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Sat, 25th March 2017

Anirudh Sethi Report

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Archives of “canada” Tag

WSJ: Investors in Asia turned cautious Friday ahead of a G20

Huh, the Wall Street Journal got that right …

A quiet one … I shoulda let them write the Wrap
Meeting of finance chiefs from the Group of 20
Traders are monitoring how China and Japan will react to pressure from Mr. Mnuchin to strengthen their currencies against the U.S. dollar, said Khoon Goh, head of research for Asia at ANZ. “There is a lot of interest if there will be any material changes out of the G-20,” he said.
US Treasury Sec. Mnuchin is expected to urge China, Japan, Germany and other G-20 members to keep their promise to not use their exchange rates for competitive gains
Link to the Journal, may be gated, but you get the gist.

Tony Blair leaves door open to second referendum on EU membership

Former British prime minister Tony Blair has hinted at his support to have a second referendum if a “significant part” of those who voted for Brexit change their mind.

Speaking to launch his campaign to “persuade” people not to leave the EU, Mr Blair said:

If a significant part of that 52 per cent show real change of mind, however you measure it, we should have the opportunity to reconsider the decision.

Whether you do it through another referendum, or another method, that’s a second order question.

The former leader of the Labour party also invoked the “propensity for revolt” seen across the developed to call on pro-EU supporters to convince people who “voted without knowledge of the true terms of Brexit”.

Mr Blair said he wanted to “strengthen the hand of the MPs who are with us and let those against know they have serious opposition to Brexit At Any Cost”, adding:

This is not the time for retreat, indifference or despair; but the time to rise up in defence of what we believe – calmly, patiently, winning the argument by the force of argument; but without fear and with the conviction we act in the true interests of Britain.

Trump Blocked From Addressing UK Parliament For “Racism And Sexism”

In a striking announcement by John Bercow, the speaker of the British House of Commons, Donald Trump is to be barred from giving a historic address in Westminster Hall, the British Parliament’s grandest and most prestigious hall.

Bercow announced he would not give the US President permission to speak in the 11th Century Westminster Hall when he makes a state visit. John Bercow slammed Trump for “racism and sexism”, his undermining of judges and his migrant ban. Bercow’s intervention is unusual because Speakers are expected to remain above Parliament’s partisan fray.

US court refuses to immediately restore Trump travel ban

A U.S. appeal court late on Saturday denied a request from the U.S. Department of Justice to immediately restore a immigration order from President Donald Trump barring citizens from seven mainly Muslim countries and temporarily banning refugees.

The court ruling dealt a further setback to Trump, who has denounced the judge in the state of Washington who blocked his executive order on Friday. In tweets and comments to reporters, the president has insisted he will get the ban reinstated.

 Trump says the temporary immigration restrictions on citizens from Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen, and on all refugees, are necessary to protect the United States from Islamist militants. Critics say they are unjustified and discriminatory.

The judge’s order and the appeal ruling have created what may be a short-lived opportunity for travelers from the seven affected countries to get into the United States while the legal uncertainty continues.

In a brief order, the appeals court said the government’s request for an immediate administrative stay on the Washington judge’s decision had been denied. It was awaiting further submissions from Washington and Minnesota states on Sunday, and from the government on Monday.

The government’s appeal says the decision by judge James Robart in Washington poses an immediate harm to the public, thwarts enforcement of an executive order and “second-guesses the president’s national security judgment about the quantum of risk posed by the admission of certain classes of (non-citizens) and the best means of minimizing that risk”.

Trump denounced the “so-called” judge in a series of tweets on Saturday and told reporters: “We’ll win. For the safety of the country, we’ll win.”

IRAQI FAMILY

The president’s Jan. 27 order has drawn criticism even from U.S. allies and created chaos for thousands of people who have, in some cases, spent years seeking asylum in the United States.

Iraqi Fuad Sharef, together with his wife and three children, spent two years obtaining U.S. visas, and had packed up to move to America last week, but were turned back to Iraq after a failed attempt to board a U.S.-bound flight from Cairo.

Trump lashes out at federal judge’s order to block travel ban

U.S. President Donald Trump criticized on Saturday the action of a federal judge in Seattle blocking Trump’s executive order banning anyone from seven Muslim-majority nations from entering the United States, calling it “ridiculous” and vowing to overturn it.

Trump said on Twitter, “The opinion of this so-called judge, which essentially takes law-enforcement away from our country, is ridiculous and will be overturned.”

 The bench order to lift the travel restriction was issued Friday. It suspends the executive order that Trump signed, banning travelers from the seven countries from entering the United States for 90 days, and refugees for 120 days, triggering a wave of protests across the United States.

Nearly 60,000 people had their U.S. visas cancelled due to the travel ban, the State Department said Friday.

The people will continue to be affected while the U.S. government reviews its screening process for admitting travelers from Syria, Yemen, Sudan, Somalia, Iraq, Iran and Libya and refugees from any country, the department said.

China press (Xinhua): “China collapse” would be good for no one

A commentary piece in Xinhua that outloines current challenges facing the Chinese economy:

  • Such as a weak global recovery, rising trade protectionism, domestic debt overhang & excess capacity
But still, it says:
  • China’s contribution to world growth in 2016 is again poised to top that of all other countries, exceeding the figure for all developed economies combined
  • The IMF has projected China’s growth to be 6.6 percent with global growth at 3.1 percent in 2016
  • However, China’s growth last year appears set to hit 6.7 percent
It concludes with a projection on growth at 6.5%
( Xinhua News Agency is the official press agency of China, it is a ministry-level institution subordinate to the central government and its head is a member of the Central Committee of China’s Communist Party.)

The Big Theme for 2017: Global Cash Bans

The big theme for 2017 will be Cash… not a pro-deflationary “time to own cash” theme… but a “let’s ban it as quickly as possible” theme.

Let’s review.

In 2016:

1)   Former Secretary of the Treasury, Larry Summers, called for the US to do away with the $100 bill.

2)   Former Chief Economist for the IMF, Ken Rogoff, published his book The Curse of Cash.

3)   The New York Times and Financial Times publicly endorse a ban on cash.

4)   Fed Chair Janet Yellen, during a Q&A session said cash is “not a convenient store of value.”

Of course the above items are simply propaganda and words. But 2016 also featured major actions as far as the War on Cash is concerned…

The 7th largest country in the world by GDP (India) banned physical cash in denominations that comprise over 80% of all outstanding bills.

Italy’s Approval of Constitutional Reform to Put EU Integration Back on Track

In case Italian voters approve constitutional changes in a referendum, it will stimulate the European integration process as a “yes” vote will boost positions of Prime Minister Matteo Renzi’s center-left government in Europe against the Italian populists and right-wing parties, Alessandro Maran, a lawmaker from Renzi’s Democratic Party (PD), told Sputnik on Saturday.

On Sunday, Italy is due to hold the referendum on constitutional changes primarily aimed at eliminating equal powers of two parliament’s chambers and thus avoiding political instability and frequent fall of governments. As far as Renzi staked his future on the outcome of the referendum, the opposition tried to use a vote on reforms as a tool to express overall dissatisfaction with PD policies and the prime minister’s record in office. “If, as I hope, the Yes camp prevails, Renzi’s government and PD will play a vital role in Europe. It would be a great opportunity for our country and could bring the European integration process back on track,” Maran, the Senate’s Constitutional Affairs Committee member, said. Polls cannot be published in the last two weeks of campaigning, but most polls before this time limit predicted that Renzi-lobbied reforms were unlikely to pass. A poll conducted by Ixe for Agora-Rai3 TV station showed that 42 percent of voters did not want constitutional changes, 37 percent are in favor of them, and over 20 percent of respondents remained undecided.

Top 5 Events for Coming Week

Now that the US employment report is behind us, the new trading week will be dominated by central bank decisions (no the Fed decision is not one of them but it will be anticipated on Dec 14th).

  1. ECB interest rate decision.  Thursday December 8th at 7:45 AM ET/1245 GMT.  The ECB is expected to keep their interest rates unchanged. However, they are expected to   announce an extension of the QE program.  ECB’s Draghi will have his usual press conference starting at 8:30 AM ET,  1330 GMT.  You can expect that press conference to last one hour.
  2. RBA interest rate decision. Monday December 5 at 10:30 PM ET/Tuesday December 6 at 0330 GMT.  The Reserve Bank of Australia is expected to keep the rates unchanged at 1.5%. There has been more chatter recently, that the RBA may look to tighten in 2017. Goldman Sach recently said this, as did the OECD.  However, Morgan Stanley was out with their trade recommendations that focused on shorting the AUD (see post here). So there is debate.  The decision and statement will be eyed for any change in sentiment.  The RBA last changed rates in July.
  3. BOC interest rate decision.  Wednesday, December 7th at 10 AM ET/1500 GMT. The Bank of Canada is expected to keep rates unchanged at 0.5%.  Today the Canada employment report showed job gains of 10.7K vs -15K est.  However, it was concentrated in part time jobs for the second consecutive month.  The unemployment rate did fall to 6.8% from 7% (equaled the low for the year from June).  This week, Gov. Poloz spoke cautiously saying:
  • All things being equal,  need to have bigger shock when you’re in such a zone of uncertainty to prompt a move
  • At this stage too early to tell impact of Trump election; BOC won’t react to hypotheticals.
  • Big shock or accumulation of things, could change path
  • Canada has gone through downsizing phase and resources
  • Most of bad news for resources behind Canada
  • Capability may be more important than output gap
  • Uncertainty from Trumps victory
  • BOC does not make assumptions about US government policy
  • We have all the ingredients of divergence in monetary policy with US
  • If we hadn’t had oil price shock Canada and US economies will be in more similar situations
  • Bond yields have crept up in last few weeks.. That is something we have to build into calculus going forward
  • Sales by Canadian owned foreign affiliates  are about the same size as total exports every year
  • Canada will set independent policy
    4.  Australia GDP QoQ. Tuesday December 6 at 7:30 PM ET/0030 GMT (Wednesday).  The eestimate is for a gain of 0.2% vs +0.5%  in Q2. The YoY is expected to rise by 2.5% vs 3.3% last.

Euro nerves on display ahead of Italian referendum

The Italian constitutional referendum takes place on Sunday. The question on the ballot will ask Italians whether they are in favour of cutting the number of senators and reducing the costs of its political institutions. But Mr Renzi, who came to power in an internal party coup two years ago, has promised to step down and not lead a technocratic government should the ‘Yes’ campaign fail.

The euro itself has been relatively sanguine, holding around $1.06 of late even though a “No” vote in Italy is seen bolstering populist anti-Brussels movements across the bloc. But underneath the surface, the market is getting stressed. The cost of hedging volatility for the euro/dollar exchange rate over the next week has more than doubled in the past several days and at 18.2, is now the highest since June.