Italy's 2019 budget approved by the cabinet on Monday includes a basic income for the poor, lowers the retirement age and offers a partial amnesty to settle tax disputes. (Here’s a question, is Italy the only country in the world to be lowering the retirement age?). Prime Minister Giuseppe Conte and his top ministers told reporters on Monday. Speaking after the cabinet signed off on the budget bill, Deputy Prime Minister Luigi Di Maio said the basic income to relieve poverty would kick off within the first quarter of the year.
With the number of recent leaks, the Trump Administration and Apple Inc could both seemingly give Thames Water a run for their money. The suspicion within the White house has now gone so far as to persuade Vice President Mike Pence to offer undergoing a lie detector test to prove he’s not the author of the anonymous New York Times piece. The scathing op-ed highlighted the “adults in the room” making a “quiet resistance” against Trump’s “amorality” and lack of “any discernible first principles that guide his decision making”; it publicised “the internal workings of a chaotic and divided administration and to defend the choice to nevertheless work within it” to further the “bright spots” of the administration’s accomplishments in “deregulation, historic tax reform”... The hype is almost enough for one to forget Trump faces the threat of Special Counsel Mueller’s investigation.
Yesterday morning, it seemed reality TV king turned President Trump’s biggest grievances were the Fed incrementally raising rates and accusations of renminbi and euro rate manipulation; that was until two of his former attaché were found (or pleaded) guilty of fraud and other charges. America’s most (un)popular real-life drama reached a climax yesterday when, within minutes of each other, Manafort was found guilty and Cohen pleaded guilty of fraud, further tarnishing the Trump’s trustworthiness in what has been deemed the “worst day” and “worst hour” of his presidency.
First, Trump’s ex-campaign chairman, Paul Manafort, was convicted of eight counts of (bank and tax) fraud. Though once part of Trump’s inner circle and key in his campaign for President, these convictions against Manafort are related to his lobbying and consulting work for Ukraine ex-President Yanukovych and not directly related to Special Counsel Robert Mueller’s core investigation into Russian collusion and meddling in the 2016 election. Yet many will see the victory helps authenticate what Trump continues to call a “witch hunt” and gives credence for continued investigations. Moreover, it’s far from the end for Manafort, who faces seven more charges in a criminal case next month in DC (that didn’t have the option to be held in Manafort’s home state) and the possibility of being retried on the 10 federal case charges that the Virginia jury failed to reach an agreement on.
Second, more pertinently, and just minutes after Manafort’s verdict, Trump’s once long-time attorney and “fixer” Michael Cohen pleaded guilty at a New York court to eight charges including: violating campaign finance laws, tax fraud and bank fraud. The first of these, relating to the hush-money paid to alleged mistresses of Donald Trump, has been the focus of the media’s coverage. Yesterday, Cohen said that “at the direction” of Trump he made payments to Stormy Daniels and Karen McDougal, the graphic actress and the Playboy model, for the rights of their scurrilous accusations. His appeal agreement still calls for a sentencing of between 46 and 63 months in prison.
Law Professor Lisa Kern Griffin of Duke University says this development “brings the president perilously close to being an unindicted co-conspirator engaged in criminal wrongdoing”, some Democrats are already calling for impeachment, and Lanny Davis, Cohen’s lawyer, went tweet-to-tweet with Trump asking, “If those payments were a crime for Michael Cohen, then why wouldn’t they be a crime for Donald Trump?” For the verdict on this cliffhanger, we will have to wait for the inevitable next episode.
The latest person to be caught in Donald Trump’s crosshairs (however, not for the first time) is the man he chose to be the chairman of the Federal Reserve, Mr Jerome H. Powell, who has disappointed the leader of the free world by raising interest rates. At a charity event for wealthy republicans, Trump told donors that he believes Powell should keep interest rates low, adhering to an easy-money monetary policy. Later, in an interview on Monday with the news service Reuters, Trump continued to show his displeasure. ‘I’m not thrilled with his (Powell) raising of interest rates, no. I’m not thrilled’
Andrés Manuel López Obrador (AMLO), will not be officially inaugurated as Mexico’s next President until December but already looks to be taking a proactive role on issues such as NAFTA. Since his Presidential election victory on 1 July, he has written to Trump advocating that the US and Mexico work together on the key issues of ‘trade, migration, development, and security’.
It’s a quiet day in markets with US Core CPI a non-event coming in bang on forecast at 2.3% yoy. Headlines were focused on Trump’s travels and the latest NATO Summit where a “very happy” Trump held a press conference confirming he can now “believe in NATO” whose members have committed to “up spending [by] $33bn” with a commitment from a “very unified and much stronger” Alliance to swiftly meet the NATO 2% of GDP spending target. Agreeableness does not a dealmaker make.
It seems this week there have been a number of reminders for politicians and businesses that they can’t have their cake and eat it too:
First, senior officials at the EU were reportedly rubbishing the Shadow Brexit team’s ‘commitment’ to retaining single market benefits whilst demanding restrictions on the free movement of people. One member of the European Commission dismissed Labour’s plan as ‘cakeism’.
#prayfortheoiltraders appeared on Twitter yesterday as they were taken on a rollercoaster ride with Brent oil prices whipsawing down from 76 dollars to near 73 dollars per barrel even as all those holding $200bn of long oil futures contracts got what they were anticipating - Trump nixing the Iran Nuclear Deal. The expected price reaction eventually came 5 hours later when oil prices moved back up to where they started (the market having mostly priced in Trump’s braggadocio). At the time of writing, Brent prices have pushed above 77 dollars a barrel setting new highs – that is since the paradigm shift of oil markets in late 2014 (prices would still have to rise a further 50% to approach where they were in the first half of this decade).
With a trend of chemical weapons use in Syria that, if uncontended, could be deemed standard practice by other warring states; and a pivotal moment in the war against Islamic State - it certainly doesn’t seem to be the best of times for the Trump Administration to head down this familiar road that has previously resulted in impeachment. After all, the FBI and Deputy Attorney General Rod Rosenstein must have had significant credence for the nerve to raid the President’s Attorney. As one former FBI agent stated, “I’ve been an FBI special agent for 20 years and have only seen a handful of searches executed on attorneys. All of those attorneys went to prison.”
A year ago the world woke up to the certain prospect of Trump as the 45th President of the United States. Since then, as the Independent put it, he has made “2,470 tweets and 0 major legislative achievements”. He has also made 13 trips to foreign countries and at least 34 trips to his favoured destination: the golf course.
President Trump has this week been on his latest trip, sweet-talking his way through Asia and has turned from recent meetings and negotiations with Japan and South Korea to focus now on China. Yesterday in Beijing the Trumps met Chinese President Xi Jinping and today they meet Premier Li Keqiang. Tomorrow they go on to Vietnam and then to the Philippines: all in one week (the trip 11 days in total).
Today the US dollar seems to have halted the decline it had endured for the past few days. Treasury yields struggled to find their equilibrium yesterday, ending the day mostly flat, and are a touch lower today ahead of the forthcoming Fed meeting minutes. We should be able to see a little more detail on the discussions around unwinding the balance sheet and perhaps some important insights into the Fed’s view on the recent low core inflation figures. In any case, enjoy the finer points from what could be Yellen’s penultimate “full” Fed meeting (November and January meetings omit Economic Projections and Chair press conference).
Today the dollar continued its rally along with US equity indices whilst 10-year Treasury yields rose 5 basis points. The DXY Index is now up more than 1.4% so far this week; at 93.4 at time of writing, it is now back to where it was this time last month. Some of this may be due to profit taking from the recent rally in the euro (which is still up around 12% versus the US dollar year to date). The rest of the dollar rally and sell-off in Treasuries stems from hawkish comments from Fed Chair Yellen (and New York Fed President William Dudley) as well as market optimism over the anticipated tax proposal from President Trump later today.
One must wonder how the German chancellor Angela Merkel is feeling this morning, after her overwhelming, yet ultimately disappointing election result yesterday. Although Merkel’s conservative party took the largest share of the vote at 33%, this was down nearly 9% from the 2013 election, and the lowest percentage of the vote since 1949. Merkel’s coalition partners, the Social Democrats (SPD), also slumped to a postwar low of just over 20%, and have announced it will go into opposition.
As recent hurricanes have devastated parts of the Caribbean and hit the southern states of the US, questions are once again being asked about the Trump-administration's views on climate change. With sea temperatures warmer than usual in the North Atlantic and the Gulf of Mexico, the National Oceanic and Atmospheric Administration had already predicted that the Atlantic hurricane season, which officially runs from 1 June until 30 November, would be ‘above average’ with their estimate being a total of 19 storms, with 9 of them hurricanes. The average is 11 storms and 6 hurricanes.
This weekend marks 100 days of the Trump presidency, or as the latest Simpsons parody referenced it “we are 6.8% of the way home”. Often considered an important period for getting things done before election goodwill and hype fade, and campaigning for midterms begins to distract concerned politicians. But perhaps this expectation is exaggerated, especially when held up to standard Franklin D Roosevelt set in pushing through his ‘New Deal’ in the midst of the Great Depression and strong opposition from Republicans and corporations.
Stocks, particularly the technology sector and small-caps, continue their optimism fuelled rally with the NASDAQ surpassing 6,000 for the first time on Tuesday: double the level from four years ago. Much of the broader gains can be attributed to the recent waning of global political angst and further risk-on trades as the VIX retreats to near-decade-lows and the US dollar Index (DXY) hovers around the 99.0 level. But the outperformance of growth stocks likely stems from lower expectations for both inflation and broader economic growth in the face of a floundering Trump administration.
Perhaps after the recent US healthcare reform debacle the realities of political office versus campaign rhetoric are hitting home for Donald Trump as his stance seems, for the moment at least, to be softening on a number of issues. He has repeatedly denounced NAFTA, the North American Free Trade Agreement, branding it a ‘disaster’, and threatened to withdraw from it without meaningful changes being agreed with Mexico and Canada. These comments and the withdrawal of the US from the Trans Pacific Partnership (TPP) earlier this year have seen forecasters elevate protectionism to a key risk to the global outlook.
Away from the pre-banquet US airstrike attack on Syria, according to Chinese newswires the meeting between Chinese President Xi Jinping and US President Donal Trump was ‘a great success’. It went so well that Xi said the two ‘got deeply acquainted, established a kind of trust and built an initial working relationship and friendship’. In a memo after the ‘outstanding’ ‘relationship’ had been ‘developed’, Trump gushed at how he believes ‘lots of very potentially bad problems will be going away.’ This probably hushed a number of reporters, who were angling for all manner of disruptive and ‘very difficult’ talks.
According to a report from the International Energy Agency (IEA), global emissions from the world’s energy sector were just over 32bln tonnes in 2016, the same figure as the previous two years, despite the global economy growing 3.1%. Although it’s too soon to be certain, they say there are encouraging signs of growth in the renewable energy sector as well as a shift from coal to natural gas. The biggest surprise was in the US, with carbon dioxide emissions falling 3%, meaning that US emissions are at their lowest level since 1992, whilst the economy has grown over 80%.
On Friday night Donald Trump abandoned his healthcare bill after it became clear it had no chance of passage and hence it was pulled before anyone could vote on it. Trump said that his administration’s effort to repeal and replace Obamacare would likely be suspended for some time, putting the rest of his agenda at risk as the tax savings from a new health care bill will now not be available. After the about-turn Trump admitted that he could not get the votes he needed saying ‘We were very close, it was a tight margin’ whilst conceding that ‘We have to let Obamacare go its own way for a little while’ but still believing it was ‘now likely to explode.’