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18 июня, 16:24

Trump: "The People Of Germany Are Turning Against Their Leadership"

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Moments after Angela Merkel received a 2-week ultimatum to resolve Germany's increasingly contentious refugee issue, Donald Trump decided to capitalize on Merkel's misfortune, and in a tweet claimed that "the people of Germany are turning against their leadership as migration is rocking the already tenuous Berlin coalition. Crime in Germany is way up. Big mistake made all over Europe in allowing millions of people in who have so strongly and violently changed their culture!" The people of Germany are turning against their leadership as migration is rocking the already tenuous Berlin coalition. Crime in Germany is way up. Big mistake made all over Europe in allowing millions of people in who have so strongly and violently changed their culture! — Donald J. Trump (@realDonaldTrump) June 18, 2018 Trump, who is currently on the receiving end of a full court media press for his decision to separate migrant children from their parents at the border, which is what the "Russian collusion" attack narrative has pivoted to in the aftermath of the humiliating for the FBI OIG report, then took it up a notch and said that "we don’t want what is happening with immigration in Europe to happen with us!" We don’t want what is happening with immigration in Europe to happen with us! — Donald J. Trump (@realDonaldTrump) June 18, 2018 As we reported earlier, CSU hardliners in Merkel's conservative bloc on Monday gave her a two-week ultimatum to tighten asylum rules or risk pitching Germany into a political crisis that would also rattle Europe. Interior Minister Horst Seehofer's CSU party at a meeting unanimously backed his call to give Merkel a fortnight to find a European deal on the burning issue by a June 28th-29th EU summit, failing which he would order border police to turn back migrants. Merkel's woes come as European Union countries are once again at loggerheads over immigration, triggered by Italy's refusal this month to allow a rescue ship carrying 630 migrants to dock. As The Local noted previously, Merkel now faces the challenge of persuading EU governments to sign up to a common plan on the migrants. Central and eastern EU nations such as Hungary and Poland have either refused outright or resisted taking in refugees under an EU quota system. A populist-far right government in Italy and the conservative-far right cabinet in neighbouring Austria have also taken an uncompromising stance. Merkel's talks later Monday with Italian Prime Minister Giuseppe Conte in Germany could prove crucial if she is to have any chance of forging an agreement in Brussels. On Tuesday, she will also meet French President Emmanuel Macron in Germany. Berlin is also reportedly preparing to call a meeting between Merkel and the leaders of several EU frontline nations in the migrant crisis ahead of the EU summit. "It would be almost a miracle if she emerges a winner from the next EU summit," Welt daily said. But the chancellor may have no choice, as Seehofer could still launch the nuclear option of shutting Germany's borders in defiance of her - an act of rebellion which would force her to sack him. That "would be the end of the government and the alliance between CDU and CSU," a CDU source told Bild.

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18 июня, 16:12

Onward To Stock Market Nirvana... Or Not

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Authored by Charles Hugh Smith via OfTwoMinds blog, Rising wedges tend to lead to declines, so ignore them. At long last, we have reached the Nirvana of consensus: the stock market is heading to new all-time highs. Even the perma-Bear camp seems to have accepted the inevitability of new all-time highs ahead: The FANG stocks are hitting new highs, the Russell 2000 Small-Cap Index is hitting new highs, and the laggard S&P 500 is sure to catch up to its peers, as it climbs the ladder of higher lows. Once again we've reached the Nirvana of ever-higher stock valuations. Or not. That troublesome kid watching the naked Emperor ride past in his imaginary finery keeps muttering about rising wedges. Consider the Russell Small-Cap Index (RUT): The Raging Bull of the FANG stocks, Netflix: The S&P 500: And the so-called "fear index," the VIX, reduced to the Nirvana of complacency and supreme confidence: The Nirvana of January--super-low VIX and an ever-rising stock market-- was disrupted by an unwelcome eruption of reality. The beaten down VIX traced out a couple of blue wedges before the eruption, but let's ignore them. What matters is order was restored to the Universe by the triumph of complacency and confidence as the VIX was ground down to sub-12 levels again. Rising wedges tend to lead to declines, so ignore them. Never mind their ubiquity-- Nirvana blasts right through resistance and rising wedges. The faithless few might be troubled by the similarities of late January to the present, but the faithful have supreme confidence in the Fed, the tremendous bite of the FANGs and the all-powerful forces of greed and complacency--a marriage made in heaven! Here's a look at the real Nirvana: the income and wealth gains of the top .1%. Debt-serfs "own" nothing but debt, the Technocrat class shouldering student loans and mortgages keeps the machine running by working themselves to exhaustion, and the speculative class skims virtually all the gains. Stock market Nirvana feeds wealth/income inequality Nirvana. *  *  * My new book Money and Work Unchained is $9.95 for the Kindle ebook and $20 for the print edition. Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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18 июня, 15:58

Key Events This Week: Sintra Jawboning Orgy, PMIs And Non-Stop Central Bank Speakers

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Following what was widely dubbed as "the most important week of the year", which saw major announcements by both the Fed and ECB, things slow down sharply but central banks remain in the spotlight again with the ECB's Forum on Central Banking due to take place in Sintra, with speakers including Draghi, Powell and Kuroda amongst others. We'll also have the BoE policy meeting, while the other potentially big event for markets is a likely contentious OPEC meeting in Vienna where ministers are due to discuss a possible lift in output. Global flash PMIs at the end of the week is likely to be the big data highlight. In the US, newsflow slows down, with the Philly Fed mfg index expected to moderate in June, but still remain at elevated levels. On the flip side, May housing starts and existing home sales are expected to rebound. Fed Presidents Bostic and Williams, and Fed Chair Powell speak next week. We will listen for clues around their views on the path of policy. Bostic likely remains a 3-hiker for 2018, while Williams and Powell may both be at 4. * * * In its preview, Deutsche Bank - the bank which has the most to lose from Draghi's ongoing dovish crusade as it will keep yield curves subdued for the next year - writes the ECB's Forum on Central Banking which runs from Monday to  Wednesday in Sintra is likely to be the big event for markets. Remember that it was this time last year that bond yields rose sharply higher when Draghi signaled that the ECB was poised to phase out its economic stimulus measures. In terms of the agenda itself, on Monday evening President Draghi will deliver opening remarks followed by a speech from former US Secretary of State Lawrence Summers. On Tuesday morning Draghi will then make the introductory speech, before board member Peter Praet speaks in two separate panels, the second including the Fed's Bullard and ECB's Lane. Finally on Wednesday we'll hear from ECB board member Sabine Lautenschlager in the morning and then Benoit Coeure. The main event might well come on Wednesday afternoon however when we get to watch a policy panel featuring Draghi, Fed's Powell, BoJ's Kuroda and RBA's Lowe. However, as Jim Reid writes elsewhere, chances are that coming so close after the big ECB meeting, it’s unlikely to have the same impact on markets as it did this time last year when Draghi announced that the ECB was ready to start phasing out extreme monetary stimulus. However it’s a true A-list gathering of Central Bankers that makes the casting agents of Ocean’s Eleven look like they ran out of money. As such headlines will be aplenty. Meanwhile, we'll have to wait until Friday to get the main data point for the week when the flash June global  PMIs will be out. The data includes the manufacturing print in Japan along with all three services, manufacturing and composite readings in core Europe and the US. In terms of what to expect, the composite print in the Eurozone is expected to more or less hold steady at 54.0 (versus 54.1 in May which as a reminder was the lowest since November 2016). The manufacturing reading is expected to fall to 55.0 (which would be the lowest in 18 months) from 55.5 and the services print stay relatively unchanged at 53.7. For the US, the manufacturing and services readings are expected to hold steady at 56.3 and 56.8 respectively. As for central banks, the BoE meets on Thursday although no change in policy is expected. The market will likely be most interested in the Bank's take on recent economic data however, although this is not a meeting which contains new BoE economic projections. Later on Thursday Governor Carney is also due to make his Mansion House speech. In terms of other data to watch next week, its fairly quiet in the US with May housing starts and building permits on Tuesday, June Philly Fed business outlook and May leading index on Thursday the highlights. In the UK May public finances data is out on Thursday while in Japan the May CPI report is out on Friday. Fedpseak wise we're due to hear from departing NY Fed Chief Dudley on Monday when he speaks at a conference on reforming bank culture. His successor, Williams, will then deliver closing remarks at the same conference in the evening. The Fed's Bostic is also due to speak at a conference on Monday evening on the subject of the economic and monetary policy outlook. Over at the ECB, outside of Sintra, Villeroy is due to speak on Wednesday and Thursday along with Weidmann and Nowotny (also both Thursday). Meanwhile the Oil market should get its turn in the spotlight next week when we have the meeting of OPEC ministers and partners in Vienna on Friday. The meeting is due to be used to discuss whether or not to restore the oil output that was halted last year and is scheduled to continue into Saturday although OPEC ministers and CEOs of major energy firms are also due to gather from Wednesday so there are the potential for headlines from then. Bloomberg expects the contentious meeting to result in the cartel lifting its production by 600k barrels a day. With regards to other potentially important things to look out for next week, on Monday the Brexit withdrawal bill passes to the House of Lords, while German Chancellor Merkel is due to meet new Italy PM Conte in Berlin. Then on Tuesday Merkel is due to meet France President Macron with talks expected to focus on strengthening the Euro area. Elsewhere the Fed’s results from its 2018 bank stress tests will be out on Thursday while EU finance ministers are also due to gather in Luxembourg to meet to conclude Greece’s debt relief deal and a post bailout surveillance mechanism. * * * Weekly preview of events by day, courtesy of Deutsche Bank Monday: The most significant event on Monday is the start of the ECB's Forum on Central Banking in Sintra (continuing until Wednesday), with President Draghi due to make opening remarks in the evening. Away from that, the Fed's Dudley and Williams are all due to speak while datawise in the US the NAHB housing market index reading is due for June. In the UK house price data is due and in Japan May trade stats are due. Finally the Brexit withdrawal bill passes to the House of Lords on Monday and Germany Chancellor Merkel meets new Italy PM Conte. Tuesday: The ECB Sintra conference will feature comments from President Draghi again, along with Board Member Praet and Governor Lane. The Fed's Bullard is also due to take part. Away from that the only data of note is the Euro area's current account balance reading for April and US housing starts and building permits for May. It's worth noting that Germany Chancellor Merkel will also meet France President Macron on Tuesday. Wednesday: Concluding the ECB conference will be comments from Board Members Lautenschlager and Coeure, along with a policy panel featuring President Draghi, Fed Chair Powell and BoJ Governor Kuroda. Away from that BoJ meeting minutes will be out overnight, while Germany PPI for May, UK CBI selling prices data for June and May existing home sales in the US will be released. Away from that the OPEC International Seminar is due to begin in Vienna. Thursday: The main focus on Thursday will be the BoE meeting at midday. Governor Carney will hold a press conference and then later in the evening is due to make his Mansion House speech. Data releases on Thursday include June confidence indicators in France, May public sector net borrowing data in the UK, June confidence indicators for the Euro area, along with weekly initial jobless claims, June Philly Fed business outlook, May leading index and April FHFA house price index readings in the US. The ECB's Villeroy de Galhau and Nowotny are also scheduled to speak along with the Bundesbank's Weidmann. Elsewhere the Fed's 2018 bank stress test results will be released, while Thursday also marks the deadline for Greece's debt relief deal. Friday: The big data highlight on Friday is the release of the flash June PMIs around the world. In Japan the manufacturing reading will be released while in Europe and the US we'll receive the manufacturing, services and composite prints. Away from that the May CPI report in Japan will be released and the final Q1 GDP revisions will be made in France. The Oil market will also be in focus with the OPEC meeting in Vienna (continuing into Saturday). * * * Finally, here is a breakdown of just US events, along with consensus estimates, courtesy of Goldman: The key economic release this week is the housing starts report on Tuesday. There are several scheduled speaking engagements from Fed officials this week. Federal Reserve Chairman Jerome Powell will be speaking on Wednesday. Monday, June 18 08:00 AM New York Fed President Dudley speaks: Outgoing New York Fed President William Dudley will give opening remarks at a conference on reforming bank culture. 09:00 AM New York Fed President Dudley speaks: Outgoing New York Fed President William Dudley will participate in a panel discussion on “Finance, Culture, and Society.” 10:00 AM NAHB housing market index, May (consensus +70, last +70) 01:00 PM Atlanta Fed President Bostic (FOMC voter) speaks: Atlanta Fed President Raphael Bostic will speak on the economic and monetary policy outlook and participate in a Q&A session for both the audience and press. 01:00 PM New York Fed President Williams (FOMC voter) speaks: Incoming New York Fed President John Williams will give closing remarks at a conference on reforming bank culture. Tuesday, June 19 08:30 AM Housing starts, May (GS +2.5%, consensus +2.0%, last -3.7%); Building permits, May (consensus -1.0%, last -1.8%): We estimate housing starts rebounded 2.5% in May, retracing much of the 3.7% April decline. We expect a favorable swing in the weather to boost construction activity, and we believe single-family construction fundamentals remain solid. 01:00 PM St. Louis Fed President Bullard (FOMC non-voter) speaks: St. Louis Fed President James Bullard will participate in a panel discussion on the “Macroeconomics of Price and Wage Setting” at the European Central Bank’s Forum on Central Banking in Portugal. Wednesday, June 20 08:30 AM Current account balance, Q1 (consensus -$129.0bn, last -$128.2bn) 09:30 AM Fed Chairman Powell (FOMC voter) speaks: Federal Reserve Chair Jerome Powell will participate in a panel discussion on “Monetary Policy at a Time of Uncertainty and Tight Labor Markets” at the European Central Bank’s Forum on Central Banking in Portugal. There will be prepared text and audience Q&A. 10:00 AM Existing home sales, May (GS flat, consensus +1.4%, last -2.5%): We look for unchanged existing homes sales in May based on softer regional housing data, following the 2.5% pullback in April. Existing home sales are an input into the brokers' commissions component of residential investment in the GDP report. Thursday, June 21 08:30 AM Initial jobless claims, week ended June 16 (GS 225k, consensus 220k, last 218k); Continuing jobless claims, week ended June 9 (consensus 1,712k, last 1,697k): We estimate initial jobless claims rose 7k to 225k in the week ending June 16. Claims look depressed in California and Florida, and we note that the timing of auto plant shutdowns could modestly boost claims in the upcoming report. Consensus expects continuing claims—the number of persons receiving benefits through standard programs—to rebound 15k to 1,721k. 08:30 AM Philadelphia Fed manufacturing index, June (GS +32.0, consensus +29.0, last +34.4): We estimate that the Philly Fed manufacturing index declined by 2.4pt to 32.0 in June, following a sharp 11.2pt increase in May. Incoming manufacturing surveys so far indicate continued expansion in the business activity in June, so we expect a still-elevated reading this month. 09:00 AM FHFA house price index, April (consensus +0.5%, last +0.1%) Friday, June 22 09:45 AM Markit Flash US manufacturing PMI, June preliminary (consensus 56.3, last 56.4) 09:45 AM Markit Flash US services PMI, June preliminary (consensus 56.7, last 56.8) Source: BofA, DB, Goldman

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18 июня, 15:29

"Blow For Blow" US-China Trade Spat Expected To Become "War Of Attrition"

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Every investor and fund on Wall Street is trying to discern where the blossoming trade dispute between the US and China will go next now that the first punches have finally been thrown. The US has already threatened to issue another "tit" for China's "tat", which China announced on Friday by unveiling a slate of tariffs to be unveiled in two stages, not unlike the US tariff rollout. So, while we await the Trump administration's next salvo, Bloomberg is reporting that most analysts are expecting the battle to be "a war of attrition" - meaning things will get much worse before they get better. Analysts increasingly expect the confrontation to be a war of attrition. While China has shown a willingness to make a deal on shrinking its trade surplus with the U.S., it has made clear it won’t bow to demands to abandon its industrial policy aimed at dominating the technology of the future. "The Chinese view this as an exercise in self-flagellation, meaning that the country that wins a trade war is the country that can endure most pain," said Andrew Polk, co-founder of research firm Trivium China in Beijing. China "thinks it can outlast the U.S. They don’t have to worry about an election in November, let alone two years from now." Contrary to what the "analysts" have decided, it's equally likely that the Trump Administration knows Xi Jinping would never cave and scale back the state-mandated "Made in China 2025" initiative, and is hoping instead to use this demand as a tool to coax the Chinese into delivering a larger trade-deficit reduction...unless we misunderstand the precepts of Game Theory. Whatever their expectations, it appears politicians, analysts and the media have united in their insistence that whatever is happening right now between the world's two largest economies is "not a trade war". We are only ever "approaching" a trade war...because admitting that one has already arrived would seriously spook the market. The two nations moved to the brink of a trade war on Friday after the Trump administration announced new tariffs on imports would take effect from July 6. A 25 percent tariff will be imposed on $34 billion in goods imports, with further duties on another $16 billion in imports under consideration. In response, China said it would charge tariffs of the “same scale and intensity” on goods from the U.S., adding that all trade commitments made during the previous weeks of negotiations are now off the table. ... "We could be dangerously approaching such a trade war," Jack Reed, the ranking Democrat on the Senate Armed Services Committee, told Fox News Sunday. Bloomberg also pointed out this morning that China's "arsenal of potential retaliatory measures" to the US's trade tactics is wider than the US's. As stated above, Chinese politicians don't need to worry about elections, and the Chinese people are largely united in their support of China beating back what they consider American aggression. Aside from slapping tariffs on American products, China’s arsenal of potential retaliatory measures is formidable, and it could inflict heavy punishment on the more than $200 billion of investment by American companies in China. Increased safety inspections and delays in approving imports are possible tools, as is consumer boycotts of American goods sold in China’s rapidly growing retail market, or stemming a flow of free-spending tourists to the U.S. China’s punishment of South Korea for allowing the U.S. to station a missile defense system on the peninsula cost that nation billions of dollars, and it has used similar tactics against the Philippines and Japan as well. China also has a pivotal role in Trump’s goal of disarming North Korea because without its participation, sanctions have little chance of success. “We have very legitimate reasons to be concerned about China’s trade practices,” Susan Rice, former national security adviser to President Barack Obama, told CNN’s Fareed Zakaria GPS on Sunday. “But the way to resolve this is not at the expense of American workers and manufacturers and farmers, by getting into a trade war that has potential, real global ramifications.” And, as we noted over the weekend, Chinese officials haven't been shy about warning US corporations about the potential consequences of a trade war if the administration continues to ignore pleas from the business community. In addition to all of the tactics cited above, China could also follow Russia's lead and sell a large chunk of its Treasury holdings. In a longer-term, worst-case scenario, there also are actions such as selling down its massive stockpile of U.S. treasuries or devaluing the yuan, moves that would send shock waves through global markets. But one factor that could complicate this trade "skirmish" (or whatever you want to call it) is the fact that, as one analyst who spoke with Bloomberg pointed out, the US's aggressive trade policies are part of a larger "technology arms race" with China as the two countries compete on building better AI and more advanced communications technology (the race for 5G is probably the best example).  Trade is just a way to contain China from moving up the technology ladder, according to Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis SA in Hong Kong. Trump’s ‘America First’ policy is against every nation, but it includes a tech arms race against China, and China will respond by trying to build ties with other nations, and buying technology from wherever it can, she said. And when the issue is framed this way, it's much easier to imagine it spiraling out of control into a second cold war...or possibly even a military conflict. Because while analysts have fixated on the trade dispute "tit for tat", a much more alarming military "tit for tat" is unfolding over the South China Sea, as China and the US trade military exercises and provocative "freedom of navigation" operations. China recently carried out a live-fire anti-aircraft drill over the disputed area using dummy "target drones".

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18 июня, 15:10

"Can’t Work With That Woman Anymore": Merkel Handed A Two-Week Ultimatum On Her "D-Day"

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Adding insult to injury, one day after Germany's historic loss to Mexico (which resulted in a man-made earthquake in USA's southern neighbor), Europe's most important country is facing the "Destiny Day" to a political crisis like no other in its recent history. For almost 13 years as chancellor, Handeslblatt writes this morning, Angela Merkel managed to outmaneuver all rivals, schemers and plotters. "But her time could finally be up." Two of her Christian-Democratic predecessors, Konrad Adenauer and Ludwig Erhard, fell from power not after losing the electorate, but after losing the support of their own parliamentary bloc. That may now be Merkel’s fate, too. Today, the top brass of her party, the CDU, and its Bavarian frenemies, the CSU, are meeting separately in Berlin and Munich, to agree on a common course about the coming days and weeks, however chances of a deal appear increasingly remote: according to Handelsblatt, Horst Seehofer, the CSU’s boss, federal interior minister and perennial Merkel gadfly, told one newspaper that he "can’t work with that woman anymore." Horst Seehofer and Angela Merkel. Photo: DPAThe issue is, as it has been since the crisis of 2015, refugees. If Seehofer, acting as interior minister, really starts turning back asylum seekers at the border, this will count as open insubordination to Merkel. She would have to fire him. That would probably lead to a break between the CDU and CSU, which would cost their governing coalition with the Social Democrats its parliamentary majority. Merkel would step down or be forced out. Which is why, on Sunday Germany's Bild said that Monday is "destiny day for Angela Merkel. For the government." As we discussed previously, Seehofer has been one of the fiercest critics of Merkel's liberal stance that allowed a million asylum seekers into Germany since 2015. Heading into Monday, the interior minister wanted to turn away at the border new arrivals who have previously been registered in another EU country, often their first port of call, Italy or Greece, a proposal which however is a non-starter with both Italy and Greece. But Merkel is firmly opposed, warning that it would leave countries at the EU's geographic southern periphery alone to deal with the migrant influx. Instead, she wants to find a common European solution at the June 28-29 EU summit. It is hardly a secret that popular misgivings over the massive migrant influx have given populist and anti-immigration forces a boost across several European nations, including Italy and Austria where far-right parties are now sharing power. In Germany, voters handed Merkel her poorest score in September's elections while giving seats for the first time to the far-right anti-Islam AfD. The latest poll released this morning did not help: a Forsa poll commissioned by RTL and ntv, showed that in the wake of the refugee debate, German CDU/CSU lost 4% points, as voter support for CDU/CSU slipped to 30%, the lowest since the federal elections. CSU in Bavaria falls to 36% Coalition partner SPD down 2 ppts to 16% AfD at 15% Greens at 14%; FDP at 10%; Left party at 9%; Other parties in total 6% Several high profile crimes by migrants, including the 2016 Christmas market attack by a failed Tunisian asylum seeker as well as the recent rape-murder of a teenage girl allegedly by an Iraqi, have also helped to fuel anger. The case of a German teenager who was believed to have been stabbed to death in a supermarket by her Afghan asylum seeker boyfriend is due to be heard in court on Monday. With an eye on October's Bavaria state election, the CSU is anxious to assure voters that it has a roadmap to curb the migrant influx. As such, Seehofer's "masterplan" on immigration was meant to be the showpiece of the CSU's tough stance against new arrivals. But the interior minister was forced to cancel a planned presentation of his vision after Merkel disagreed with his proposal to turn some asylum seekers away at the borders, sparking last week's dramatic escalation of discord within the conservative bloc. For all the noise, the CSU knows that there is more at stake. On Sunday, Seehofer struck a more conciliatory tone when he told Bild that "it is not in the CSU's interest to topple the chancellor, to dissolve the CDU-CSU union or to break up the coalition" adding that "we just want to finally have a sustainable solution to send refugees back to the borders." Which brings us to Monday, when Seehofer's CSU met on Monday to decide which course to take. As the Local de reported, he had the nuclear option of seeking approval to shut Germany's borders immediately in defiance of Merkel, or the less aggressive choice of giving her an ultimatum of two weeks to sort out a deal with other EU nations. Signalling that he is leaning towards the latter option, Seehofer wrote in a column in Frankfurter Allgemeine Zeitung that "it is essential that the EU summit takes a decision at the end of June. "The situation is serious but still solvable," he wrote. Of course, whichever option he chooses, the ball will land in Merkel's court. * * * Then, moments ago, DPA reported that Seehofer indeed gave Merkel a two week ultimatum until the end of June to agree Europe-wide migration rules. After the deadline, if Merkel is unable to get EU countries to approve a solution within the deadline, comprehensive refusals of migrants at borders will begin, which will ultimately begin a chain reaction which will likely end will the collapse of Merkel's government, and the end of her political career. To be sure, having been given a two-week ultimatum, Merkel now faces the Herculean challenge of persuading EU governments to sign up to a common plan on the migrants. Good luck with that: central and eastern EU nations such as Hungary and Poland have either refused outright or resisted taking in refugees under an EU quota system that has essentially floundered. A populist-far right government in place in Italy, as well as the conservative-far right in power in neighbouring Austria, have also taken an uncompromising stance on immigration. Meanwhile, despite howls of protests from aid groups and even the United Nations, Rome has banned rescue vessels carrying migrants from docking. * * * What are the next immediate catalysts? Merkel's talks on Monday evening with Italian Prime Minister Giuseppe Conte could prove crucial, if she is to have any chance of finding concordance in Brussels. Then, on Tuesday, Merkel will meet with French President Emmanuel Macron. Berlin is also reportedly preparing to call a meeting between Merkel and the leaders of several EU frontline nations in the migrant crisis ahead of the Brussels summit. Underlining the unenviable task ahead for Merkel, Welt daily said "it would be almost a miracle if she emerges a winner from the next EU summit." Which is why, one month from today, Germany may be faced with a summer of discontent: not only does it now look increasingly unlikely that the German team will not play in the July 15 World Cup final (if its game against Mexico was any indication of what to expect), but it is increasingly likely that Angela Merkel will be absent at the final game as well. In other news, we can't wait until this latest European scandal resulting from Merkel's own "progressive" politics and liberal vision, in no small part influenced by George Soros and his Open Society ideals, is blamed on Putin too.

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18 июня, 14:35

Preview Of Friday's "All-Important" OPEC Meeting

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Heading into Friday's much anticipated OPEC meeting in Vienna, the focus has shifted from (declining) global demand-side concerns to specific supply-side actions, and while it is broadly expected to conclude with an oil production increase -  the first since the historic production cut agreement in late 2016, is set to be contentious with members Iran, Venezuela and Iraq arguing against a hike proposed by Saudi Arabia and non-member Russia. Here is a brief summary of what to expect: Weekend reports noted that Russian Energy Minister Novak stated that, in conjunction with Saudi Arabia, OPEC and non-OPEC countries will discuss raising oil output by 1.5MMb/d in Q3 only. Meanwhile, Iran said on Sunday that 3 OPEC members - Iran, Iraq and venezuela - would veto the proposed increase. That counters Saudi Arabia’s oil minister who said on June 14 that it’s “inevitable” that OPEC and its allies will decide to boost output gradually. Saudi officials have been discussing different scenarios that would raise production of OPEC and allied producers by between 500k b/d and 1m b/d, Bloomberg reported last week. However, countering this, a Monday morning report from Bloomberg noted that OPEC is said to discuss an output hike of only 300k-600k bpd, while Saudi and Russia are said to work on making the oil alliance permanent. Furthermore, OPEC members are said to be looking for a compromise to overcome the Iran dissent According to a Bloomberg survey, OPEC and allies will probably boost output: 18 out of 31 analysts predicted an increase in the June 12 poll Most predicted +500k b/d; range was +180k to +1m Bloomberg tanking-tracking analysis on June 15 showed Iranian oil exports dipped in the first half of June, a sign that President Trump’s re-imposition of sanctions may be deterring buyers In terms of Vienna logistics: OPEC’s International Seminar is Wednesday, Thursday, with participation of all OPEC ministers, CEOs of Sonangol, BP, Total, among others. Click here for program. OPEC’s formal, policy-setting ministerial meeting is on Friday, including a session that involves certain non-OPEC nations. Finally, with Trump making increasingly louder noises that he won't accept higher oil prices (most recently last week), and warning OPEC not once but twice on Twitter to produce more, it is no surprise that WTI dropped to its lowest price in the past month in the overnight session, although it has since rebounded modestly on hopes the OPEC production cut could be smaller than expected.

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18 июня, 14:12

Audi CEO Arrested As Diesel-Emissions Scandal Spreads

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Munich prosecutors have arrested Audi CEO Rupert Stadler, also a member of parent company Volkswagen's board, on concerns he might try to suppress evidence, in what is the highest-profile arrest of a Volkswagen executive since the diesel emissions scandal exploded into public view nearly three years ago. The arrest comes a month after Audi admitted that another 60,000 A6 and A7 models with diesel engines could have "software emissions issues," and more than two months after Volkswagen CEO Matthias Mueller stepped down and was replaced by Herbert Diess, formerly the CEO of the company's core VW unit, according to the BBC. While former VW Group CEO Martin Winterkorn has been charged by US authorities, Stadler is the first executive to be taken into custody, and perhaps it's about time: the emissions scandal provided ample evidence that Volkswagen had probably the worst executive oversight in Europe, and that a real criminal conspiracy had unfolded in the highest ranks of the company. The only real surprise is that it's taken this long: US authorities blew the lid off the company's emissions test-defeating software in September 2015 - nearly three years ago. Since then, the scandal has spread from the VW unit to other Volkswagen subsidiaries, and beyond: BMW and Daimler have also faced allegations of emissions cheating, as has American car maker General Motors. Audi CEO Rupert StadlerMore surprising still has been Volkswagen's steadfast support of Stadler, who retained the backing of his fellow board members, including the influential Porsche-Piech families that own majority voting rights in Volkswagen, according to the Financial Times. The arrest was first reported in Germany's Der Spiegel.  The company issued a statement on Stadler's arrest to Reuters. "We confirm that Mr Stadler was arrested this morning. The hearing to determine whether he will be remanded is ongoing," the spokesman said, adding that the presumption of innocence applied to Stadler’s case. The CEO has previously survived calls by minority shareholders to step down, and yet in the face of threats the company not only defended Stadler, it extended his contract and promoted him to the head of a new "premium" cars division. The new role gave him sales responsibilities group-wide. The company will likely continue to stand by him as lawyers haggle for his release. The company maintains that there's no evidence to suggest Stadler knew of the cheating, though after Munich prosecutors raided Stadler's apartment (and one other Audi boardmember) they named Stadler as a suspect. They've also said they're investigating 20 suspects whom prosecutors believe were aware of Audi's diesel engine scheme. In light of today's development, expect more imminent arrests as it is unlikely, given the number of Audi employees currently under investigation, that this will be the last shoe to drop.

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18 июня, 13:59

Global Stocks, Futures Tumble On Trade War, Merkel Shock; Oil Volatile Ahead Of Meeting

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Bulletin Headline Summary from RanSquawk: Oil rebounds on OPEC source reports mentioning an output hike of 300k-600k bpd (vs. 1.5mln bpd touted previously) The Dollar is mixed overall, but the index did revisit 95.000+ ytd peaks (around 95.150) Looking ahead, highlights include comments from Fed’s Dudley, Bostic and Williams, BoC’s Deputy Governor and ECB President Draghi Global stocks and US index futures are a sea of red this morning amid growing concerns over the escalating trade war between China and the U.S., which on Friday launched tit-for-tat $50BN in tariffs, coupled with the growing risk that Merkel's government is on the edge of collapse. As Bloomberg notes, it’s pretty risk-off this morning no matter where you look: it’s blow for blow in the U.S.-China trade spat sending European and Asian stocks sharply lower, metals have been melting, EM currencies remain under pressure with Argentina’s peso sinking further. Global trade is (once again) back at the top of the wall of worry, with investors afraid that the confrontation between the U.S. and China can escalate out of control, hitting both the global economy and corporate earnings. On Friday, China immediately responded after President Donald Trump slapped tariffs on $50 billion of imports, putting an additional 25 percent levy on $34 billion of U.S. agricultural and auto exports starting July 6. “Up to now it’s been hypothetical; action has been taken, tariffs are coming and you need to pay very, very careful attention to the impact it’s going to have on your holdings,” Bank of Singapore Chief Investment Officer Johan Jooste told Bloomberg Television. "There are too many unknowns right now to be terribly specific. The thing you do know is risk is higher. The market will take something of a cautionary stance." Analysts expect the U.S.- China confrontation to be a war of attrition: while China has shown a willingness to make a deal on shrinking its trade surplus with the U.S., it has made clear it won’t bow to demands to abandon its industrial policy aimed at dominating the technology of the future. Looking ahead, as a reminder on Friday Reuters reported the US may impose higher tariffs on an additional $100bn of Chinese imports. If this triggers another round of actions from China, then this second round of trade war will likely be much more damaging for both sides. According to DB, this could reduce China’s GDP growth by c0.3% of GDP, but importantly, the US tariff list will likely include big item consumer goods such as phones, computers, TVs etc, which could mean a lot more workers in China and US consumers would be negatively affected. If this second scenario eventuates, economists expect China to loosen policy such as tolerating the property and land market boom in tier 3 cities and cutting the RRR twice over the rest of this year to partly offset the potential drags In Europe, Angela Merkel’s political future is on the line amid a crisis over Germany’s migration policy, while U.K. prime minister Theresa May seems cornered by Brexit foes. Meanwhile, there is some confusion over Europe's grand MiFID II overhaul on market transparency: according to Robert Ophele, chairman of French market regulator Autorité des Marchés Financiers, the jury is still out, given the "surprise" surge in off-exchange trading. As a result, the Stoxx 50 is down -0.9%, with the rebound in the Euro not helping export-heavy Germany. The DAX is the clear underperformer, down -1.3%, with Germany's political drama the main source of angst this morning. The FTSE 100, with its heavier weighting of energy and metals vs other European indices, is falling in line with peers, which however according to Bloomberg implies that neither Brexit nor the possible clash at Friday's OPEC meeting are rattling energy shareholders that much. In Asia, markets were closed for the holidays in China and Hong Kong, but Japan’s Topix Index fell the most in almost three weeks as the yen edged higher and after a strong earthquake hit Japan’s industrial heartland of Osaka. Oil tumbled below $64 initially, after Saudi and Russia signaled global output would continue to rise while the US-China suggested Chinese demand could decline. #Oil is down between 1-2% (sub $73 Brent, sub $64 WTI) after Saudi and Russia signalled output would (continue) rising and, in a blow to global trade, China said it would impose tariffs on US crude imports🐻 #OOTT pic.twitter.com/ZejmciwvQP — Amanda Cooper (@a_coops1) June 18, 2018 However, oil then promptly rebounded ahead of this Friday's key OPEC meeting, following a Bloomberg report that OPEC was discussing output hikes of only up to 600,000b/d, well below earlier rumors of as much as 1.5mmb/d. In global FX it has been a quiet session, with Sweden’s ensuing World Cup football encounter probably more discussed at trading desks than major currencies (at least according to Bloomberg's Love Liman). The dollar tried and failed to build on gains soon after the London open but made no progress even though the euro was held was down by concerns surrounding the fate of Merkel’s ruling coalition. The Bloomberg Dollar index slumped to session lows not long after it hit session highs around the time Europe opened. The EUR first slumped, erasing all of Friday's gains, however, then rebounded back over 1.16 after Europe opened for trading. Looking ahead, it could be the dollar that benefits from this week’s gathering of central bankers in Sintra, Portugal, given a renewed focus on the widening gap between monetary policy in the U.S. and the euro area, Credit Agricole says (and to think it was just a year ago that Draghi's Sintra speech sent the Euro soaring higher). In other G-10 FX, the Yen strengthened as Osaka earthquake adds pressure from trade wars on Japanese stocks; Topix index declines 1%. Meanwhile in EM, the Thai baht, the South Korean won and the Philippine peso led weakness in emerging Asian currencies as rising trade tensions between the U.S. and China escalated against a backdrop of a strengthening U.S. dollar.  "There is no break for Asian FX as a more hawkish Fed, and stronger USD are adding to the expanding wall of worry for Asian currencies,” Stephen Innes, head of trading for Asia Pacific at Oanda Corp. in Singapore, writes in a client note. “Like a nagging backache, there appears to be little relief from the protracted trade unease between U.S. and China" Elsewhere, the South African rand’s implied volatility against the USD is rising at a faster rate than actual price swings, indicating that traders are anticipating a wild ride ahead for South Africa’s currency. After falling to a three-year low in April, the rand’s three-month implied volatility has climbed as crises in Turkey and Argentina soured sentiment toward emerging markets and rising U.S. rates attracted capital to the dollar, and is now at the highest since December. Surprisingly, the Turkish lira was today's outperformer, as it started the week with heavy swings and bond yields climbed to a record high ahead of the country’s presidential and general elections on Sunday. The strength may not last: "The external backdrop is not conducive for risky assets due to growing trade tension between the U.S. and China," said Piotr Matys, an emerging-market currency strategist at Rabobank in London. Sovereign bonds were mixed, while developing-nation Asian equities extended declines for a fourth day. Euro-area bonds and Treasuries found support from investors. While Italy’s bonds continue to recover, local investors are skeptical. They are avoiding the nation’s debt after political uncertainty fueled a market rout at the end of May, even as the securities may look more attractive after the slump according to Bloomberg. Ahead of the Bloomberg report on smaller than expected OPEC production cuts, the market's attention was focused on reports that Russian energy minister Novak stated OPEC and non-OPEC countries will discuss raising the oil output by 1.5mln bpd in Q3 only. However, Iran stated that 3 OPEC members (Iraq, Iran & Venezuela) will veto a proposed production increase. Ahead of this meeting banks are expecting production increases of 700k BPD (SocGen & Barclays) to 1mln BPD (Goldman Sachs). Sources in EU trade suggested that this would be a smaller hike than expected, however, with 300-600k BPD the stated figures. In the metals scope gold is in the green (+0.15%) as market sentiment sours on Chinese trade concerns and investors are flocking to safe haven assets. Copper has slipped for the second straight session and is at USD 6,997/tonne hovering just above 2 week lows as supply concerns continue to ease. Aluminium is also falling and has hit 2 month lows at USD 2,193/tonne, with support seen at the 200dma of USD 2,175/tonne. It's a quiet calendar for the US, with the only expected data on Monday the NAHB Housing Market Index. Elsewhere, highlights include comments from Fed’s Dudley, Bostic and Williams, BoC’s Deputy Governor and ECB President Draghi. Market Snapshot S&P 500 futures down 0.6% to 2,767.75 STOXX Europe 50 down 1.1% to 3466.45 MXAP down 0.7% to 171.55 MXAPJ down 0.4% to 559.81 Nikkei down 0.8% to 22,680.33 Topix down 1% to 1,771.43 Hang Seng Index down 0.4% to 30,309.49 Shanghai Composite down 0.7% to 3,021.90 Sensex down 0.04% to 35,607.98 Australia S&P/ASX 200 up 0.2% to 6,104.13 Kospi down 1.2% to 2,376.24 German 10Y yield fell 1.6 bps to 0.387% Euro down 0.3% to $1.1581 Italian 10Y yield fell 12.7 bps to 2.343% Spanish 10Y yield unchanged at 1.297% Brent futures up 0.8% to $74.04/bbl Gold spot up 0.2% to $1,281.51 U.S. Dollar Index up 0.1% to 94.85   Top Overnight News U.S. and China trade war escalates. In his announcement of tariffs on Chinese goods on Friday, Trump vowed additional duties if China retaliated -- which Beijing immediately did. An announcement on U.S. restrictions on investments from China will follow Germany’s crisis over migration policy is entering a critical phase with Chancellor Angela Merkel’s political future on the line and the ripples already being felt across Europe Merkel’s CDU allies stand behind chancellor in migration crisis; German Interior Minister Horst Seehofer said to target immediate refusals at border, RND reports OPEC is said to debate output hike of 300k to 600k b/d versus Russia’s proposal of 1.5m b/d; Bloomberg survey showed majority forecast of 500k b/d Iran says Venezuela and Iraq will join it in blocking a proposal to increase oil production that’s backed by Saudi Arabia and Russia when OPEC and its allies meet in Vienna this week Pound faces another week of political turmoil as the Conservative Party’s internal battle over Brexit rages ons U.K. Prime Minister Theresa May has been warned that rebels inside her own party could bring down her government if they don’t like the final Brexit deal she negotiates with the European Union Oil fell near $64 a barrel as Saudi Arabia and Russia prepared for a clash with allied crude producers over whether to lift output and as China and the U.S. exchanged threats over trade Three people were confirmed dead and almost 100 injured after a strong earthquake hit Osaka on Monday morning, rattling one of Japan’s industrial heartlands and halting trains and factories across the region Steady growth in Japanese exports for a second straight month offered more reassurance that Japan’s economy is rebounding in the current quarter, despite rising trade tensions. A surge in imports pushed the trade balance to a bigger-than-expected deficit A falling tide lowers all boats, it seems. Amid an exodus from emerging markets, investors are pulling out of even Asian economies with solid prospects for growth and debt financing After two months of cutting bets on rising prices, hedge funds are feeling optimistic again as OPEC prepares to meet China, Hong Kong, Taiwan and Indonesia closed for holidays Asia stocks mostly backpedalled at the start of the week as the region digested the tit-for-tat trade spat between US and China, in which the US confirmed tariffs on USD 50bln of Chinese goods and China responded with reciprocal tariffs of the same value against the US. ASX 200 (+0.3%) and Nikkei 225 (-0.8%) both opened negative with Australia initially led lower by commodity-related sectors although strength in financials and healthcare later reversed the downside in the index, while sentiment in Japan was dampened by a firmer JPY and amid a fatal earthquake in Osaka. KOSPI (-1.3%) underperformed as a fallout from the US-China tariff dispute due to fears South Korea could feel the brunt of the trade war between its 2 largest trading partners, and with index-heavyweight Samsung Electronics pressured after it was ordered to pay USD 400mln for patent infringement related to semiconductor technology. Finally, markets in mainland China, Hong Kong, Taiwan and Indonesia were all closed for holiday, while 10yr JGBs were uneventful despite the risk averse tone as prices took a breather from last week’s upside and following a lack of a Rinban announcement by the BoJ. Top Asian News HDFC Bank Is Said to Mull Relying on India in $2.3 Billion Offer Noble Group Halts Shares as Restructuring Hangs in Balance India Is Said to Plan to Sell a Stake in State-Run Coal Miner Deutsche Bank Head of Asia Equity Sales Tan Is Said to Leave Emerging Asia Hit by Biggest Foreign Investor Exodus Since 2008 European equities took impetus from Asia as the fallout from the US-China tariff dispute continue to subdue the market. FTSE 100 (-0.2%) outperforms its major peers as the index is kept afloat by currency effects. In terms of sectors, energy names are extending losses following the slump in oil prices (ahead of the key OPEC+ meeting later this week) while material names are also hitting rock bottom amid trade woes effecting base metal prices. IT names are underperforming, albeit off worse levels, as risk averse investors flee to less risky sectors. Looking at stock specifics, Aviva (+2.4%) and RSA (+1.7%) are amongst UK’s top performers after reports that DAX 30 heavyweight Allianz (-0.3%) is considering the companies for a large UK deal. Elsewhere, Hermes (-0.7%) replaced Lafargeholcim (-0.1%) in the CAC 40 today. Top European News Equinor Awards Record $3.7 Billion in Drilling-Service Deals Norwegian Air Gains as Lufthansa CEO Says He’s Mulling Bid UBS Credit Rating Is Raised at Moody’s on Wealth Management Credit Suisse Gears Up for Next Wave of Leveraged Loan Issuance In FX, the Dollar is mixed overall, but netting more gains vs the Eur and Gbp in particular against losses elsewhere to nudge the index back up to 95.000 and close to ytd peaks (around 95.150) forged in wake of last week’s divergent Fed and ECB policy actions/guidance. A clearer or convincing break above the big figure would bring strong resistance just ahead of 95.500, but this may also require other G10 pairs to breach levels that have held so far, like 111.00 in Usd/Jpy and 1.3200 in Usd/Cad. EUR/GBP: As noted, the major laggards as Eur/Usd remains capped ahead of 1.1600, while Cable is retreating towards 1.3200 amidst ongoing Brexit jitters and ahead of this week’s BoE policy meeting that is widely if not unanimously expected to see the MPC stand pat again and signal no urgency to normalise policy further. Nearest support is 1.3210 and for Eur/Usd the 2018 base at 1.1510. JPY/CAD: Marginal outperformers with Usd/Jpy pivoting around 110.50 and the Jpy benefiting from a degree of safe-haven demand amidst the latest import tariff trade-off between the US and China, while the Loonie has recovered some lost ground to trade back above 1.3200 vs its US peer after sliding in wake of the G7 fall-out. Note, latest OPEC spec suggesting 300-600k BPD output increase has boosted crude prices and the Cad to a degree. TRY: Attempting to pare some of its recent losses beyond 4.7000 vs the Usd, but still looking very vulnerable against the backdrop of widespread EM weakness relative to the Dollar as Turkey’s election looms and polls indicate a very unpredictable outcome. Indeed, even improvements in the jobless rate and a swing in the budget balance to a surplus from deficit is not offering the Lira any real comfort. In commodities, oil rebounded from losses seen at the end of last week as concerns over Chinese crude tariffs were offset by a Bloomberg report OPEC may cut oil output by a far smaller 300-600kb/d. Still WTI was down modestly ahead of the upcoming OPEC meetings this week that are set to announce increased production for the cartel. Brent is outperforming WTI on Libyan internal conflicts affecting refinery production. Reports have noted that Russian energy minister Novak stated OPEC and non-OPEC countries will discuss raising the oil output by 1.5mln bpd in Q3 only. However, Iran stated that 3 OPEC members (Iraq, Iran & Venezuela) will veto a proposed production increase. Ahead of this meeting banks are expecting production increases of 700k BPD (SocGen & Barclays) to 1mln BPD (Goldman Sachs). Sources in EU trade suggested that this would be a smaller hike than expected, however, with 300-600k BPD the stated figures. In the metals scope gold is in the green (+0.15%) as market sentiment sours on Chinese trade concerns and investors are flocking to safe haven assets. Copper has slipped for the second straight session and is at USD 6,997/tonne hovering just above 2 week lows as supply concerns continue to ease. Aluminium is also falling and has hit 2 month lows at USD 2,193/tonne, with support seen at the 200dma of USD 2,175/tonne Looking at the day ahead, the most significant event today is the start of the ECB's Forum on Central Banking in Sintra (continuing until Wednesday), with President Draghi due to make opening remarks in the evening. Away from that, the Fed's Dudley and Williams are all due to speak while datawise in the US the NAHB housing market index reading is due for June. Finally the Brexit withdrawal bill passes to the House of Lords on Monday and Germany Chancellor Merkel meets new Italy PM Conte. US Event Calendar 10am: NAHB Housing Market Index, est. 70, prior 70 8:45am: Departing NY Fed Chief Dudley Speaks at Bank Culture Conference 9am: Dudley, Duke and Gorman Speak on Culture in Finance Panel 1pm: Fed’s Bostic Speaks on Economist and Monetary Policy Outlook 4pm: Fed’s Williams Speaks at NY Fed Bank Culture Conference DB's Jim Reid concludes the overnight wrap Happy Monday. Whether it’ll be a happy Tuesday for me might depend on whether Tunisia help England to end a stretch of only one win in their last eight World Cup games tonight. Having said that, half of Deutsche Bank is going to be in mourning today after Germany’s opening match defeat yesterday. Outside of football I hope you all had a good weekend. I spent yesterday afternoon watching Paddington 2 for the fifth time as Maisie loves it. In fact it might be Hugh Grant’s best film since “Mickey Blue Eyes”! Talking of Mr Grant, once we get past the BoE meeting on Thursday, it will be a case of “Four Central Bank meetings and a nuclear summit” over the last week. Of those central bank meetings so far, the main outcomes were that the Fed was more hawkish than expected and with the ECB pulling off a remarkably dovish QE exit routine. As such our rates strategists have now upped their 10 year US Treasury forecast for YE 2018 to 3.50% (from 3.25%) and lowered their 10 year Bund forecast to 0.90% from 1.25%. We can’t stray too far away from central bankers this week as between today and Wednesday we have the ECB's Forum on Central Banking due to take place in Sintra. Chances are that coming so close after the big ECB meeting, it’s unlikely to have the same impact on markets as it did this time last year when Draghi announced that the ECB was ready to start phasing out extreme monetary stimulus. However it’s a true A-list gathering of Central Bankers that makes the casting agents of Ocean’s Eleven look like they ran out of money. As such headlines will be aplenty. Kicking things off tonight, President Draghi will deliver opening remarks followed by a speech from former US Secretary of State Lawrence Summers. Tomorrow morning Draghi will then make the introductory speech, before board member Peter Praet speaks in two separate panels, the second including the Fed's Bullard and ECB's Lane. Finally on Wednesday we'll hear from ECB board member Sabine Lautenschlager in the morning and then Benoit Coeure. The main event might well come on Wednesday afternoon though when we get to watch a policy panel featuring Draghi, the Fed's Powell, BoJ's Kuroda and RBA's Lowe. Elsewhere we have a BoE meeting (Thursday) and a likely contentious OPEC meeting in Vienna (Friday) where ministers are due to discuss a possible lift back up in output after the freeze last year. Headlines will start from Wednesday as officials and companies start to gather before the meetings. Global flash PMIs at the end of the week are likely to be the big data highlight. With regards to other potentially important things to look out for, early this week the Brexit withdrawal bill passes to the House of Lords and back to the Commons with plenty of opportunity for rebellion and headlines about the future of Brexit and PM May. Mrs Merkel will be busy keeping her party’s coalition together while also meeting Italian PM Conte in Berlin today and Macron tomorrow re-strengthening the Euro Area. Finally the Fed’s results from its 2018 bank stress tests will be out on Thursday. The rest of the week ahead is included at the end. Back to Ms Merkel, last week speculation swirled about the health of her party’s (CDU) 69-year old coalition with the CSU due to policy differences on immigration, as Sonntag reported Germany’s Interior Minister Mr Seehofer (a member of CSU) will defy Chancellor Merkel and unilaterally implement a plan to turn away refugees from Germany as early as today. Over the weekend, the tone was a bit more conciliatory as the Bild newspaper reported the CSU Party will meet today and may give Ms Merkel another two weeks to get an EU deal facilitating the return of immigrants to countries where they were first registered. Notably, Mr Seehofer noted “the situation is serious but manageable” and that “no one in the CSU has an interest in toppling the Chancellor, in dissolving the union of the CSU-CSU”. Elsewhere, the WSJ reported Ms Merkel has reached out to some of her southern EU neighbours to sound out their willingness to readmit migrants. Looking ahead, as highlighted above Ms Merkel will meet with her Italian and French counterparts this week and then also have the June 28-29 summit of EU leaders to seek some sort of agreement. Turning to trade tensions and its potential impacts on China. DB’s Zhiwei Zhang and team estimates the impact of the announced US tariff on China's economy is quite small for now. They note that if the US imposes 25% tariff on $50bn of Chinese goods ($34bn in July, $16bn in Sep.), the total impact would be less than 0.1% of China’s GDP in 2018. Looking ahead, Reuters reported the US may impose higher tariffs on an additional $100bn of Chinese imports. If this triggers another round of actions from China, then this second round of trade war will likely be much more damaging for both sides. The team estimate this could reduce China’s GDP growth by c0.3% of GDP, but importantly, the US tariff list will likely include big item consumer goods such as phones, computers, TVs etc, which could mean a lot more workers in China and US consumers would be negatively affected. If this second scenario eventuates, our economists  expect China to loosen policy such as tolerating the property and land market boom in tier 3 cities and cutting the RRR twice over the rest of this year to partly offset the potential drags. This morning in Asia, markets are trading modestly lower with the Nikkei (-0.93%) and Kospi (-1.22%) both down, while markets in HK and China are closed for holidays. Meanwhile, futures on the S&P are down c0.5% and UST 10y yields are down c1bp. Datawise, Japan’s May adjusted trade balance was lower than expected (-JPY297bn vs. +JPY144bn expected) as growth in imports was stronger than expected. As for markets back on Friday, equities broadly weakened as trade tensions escalated. The Stoxx 600 (-0.99%), DAX (-0.74%) and FTSE (-1.70%) all declined, dragged down by materials and energy stocks (-2.43%). The S&P traded -0.7% lower initially, but recovered later in the day to close -0.10%, in part due to higher volumes on the close for index rebalancing. Government bonds were broadly firmer (UST 10y -1.5bp; Bunds -2.3bp) while 10y Italian BTPs rallied for the third consecutive day (-12.9bp), in part reflecting the ongoing reactions to a more a dovish ECB. In commodities, WTI oil dropped -2.74% as the Russian energy minister Mr Novak signalled that Russia and Saudi Arabia both “in principle” support a gradual rise in output. Meanwhile, other LME base metals also dropped 2-3% following increased trade tensions (copper -2.19%; zinc -3.36%; aluminium -2.30%) while the price of soybeans fell to a fresh one year low (-2.05%). On Sunday, Iran’s representative to the OPEC meeting noted that Iran, Venezuela and Iraq “are going to stop” Russia & Saudi Arabia’s proposal for higher oil production. He added that if the two countries want to “act alone, that’s a breach of the cooperation agreement”. This morning, WTI oil is down another c2%. So lots to look forward to ahead of this week’s OPEC meeting. Before we take a look at today’s calendar, we wrap up with other data releases from Friday. In the US, the May IP was weaker than expected at -0.1% mom (vs. 0.2%), weighed down by a -0.7% mom decline in manufacturing production, which was mainly due to a decline in production in the auto sector as a result of a fire at a major truck assembler. Elsewhere, the June Empire manufacturing index was above market at 25 (vs. 18.8 expected) and the highest since October 2017, with the new orders and employment indices both firmer. Meanwhile the June University of Michigan sentiment index was 99.3 (vs. 98.5 expected), with both the 1yr and 5-10 inflation expectation up 0.1ppt mom to 2.9% yoy and 2.6% yoy respectively. Notably, the 1yr ahead index is now at its highest level since March 2015. Following the above, the NY Fed’s estimate of Q2 GDP growth has edged 0.1ppt lower to 3.0% saar. In Europe, the final reading of the Euro area’s May core CPI was confirmed at 1.1% yoy, while Italy print was revised 0.1ppt lower to 1% yoy. The Euro area April trade surplus was smaller than expected at €18.1bln (vs. €20bln) while the 1Q Euro area labour costs have increased 2.0% yoy, up from 1.4% yoy in Q4, which is the fastest pace recorded for five years. Looking at the day ahead, the most significant event today is the start of the ECB's Forum on Central Banking in Sintra (continuing until Wednesday), with President Draghi due to make opening remarks in the evening. Away from that, the Fed's Dudley and Williams are all due to speak while datawise in the US the NAHB housing market index reading is due for June. Finally the Brexit withdrawal bill passes to the House of Lords on Monday and Germany Chancellor Merkel meets new Italy PM Conte.

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18 июня, 13:01

Blain: "Back In The Markets, There Is So Much To Worry About"

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Submitted by Bill Blain of Mint Partners Iceland, Rising worries about immigration, trade and oil prices... whatever next. “A free man can live on fish. Independence is better than meat.” Today, its’ all about Iceland! The giant-killing demi-gods of football slaughtered Argentina in a 1-all draw! [Think Led Zep riff : Da da da dada!] What other mere team can possibly match them? The population of Edinburgh is 100k people bigger than the whole of Iceland! And, since the Icelanders are pretty much Scots according to their DNA, I’m now a fanatical fan! I’ve ordered my Iceland shirt, the Black-Death Brennavin, fermented shark and sheep’s wobbly bits for the next game on Friday when they will take down Nigeria in Stalingrad! (I shall be supporting England this afternoon – I guess I’ve gone soft after so many years amongst them… Who are they playing btw?) Meanwhile…. Back in the markets, so much to worry about. I suppose the challenge is to figure out what the looming German political implosion over immigration policy, the likely splatter effects across Europe, trade war worries and US high-tech sanctions on China, turmoil in OPEC, and the light comic relief provided by the UK Brexit shenanigans, are collectively going to do to sentiment. Germany without Merkel? A full scale trade war? They are not unimaginable! Or, I could worry about what I’m going to say at tomorrow’s Euromoney Global Borrowers and Investors Conference… Or, I could worry about this week’s big Central Bank gab-fest. I would love to be a fly on the wall in Portugal… I can picture Jay Powell sitting there with a smug smile talking about the normalised US economy at full employment while Draghi tries to put some kind of gloss on Europe’s stunning 1% growth quantum and his difficulties balancing his “independent” central bank with national vs EU political imperatives – you have to admire the man for trying. The US is pretty much the only normalised economy on the planet – average interest rates are still below 1%, inflation is where?, and central bank balance sheets remain at record levels. What is “synchronous” about that? There seem to be two economic outlooks in fashion at the moment. I) that normalisation and synchronous growth will drive the global economy much higher therefore buy buy and buy some more, versus the alternative II) that years of intervention, distortion and regulatory bluster leave markets weaker and more vulnerable than ever before. I suppose that’s going to be the gist of my debate at the Euromoney conference tomorrow… I guess I’ll be talking about “irrational complacency” and “delusional exuberance”… The big issue is likely to be the OPEC meeting where the Iran axis will try to block the Russia/Saudi pact from increasing production. My stock picking chart-analyst Steve Previs cast his technical eye over the recent charts of oil price action. He concludes we’re looking at a likely slide back towards $60 BBl in the near term despite bullish oil speculators. The US ramping up production and the Russia/Saudi pact looking to sell more – the prospects for an oil glut look high. So much for oil prices driving inflation? Let’s wait and see what direction sentiment takes…

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18 июня, 12:00

Trump Wants To Free America From "Fool Trade" And Flip The Tables On The EU

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Authored by Andrew Korybko via Oriental Review, Trump promised to replace what he termed as “fool trade” with fair trade when it comes to America’s economic partnerships, especially those with NAFTA and the EU. Tweeting from Singapore after the failed G7 Summit in Canada, the President wrote that “Fair Trade is now to be called Fool Trade if it is not Reciprocal”, before explaining how Canada and Germany “rip off” the US through their own protectionist tariffs and insufficient contributions to NATO, respectively. Trump’s sour that their leaders attacked him for his “Make America Great Again” steel and aluminum tariffs while hypocritically ignoring their own lopsided economic relations with the US, and he believes that now is the time to make right for what he truly believes are the historic wrongs that his predecessors committed in voluntarily handicapping American power. Proverbially speaking, the President conceptualizes America as Gulliver the “giant” tied down by a bunch of Lilliputian dwarves, albeit having previously put itself in this submissive position out of some sort of ideological masochistic-sadism that Trump wants to free it from. Canada’s Prime Minister Justin Trudeau (R) meets with U.S. President Donald Trump during the G7 Summit in the Charlevoix town of La Malbaie, Quebec, Canada, June 8, 2018 The Cold War-era quid pro quo of the US providing costly security assistance to its NATO allies in order to enable them to concentrate more fully on building their utopian welfare states is no longer relevant because of the changing nature of geopolitics and the rise of asymmetrical threats, though Clinton, Bush, and Obama perpetuated this state of affairs because it advanced the Liberal-Globalist model that all three of them were pursuing at the expense of average Americans. Having entered into office because of the desperation that millions of regular folks in Middle America are experiencing as a result of the domestically catastrophic consequences of globalization on the American Heartland and especially the Midwest, Trump feels obligated to do something about this massive self-inflicted economic wound that’s bleeding hundreds of billions of dollars from the country each year for voluntary reasons that are impossible for this businessman to fathom. Transforming “fool trade” back into fair trade will harmonize this imbalance, at least from the US’ perspective, though it’ll be detrimental to its semi-socialist partners who have grown accustomed to having the “big brother” that they love to complain about so much subsidizing their militaries and de-facto doing the same for their economies through this decades-long legacy of uneven trading arrangements that Trump now wants to change. The far-reaching consequences of the Europeans losing out on this multibillion-dollar bonanza are that their domestic growth and social stability will undoubtedly suffer while the elite scramble to appease the masses as they frantically try to negotiate more favorable trading terms with the US. America can deal with an indefinite disruption of transatlantic trade much better than the Europeans can, and Trump’s betting that he can exploit the resultant geopolitical tumult in order to strengthen the US’ unipolar control over the EU.

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18 июня, 11:15

Italy Rejects Two More NGO Migrant Ships; Merkel Scrambles To Keep Job As German Lawmakers Revolt

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Italy demanded on Saturday that the Netherlands recall two NGO-operated migrant transport ships flying the Dutch flag, after Italian Interior Minister Matteo Salvini warned that they would not be allowed to dock in Italian ports.  The ships are currently sitting off the coast of Libya.  “They should know that Italy no longer wants to be an accomplice in the business of illegal immigration and therefore they will have to aim for other, non-Italian, ports,” Salvini said in a Friday post on Facebook.   The blocked NGO ships come on the heels of Italy's refusal to take in a boat full of 629 shipwrecked migrants picked up off the coast of Libya - a move ushered in by the Italian government's new populist coalition headed by Salvini.  "We are finished being doormats," tweeted Salvini on Sunday.  After Salvini's comments, one of the Dutch-flagged NGOs, Mission Lifeline, tweeted in German "When fascists promote us..." to which Salvini fired back over Twitter "insults and threats will not stop us."  La nave Ong Lifeline commenta: “Quando i fascisti ci fanno pubblicità...”. Roba da matti. A casa nostra comandiamo noi, la pacchia è STRA-FINITA, chiaro? Insulti e minacce non ci fermano. Se voi mi aiutate, io non mollo! #chiudiamoiporti pic.twitter.com/w5ZI1H5nYa — Matteo Salvini (@matteosalvinimi) June 16, 2018 “The issue of migrants is epic and Europe has remained detached for years about it, having inappropriate procedures in place before this issue became so severe,” Italy Foreign Affairs Minister Enzo Moavero Milanesi said, according to interview in Corriere della Sera.  On Saturday, France agreed to accept some of the 629 migrants from 26 countries rescued by the MV Aquarius following an international spat between French President Emmanuel Macron and Italian authorities which led to Spain agreeing to take them in. After Italian Interior Minister Matteo Salvini refused to accept the NGO vessel packed with shipwrecked immigrants, Macron said that Italy was "playing politics" with the migrants, and that the Italian government had displayed "cynicism and irresponsibility." Mr Macron's spokesman Benjamin Griveaux said the French president recalled that "in cases of distress, those with the nearest coastline have a responsibility to respond". "There is a degree of cynicism and irresponsibility in the Italian government's behaviour," he quoted President Macron as saying. -BBC Rome wasn't having any of Macron's rhetoric - as Italian Prime Minister Guiseppe Conte shot back - accusing Macron of being hypocritical, cynical and rigid.  "The statements around the Aquarius affair that come from France are surprising and show a serious lack of knowledge about what is really happening. Italy can not accept hypocritical lessons from countries that have always preferred to turn their backs when it comes to immigration," Conte's office said. And after several days of discussions, Madrid announced on Saturday that it had accepted France's offer to take in some of the 630 shipwrecked migrants.  Merkel in jeopardy With a populist wave sweeping Europe and several European nations such as Austria preparing for strict and aggressive measures against unchecked migration, German Chancellor Angela Merkel finds herself hanging by a thread after a lawmaker from her own party said she could be out by the end of next week during an appearance on BBC World at One (via Express). The Chancellor is at odds with her conservative Bavarian allies - the Christian Social Union (CSU), who share power with Merkel's Christian Democrats (CDU).  As Bloomberg reports, the executive of the Bavarian party - an ally in Merkel’s government - will pass a resolution Monday approving rebel Interior Minister Horst Seehofer’s plan to turn away more refugees at Germany’s borders, the Bild Zeitung reported, citing party aides. Merkel has been given a two-week deadline to gain the support of EU partners or Seehofer will execute the order unilaterally, according to Bild. The two-week ultimatum, if true, would mark an irreparable rift between the Chancellor and the party's Chairman Horst Seehofer, according to Social Democrat lawmaker Ingrid Arndt-Brauer.  Such an ultimatum would be “outrageous and not to be tolerated:” Arndt-Brauer told Bloomberg. “You cannot do that with the chancellor -- relations between Merkel and Seehofer would seem beyond repair” On Friday, the CSU, had announced the end of its alliance with Merkel's CDU - though that report was quickly denied. "No one in the CSU has an interest in bringing down the chancellor, to break up the CDU/CSU parliamentary alliance or to blow up the coalition," said Seehofer in a statement to newspaper Bild am Sonntag, adding "We want a solution for sending back refugees at our borders." While the German public's anger over Merkel's "open door" policy has been simmering for years, the instability within the ruling coalition - which features a decades-old political alliance between the CDU and CSU - intensified when Merkel decided over the weekend to veto a plan by Interior Minister Horst Seehofer aimed at controlling and reducing illegal migration. The minister’s refusal to back down has already shattered an uneasy truce between conservative backers and opponents of her liberal asylum policy. France and Germany close to an agreement Merkel's troubles within Germany notwithstanding, Paris and Berlin appear to be close to an agreement on eurozone reform after months of infighting and division, according to French Finance Minister Bruno Le Maire.  Populist uprising As Niall Ferguson notes in The Sunday Times, "On immigration, Italy’s populists are the future. Merkel is the past," and the migration issue will be looked at by future historians as a watershed moment in the destruction of the EU.  Increasingly, I believe that the issue of migration will be seen by future historians as the fatal solvent of the EU. In their accounts Brexit will appear as merely an early symptom of the crisis. Their argument will be that a massive Völkerwanderung overwhelmed the project for European integration, exposing the weakness of the EU as an institution and driving voters back to national politics for solutions. Let us begin with the scale of the influx. In 2016 alone an estimated 2.4m migrants came to the 28 EU member states from non-EU countries, taking the total foreign-born population of the union up to 36.9m, more than 7% of the total. This may be just the beginning. According to the economists Gordon Hanson and Craig McIntosh, “the number of African-born first-generation migrants aged 15 to 64 outside sub-Saharan Africa [will] grow from 4.6m to 13.4m between 2010 and 2050”. The great majority of these will surely head to Europe. -Niall Ferguson Ferguson notes  that the wave of populism sweeping Europe stands to spread like wildfire - having already established footholds within the governments of six EU member states: Austria, the Czech Republic, Greece, Hungary, Italy and Poland - while 11 populist parties have at least 20% popular support - "implying that the number of populist governments could roughly double."  I used to be sceptical of the argument that Brexit was about leaving a sinking ship. I am now reassessing my view. Even as the impossibility of reconciling Tory remainers and Brexiteers becomes an existential threat to Theresa May, events in Europe are moving in directions that seemed inconceivable just a few years ago. -Niall Ferguson Never forget, Gaddafi wanted a scant €5bn/year to keep North African migrants out of Europe. Alas, Hillary Clinton and the French were hell bent on taking him out. "We came, we saw, he died" - and then Europe was destroyed by unchecked migration. 

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18 июня, 10:30

The Race For Turkey

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Authored Amir Tehari via The Gatestone Institute, As the Turkish election campaign reaches its final phase, a consensus is emerging that it should be regarded as a referendum on Recep Tayyip Erdogan, the man who has dominated the nation's politics for almost two decades. Erdogan has often boasted that he has never lost an election and, as polls indicate, he is unlikely to lose this time either. Since 2002, he and his AKP (Justice and Development Party) have won five parliamentary elections, three local elections, three referendums and one presidential election. But what if the victory he expects next week turns out to be a tactical win and a strategic loss? Erdogan won his first victory in a national election at a time that Turkish politics had hit an impasse and needed radical changes of direction and method. Erdogan provided that change and, at least during his first decade as the captain of the Turkish ship of state, succeeded in steadying the wayward vessel and pointing it towards what looked like peace and prosperity. Now, however, observers of the Turkish experience are almost unanimous in thinking that not only those promised golden shores may be receding but that Erdogan's leadership may have led to five new impasses. The first impasse is political. By concentrating power in the presidency, which means in his own hands, something that, after Ataturk's death, took Turkey almost half a century to modify, Erdogan has upset the institutional balance and the pluralism of the political scene developed since the latest of the military juntas in the 1980s. Two decades ago, Erdogan was the bearer of a new message of pluralism, power-sharing and give-and-take. Today, he himself is the message. In voting for Erdogan you are no longer voting for a program, a philosophy, or even a new governing elite. You vote for Erdogan. Turkey's President Recep Tayyip Erdogan. (Photo by Getty Images) Paradoxically, the Turkish voter today knows less about who really Erdogan is, or wants to be, than two decades ago. Uncertainty regarding the future of Turkish institutions is more acute than it was in the post Turgot Ozal sunset phase of rule by corrupt and incompetent parties. The second impasse created under Erdogan concerns the vexed issue of identity, most dramatically underlined by the four-decade long failure of successive governments in Ankara to forge a modus vivendi with the ethnic Kurds who account for at least 15 per cent of the population. Ataturk had decided to solve the problem by denying it existed. He jettisoned the Ottoman system of "unity in diversity" by inventing an ideal "Turkish identity" that ignored ethnic, religious and cultural differences in a society rich in its diversity. Ataturk's policy led to an impasse which produced a civil war that has claimed more than 40,000 lives. Initially, Erdogan realized the wisdom of the Ottoman policy of managing ethnic prejudices by regarding diversity as an asset. His government was initially successful in defusing the Kurdish time-bomb with a series of accommodating policies. Later, however, Erdogan tried to "drown the fish" by dividing the nation into numerous ethnic identities of which Kurds would be one among many, a trick that ensured the failure of his initially promising policies. To be sure, the Kurdistan Workers Party (PKK) helped that failure by sticking to its dogmatic, violent and Stalinist methods. Today, the Kurdish question is more acute than ever. The third impasse concerns Turkish aspirations after full membership of the European Union, a goal shared by almost all political parties, even if only in a pro-forma manner, since the 1960s. May be "Destination Europe" was never more than an empty slogan as powerful voices in the European Union oppose Turkish membership for a variety of reasons, including racism and concerns about Islam. Nevertheless, the slogan provided a strong narrative in favor of democratic reforms and economic liberalization that cut across parochial and partisan interests and narrow concerns. Today, however, as far as "joining Europe" is concerned, Turkey is farther than ever from its pronounced goal. Almost all parties contesting next week's elections at both presidential and parliamentary levels agree that the road to Europe is blocked, at least for the foreseeable future. Erdogan has also created a fourth impasse in Turkey's relations with the North Atlantic Treaty Organization (NATO) and its leader the United States. That led to a surrealistic situation in which Turkish forces invading Syria at some point feared a direct clash with US troops helping Syrian Kurds consolidate their hold on a chunk of territory. Erdogan's involvement in Syria obliged him to try to be sweet to the Russians who were emerging as a major player there. That, in turn, widened the distance with both the US and the European Union at a time they had their own issues with Vladimir Putin's Russia. Too late, Erdogan realized that Turkey, de-coupled from NATO, would not be as valuable to Russia and thus denied the influence that Ankara might have dreamed of. Finally, Erdogan has created a fifth economic impasse by casting a shadow of doubt over policy options he might contemplate once reconfirmed in his position. Four years ago, Turkey seemed to have definitely converted to a model of economic liberalism that emphasized private enterprise, limited the public sector to a few key areas, and respected international norms and practices especially as far as transparency and the rule of law are concerned. Today, however, Turkish economy seems to be prone to interventionist temptations, corrupt practices and shenanigans prevalent in so-called "developing nations" with petty autocratic governments. Not surprisingly, direct foreign investment has fallen to its lowest level since 2010 while the Turkish currency, lira, has lost almost a third of its value compared to a basket of world currencies. Turkish annual growth rate forecast by the World Bank is the lowest since 2008 with recession a growing concern. Paradoxically, in this election campaign, none of those impasses featured as prominently as they deserved, with all parties, and their presidential candidates, falling for the personalization of the exercise that Erdogan wanted. In that sense, Erdogan may have already won. At a time of uncertainty many voters may decide that it is better to stick with the devil they know rather than risk courting an unknown one. However, Erdogan's win could also turn out to be his loss, especially if, as many expect, voter-turnout and his share of the votes take a downward turn.