalition” which aims fighting the hiring which is taking place via social media and propaganda websites. Should the US use this coalition to cut ISIL from internet propaganda, the terrorist organisation is likely to lose its channel to hire new militants (specifically in the West).

Informations out of North Korea have proven our thoughts right: Kim Jong Un has personally ordered to free the M. Jowle. This is a weak signal that North Korea leadership is willing to soften its stands when its old partners are moving toward a new strategy. We see this development increasing the chances of a reunification with South Korea. This story should accelerate when President XI and PM Abe will meet and reduce the seemingly tension over the disputed regions.

 

EU other news: 

While the EU member states 2015 budget discussion is still on-going, France and Italy have offered some additional budget deficit cuts. We consider that these additional cuts are likely to be considered as sufficient in order to clear the way to accept the two countries budget proposal and move forward with the infrastructure investment program which intend to create more growth and ultimately reduce the high level of youth unemployment.

 

EU struck two important deals: 1) European Union leaders agreed early Friday to cut greenhouse gas emissions in the 28-nation bloc to at least 40 percent below 1990 levels by 2030 (while before the meeting Chancellor Merkel was indicating that the challenge was great and the negotiation would not be easy), 2) better coordination in the Ebola outbreak front (this is likely to provide the path toward so form of EU - CDC which would have to coordinate efforts -.

We have been indicating that we consider that EZ narrative has shifted to more positive dynamic. Indeed, an European Union accounting change has improved Cyprus’s public-finance outlook more than any other euro-zone nation, raising the prospects it will exit a bailout program ahead of schedule and sell bonds this year.

The Chancellor of the Exchequer is to promise to get up to half a million more women into the workplace as part of a new Conservative push on the economy and to regain women votes which have been defecting to other mainstream parties (Women voters are smart enough to not trust UKIP and populists parties according to polls analysis). PM Cameron at the other side of the spectrum is making “noise” against EU, in order to reduce the haemorrhage of Tories supporters defecting to UKIP. We find this approach dangerous and self-defeating although its the only political game PM Cameron could play at present. Indeed, the more PM Cameron criticised immigration and EU policies the more he increases his chances that the public will see in his the charismatic leader which stands out and secured a deal against EU bureaucrats. But while we believe that the negotiation has already taken place and the PM is trying to flex mussels to keep his political base, we consider that the negative rhetoric vis-a-vis immigrant coming from EU is dangerous because it could spur a reversal in the trend which started since Fmr. PM Margaret Thatcher. At that time, Britain was considered to be “eldorado” for Italian, Spaniards, French and Eastern European alike which re-allocate in Britain to create businesses, work and make a leaving. By criticising these “migrants” - some of them are british citizens now -, which have enriched Britain culture as well as its GDP, PM Cameron is threatening to reverse the flow of migration, while many Eurozone countries are genuinely embracing structural reforms and lacking stamina of the immigrant to create jobs, businesses and growth. We are surprised that PM Cameron does not out speak about oligarchs migration which have not brought only “clean” money and which, as it did in the south of France, have financed populist groups to hit EU hard when Russia is struggling geopolitically.

 

China: 

Home prices fall for the fifth month in September. This confirms our view of the curent dynamics on hold in China: resilient labor market and export demand are helping the world’s second-largest economy weather a housing market downturn. At the same time, SOE (state own enterprises) have been suffering from: lower profits and investments. Furthermore, Chinese government has reported trainmakers merger as a step to improve efficiency and investment returns.

This is in line with the rebalancing objective to move away from the old growth drivers and focus on economic reforms. News out of the corporate sector shows that even in this field China is delivering the reforms announced (shift toward “Social Capitalism” model). 

As the economy continue to soft land, we see the Chinese leadership continuing to support governance improvement and crack down on corruption.  For example, Australian police have agreed to assist China in the extradition and seizure of assets of corrupt Chinese officials who have fled with hundreds of millions of dollars in illicit funds, the Sydney Morning Herald newspaper reported (see more below).

We believe that Chinese leadership will continue to drive the growth lower but smoothly to avoid triggering a hard landing chock. We see any stimuli to be small and targeted because the government continues to fear that the economic rebalancing has not taken momentum yet  although 1) labor intensive manufacturers are relocating in cheaper labor countries, 2) businesses are upgrading their business models [while becoming environmental friendly], 3) President Xi has conducted many trade - investment agreement with Neighbours (after Premier Li did the same in Africa) to secure investment projects which use Chinese manpower - engineers know-how in this domaine, 4) China is gaining more military presence and has fluxed it mussels - e.g. China “Top Gun” intercept by a US fighter jet -, 5) China has signed many RMB agreement which reinforce the currency usage and prepare its full liberalisation - after Free Trade Zones (FTZ) have proven to be a success -, 6) China has undertaken a genuine fight against bad governance and better regulation - many examples in our recent daily briefings of fight against corruption and bad governance-. 

While the recent decisions strengthen President Xi power, we foresee the first objective of the Chinese President to be rebalancing the Chinese economy while cooling the pressure which have developed in China (banking, housing etc.).

 

Australia:  TPP deal is advancing well to clear the way to the move we’ve called in our Strategic Views WTO 2.0. Through the TPP, Australia is changing its beta to commodities, which have been the major driver for Australian assets pricing. We differ in our view from the consensus that Australia is rebalancing and moving away from the commodity delta one is has been for many year.

Consensus views assume that neither China nor Australia are conducting their rebalancing agenda. We do believe that the current weaknesses offers genuine opportunity to benefit from the other drivers to the Australian economy which are not related to commodities. We see the current Australian Dollar weakness to continue at least until the USD start to weaken again when markets will realise that it has beaten too much on a quick rate normalisation. Meanwhile, from our previous daily briefing, we have gathered sufficient support to the view that the drivers of the Australian GDP are moving toward: 1) education, health and finance services provider to Asian neighbours, 2) innovation and digital sector, 3) energy resources export to Japan (the later contributes to our constructive view that the current negative Japan Energy Trade deficit will rebalance in the medium term - reducing Japanese Government bonds solvency risk - ).

 

Japan: 

Japanese retail sales growth accelerated for the third straight month in September in an encouraging sign that consumer spending could be strong enough to absorb a second sales tax increase scheduled for next year. Retail sales improvement is clearing the way for PM Abe administration to move ahead, after economic assessment, to hike the VAT for a second time (though we continue to believe that the second hike will come in small steps). Governor Kuroda support to financial institutions to continue buying JGBs, while the administration is improving the Government solvency are genuine steps to rebalance the Japanese economy without trig erring a JGB solvency crisis (many vigilantes have been playing this year).

The recent news out of TPP negotiations indicate that Japan continue to be committed to de-regulate its economy to improve potential growth (which have been lacking due to total factor productivity stagnation and ageing population).

Japan warned on Friday that a volcano in southern Japan located roughly 64 km (40 miles) from a nuclear plant was showing signs of increased activity that could possibly lead to a small-scale eruption and warned people to stay away from the summit. This signs are increasing the pressure on the PM Abe administration to consider all routes (specifically the TPP) which could help bring down Japan energy trade deficit without counting too much on reopening of the nuclear plants. These measures include Trade Partnership which could secure Japan energy, but at the other hand Japan has to agree to changes in behaviour requested by the Green party in Australia which would be instrumental to clear the TPP. We consider that accepting a much tough regulation on Whales hinting or presenting apology for “confort women” is an acceptable price to pay to secure the Japanese economy from sovereign solvency risk.

North Korea decision to free Jeffrey Fowle, a US Citizen, is a positive indication that the relations with NK are improving in what we see as first genuine steps toward a reunification solution which would involve China, South Korea and Japan. We see the next China - Japan summit (discussed by FinMin Aso in Finance APEC Summit) as instrumental for reducing the tension between the two countries and to move ahead with reunification talks.

 

Central banks News

 

Central banks news: The recent 24h news about central banks were all about two subjects: 1) take away from ECB stress tests and 2) October FOMC meeting.

On the Asset Quality Review, we were saying yesterday that the results are in line with our own assessment of the banks which have had for years (even before the Great Financial Crisis) strategic difficulties (Driss has been covering European Financial Institutions stock for more than a decade). The stress test eased worries and have been well received by the market. Except the criticism that the AQR did not run a specific scenario of a deflationary self-fulfilling scenario, the methodology and the assumption were widely accepted. On the deflationary scenario, ECB VP Constancio said that the ECB does not see any deflation and hints that the ECB will do whatever it takes to avoid deflation. This is in line with the communication made by the Fed in 2009, when the central bank run its stress test, which at that time was criticised for not having an economic scenario which take into account deflationary risk. Furthermore, as we were expecting a couple of months ago, chatters have started to talk about possible cross Eurozone M&A. These will help some banks to solve their existential problems such as the widely fragmented banking sector in Italy or the low margin in Spain or Germany.

Because the ECB test is widely seen as credible, and there is a strong willingness to restructure the banking sector through M&A, we see the likelihood of the lending activity resuming very high. This likelihood is high thanks as well to the recent monetary tools announced by ECB (T-LTRO and Private Asset QE) and the reforms announced by Italy and France (the two lagger in term of reform implementation in the Eurozone). We continue to have a very constructive scenario on the Eurozone, while we continue to see the market under pricing / under estimating the chance of success of the EZ.

 

While we see the market under estimating the EZ constructive scenario, we see the consensus wrongly hawkish when it comes to the Fed. While we consider that there are 55% chances that Fed delays ending QE tomorrow Wednesday, we consider that its more than 90% probability the Fed will indicate that it will be slow to normalise due to the uncertainties which are affecting (which might affect) the US economy: Ebola, US midterms elections, Oil prices collapse, Eurozone slow growth, China rebalancing etc. We do see the consensus speaking books instead of looking at evidences without too much bias. Should the Fed confirm our views, we consider that many investment portfolio would have to re-adjust which will create a short squeeze. We see 10Y US rates and USD as the most vulnerable asset classes in the short term. Furthermore, we consider that the market is near the exhaustion point when investors will jump off the guns and increase their exposure to stocks. Indeed the community has been quite cautious due to the excessive talks about rate normalisation and profits margin sustainability. Evidences from the earnings season and from the Fed are showing that again the consensus is likely to be proven wrong.

 

Euro rises against dollar as ECB stress tests ease worries

TOKYO (Kyodo) -- The euro rose against the U.S. dollar on Monday in Tokyo, pushing the U.S. currency down against the yen, as the European Central Bank's stress test results eased worries over the health of banks in the currency bloc.

At 5 p.m., the dollar fetched 108.02-05 yen compared with 108.11-21 yen in New York and 108.23-25 yen in Tokyo at 5 p.m. Friday. It moved between 107.86 yen and 108.26 yen during the day, changing hands most frequently at 108.00 yen.

The euro was quoted at $1.2691-2692 and 137.10-14 yen against $1.2667-2677 and 136.97-137.07 yen in New York and $1.2640-2641 and 136.81-85 yen in Tokyo late Friday afternoon.

The ECB said Sunday that 25 of the eurozone's 130 major banks failed its review, with total capital shortfall at 25 billion euros as of the end of 2013.

Of the 25 banks, however, 12 have since covered their shortfalls by increasing capital and "it isn't an issue for the eurozone financial system as a whole," said Minori Uchida, head of Tokyo global market research at the Bank of Tokyo-Mitsubishi UFJ.

"The banks that failed are concentrated in Italy and Greece, so the situations in those countries still warrant caution," he added.

 

Did ECB Stress Tests Restore Faith in European Banks?

 

Treasuries Rise on Speculation Fed May Keep Low-Rate Policy

Treasuries rose as investors speculate interest rates will remain low for an extended period even as the Federal Reserve is forecast to end its bond-buying as U.S. economic data improves.

Benchmark 10-year yields fell as the central bank conducted its final scheduled bond purchase today under its third round of quantitative easing before policy makers begin a two-day meeting tomorrow. The government will sell $29 billion of two-year notes tomorrow in the first of four auctions this week totaling $108 billion.

“The market is pushing back the first rate hike,” said Ray Remy, head of fixed income in New York at Daiwa Capital Markets America Inc., one of 22 primary dealers that trade with the Fed. “Yields are at the upper end of the range of 2.05 to 2.3 percent” on the 10-year.

 

Fed will likely signal no rate hike anytime soon

WASHINGTON (AP) — The global economy has slumped. Turmoil has gripped financial markets. And the U.S. job market, despite steady gains, still isn't fully healthy.

Yet when the Federal Reserve meets this week, few foresee any major policy changes. The Fed is expected to complete a bond-buying program, which was intended to keep long-term interest rates low. And, to support the economy, it will likely reiterate it's in no rush to raise its key short-term rate.

The economy the Fed will discuss has been strengthening, thanks to solid consumer and business spending, manufacturing growth and a surge in hiring that's lowered the unemployment rate to a six-year low of 5.9 percent.

Still, global weakness poses a potential threat to U.S. growth. The housing industry is still struggling. And Fed Chair Janet Yellen has stressed that while the unemployment rate is close to a historically normal level, other gauges of the job market remain a concern. These include stagnant pay; many part-time workers who can't find full-time jobs; and a historically high number of people who have given up looking for a job and are no longer counted as unemployed.

 

Italy Bank Mergers Possible After ECB Tests, Industry Group Says

The European Central Bank’s review of the region’s lenders may prompt some consolidation in the Italian financial industry, the head of the country’s banking lobby said.

“This is something that can happen,” Giovanni Sabatini, director general of the Italian Banking Association, said in an interview today in Rome. “The commercial banking model is under pressure” and there’s a need for “restructuring of the system, a search for more efficiency to increase productivity and reduce costs.”

Italian banks showed the largest combined capital shortfall in the ECB’s review, with Banca Monte dei Paschi di Siena, Italy’s third-biggest bank, emerging with a 2.1 billion euro ($2.7 billion) shortfall. The Bank of Italy would favor a potential merger of Monte Paschi as long as it makes the bank stronger, is a market transaction, and adds credit to the economy, the central bank’s Director General Fabio Panetta said yesterday.

 

Economics News

 

Economics News:

Europe: France and Italy announced additional efforts relative to the budget sent to the EU commission last week. The measures taken are mainly “cosmetic” to break a deal with the commission and move ahead to the investment program implementation (i.e. Juncker infrastructure program). As we were expecting, the UK Prime Minister has shown a hard line vis-a-vis of Europe in other to reduce the defection spree which have taken Tories voters to UKIP. While we consider that markets continue to interpret these announcements as a hard line vis a vis Br-Exit, we continue to see that Br-Exit has been discussed before Scotland independence vote and we understand that PM Cameron has been given guarantees that he will strike a deal with will help him campaign for No vote in the Britain in-out referendum. For instance, the populists parties strength in the parliament is a problem all EU members and the commission has to deal with in order to change the voters narrative relative to the EU. Draghi-nomics success is instrumental to strengthen the EU union and prepare for the next stage of integration.

BoJ has been the first central bank to discuss openly the effect of plummeting oil prices on its own inflation target. The central banks indicated that it may require more time to return to 2% target. This delay should not be interpreted as negative for Japan because the most important problem faced by Japan today is the level of the Energy Trade deficit (which have been deteriorating since March 2011 when Japan decided to stop nearly all nuclear power plans). A USD weakness, which may take place when markets reassess the timing of monetary normalisation, will be instrumental to reduce the pressure on the Energy trade deficit.

 

 

 

France to Make Extra Budget Efforts, Sapin Tells EU Commission

France will work harder to cut its public deficit with a tougher crackdown on tax fraud and aided by lower borrowing costs, Finance Minister Michel Sapin told the European Commission.

The euro area’s second-largest economy will reduce the deficit by an additional 3.6 billion euros to 3.7 billion euros ($4.7 billion), the minister told Agence France Presse today.

France is aiming to slash its structural deficit by 0.5 point of its gross domestic product, Sapin said in a letter to EU Economic and Monetary Affairs Commissioner Jyrki Katainen, which was published today on the finance ministry’s website. There was no date on the letter.

 

Italy to cut deficit by 0.3 pct of GDP in 2015: Economy Minister

ROME, Oct. 27 (Xinhua) -- Italy will reduce its structural budget deficit by 0.3 percent of gross domestic product (GDP) in 2015, Economy Minister Pier Carlo Padoan wrote on Monday in response to Europe's request for clarifications on the country's draft budget.

"The Italian government is committed to adopting additional measures for 2015 in order to strengthen the fiscal effort already envisaged in Italy's draft budgetary plan," Padoan wrote in a letter to European Economic Affairs Commissioner, Jyrki Katainen.

Padoan said in the letter that more adjustment was not possible as the Italian GDP had fallen over 9 percent from its 2008 level. "The economy is in its third year of recession and there is a serious risk of stagnation and deflation. A fourth year of recession must be avoided in every way," he highlighted.

 

Cameron Shown Hard Line by EU Budget Chief Over Surcharge

The European Union’s budget chief said the U.K. should be prepared to pay a 2.1 billion-euro ($2.7 billion) surcharge to the EU this year or face the threat of penalty fees, drawing a hard line over Britain’s latest spending spat with the bloc.

European Budget Commissioner Jacek Dominik said he was surprised by the outrage that British Prime Minister David Cameron expressed at an Oct. 23-24 EU summit about the extra invoice to the British government from the European Commission, the 28-nation bloc’s executive arm.

The additional bill stems from an adjustment to the economic-output data of all EU countries dating as far back as 1995 and was shared with them in mid-October, said Dominik. He said no EU government, including the “experienced” U.K. administration, sounded an alarm bell during consultations earlier this month.

“They all knew about it,” Dominik told reporters today in Brussels. “None of the member states has raised any questions concerning the data.”

The comments signal a lack of EU appetite to give Cameron a face-saving way out of a political corner that highlights Britain’s growing EU skepticism. Faced with a U.K. general election in May, Cameron is seeking to blunt gains by the U.K. Independence Party as it steps up its campaign to take the country out of the EU four decades after joining.

 

BOJ Said to Mull Moderating Inflation Outlook as Oil Slumps

Oct. 28 (Bloomberg) -- The Bank of Japan will consider moderating its language on inflation in a report this week to take account of the impact of lower oil prices, according to people familiar with central bank’s discussions.

The central bank may tone down or abandon its assessment that consumer-price gains are likely to “follow a rising trend again from the second half of this fiscal year,” according to the people who asked not to be named because the talks were private. Some officials see the potential for the BOJ to cut its inflation projections for the year through March and the following fiscal year, the people said.

While this adds to signs of waning momentum in the world’s third-biggest economy, the people said the effects of the 21 percent slump in oil prices since June are likely to pass. This will allow the BOJ to maintain its view that inflation is likely to hit its 2 percent target around the middle of the year starting in April 2015, they said.

“It’s inevitable for the BOJ to cut its inflation outlook for the near future given the plunge in oil prices,” JPMorgan Chase and Co. analysts led by Masaaki Kanno wrote in a report dated yesterday. The central may also need to admit defeat as early as January on the two-year time frame it set for reaching 2 percent inflation, according to the note.

 

IMF: Insecurity poses risk to Mideast economic growth

Dubai, Oct. 27 (Xinhua) -- Economies in the Middle East and North Africa region are expected to grow by 2.6 percent in 2014, but the economic situation is delicate due to the various security crisis proliferating in the region, the International Monetary Fund's (IMF) Middle East director said on Monday.

Masood Ahmed, the director for the Middle East and Central Asia at the Washington-based IMF said that conflicts in Iraq, Syria and Libya were mitigating growth efforts by the other Arab countries not hit by violent turmoil.

Regional growth could only improve in 2015, if the security situation improves, the top official said.

The real gross domestic product in the Gulf Arab countries around Saudi Arabia will grow by 4.5 percent this year and could grow by the same rate in 2015, Ahmed said.

 

Earnings News

 

Earnings news: earnings continue to help calming the excessive markets’ nervousness that corporations profit margins will be unsustainable and will push stocks prices into a depressed territories.

The Earning season just started by the overall view is not as “depressing” as many have been painting for months (we have disagreed with this view at many occasions). Except some important misses due to idiosyncratic reasons, the profit margins still look healthy.

But the corporations continue to see “challenging” top line. In fact the “balance sheet deleveraging” dynamics continue to be at play. In a nutshell, corporation anticipates less top line growth, they protect their margins, using tax initiatives, financial engineering (such as buy-backs) or rationalise their staff. This dynamic is usually used by some populists groups to point to the class-struggle between Rich (shareholders) and Poor (workers). But there is an untold story, which explains that even with the very high level of inequalities, there is a very low probability for a XIX Century style revolution *though many would love to see it to challenge the current governance improvement trend*. The untold story is that among people leaving big corporation, there is an overwhelming number of entrepreneurs, innovators and good professionals which have reached the level of intolerance vis-a-vis some crony capitalism phenomenon. This is what we like to call “Stalinism Capitalism”: it works like capitalism for large shareholders and management while its Stalinism for workers, small shareholders (including Pension Funds). Should big corporation move away from Stalinism Capitalism, a trend which is already in place, we would with more than 75% probability: 1) improve profit margins, 2) improve workers pay and conditions, 3) improve gender equality - which empowers workers -, 4) improve consumer services. This trend is a certainty because political activism has been focusing on criticising states actions, it has just get organised to challenge private sector bad behaviour. Furthermore, G-20 in Australia is likely to press government to move toward good governance.

We would like to take the opportunity here to repeat that this trend toward the good governance is in place and supported by many policymakers (China, Australia, France etc.). But, reports on bad governance practices overshadow the changes. But we continue to see a need to accelerate the change in governance in other to regain the public trust (the most important “asset” of the XXI Century).

 

Ebola

 

Ebola news

The Ebola quarantine controversy has become a chaotic brawl involving politics, science and the law. The conservatism hard liners (Rand Paul) have been criticising everything with a deliberate objective to spur fear (as we were showing in our recent report).

As we were expecting, the number of cases in the west has decelerated, while western Africain countries are tagged Ebola free by WHO. However, there is no time to reduce vigilance until the virus is getting controlled and Ebola vaccines would have proven their effectiveness. WHO sees a new treatment in the coming 2 weeks, and a vaccine to be tested as soon as December 2014.

The GOP continue to point to the need of additional measures such as Visa ban. But while Visa ban, alike travel ban, serves interests which want to inflict more pain to the economy (less trade, more pressure on an already fragile airline industry) it does not help reduce the outbreak.

In our special note on Ebola (Ebola a communication war) we stressed that Ebola virus will be more about communication issues than a medical problem. On one hand, we pointed to the excessive fear spurred by politically motivated participants on Twitter. On the other, we stressed that while spreading fear about Ebola could help short term interest groups such as increasing financial markets volatility which could help put the blame on excessive financial regulation. It does show how the Tea Party caucus and less moderate GOP are unprepared to take over the executive branch. If I was advising Marco Rubio or Rand Paul, I would have advised them to fire their communication and strategic teams. Why? For one simple reason, by emphasising the mistrust, both the two Senators are showing how unprepared, un-experienced they are to pretend running for office in 2016. 

  1. Would anyone trust a leader who will start trashing all the administration and pushing the public to panic while they have to be focus finding solutions? 
  2. Would anyone trust Marco Rubio, who continue to fight a XVI Century war against Science, to take the right decision while over seeing CDC operations? 
  3. Would anyone trust Sen. Rand Paul to be the leader to calm the public when he was indicating that Ebola could be airborne (NB: this is not the case please see our report)?

Should the Senate goes to the GOP, it would be the first time in my 20 years career analysing politics that I would have been witnessing a group wining on the ground that : 1) they will spur fear instead of calming public nervousness and show they would be working, 2) they will trigger an economic crisis because they might be some highly hypothetical fear that Chair Yellen will be behind the curve, 3) they might call for President impeachment trial when the country is leading a coalition against terrorists (inc. ISIL). Will the US public prefer voting to help some private interests which have invested ~$1bn in ads? I doubt. I continue to believe that Tocqueville is right: the US is the best democracy invented so far.

The arrival of Ron Klain as a coordinator of the US administration efforts is likely to lead to a reduction in the excessive fear we have reached last week.

 

CDC: Those with highest Ebola risk should avoid commercial travel, large gatherings

NEW YORK (AP) -- U.S. health officials are recommending that people who are at highest risk for coming down with Ebola avoid commercial travel or attending large public gatherings, even if they have no symptoms.

The Centers for Disease Control and Prevention issued the updated advice to state and local officials on Monday.

The CDC guidance comes after the governors of New York and New Jersey announced mandatory quarantines for medical workers returning from three West African countries plagued by the worst Ebola outbreak in world history. Illinois and Maryland have announced quarantines for health workers at high risk for getting the disease, including anyone who's touched an Ebola patient's body fluids without protective gear.

Previously the CDC has recommended screening of travelers from West Africa and monitoring of people for three weeks after they arrive in the United States.

 

UPDATE 8-U.S. CDC says returning Ebola medical workers should not be quarantined

Oct 27 (Reuters) - Federal health officials on Monday revamped guidelines for doctors and nurses returning home to the United States from treating Ebola patients in West Africa, stopping well short of controversial mandatory quarantines being imposed by some U.S. states.

Dr. Thomas Frieden, director of the U.S. Centers for Disease Control and Prevention (CDC), called for voluntary home quarantine for people at the highest risk for Ebola infection but said most medical workers returning from the three countries at the center of the epidemic would require daily monitoring without isolation.

New York and New Jersey are among a handful of states to impose mandatory quarantines on returning doctors and nurses amid fears of the virus spreading outside of West Africa, where it has killed nearly 5,000 people in the worst outbreak on record.

The Obama administration's new guidelines are not mandatory and states will have the right to put in place policies that are more strict. Some state officials, grappling with an unfamiliar public health threat, had called federal restrictions placed on people traveling from Ebola-affected countries insufficient to protect Americans and have imposed tougher measures.

 

No unity over Ebola monitoring of travellers

The Ebola quarantine controversy has become a chaotic brawl involving politics, science and the law. The rules on quarantining health-care workers returning from West Africa are changing almost daily and varying according to geography and political climate.

The Pentagon announced Monday that Army personnel returning to their home base in Italy from Liberia will be held in quarantine for 21 days — even though none have symptoms of Ebola or were exposed to patients infected with the virus.

The military’s policy does not appear to track new guidelines announced Monday by the Centers for Disease Control and Prevention, which called for “high-risk” individuals and health-care workers without any symptoms to be directly monitored by state and local health authorities.

 

Latest updates / Australia stops processing visas from West African nations affected by Ebola

EU wants massive increase in staff to fight Ebola; UN: Governments must not deter Ebola workers, quarantine must be rational; new Jersey releasing quarantined nurse; 10 contacts of Ebola nurse leave Madrid hospital.

Australia has stopped processing humanitarian and immigration visas from West African nations affected by the Ebola outbreak, a move to help prevent the deadly disease reaching the country, Immigration Minister Scott Morrison said.

Australia has not recorded a case of Ebola but has had a number of scares, including an 18-year-old West African woman who tested negative on Monday.

"The government has strong controls for the entry of persons to Australia under our immigration program from West Africa," Morrison told parliament on Monday.

 

Gaza

 

Gaza:

The balancing act continues to be fragile. On one hand, the more the international community moves toward a two-states solutions peace negotiation, the more Muslim Brotherhoods intensify the pressure to avoid a peace which could cost the movement all the political capital it still have. Northern Sinai terrorist plot which killed 30 Egyptian troops on Friday, making it the deadliest single attack in decades on the military. Egypt has been struggling to stem a wave of violence by Islamic extremists since the overthrow of Islamist President Mohammed Morsi. As indicated by Secretary of State Kerry, a genuine peace between Israel and Palestine could resonate into the region and reduce Muslim Brotherhoods political appeal. On the other hand, the weekend came with another unfortunate dead in the Palestinian side, which, unless Israel Defence Forces accept a transparent investigation, will be used as a way to spur more mistrust in Israel. Furthermore, Israeli decision to go ahead with 1000 units in Jerusalem, which intend to strengthen the administration ahead of the elections, is likely to increase the pressure on Israel to change its strategy.

In addition to UN Secretary General, China, US and EU calls for peace process to reopen, Russia has provided it support. We want to highlight that Russia enjoys a very strong support in the muslim world because it has been seen as the opponents to the U.S. which is seen as a supporter Israel. This time we see that Russia support aims pursuing the current status quo, in order to continue to support the geopolitical risk in oil prices. It’s obviously in Russia interest to push oil prices higher and any genuine peace could take some additional dollars out of oil prices which are already depressed.

We have been expressing worries after the decision to reconstruct Gaza because there is a genuine lack of traceability of funding. Hamas confirmed that some funds are redirected to re-militarize. This is in line with the fact that as Hamas is losing its political capital to Fatah of President Abbas. The organisation announcement is a gesture to regain some of its “lieutenants” defecting to other “hard liner” organisations.

We have been saying for some time that a fight against terrorism and radical Islam required to genuinely rebuild of trust which would phrase in 3 steps. First, reopen Palestine Israel peace process. Second, sell the narrative that this process is intend to be a win-win scenario (i.e. peace, jobs, and growth for the 2 countries). Third, reduce the speed of Jihadists hiring because those are getting radicalised by the feeling of “injustice” and a perceived war against palestinian and muslims in general.

Recent Secretary of State Kerry comments that a Palestinian - Israel two-state solutions will help derail ISIL are in line with the convictions we expressed since the start of Gaza war and the “fight for talents” terrorists organisation have been organising. Please see our comments on Iraq & Syria will indicate that the terrorists are loosing battle in the ground but want to keep their narrative alive in order to keep hiring (when the western countries are just realising that defeating ISIL will require defeating its hiring process).

 

Israel advances building plans for east Jerusalem despite outcry

JERUSALEM - The Israeli government is advancing construction plans to build about 1,000 housing units in parts of Jerusalem that Palestinians demand for their future state, a government official said Monday, amid heightened tensions in the holy city.

Israel's prime minister said he will continue to build in all parts of Jerusalem, despite international criticism.

Benjamin Netanyahu told parliament Monday that "the French build in Paris, the English build in London and the Israelis build in Jerusalem." The government is currently advancing construction plans to build about 1,000 housing units in east Jerusalem.

The Palestinians seek east Jerusalem - home to the city's most sensitive holy sites for Jews, Muslims and Christians - as their future capital and oppose any Israeli construction there. Palestinian youths have been clashing regularly with Israeli security forces in east Jerusalem for months.

 

At least five arrested in fresh east Jerusalem clashes

Palestinians were laying to rest on Sunday a man who killed two people, including a baby, when he rammed his car into Jerusalem pedestrians, sparking days of violence.

Video footage from the funeral showed a group of youths carrying Abdelrahman Shaludi's casket to the cemetery near Jerusalem's Old City, chanting "God loves him because he is a shahid," or martyr.

The 21-year-old Palestinian was shot dead by police in what they called a "terror attack" after Wednesday's car attack.

A three-month-old girl was killed on the spot and on Sunday an Ecuadorian woman who was one of six people hurt died of her injuries, said Jerusalem's Hadassah hospital.

Ecuadoran President Rafael Correa condemned the attack that killed Karen Mosquera, saying on Twitter "We will reject violence from wherever it comes".

 

Record third quarter for Israeli high-tech investment [Globes, Tel Aviv, Israel :: ]

Oct. 27--In the third quarter of 2014, 170 Israeli high-tech companies attracted $701 million, the IVC Research Center and accounting firm KPMG Somekh Chaikin report today. This is 6% above the $661 million of the third quarter of 2013, but down 24% from the exceptionally high $928 million raised in the previous quarter. The third quarter 2014 amount was 29% above the $545 million average of the last three years.

 

Israeli Knesset faces tough task over budget

The Knesset is expected to review some controversial draft laws but the budget will prove most challenging.

Tel Aviv, Israel - The Israeli parliament reconvened on October 26 for what many observers say will be a largely fruitless session, as Prime Minister Benjamin Netanyahu and his political foes devoted their energy to political manoeuvring ahead of expected early elections.

On paper, at least, the Knesset will have a busy few months. Lawmakers are set to introduce bills on a range of controversial topics, from Jewish prayer at the Temple Mount/Haram al-Sharif to the identity of the state.

Most of these will be purely for show - get-out-the-vote tactics ahead of an election that could occur as early as next year, well ahead of the end of the Knesset's term in late 2017.

Recently, Netanyahu has found himself in a vulnerable position: The brief surge in his popularity after the latest Gaza war has predictably faded, and he faces growing challenges both from within his party, Likud, as well as several right-wing opponents.

 

Iraq & Syria

 

Iraq & Syria: 

Since the beginning of the attacks against ISIL in Iraq and Syria, the western community started to fight radical extremists at home. In Australia, in the UK as well as in other countries, recruiters, preachers and financiers are brought to justice. But, we continue to believe that ISIL risk is much important and the global coalition response is still inadequate. The coalition has focused on the urgency: stoping ISIL from spreading in Middle East. But the coalition should be held accountable for its continuing lack of response to the more important reason behind the jihadists hiring: MISTRUST. We are puzzled by how media is giving airtime to ISIL by spreading videos, messages and communiques while moderate muslims have no voice (even when US President made reference to #NotInMyName community in his UN General Assembly speech). From a game theory prospective, we understand very well the reasons behind giving airtime to murders. By spurring the fear, some interests groups could imagine that they can derail the current trends toward good governance. In 2009, we were indicating : to solve today’s problems (financial, economic, ecological crisis), there is no way but improving governance. These interests groups will be defeated not because Terrorism is bad, but because terrorism and ISIL is an unstable equilibrium. Some are justifying this situation because it serves as a wake up call to move forward. We believe that the time has came to accelerate the G-20 initiatives and get rid of bad governance, because terrorism needs “dark” money to flourish and anyone who is link to these channels should be brought to justice.

 

Last week we were saying that, as soon as Turkey will have assurances that the Kurds will not use the current tension at Kobane to increase the tension over the Kurdish independence, ISIL is loosing this symbolic battle. We were indicating that Kobane is a must win for ISIL in order to pursue their “marketing campaign” borrowed from Spartacus and David & Goliath.

During the recent days, ISIL was loosing ground in Kobane and diverting its to-become-jihadists attention to Baghdad, Raqa / Anbar province to show how barbaric ISIL can be. These actions intend to keep the “to-become-Jihadists” (like Australian Abdullah Emir - click here-) attention on joining their fight. We have been witnessing that many non-affiliated groups have pledge allegiance to ISIL in order to keep hiring. We have seen for example that Algeria salafists groups have renamed themselves to “Califat fighters” to channel funding, weapons, supports etc. We would not be surprised if ISIL continues to spur disinformation that they can take their fight to the sky or that the have got access to US arms (as indicated by the US thanks message channeled by some extremists twitters.

By winning the communication war and cutting ISIL from attracting young fighters the coalition increases its chances to ultimately defeat ISIL.

We would like to remain our readers that ISIL is three groups: 1) psychopaths - drug addicted fighters  who are leading the fight because their illness have reduced their fear of death, 2) Some sunni army groups which have been betrayed by Al-Maliki government (these include Ba’aht party), 3) Some sunni tribes. The “non-psychopaths” are using ISIL as a threat to push the global community to pressure Iraqi government to be more genuinely inclusive and reduce bad governance. Reports over the nomination of the new government interior minister are one of the numerous example of the aftermath of Al-Maliki legacy.

We would not be surprised that Iraqi army would spur the information that they would be helping ISIL to take it fight to the sky, but let’s face facts, unless ISIL gets some government support, it’s very difficult to imagine how ISIL could have any chances vis-a-vis US and coalition airforces. As we were expecting, new intelligence indicate that ISIL have the ability to use Chlorine bombs.

IHS confirmed the estimates we had that ISIL was making ~$2millions per day from oil, before US Strikes. Recent reports, unconfirmed by Turkey, indicate that the oil transactions were going through Turkey. We would not be surprised because Muslim Brotherhood a radical political islam group have left Qatar to Turkey. These groups might be of help. Furthermore “money laundering” and terrorism financing is usually much easier in countries which lack high standards in term of governance. We do believe that the more data on this issues will be leaked the more the pressure on President Ergodan will intensify to find a solution to the Muslim Brotherhood ideology and to improve governance.

Two factors are important to watch in the coming days: 1) how President Ergodan will change his position when the situation deteriorates, 2) how the coalition will withstand two events (Iran nuclear negotiation and Saudi decision to let Oil prices stabilise at 70-80$). On the first topic, President Erdogan seems to be willing to provide help - sufficient help to keep ISIL away from Turkey where Muslim Brotherhood are reallocating after being “asked to leave” by Qatar. Second, the coalition is strong and seems to have accepted low oil prices.

 

Suicide bomber kills 27 militiamen south of Iraqi capital

(Reuters) - A suicide bomber killed at least 27 Shi'ite militiamen outside the Iraqi town of Jurf al-Sakhar on Monday after security forces pushed Islamic State militants out of the area over the weekend, army and police sources said.

The attacker, driving a Humvee vehicle packed with explosives and likely stolen from defeated government troops, also wounded 60 Shi'ite Muslim militiamen, who had helped government forces retake the town just south of the capital.

Iraqis are bracing for more sectarian attacks on Shi'ites, who are preparing for the religious festival of Ashura, an event that defines Shi'ism and its rift with Sunni Islam.

At mosques and shrines across Iraq, millions of Shi'ites are expected to commemorate the slaying of Prophet Mohammad's grandson Hussein at the battle of Kerbala in AD 680.

 

Lebanon army enters militant refuge after thousands flee

Lebanese troops entered a Tripoli neighbourhood Monday where thousands of civilians had fled deadly fighting with Al-Qaeda-linked militants who have battled the army across the northern city for three days.

The troops met no immediate resistance as they moved into the Islamist stronghold of Bab al-Tabbaneh, where the militants were nowhere to be seen, an AFP correspondent reported.

Troops carried out house-to-house searches as they advanced and made several weapons seizures. Only sporadic gunfire could be heard.

Thousands of civilians had fled the impoverished Sunni neighbourhood of some 100,000 people during a lull in fighting late on Sunday.

Dozens of homes and shops burned down as the army rained heavy mortar fire on the militants who had holed up in Bab al-Tabbaneh after launching an unprecedented assault in Tripoli's central market district on Friday.

 

U.S. sees Syria rebels in political, not military solution: Asharq al-Awsat newspaper

(Reuters) - The United States does not expect Syrian rebels it plans to train to fight Islamic State militants to also take on President Bashar al-Assad's forces, but sees them as a crucial part of a political solution to end the war, the Asharq al-Awsat newspaper quoted a senior U.S. official as saying.

The United States, which is leading an international coalition bombing Islamic State in Syria, has said it wants to train and equip "moderate" rebels to fight the militant group which has seized tracts of land in Syria and neighboring Iraq.

Asked whether those rebel Free Syrian Army (FSA) units would ultimately go on to fight Syrian government forces, John Allen, the U.S. representative to the coalition, told the Asharq al-Awsat daily:

"No. What we would like to see is for the FSA and the forces that we will ultimately generate, train and equip to become the credible force that the Assad government ultimately has to acknowledge and recognize."

 

Melbourne man charged with funding Islamic State 'defending innocent brothers and sisters'

A Melbourne man charged with making funds available to the Islamic State and another terrorist organisation has been refused bail because a magistrate feared he could flee Australia and offend if released from custody.

The Australian Federal Police alleges Hassan El Sabsabi made almost $16,000 available to terrorist organisations this year by sending it overseas, Melbourne Magistrates Court heard on Monday.

Mr El Sabsabi, 23, was arrested four weeks ago during a raid on his Seabrook home and charged with seven counts of making funds available to terror groups between March and September.

One charge relates to funding the Islamic State of Iraq and the Levant, while the others relate to sending money to another terrorist group, Jabhat al-Nusra.

The charges each carry a maximum penalty of 25 years in jail.

Mr El Sabsabi applied for bail on Monday on the grounds he faced exceptional circumstances because it could be two years before his case is heard by a court.

 

Canada must do more to thwart radical threat, security officials say

OTTAWA (Reuters) - The head of Canada's national police told a parliamentary committee on Monday the government must do more to stop homegrown radicals, such as those who killed two soldiers on home soil last week, from going overseas for militant training.

Royal Canadian Mounted Police Commissioner Bob Paulson said last week's killings in Ottawa and outside Montreal, which he said appeared to be carried out with minimal planning or preparation, show the nation faces a "serious" threat.

"While we are facing this threat at home, we must focus our efforts on preventing individuals travelling abroad to commit acts of terrorism," Paulson said. "Preventing the individuals from travelling is critical. If these individuals return with training and/or battle experience, they pose an even greater threat to Canada and our allies."

Paulson's remarks followed the fatal shooting on Wednesday of a Canadian soldier standing guard at an Ottawa war memorial by a man who then charged into the Parliament building. Two days earlier, another man rammed two soldiers with his car near Montreal, killing one.

 

Turkey’s Kurdish problem on crash course with the next elections

The killing of three unarmed Turkish soldiers - strolling around in their civilian clothes during their weekend leave on Oct. 25 in Yüksekova, southeastern Turkey, further escalated tension in the Kurdish issue, which has been lingering in the air for weeks. They were deliberately killed by gun fire, shot in the back of their heads in the middle of the market street.

Prime Minister Ahmet Davutoğlu stated yesterday, Oct. 27, that the suspects for the murders had been detained, vowing that such attacks would not divert his government from its commitment to finding a political settlement to the country’s chronic Kurdish problem through dialogue with the imprisoned leader of the outlawed Kurdistan Workers’ Party (PKK).

The PKK launched its armed campaign in 1984, costing the lives of some 40,000 people, until the dialogue initiative of (former prime minister) President Recep Tayyip Erdoğan, was opened in 2012 with PKK leader Abdullah Öcalan via Hakan Fidan, the head of the National Intelligence Organization (MİT). The process has also been continued by Davutoğlu.

For the last two years - which have witnessed two important elections for the government (the local elections in March 2014 and the presidential ones in August) - it has been important for Erdoğan not to oversee any coffins of soldiers or policemen slain by PKK militants to stir up anger against the government during funerals. That has contributed to the election success of the ruling Justice and Development Party (AK Parti) and Erdoğan’s own election as president with votes shifted from the grassroots of the Nationalist Movement Party (MHP). Some voters think that PKK could have at last been pacified and that the sons they send for their compulsory military service will come back home safe and sound, not in coffins wrapped in Turkish flags. That grassroots is against any settlement with the PKK, but could tolerate the process as long as there was no bloodshed.

 

Al Qaeda-linked Syria Islamists enter government-held Idlib

(Reuters) - Islamist militants linked to al Qaeda entered Idlib in northern Syria on Monday and opened up a new front in a city that has been controlled by President Bashar al-Assad's forces for more than a year, both sides said.

State television said the Nusra Front militants infiltrated Idlib at dawn and were confronted by troops and pro-government militias. The Nusra Front said its fighters killed dozens, including officers, in the attack and seized buildings.

In 2012, other rebel groups, including the Western-backed Free Syrian Army, briefly took control of parts of Idlib but were pushed out by the army.

Assad, fighting an array of insurgent groups, has lost much of north and east Syria but has secured a stretch of land from the capital Damascus in the southwest up toward Aleppo in the northwest.

 

Obama Is Getting Slammed For His 'Goldilocks Approach' To ISIS And Syria

The Obama administration is coming under increasing criticism for what critics say is a "half-hearted," "Goldilocks" approach toward defeating the extremist group ISIS in Syria.

The US military has begun the process of vetting moderate factions of rebels in Syria.

But President Barack Obama has been reluctant to commit the US military to help those nationalist Syrian forces in their fight against the regime of Syrian President Bashar-al Assad, as he is wary of getting US forces too involved in Syria's civil war. 

Experts and even some in the administration have started to hint at serious flaws in Obama's strategy to "degrade and ultimately destroy" ISIS, also known as ISIL or the Islamic State. For instance, the administration plans to only train the rebels to defend territory — not go on the offensive — something that could provide an unintentional boost to Assad regime forces.

 

UK chemistry teacher admits Syria terror charges

LONDON (AP) — A British chemistry teacher accused of supporting the Islamic State group faced jail after he pleaded guilty Monday to terrorism charges.

Jamshed Javeed admitted two counts of engaging in conduct in preparation of terrorist acts. He accepted that he intended to travel to Syria to join rebels fighting against President Bashar Assad's government.

The 30-year-old was arrested in December by counterterror police, who said Javeed had been "an otherwise law-abiding man" who began to support the Islamic State group last summer.

 

Russia

 

Russia - Ukraine tension take away:

Pro-EU struck a historical win in Sunday 26th general elections. This is in line with our scenario for the development of the current tension between Ukraine and Russia. While we see this results as been positive for the fight against bad governance and corruption and increase the likelihood for Ukraine to move closer to EU, we consider that Russia is likely to escalade.

Chancellor Merkel attitude is in line with our view that she is using Putin threat to push EU to undertake more reforms and more integration, while keeping the threat of Russia isolation very high. Meanwhile, Russia economy continues to tank.

We would like to remain our reader that when it comes to whether Russia will cut gas delivery to Europe, we believe that it’s not a matter of “if” but “when”. Our study of Putin chess game enables us to see that a moment where fear over Ebola will reach the level where any non-lethal flu could become a source of panic and paranoia , would be the genuine timing for cutting gas. This will help populists (supported by Putin) to criticise Europe even more.

Actually, many other political groups are using the strategy of making allegiance to Putin in order to push some domestically driven agenda.

Reports out of Sweden relative to underwater activities indicate that Sweden is shifting away from its “neutral” stands and is heading to put some additional pressure on Putin. Should Sweden change stands as the recent evidence are starting to show, Ukraine tension might increase because it will leave President Putin without any example of neutrality Ukraine should be bind by. 

Comments by Swedish PM Lofven “[Sweden] have already say [it] will stay out of NATO” hint that the recent events are bringing the question back to the table (at least from the Russian prospective). The recent “tension” over military planes violating Estonia air space is another example of the fact that the situation is unlikely to settle before the beginning of next year.

Finally, U.S. is intensifying the pressure on Iran to move ahead with a deal, at a moment when Iranian media reported the dead of Ayatollah Mohammad Reza Mahdavi Kani, the head of Iran’s top clerical body after lying in a coma for months, leaving a gap in the only institution that has the authority to elect and dismiss the country's Supreme Leader. This does not create any short term change in the negotiation but it’s closing the window of opportunity for striking a deal. The fight between “hard-liners” and “conservatism” (supporters of Hassan Rohani) is likely to intensify going into 2016 election.

We continue to see only two possible outcomes: 1) Russia pursue its aggressive attitude and pushed for a separation of Ukraine at the expense of a full-fledge isolation, or 2) Russia opposition start to “challenge” President Putin to return to reforms. The second outcome is unlikely for now because intelligence from the ground is indicating that while the opposition is willing to change the trend, there is a serious lack of appetite to challenge President Putin be in openly or behind the scenes.

We foresee the situation to continue to deteriorate while Oil prices continue to plummet. Russian economy is likely to suffer a lot, while EU narrative is likely to change because the “communication war” which have been spurred by Russia and its supporters in the Western political groups is loosing traction.

 

FLOATING GAS TERMINAL ANCHORED IN LITHUANIA

TALLINN, Estonia (AP) — A giant floating natural gas terminal arrived Monday in the Lithuanian port of Klaipeda as the Baltic country tries to further reduce its reliance on energy supplies from Russia.

The South Korean-built 300-meter (984-foot) vessel — the size of an aircraft carrier — will be able to provide 4 billion cubic meters (141 billion cubic feet) of gas a year when it becomes operational, expected in December.

The three Baltic nations of Lithuania, Latvia and Estonia get all their natural gas from Russia and lack connections to the wider European pipeline system that would allow them to import from elsewhere.

Lithuanian President Dalia Grybauskaite said the terminal will be able to cover 90 percent of the gas needs of three countries, importing about 1 billion cubic meters of gas via the terminal in the first year of operation.

"We have become an energy-secure country," she said at a ceremony to welcome the arrival of the ship in Klaipeda, according to the BNS news agency.

Moscow's use of gas supplies as a means of putting pressure on Ukraine — like the Baltics, once part of the Soviet Union — has driven new urgency into projects to diversify sources. The Baltic countries have been among the swiftest in Europe to act to reduce dependence on Russia.

 

Lithuania Grabs LNG in Effort to Curb Russian Dominance

Lithuania is declaring natural-gas Independence.

After less than three years and spending of 350 million litai ($128 million), an off-shore liquefied natural-gas vessel is anchoring on the former Soviet republic Baltic coast today and will convert LNG into natural gas and pump the commodity to the mainland.

The aim is to free the country from its dependence on Russia’s OAO Gazprom (OGZD), the world’s largest gas supplier and the sole source for Lithuania. Years before the Ukraine conflict renewed fears of another winter gas shutoff from Russia, Lithuania requisitioned the Independence, a South Korean-made ship the length of three football fields. It is docking in the port of Klaipeda and may replace all Russia’s annual 2.7 billion cubic meters of gas supplies.

 

Snowden Receives Medal Commemorating Prominent Russian Intellectual

MOSCOW, October 27 (RIA Novosti) - Former NSA Contractor Edward Snowden has been awarded the Commemorative Medal for the "90 years since the birth of Alexander Zinoviev", a prominent Russian logician and social critique writer.

"Our biographical institute has decided to award the commemorative medal for the '90 years since the birth of Alexander Zinoviev' to Edward Snowden," the widow and director of the Zinoviev Biographical Institute said at an international scientific conference on Monday.

Zinovieva added that the decision was made considering Snowden's bravery, courage and civil acts that stand in line with the values of Alexander Zinoviev.

 

Moscow Suggests Holding 'Russia and Islamic World' Group Meeting Before End of 2014

MOSCOW, October 27 (RIA Novosti) - Russia's Deputy Foreign Minister Mikhail Bogdanov proposed Monday holding a meeting of "Russia and the Islamic world" group under the chairmanship of Tatarstan's president before the end of 2014.

"We would appreciate it if you agreed to participate in the work of this group, and we hope to hold the first meeting of the renewed group ["Russia and the Islamic world"] under Mr. Minnikhanov's [Rustam Minnikhanov, current president of Tatarstan – federal subject of Russia] chairmanship before this year's end," Bogdanov said at his meeting with Syria's Grand Mufti Ahmad Badreddin Hassoun.

 

US couple wants to refuse from adopted Russian children

An American couple intends to initiate a legal action to refuse from two children, whom they had previously adopted from Russia. According to the American citizens, the children suffer from a serious mental disorder.

According to The New York Post, the two children were adopted in April 2008. The spouses said in their lawsuit that agencies Spence-Chapin and Cradle of Hope that were in charge of all the paperwork for the adoption described children as "healthy and socially adapted." However, soon after the children (6 and 8 years of age) were adopted, it became clear for the adoptive parents, that the children had serious mental problems. The plaintiffs claim that the children repeatedly threatened to kill them.

Moreover, it turned out that the adopted children were not relatives, although the agencies said the opposite. The two children have been staying in a psychiatric center in the State of New York since 2012. It was ordered the children should remain under the constant supervision of doctors.

 

WTI Falls for Third Day as U.S. Supply Seen Rising; Brent Drops

Oct. 28 (Bloomberg) -- West Texas Intermediate fell for a third day amid speculation crude inventories increased to near a four-month high in the U.S., the world’s biggest oil consumer. Brent slid in London.

Futures dropped as much as 0.7 percent in New York. Crude stockpiles are forecast to have expanded by 3.8 million barrels to 381.5 million last week, a Bloomberg News survey shows before government data tomorrow. OPEC is unlikely to reduce its production target when it meets next month, said Mohsen Qamsari, a director for international affairs at National Iranian Oil Co., according to the Oil Ministry’s news service.

“It’s clear that the supply situation is at a record in terms of stockpiles, so it’s going to take some time to clear that excess,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone today. With OPEC, “the expectation is that they will announce a cut but the question is whether or not they will deliver on them.”

WTI for December delivery declined as much as 55 cents to $80.45 a barrel in electronic trading on the New York Mercantile Exchange and was at $80.70 at 1:06 p.m. Seoul time. The contract lost 1 cent to $81 yesterday. The volume of all futures traded was about 54 percent below the 100-day average. Prices are down 18 percent this year.

 

Hong Kong

 

Hong Kong take away:

Security chief Lai Tung-kwok yesterday attempted to lift the lid on "hate and violence" by Occupy protesters with a video of clashes with police - but found himself on the receiving end of a backlash amid accusations that he left out inconvenient events

We believe that the situation is likely to continue to ebb and flow between some “tension” and discussions with HK government. The IV-Plenum communique indicated, as we were expecting, that the Chinese government is moving ahead with an agenda which should please the Occupy movement in Hong Kong as well as in other countries: 1) improve governance, 2) crack down on Corruption, 3) introduction of the rule of law and 4) independence of justice. These steps are likely to help President Xi government to start finding a way out of the current “crisis”. While we consider the reforms path is pointing to the right direction, we consider that China can accelerate because the new normal is getting understood by the public, the business community though the financial markets are still lagging behind. President Xi might use HK as a platform for political reform experiment. In nutshell, we see Occupy and Umbrella Revolution to be a green shot toward helping government understand that accountability, democracy, and the rule of law need to be strengthened and that there is no other ways but political reforms.

 

Backlash after Hong Kong police release video of Occupy protesters’ ‘violent behaviour’

Security chief Lai Tung-kwok yesterday attempted to lift the lid on "hate and violence" by Occupy protesters with a video of clashes with police - but found himself on the receiving end of a backlash amid accusations that he left out inconvenient events.

Lai premiered the video - said to have been gleaned from clips found on the internet - to members of the Legislative Council's security panel. But panel members criticised him for using the meeting as a "tool of political propaganda".

The minister insisted the video was meant only to show lawmakers what had happened.

Before showing the film, Lai spent seven minutes telling lawmakers how "Occupy Central … deviated from its nature of civil disobedience" and failed to live up to its promise to act "with love and peace".

 

UPDATE 2-China reform credentials hit by HK-Shanghai bourse link fiasco

* Scheme had been expected to go live on Oct 27

* HKEx CEO says "not in loop" on timing

* Financial stocks hit on both bourses

* Adds to patchy record on China's financial reforms

HONG KONG, Oct 27 (Reuters) - The stalled link-up between the Hong Kong and Shanghai bourses hit financial stocks on both exchanges on Monday, left investors in the dark about the scheme's future and raised more questions about Beijing's patchy record on delivering reform.

The Stock Connect had been expected to go live on Monday, but banks and asset managers complained last week that the scheme rules were unclear, and on Sunday Charles Li, chief executive of Hong Kong Exchanges and Clearing Ltd , said it had not received regulatory approval.

That will have come as a blow to banks and brokers that have been hiring traders for what BNP Paribas has estimated could generate more than $3 billion a day in extra trading by giving outside investors direct access to mainland Chinese stocks.

 

Xi Jinping urges expansion of Shanghai FTZ across mainland

President Xi Jinping has urged policymakers to expand the Shanghai free-trade zone pilot scheme to other parts of the country, calling the zone the "seeds" of mainland economic reform.

Addressing the Communist Party's leading group for overall reform, Xi said lessons learned after more than a year of operating the FTZ in Shanghai could be applied to other areas, Xinhua reported.

"We should plant these seeds in more land so that flowers will blossom and fruits will be harvested as quickly as possible," he said, adding that the zones should eventually be expanded across the mainland.

The president's remarks followed media reports over the weekend that a plan to set up an FTZ in Tianjin had been endorsed by ministry-level regulators and was awaiting the State Council's go-ahead.

The mainland's first FTZ was launched in Shanghai in September last year as an experimental ground for more drastic economic reforms amid ambitions to develop the 29 sq km zone into a mini-Hong Kong.

 

Catalonia

 

Catalonia: referendum called off, Rajoy opened discussion to give more autonomy to Catalonia, Russia’s RT News is pressing Catalonian to revolt. We were expecting it and we add Catalonia to the numerous subjects were big data has proven its accuracy. However, any delay in negotiation between Catalonia and Madrid could reverse the tied. Unfortunately, many politicians have been used to procrastination and may try to promise reforms without delivering them. This time Spain has to face the reality: all over the world, the public awareness of “moral faults” has increased. Not solving Catalonia problem is giving more argument to the mistrust camp. It suffices that one sees the overwhelming indication that mistrust helps to radicalise the public, to conclude that procrastination would be responsible for public radicalisation. The Elite in Spain does not understand that the old days of the Spanish Monarchy without accountability is ending. They’re better get used to that and move forward. King Felipe-IV  said last Friday "These feelings rooted and shared from North to South and from East to West in our territory, we should never forget them, much less lose them," when addressing the annual Prince of Asturias Awards 2014. "On the contrary, we have to preserve and nurture them," he added.

 

We were saying “calls for independence referendum is increasing pressure on both Madrid and EU to move forward to offer better conditions and better narrative to the public. We see PM Rajoy taking constitutional actions to deter Catalonia from conducting the referendum, at a moment where more the referendum is gaining support from the independence forces all over the world. Madrid may accept to open discussion to devote additional autonomy to Catalonia in order to reduce the pressure. This story is likely to push EUR existential threat higher short term, but we consider that EUR is likely to rebound by the end of this year, when these threats will be repriced as less likely.” (daily briefing Sept. 30 2014). Catalonia decision to suspend formal campaign is the first step in our constructive scenario. However, Artur Mas uses the threat of going ahead with the referendum, though the constitutional court has specified that’s un-constitutional. This threat is urging PM Rajoy to act which he did in Saturday by opening discussion of some kind of PM Cameron solution to Scotland independence call (i.e. more fiscal autonomy). Catalonia government will decide by October 15 on whether to hold referendum. We see the most likely scenario to be some deal with Madrid which would : 1) help Artur Mas to claim victory - he would have secured more autonomy - and 2) help PM Rajoy to de-escalade the tension over Catalonia. We see the next region to start a fight for more autonomy to be Bavaria (Germany’s most wealthy region which is pushing Alternative fur Deutschland - AfD - anti-EZ party wants to reduce its contribution to other regions - “lazy” EZ members states, in their parlance -. Business interest (Football Clubs) are starting to indicate the cost of a secession. Novo-Russia continue to support Catalonia, as a secession could help justify Crimea. Many have been talking about war in the East, the War against Russia is also taking place in Catalonia. The relations between populists parties in EU and Russia speaks volume. Czar Putin should make no mistake EU is one and indivisible. Populism is a cancer, EU is recovering from it.

Spain Should Avoid Split: King Felipe VI

MADRID, October 25 (RIA Novosti) - The Spanish should remember that they are united by emotional ties, King Felipe VI of Spain said.

"These feelings rooted and shared from North to South and from East to West in our territory, we should never forget them, much less lose them," the king said Friday when addressing the annual Prince of Asturias Awards 2014. "On the contrary, we have to preserve and nurture them," he added.

The statement comes on the threshold of the independence referendum in Catalonia.

"We, the Spanish, are no longer rivals to each other," he added.

The focus of the king's speech at the annual Prince of Asturias Awards 2014, which is one of the most prestigious awards in Spain in scientific, technical, cultural, social, and humanitarian work, was on two main issues: the Catalan independence referendum and the continuous corruption scandals that have divided the Spanish society.

 

US midterms elections

 

US midterms elections:

November 4th midterm elections is coming with many uncertainties. Should GOP win the Senate, the US administration is likely to find itself stuck with a divided government which could make : debt ceiling, budget negotiation, Fed Transparency Bill negotiation, very hard. Some humorists have called the Tea Party caucus to be the “no-negotiators”. Without leaning toward a liberal Tea Party bashing, we would like to remind our readers of October 2013 debt ceiling talk. These period have created too much fear that the US might default that some Sovereign Wealth Funds (SWF) have been considering challenging the USD reserve currency privilege status. The average polls are giving 55% chance to the GOP to secure a win in the Senate. However, these polls do not track the weak signals narrative nor participation variable (a model we’ve built for Scotland Independence and which has proven a very good results). Koch donors story (politico here) is very interesting because it shows that Oil interest groups are busy trying to reduce the speed at which their wealth is evaporating. $1bn is the amount invested, hope that this investment does not include any link to gestures to destabilise the Homeland security. We are confident that private initiative such as Super Pac of Super Pacs (using public donation to cut interest groups campaign financing) would take over in the short term because Pension Funds and Investors will soon recognise that “Greed is NOT good” and better have a functioning democracy.

We continue to side with the consensus. But we consider that as soon as investors will start looking at the consequence of a GOP Senate majority win we might see some change in the dynamics. We have the opportunity to use a new source of big data information. We will be using it to bring the change in the narrative in the coming 3 weeks. Stay tuned and thanks for your support.

The recent polls which show a GOP turnout advantage, should be taken with a pinch of salt. The reason is that turnout is a very volatile variable and depend on the consequence of not showing in the polls. Countries differ in their reaction function to election. As a general view, the more a country struggles to get rights the more the public is fearing the return of any dark days and go to the polls. The more the media will focus on the fact that GOP are winning (with the consecutive effects) the more the voters might increase their turnout. We believe that this “reversibility of votes” is the “magic” bullet which might help save some efficacy for the second half of President Obama tenure as well as avoid an incredible economic headwinds (see here Ted Cruz agenda for GOP Senate). Should one add Senator Ted Cruz comments, those of Senator Rand Paul (which spur fear about Ebola), we might find ourselves in situation which would have many similarities to  Nero burning Rome (click here).

These are the reasons why we are less confident than many commentators in the US that GOP Senate majority is a given. The fear mongering is likely to play against GOP because it’s a sign of irresponsibility that a to-become-a-leader would cry to the wolf instead of tackling issues. Actually, GOP has tried to use the big data approach which helped Barack Obama to win twice the presidency. Unfortunately for the GOP the most social media active conservative are all from the tea party, Gold bugs ideological views. These are incapable of thinking of a negotiation because their aim is to destroy State. In that sense, we feel that they are very close to ISIL thinking.

 

DEMOCRATS LOOK FOR HOPE ON SENATE IN EARLY VOTING

ATLANTA (AP) — Registered Democrats have out-voted Republicans by double-digit margins among ballots cast early in two bitter Senate races, but the national political climate favors Republicans to take control of the chamber with a week to go before midterm elections.

Republicans remain optimistic on their overall momentum to wrest the Senate majority from the Democrats, and are looking to expand their majority in the House of Representatives. Such an outcome would make it difficult for President Barack Obama to achieve many of his legislative goals during the remaining two years of his term, from raising the minimum wage to immigration reform legislation.

Democrats pressed on aggressively with efforts to motivate key voter groups, banking on high turnout among their core supporters to outweigh their main weakness heading into the Nov. 4 elections: Obama's low approval ratings.

Senate Democrats unleashed a late-campaign round of attack ads Monday accusing Republicans in key races of harboring plans to cut Social Security pension benefits and the Medicare health program for the elderly. The ads appear aimed at older voters, who cast ballots in relatively large numbers in midterm elections and have tended to support Republicans in recent years.

 

McCarthy: GOP Congress leads to GOP president

Washington (CNN) -- House Majority Leader Kevin McCarthy tied his party's 2016 White House prospects to the election just one week away -- and how Republicans govern over the next two years.

Speaking at a fundraiser in Long Island this weekend, the No. 2 House Republican told donors that Republicans need to win back the Senate this year and govern effectively in Congress beginning in January to have a chance at seating a Republican in the Oval Office.

"If we don't capture the House stronger, and the Senate, and prove we could govern, there won't be a Republican president in 2016," McCarthy said, according to a Politico profile published Sunday.

McCarthy has privately estimated that the GOP has a 75 percent chance of retaking the Senate, according to the same report.

But it will be "tough" if those Senate odds don't prevail, McCarthy said.

 

U.S. midterm elections: The other player, the U.S. Supreme Court

It's easier to get Ebola in Texas than it is to vote.

That's the wisecrack going around since the U.S. Supreme Court decided to let Texas implement a new photo ID law for voters in next month's midterm elections, even though a lower court had struck down the plan as discriminatory and unconstitutional, a judgment that still stands, pending appeal.

It is the latest example of how the conservative majority on America's top court is overseeing the retooling of the country's election laws, generally to the benefit of the Republican Party.

Naturally, there is some interest in that, just as there is in the reverse proposition: how national elections will affect the court.

But first, the retooling.

The Texas law imposes the strictest photo ID requirements for voters anywhere in the U.S. and would apply to voters at both the federal and state levels.

 

CNN poll: Voters are angry

Washington (CNN) -- Nearly 7 in 10 Americans are angry at the direction the country is headed and 53% of Americans disapprove of President Barack Obama's job performance, two troubling signs for Democrats one week before the midterm elections, a new CNN/ORC International Poll shows.

Democrats are battling to try and save the Senate majority, while hoping to prevent more losses in the House, which the GOP controls by a 234 to 201 margin.

In the Senate, Republicans need a net gain of six seats, and several state polls in the past month of contested races show that Democrats are in danger of losing control of the majority, and thus Congress. Currently, Democrats control the Senate by a 55-45 margin with two of those seats held by independents that align themselves politically with Democrats.

 

The bad news about below $80 oil

Oil dropped below $80 per barrel on Monday morning, with important implications for production and jobs.

The most important issue for the markets is oil that dips below $80. Today, Goldman Sachs cut its West Texas Intermediate Crude target to $75 from $90. The investment bank also cut Brent crude to $85 from $100.

A few weeks ago Citi put out a report noting that the "full-cycle" costs (land, infrastructure, well drilling and operating costs) for many new shale plays is in the $70 to $80 range. That means that we are entering the area where some new shale plays will become unfeasible.

This has a bigger impact than just lower oil gas prices. Obviously, a lower gas price is good news. The bad news is the potential impact this could have on the other side of the ledger: jobs. The shale oil boom has been a significant help for the jobs market in the United States. A reduction in new drilling could have a significant impact on the booming energy industry.

 

OBAMA, IN LOW DEMAND, SUITS UP FOR GOVERNOR RACES

WASHINGTON (AP) — President Barack Obama is picking some temperate spots in an otherwise chilly political landscape to campaign in the final days before midterm elections, avoiding hostile Senate terrain in favor of tight governor races where his liabilities are less likely to stick to Democratic candidates.

With the Republicans all but certain to retain their majority in the House of Representative, control of the Senate is the biggest prize in the Nov. 4 election. But with Obama's approval ratings at the lowest of his presidency, Democrats in tight Senate contests have distanced themselves. One called him irrelevant; another refused to say whether she even voted for him.

With a week left before Election Day, Obama is fanning out to campaign in six states, betting that his last-minute appeals will mobilize core Democratic voters who have a history of sitting out midterm elections.

For Democrats and for the White House, it's the strategy with the lowest risk.

Each of the states — Wisconsin, Michigan, Maine, Rhode Island, Connecticut and Pennsylvania — went for Obama in his two presidential elections. That's in sharp contrast to the closest Senate races, most of which are in states Obama lost and where he remains highly unpopular.

 

US News

 

US other news: 

Oil prices have reached our second target $80 much quickly than anticipated. However, we consider that they’ll plateau in the short term at these level until Iran nuclear negotiations go through. In the case of success we might see prices resuming their downward trend. U.S. administration just started to take seriously numerous report of ISIL funding through Oil trade. The administration threatened to take sanctions measures against those who buy Oil from ISIL. This may create some tension with Turkey, unless President Erdogan uses this approach to go after Muslim Brotherhood groups.

Gasoline prices have collapsed reflecting the recent development in Oil prices. This reduces any inflation pressure the Fed could be fearing ahead of today and tomorrow FOMC.

We have been sharing last week an interesting paper on why ISIS excels at recruiting American teens. This trend is the most worrying while the terrorists propaganda based, on the Apocalypse and the spread view that “institutions are rotten to the core”, is gaining traction is more forums (libertarians blogs for example). I was puzzled by the number of blogs and how some Hedge Funds have been financing libertarians views although they repeat all of them the same information, data, reasoning etc. This become clearer with the recent rush to sell to small investors energy funds, while the overwhelming data and news are supportive to do the opposite. It’s frustrating that the US SEC does not protect sufficiently investors by requiring to check how these funds are sold. From a 20 years marketing experience in finance, I witnessed at least one case over two deals where the investor has not been given the full information although salesmen knew it. In a world where data are everywhere and the tools to make the sense of it are already very efficient and cheap, I do believe that financial institutions have better to be very cautious. As we have been saying many times: last time financial institutions suffers multi-billions sanctions, next time (if these do not take the genuine actions to improve governance and marketing practices) it may end up into jail time. I doubt that oil funds salesmen discussed with their clients the situation in Iran negotiation and how this could take the oil into another plunge.

The US has announced in Kuwait a new coalition called “Cyber coalition” which aims fighting the hiring which is taking place via social media and propaganda websites. Should the US use this coalition to cut ISIL from internet propaganda, the terrorist organisation is likely to lose its channel to hire new militants (specifically in the West).

Informations out of North Korea have proven our thoughts right: Kim Jong Un has personally ordered to free the M. Jowle. This is a weak signal that North Korea leadership is willing to soften its stands when its old partners are moving toward a new strategy. We see this development increasing the chances of a reunification with South Korea. This story should accelerate when President XI and PM Abe will meet and reduce the seemingly tension over the disputed regions.

 

Average gasoline price tumbles to lowest level in almost four years

The average price of regular gasoline at U.S. pumps slid to the lowest level in almost four years, dropping 18.2 cents in the two weeks that ended Friday to $3.08 a gallon, according to Lundberg Survey Inc.

Prices are 28.69 cents lower than a year earlier, according to the survey, which is based on information obtained at about 2,500 filling stations by the Camarillo company.

The average is the lowest since Dec. 17, 2010, as oil, which makes up 64% of the pump price, has fallen 24% from this year's peak in June. And prices could continue to fall.

"The crude oil price crash has been passed through by refiners," said Trilby Lundberg, president of Lundberg Survey. "Retailers will probably be pressed to pass through at the pump a few more pennies of price-cutting sometime soon."

The highest price for gasoline in the lower 48 states among the markets surveyed was in San Francisco, at $3.45 a gallon, Lundberg said. The lowest price was in Memphis, Tenn., where customers paid an average $2.73 a gallon. Regular gasoline averaged $3.33 a gallon on Long Island in New York, and $3.39 in Los Angeles.

 

US unveils coalition to fight Islamic state in cyberspace

KUWAIT Oct 27 (Reuters) - The United States on Monday unveiled what it called an information coalition with Muslim and Western nations to combat efforts by Islamic State to recruit online and stoke sectarian hatred through a "cult of violence".

U.S. officials told delegates from European and Arab countries at a meeting in Kuwait that this should complement parallel campaigns against the armed group on the battlefield and in the world of finance.

"There is a military coalition that is on the battlefield with Daesh (Islamic State) every day and from the very beginning the partners in the coalition ... felt that there should be an information coalition that complements the military coalition," U.S. Undersecretary of State for Public Affairs Richard Stengel told a news conference after the talks.

Worried by the growing threat from Islamist militants after the Islamic State in Iraq and the Levant (ISIL) captured large swathes of territory in Iraq and Syria in June, Washington has been working with regional and world powers to fight the militants militarily, financially and politically.

 

How Far Up Switzerland’s Biggest Bank Did U.S. Tax Evasion Scam Reach?

The secret binder lay wedged in a hidden drawer inside a filing cabinet in his office on the Bahnhofstrasse in Zurich, the heart of the world of Swiss private banking.

Martin Liechti, a former top private banker at Swiss bank giant UBS, privately called the binder his “CYA file,” a person briefed on the matter tells Newsweek. CYA was code for “Cover-Your-Ass” evidence Liechti had surreptitiously compiled—hundreds of incriminating emails, PowerPoint presentations, handwritten notes and spreadsheets—to show that other senior executives at UBS, including those at the very highest levels of the bank, were also aware of clandestine and illegal, under U.S. law, bank efforts to help tens of thousands of wealthy American clients evade U.S. taxes through secret offshore accounts.

Contents of the thick binder have spilled into the open in a highly unusual trial in a federal courtroom in Fort Lauderdale, Florida, key pieces of evidence that prosecutors have marshaled against Liechti’s former boss and friend, Raoul Weil, once the third-highest ranking executive at UBS.

 

FBI reportedly raids home of 'Second Snowden'

Federal authorities in the United States have reportedly set their sights on a government contractor suspected of being the source responsible for leaking documents in the aftermath of the unauthorized disclosures attributed to Edward Snowden.

Investigators recently raided the home of the individual, according to a report published on Monday this week by journalist Michael Isikoff, in accordance with a search warrant filed by federal authorities in the midst of an effort to identify the source of classified documents recently published by The Intercept — the online publication founded by Glenn Greenwald, the lawyer-turned-columnist who has worked for the last year-and-a-half on a trove of documents pilfered from the National Security Agency by Snowden, a former contractor for the American spy agency.

While Snowden, 31, identified himself as the source of the NSA leaks in June 2013 before federal prosecutors could out him, two reports published in recent months by The Intercept concerning the US government's use of “no-fly” watchlists suggested that a second, publicly unknown source within the intelligence community has colluded with Greenwald and company.

In “Citizen Four,” a documentary about the Snowden saga currently being screened at select theaters in the US, Greenwald and fellow Intercept journalist Jeremy Scahill acknowledge that a new source has provided the reporters with information in the wake of the NSA leaks.

 

Hillary Clinton backpedals on claim that businesses don't create jobs

(CNN) -- Three days after Hillary Clinton said businesses don't create jobs, she cleaned up the remark, part of a critique of trickle-down economics, explaining she had "shorthanded this point the other day."

Friday at a campaign rally for Massachusetts Democratic gubernatorial candidate Martha Coakley, the former secretary of state told the crowd, "Don't let anybody tell you that it's corporations and businesses that create jobs," going on to say trickle-down economics "has failed rather spectacularly."

Republicans seized on the sentence, seemingly made for an anti-Hillary Clinton campaign ad. America Rising, the main anti-Clinton super-PAC, is featuring it on the header of its website.

 

Europe News

 

EU other news: 

While the EU member states 2015 budget discussion is still on-going, France and Italy have offered some additional budget deficit cuts. We consider that these additional cuts are likely to be considered as sufficient in order to clear the way to accept the two countries budget proposal and move forward with the infrastructure investment program which intend to create more growth and ultimately reduce the high level of youth unemployment.

 

EU struck two important deals: 1) European Union leaders agreed early Friday to cut greenhouse gas emissions in the 28-nation bloc to at least 40 percent below 1990 levels by 2030 (while before the meeting Chancellor Merkel was indicating that the challenge was great and the negotiation would not be easy), 2) better coordination in the Ebola outbreak front (this is likely to provide the path toward so form of EU - CDC which would have to coordinate efforts -.

We have been indicating that we consider that EZ narrative has shifted to more positive dynamic. Indeed, an European Union accounting change has improved Cyprus’s public-finance outlook more than any other euro-zone nation, raising the prospects it will exit a bailout program ahead of schedule and sell bonds this year.

The Chancellor of the Exchequer is to promise to get up to half a million more women into the workplace as part of a new Conservative push on the economy and to regain women votes which have been defecting to other mainstream parties (Women voters are smart enough to not trust UKIP and populists parties according to polls analysis). PM Cameron at the other side of the spectrum is making “noise” against EU, in order to reduce the haemorrhage of Tories supporters defecting to UKIP. We find this approach dangerous and self-defeating although its the only political game PM Cameron could play at present. Indeed, the more PM Cameron criticised immigration and EU policies the more he increases his chances that the public will see in his the charismatic leader which stands out and secured a deal against EU bureaucrats. But while we believe that the negotiation has already taken place and the PM is trying to flex mussels to keep his political base, we consider that the negative rhetoric vis-a-vis immigrant coming from EU is dangerous because it could spur a reversal in the trend which started since Fmr. PM Margaret Thatcher. At that time, Britain was considered to be “eldorado” for Italian, Spaniards, French and Eastern European alike which re-allocate in Britain to create businesses, work and make a leaving. By criticising these “migrants” - some of them are british citizens now -, which have enriched Britain culture as well as its GDP, PM Cameron is threatening to reverse the flow of migration, while many Eurozone countries are genuinely embracing structural reforms and lacking stamina of the immigrant to create jobs, businesses and growth. We are surprised that PM Cameron does not out speak about oligarchs migration which have not brought only “clean” money and which, as it did in the south of France, have financed populist groups to hit EU hard when Russia is struggling geopolitically.

 

Vodafone Starts Audit Into Possible Tax Fraud at Ono Unit

Vodafone Group Plc (VOD) began an internal probe into possible tax fraud at Grupo Corporativo Ono SA, the Spanish cable operator it bought this year for 7.2 billion euros ($9.1 billion).

The mobile-phone carrier started “a forensic audit to investigate the facts relating to the alleged fraud” as soon as it became aware of the issue, Newbury, England-base Vodafone said yesterday, after El Pais newspaper reported the probe. Deloitte LLP is leading the investigation.

The alleged fraud occurred at Ono resellers who sold international call minutes in Spain and failed to declare value-added taxes, said three people familiar with the matter, who asked not to be identified because the details are private. Ono didn’t receive financial benefits and the probe doesn’t pose a threat to the acquisition, one of the people said.

 

Core euro zone government bond yields fall on weak German data

LONDON, Oct 27 (Reuters) - Peripheral euro zone government bond yields rose on Monday as a weak German sentiment survey prompted a shift to safer core debt, overshadowing relief that there were no unpleasant surprises from bank stress tests.

The results of the European Central Bank's Asset Quality Review, released on Sunday, showed that no major bank was in trouble, and those that failed had a relatively small capital hole to fill. 

Italy's performance, however, was poor with nine banks failing to meet the ECB's criteria, whereas Spain's banks got a clean bill of health.

 

Russia urges new Ukraine leaders to enter talks with rebels

Ukraine’s main pro-western parties are expected to launch coalition talks today, after dominating an election that swept from parliament most pro-Russian allies of former president Viktor Yanukovich.

With almost one-third of votes counted, the People’s Front of prime minister Arseniy Yatsenyuk had 21.7 per cent, a whisker ahead of the eponymous party of president Petro Poroshenko. In third place was the new Self-Reliance party, led by the strongly pro-EU mayor of the city of Lviv, which is close to the Polish border.

“In the shortest time we will form a coalition, so that the new government and parliament can effectively conduct reforms that are essential for the country,” Mr Yatsenyuk said.

 

UK formally ends combat mission in Afghanistan

(CNN) -- Britain formally ended its combat mission in Afghanistan on Sunday, lowering the Union Jack for the final time before handing over its last remaining base to Afghan forces.

"I made a commitment that I would get our Armed Forces out of Afghanistan by 2015, and today sees the end of combat operations in the country," Prime Minister David Cameron tweeted on Sunday.

American troops also took part in the ceremony at the Bastion-Leatherneck coalition base in Helmand province, marking the end of 13 years of UK military operations in the country.

Britain's military presence moved to Helmand in 2006 to tackle an insurgency together with troops from the United States and other countries. A total of 453 UK troops have died in service in Afghanistan.

"We will always remember the courage of those who served in Afghanistan on our behalf and never forget those who made the ultimate sacrifice," said Cameron.

 

Islamic State video places British hostage John Cantlie in Kobane

Washington: The Islamic State jihadist group has released a video showing a British hostage, apparently in Kobane, in a bid to disprove that it is losing the battle for the disputed Syrian town.

The video, the latest in a series featuring 43-year-old kidnapped reporter John Cantlie, shows him in a war-damaged town, talking to the camera and rejecting US claims that the "mujahideen" are in retreat.

There is no indication in the video of when it was shot, but Mr Cantlie refers to a news report that was broadcast by the BBC on October 17 and to remarks made by a US military spokesman on October 16.

Views of Kobane in the video include shots of a row of grain silos topped by a Turkish flag that correspond to some shown in maps of the area immediately on the other side of the frontier.

 

ECB Stress Tests Could Bring Bank Consolidation: Castagna

 

China News

 

China: 

Home prices fall for the fifth month in September. This confirms our view of the curent dynamics on hold in China: resilient labor market and export demand are helping the world’s second-largest economy weather a housing market downturn. At the same time, SOE (state own enterprises) have been suffering from: lower profits and investments. Furthermore, Chinese government has reported trainmakers merger as a step to improve efficiency and investment returns.

This is in line with the rebalancing objective to move away from the old growth drivers and focus on economic reforms. News out of the corporate sector shows that even in this field China is delivering the reforms announced (shift toward “Social Capitalism” model). 

As the economy continue to soft land, we see the Chinese leadership continuing to support governance improvement and crack down on corruption.  For example, Australian police have agreed to assist China in the extradition and seizure of assets of corrupt Chinese officials who have fled with hundreds of millions of dollars in illicit funds, the Sydney Morning Herald newspaper reported (see more below).

We believe that Chinese leadership will continue to drive the growth lower but smoothly to avoid triggering a hard landing chock. We see any stimuli to be small and targeted because the government continues to fear that the economic rebalancing has not taken momentum yet  although 1) labor intensive manufacturers are relocating in cheaper labor countries, 2) businesses are upgrading their business models [while becoming environmental friendly], 3) President Xi has conducted many trade - investment agreement with Neighbours (after Premier Li did the same in Africa) to secure investment projects which use Chinese manpower - engineers know-how in this domaine, 4) China is gaining more military presence and has fluxed it mussels - e.g. China “Top Gun” intercept by a US fighter jet -, 5) China has signed many RMB agreement which reinforce the currency usage and prepare its full liberalisation - after Free Trade Zones (FTZ) have proven to be a success -, 6) China has undertaken a genuine fight against bad governance and better regulation - many examples in our recent daily briefings of fight against corruption and bad governance-. 

While the recent decisions strengthen President Xi power, we foresee the first objective of the Chinese President to be rebalancing the Chinese economy while cooling the pressure which have developed in China (banking, housing etc.).

 

Reductions considered for capital punishment

Draft amendment under discussion drawn up to implement reform blueprint

China's top legislature is considering reducing by nine the number of crimes subject to the death penalty through revising the Criminal Law.

Among the nine crimes mentioned in a draft amendment being discussed at a session that started on Monday, five relate to economic misbehavior.

They are smuggling weapons and ammunition, smuggling nuclear materials, smuggling fake banknotes, counterfeiting banknotes and collecting funds through fraud.

The crimes of organizing prostitutes, forcing prostitution, hindering the enforcement of military duties, and spreading rumors during wartime would also not be subject to the death penalty, according to the draft.

The Standing Committee of the National People's Congress is due to deliberate on the bill during its bi-monthly session from Monday to Saturday.

According to the bill, if prisoners sentenced to the death penalty with a reprieve are found to have "gravely" violated the law during the reprieve period, they could be executed after a review by the top court.

Under current rules, if prisoners given the death penalty with a reprieve are found to have violated the law during the reprieve period, whether the violation is grave or not, they can be executed after a review by the top court.

 

China to keep closer eye on military spending

BEIJING - China intends to improve efficiency in military spending through tighter monitoring of how funds are used, state media reported Sunday.

Under the new ‘results-based management system’ set to be fully operational by 2020, individuals and military units will be held accountable for inefficiency, the state-run Xinhua news agency said. It cited what it described as a ‘circular approved by the Central Military Commission and made public on Sunday’. The General Logistics Department of the People's Liberation Army (PLA) approved the circular, Xinhua said.

Xinhua quoted Zhao Keshi, head of the department, as saying that the system would ensure that military spending effectively goes to improve combat capability. ‘The circular said modern warfare is based on huge consumption of money and materials, and cost-output management should always be an important consideration for the military,’ the report said.

 

China's legislature begins bi-monthly session

BEIJING, Oct. 27 (Xinhuanet) -- The Standing Committee of China's National People's Congress has started its bi-monthly meeting. The six-day session will focus on legal issues, including draft amendments to a number of laws and regulations.

On the agenda are a draft revision to the Administrative Procedure Law and a draft Counterespionage Law. The Counterespionage Law was formerly known as the National Security Law. The draft is expected to include new counterespionage rules that have been proven effective in practice, but are not written into the current law.

 

China Trainmakers CNR, CSR to Make ‘Major’ Announcement

 

China Government Said to Plan Merger of Two Biggest Trainmakers

Shares in CSR Corp. (1766) and China CNR Corp. (6199), the nation’s two biggest trainmakers, surged following a report the government wants them to merge. The two companies said no plans had been submitted.

 

CSR shares surged as much as 7.1 percent to HK$7.65 and traded up 4.3 percent at HK$7.45 as of 10:15 a.m. in Hong Kong. China CNR (601299) gained as much as 5.7 percent. Both shares resumed trading today after they requested a halt yesterday.

China’s State-Owned Assets Supervision and Administration Commission, or SASAC, is seeking the merger of the two companies to help the export of China’s high-speed railway technologies, Caixin reported on its website Sept. 3, citing people it didn’t identify. The proposal was still at an early stage because China Railway Corp. (1186), the state monopoly that owns the rail network, opposes the move, the report said.

 

Xi calls for new type of think tanks

BEIJING, Oct. 27 (Xinhua) -- Chinese President Xi Jinping called for a new type of think tank catered for China as the country looks to modernize its governance.

The Leading Group for Overall Reform headed by Xi convened its sixth meeting on Monday, with attendees reviewing a document on strengthening the construction of new think tanks with Chinese characteristics.

Xi said at the meeting that intellectual resources are the most important for a nation, playing a crucial role in governing a country successfully. The more arduous the reform, the more intellectual support is needed, according to a statement issued after the meeting.

Although think tanks in China are developing rapidly and making important contributions to reform and modernization, they have a hard time changing alongside rapid development. Currently, China lacks think tanks with great influence and international reputation, Xi said.

"Building a new type of think tank with Chinese characteristics is an important and pressing mission. It should be targeted on promoting scientific and democratic decision making, promoting modernization of the country's governing system and ability, as well as strengthening China's soft power," Xi said at the meeting.

The president said think tanks should be led by the Communist Party of China (CPC) and adhere to correct direction. They should also demonstrate Chinese characteristics and style. Think tanks should also abide by scientific spirit and encourage researchers to make explorations and study. Think tanks should also focus on the overall situation, Xi added.

 

China, Czech ink cooperation deals as president visits

BEIJING, Oct. 27 (Xinhua) -- China and the Czech Republic on Monday inked several deals on civil nuclear energy, finance, and medical treatment and public health, during Czech President Milos Zeman's China visit.

Bilateral cooperation is facing broad prospect. The two countries should cherish the current situation and ensure a continuous sound and stable development of ties, said Chinese President Xi Jinping.

Xi, in his talks with Zeman at the Great Hall of the People, hailed the development of bilateral ties since their establishment 65 years ago. He said the two countries should understand and respect each other's core interests and major concerns, strengthen high-level engagement and exchange of all levels, and enhance mutual trust.

The Czech Republic boasts unique strengths in aircraft manufacturing, green energy and environmental protection, while China has advantages in nuclear power, industrial parks and trade parks. The two countries should increase two-way trade and investment and expand reciprocal cooperation, Xi said.

He called on the two sides to strengthen cultural and personnel exchanges to deepen understanding and friendship. He also hoped the Czech Republic would play a bigger role in the development of China-Europe relations and cooperation between China and Central and Eastern European countries.

 

Australia News

 

Australia:  TPP deal is advancing well to clear the way to the move we’ve called in our Strategic Views WTO 2.0. Through the TPP, Australia is changing its beta to commodities, which have been the major driver for Australian assets pricing. We differ in our view from the consensus that Australia is rebalancing and moving away from the commodity delta one is has been for many year.

Consensus views assume that neither China nor Australia are conducting their rebalancing agenda. We do believe that the current weaknesses offers genuine opportunity to benefit from the other drivers to the Australian economy which are not related to commodities. We see the current Australian Dollar weakness to continue at least until the USD start to weaken again when markets will realise that it has beaten too much on a quick rate normalisation. Meanwhile, from our previous daily briefing, we have gathered sufficient support to the view that the drivers of the Australian GDP are moving toward: 1) education, health and finance services provider to Asian neighbours, 2) innovation and digital sector, 3) energy resources export to Japan (the later contributes to our constructive view that the current negative Japan Energy Trade deficit will rebalance in the medium term - reducing Japanese Government bonds solvency risk - ).

 

Australia shuts borders to Ebola-affected countries

Australia has temporarily closed its borders to people from Ebola-affected west African nations as it steps up the nation's defences against the virus.

Immigration Minister Scott Morrison told parliament on Monday Australia had suspended its immigration program, including its humanitarian intake, from Ebola-affected countries including Liberia, Sierra Leone and Guinea.

"This means we are not processing any application from these affected countries," Mr Morrison said.

Mr Morrison added Australia was cancelling or refusing non-permanent or temporary visas for people from Ebola-affected nations who had not departed for Australia.

He said the government was ensuring that all people from Ebola-affected nations who had entered Australia through the humanitarian program before the suspension had undergone three separate health checks before their departure, and were being subject to on-arrival screening and post-arrival monitoring.

 

Labor has turned back on boat policy: govt

Immigration Minister Scott Morrison has accused Labor of turning back its policy on asylum seeker turn-backs.

But the opposition's immigration spokesman, Richard Marles, says neither his nor his party's position on the policy has changed.

He conceded on the weekend the government's policy of turning asylum seeker boats around on high seas had stopped people coming, in conjunction with the offshore processing and regional resettlement deals that Labor set up.

Mr Marles said Labor was still worried about the safety of turning the boats back, and how the policy affected Australia's relationship with Indonesia - but Labor might consider supporting the policy if Indonesia did.

"He has discovered the sun rises and that turn-backs actually work," Mr Morrison told parliament on Monday.

But Mr Marles said nothing was different.

 

Pan-Pacific trade pact taking shape: Australia

Australia's Trade Minister Andrew Robb said Monday the shape of an ambitious pan-Pacific trade agreement was "crystallising", with the 12 nations involved making further progress on market access negotiations.

Robb said at the end of the three-day talks in Sydney that trade ministers had laid the groundwork for the conclusion of the Trans-Pacific Partnership (TPP) deal, which would encompass 40 percent of the global economy.

"Over the course of our weekend meeting, we have spent a considerable portion of our time in one-on-one discussions," Robb, who is hosting the Australian-leg of the discussions, said in a statement Monday.

 

Australian teenager features in second IS video

CANBERRA, Australia (AP) — An Australian teenage runaway, dubbed the Ginger Jihadist by the media, has been featured in a second Islamic State propaganda video.

Australian media reported the latest YouTube video of 17-year-old Abdullah Elmir dressed in Arabic garb and clutching an assault rifle on Tuesday as the Senate prepared to debate legislation that would simplify prosecuting Australian extremists who fight in the Middle East.

Abdullah vanished from his Sydney home in June, telling his family he was going fishing.

He appeared in his first Islamic State video last week warning that the movement won't stop fighting until the extremists' notorious black flag is flying above every nation.

In the latest video, the son of an Australian-born mother and Lebanese father is surrounded by dozens of black-clad jihadists on a bank of the Tigris River in Mosul in Iraq, News Corp. Australia newspapers reported.

 

CSL to acquire Novartis' influenza vaccine business

MELBOURNE, Australia, Oct. 27, 2014 /PRNewswire/ -- CSL Limited (ASX:CSL; USOTC:CSLLY) today announced that it has agreed to acquire Novartis' global influenza vaccine business for US$275 million. The business will be combined with CSL's subsidiary, bioCSL.

 

Combining bioCSL's existing influenza vaccine operations with the Novartis business will create the number two global player in the US$4 billion global influenza vaccine industry, with manufacturing plants in the US, UK, Germany and Australia, a diversified product portfolio and strong pre-pandemic and pandemic franchises in its major centres of operation. The combined business will have a strong growth profile and is expected to achieve sales approaching US$1 billion per annum over the next 3 to 5 years.

The Novartis influenza vaccine business is one of the largest in the world, with net sales in the 12 months to 31 December 2013 of US$527 million. The business has state-of-the-art manufacturing facilities and a diversified, late stage product pipeline.

CSL Managing Director and Chief Executive Officer, Mr. Paul Perreault, today said, "The Novartis influenza vaccine business provides bioCSL with a global leadership position in an attractive sector we understand intimately. It will transform bioCSL by giving it first class facilities and global scale as well as product and geographic diversity.

 

Trans-Pacific trade deal firming

A landmark deal covering a significant proportion of the world's trade has inched closer to reality, despite ongoing divisions between Japan and the United States at talks in Sydney.

Now into its fourth year of negotiations, the Trans Pacific Partnership (TPP) will cover almost 40 per cent of the world's economies and set boundaries for global commerce between 12 countries, including Australia.

"I have felt that the entire focus has gone up several notches," Trade Minister Andrew Robb said following three days of meetings in Sydney.

"There is a real sense we are within reach of the finish line and the prize looks very attractive.

"But with these types of agreements, nothing is decided until everything is decided."

The TPP will cover countries with a combined GDP of about US$27,750 billion.

But one issue that needs sorting out is market access between the US and Japan.

Akira Amari, Japan's state minister in charge of TPP talks, said there was still a gap between the countries over access to Japan's protectionist agriculture sector.

 

 

 

Japan News

 

Japan: 

Japanese retail sales growth accelerated for the third straight month in September in an encouraging sign that consumer spending could be strong enough to absorb a second sales tax increase scheduled for next year. Retail sales improvement is clearing the way for PM Abe administration to move ahead, after economic assessment, to hike the VAT for a second time (though we continue to believe that the second hike will come in small steps). Governor Kuroda support to financial institutions to continue buying JGBs, while the administration is improving the Government solvency are genuine steps to rebalance the Japanese economy without trig erring a JGB solvency crisis (many vigilantes have been playing this year).

The recent news out of TPP negotiations indicate that Japan continue to be committed to de-regulate its economy to improve potential growth (which have been lacking due to total factor productivity stagnation and ageing population).

Japan warned on Friday that a volcano in southern Japan located roughly 64 km (40 miles) from a nuclear plant was showing signs of increased activity that could possibly lead to a small-scale eruption and warned people to stay away from the summit. This signs are increasing the pressure on the PM Abe administration to consider all routes (specifically the TPP) which could help bring down Japan energy trade deficit without counting too much on reopening of the nuclear plants. These measures include Trade Partnership which could secure Japan energy, but at the other hand Japan has to agree to changes in behaviour requested by the Green party in Australia which would be instrumental to clear the TPP. We consider that accepting a much tough regulation on Whales hinting or presenting apology for “confort women” is an acceptable price to pay to secure the Japanese economy from sovereign solvency risk.

North Korea decision to free Jeffrey Fowle, a US Citizen, is a positive indication that the relations with NK are improving in what we see as first genuine steps toward a reunification solution which would involve China, South Korea and Japan. We see the next China - Japan summit (discussed by FinMin Aso in Finance APEC Summit) as instrumental for reducing the tension between the two countries and to move ahead with reunification talks.

 

UPDATE 1-Japan retail sales growth accelerates, offering signs of recovery

* Sept retail sales +2.3 pct yr/yr, vs f'cast +0.6 pct

* Politicians worry sales tax hikes could hurt economy

* Take hikes needed to improve budget deficit

TOKYO, Oct 28 (Reuters) - Japanese retail sales growth accelerated for the third straight month in September in an encouraging sign that consumer spending could be strong enough to absorb a second sales tax increase scheduled for next year. The 2.3 percent annual rise blew past a 0.6 percent increase expected by economists in a Reuters poll and marked the biggest gain since March. It followed a 1.2 percent rise in August. Consumer spending has disappointed since the government raised the sales tax once in April, so evidence that a durable turnaround is imminent could make it easier for Tokyo to go ahead with a second hike in the tax to boost revenue for welfare spending. Rebounding consumer spending is also a welcome sign for the Bank of Japan, as it tries to guide inflation to 2 percent some time next fiscal year to eliminate the risk of Japan falling back into deflation. "The recovery in consumer spending is gaining pace because demand is improving," said Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities. "Things are finally improving. Consumer spending will make a positive contribution to third-quarter gross domestic product." Retail sales accelerated due to gains in apparel, food and beverage sales, data released by the Ministry of Economy, Trade and Industry showed on Tuesday. An adviser to Prime Minister Shinzo Abe has been arguing that the government should delay a second increase in the sales tax to 10 percent from 8 percent scheduled for October 2015 as the economy is not strong enough. The government has already raised the nationwide sales tax to 8 percent from 5 percent on April, as part of a two-stage plan to ease pressure on the national budget. Abe has to decide by year-end whether to proceed with the second tax hike to curb Japan's mammoth debt burden, which at more than twice the size of its economy is the worst in the developed world. A recent run of weak data on factory output and exports prompted the government to cut its economic assessment for two consecutive months, raising speculation that it may roll out more stimulus spending or push back the second tax increase. People familiar with its deliberations said the BOJ is preparing to roughly halve its 1 percent economic growth forecast for this fiscal year at a meeting on Oct. 31 but stand pat on policy and its prediction that inflation will hit its 2 percent target in the year from next April.

 

"TPP ministers left with hurdles before clinching a deal"

SYDNEY, Oct. 27 (Kyodo) −− (EDS: TO BE UPDateD)

Ministers from countries engaged in a Pacific Rim free trade initiative will wrap up a three−day

meeting Monday in Sydney with contentious issues still remaining to be resolved.

Japan and the United States, the largest economies in the Trans−Pacific Partnership, held talks

Monday on the sidelines of the plenary session but failed to secure a much−awaited bilateral

agreement seen as vital to advance the broad 12−country negotiations.

After meeting with U.S. Trade Representative Michael Froman, Akira Amari, Japan's minister in

charge of the TPP, told reporters the ministers are expected to meet again in Beijing in November

on the sidelines of the Asia−Pacific Economic Cooperation forum's summit and that he plans to

resume talks with Froman then.

U.S. President Barack Obama said he wanted a document adopted on the ambitious free trade pact

in time for his trip to the Chinese capital. But a lack of progress during the latest ministerial

gathering, the first since May, clouds the goal of striking a broad deal by the end of the year.

"The problems left are extremely difficult and we cannot solve them easily," Amari told reporters.

Asked about whether a TPP summit meeting will also take place in November in Beijing, Amari said nothing has been discussed yet.

Bickering between Japan and the United States over tariffs as well as auto trade issues has been

one of the biggest sticking points in the ongoing negotiations for the TPP, which encompasses

some 40 percent of global output.

 

Kuroda Rewards Dealers Playing Negative-Yield Game: Japan Credit

The Bank of Japan is making it lucrative for financial companies to buy government bills at negative yields, by purchasing them at a premium within days of the auction.

The Ministry of Finance’s auction of 5.7 trillion yen ($53 billion) in three-month treasury discount bills on Oct. 23 had a record-low yield of minus 0.37 basis point as buyers paid 100.0010 yen on average for debt that matures at 100 yen. The BOJ offered to buy similar-maturity securities the following day at about minus 1.5 basis points.

Central bank Governor Haruhiko Kuroda’s strategy of expanding cash in circulation plus bank reserves by as much as 70 trillion yen annually is allowing the government to get paid to borrow for the first time. The dearth of short-term debt in the market prevented the BOJ from reaching its target for bill purchases earlier this month, spurring speculation its buying of longer notes will increase and push yields to record lows.

 

BOJ to release price outlook this week

Policymakers at the Bank of Japan are due to release their latest economic outlook this week. They'll give their views on whether the bank's 2-percent inflation target is achievable, amid signs that the economy is weakening.

The BOJ will compile its outlook report at a policy meeting on Friday. The document is updated every 6 months.

This time, the policymakers are expected to downgrade their growth projections for the current fiscal year, from one percent to just below that level.

This is due to slow recovery in personal consumption following the consumption tax hike in April, and slower-than-expected improvements in exports.

Policy board officials will also discuss how consumer prices may be affected by the recent slow growth and the decline in crude oil prices.

 

'Comfort women' urges Japan to apologize as survivors' time running out

TOKYO - Almost seven decades have passed since the end of World War II, and for a group of women who suffered from Japanese wartime atrocities, their tough fight for dignity is compounded by ongoing fears that time left for them to witness justice is fleeting.

The women, who were forcibly abducted and served to Japanese soldiers in brothels run by the Japanese Imperial Army during the war in countries and regions occupied by Japan, are known as "comfort women", and most survivors right now were mainly teenagers at that ruthless time.

The comfort women issue always remains headline news both here and in victim countries, as the government here has spared no effort to whitewash the wrongdoing with its tricky wording on the world-recognized "Kono Statement" that offers an official apology to the victims.

The latest case was Chief Cabinet Secretary Yoshihide Suga saying recently that no evidence can be found to prove the comfort women were "forcibly recruited" and the government does not recognize then Chief Cabinet Secretary Yohei Kono's words accepting "forcible recruitment" during a press briefing after the release of the 1993 Kono Statement.

 

"Japan mission departs for N. Korea to scrutinize abduction probe"

BEIJING, Oct. 27 (Kyodo) −− A Japanese government delegation left Beijing on Monday for a

four−day visit to North Korea to assess Pyongyang's investigation into the fates of Japanese

nationals abducted decades ago.

In talks with North Korea's special investigation committee on Tuesday and Wednesday in

Pyongyang, the delegation will try to obtain information on 12 unaccounted for Japanese abductees

recognized by Tokyo.

Prime Minister Shinzo Abe places top priority on advancing the abduction issue rather than the

North's probe into other missing Japanese such as the wives of pro−Pyongyang Korean residents of

Japan who moved to North Korea under a 1959−1984 repatriation project.

Even if the committee presents information on missing Japanese other than the abductees, Japan

will not regard it as a first report on the investigation that North Korea was due to release sometime

from late summer to early fall, according to Japanese officials.

It is not yet known whether the mission, led by Junichi Ihara, director general of the Asian and

Oceanian Affairs Bureau of the Foreign Ministry, will meet with So Tae Ha, chairman of the

committee.

 

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